of invoice or payment: Gujarat HC*
*By TIOL News Service *
*AHMEDABAD, FEB 19, 2009: CAN* you imagine Revenue raising a demand of
service tax for the period when there was no tax was payable, simply for the
reason that payment was received when it was taxable? It not only happened,
but they went in appeal to the High Court after they lost it CESTAT.
Revenue is in appeal with the questions,
"Whether or not, in Service Tax, the taxable event is realization of payment
for taxable services rendered and not the time of rendering of the taxable
service"
"Whether or not, at the time of realization of payment for the taxable
service provided, the provisions of Rule 2(i)(d)(iv) had come into force,
making the service receiver liable for payment of service tax in respect of
taxable services provided by a non-resident or a person who is from outside
India and who does not have any office/establishmen t in India"
It was submitted that the impugned order dated 03.08.2007 made by
CESTAT [*2007-TIOL-1813-
CESTAT-AHM
*] overlooks the fact that by virtue of amendment of relevant Rule of the
Service Tax Rules, the liability to pay Service Tax has been shifted to the
recipient of the service w.e.f. 16.08.2002 by virtue of Rule 2(1)(d)(iv) of
the Rules. That in the circumstances, the respondent-assessee was required
to pay the Service Tax on the services received from a sister company
located in Germany.
CESTAT has found that admittedly, the services were received by respondent
between November 2001 and March 2002 while the invoice has been raised and
settled in September 2003. It is also an accepted position that at the point
of time when the services were rendered by the service provider and received
by the respondent the liability was not cast on the recipient of the
services. The liability to pay Service Tax has been cast on the recipient of
the service only w.e.f. 16.08.2002.
The High Court observed,
1.The taxable event is providing all taxable services which has been defined
by Section 65(105) of the Act.
2.The taxable event in relation to Service Tax is admittedly the rendering
of taxable service.
3.The said taxable services were rendered between November 2001 and March
2002.
4.In the circumstances, merely because the invoice is raised and payment
made subsequently viz. after 16.05.2002 the liability cannot be fastened on
the recipient of the services as the taxable event had already occurred past
and raising of invoices and/or making of payment cannot be considered to be
a taxable event.
5.Nor is it possible to hold that the provision of Rule 2(1)(d)(iv) of the
Rules is retrospectively applicable to services rendered prior to
16.08.2002.
6.Thus, neither the Section nor the Rule even suggests that the taxable
event is the raising of an invoice for making of payment.
7.It is well settled in law that a taxing statute has to be read and plain
meaning assigned to the provisions without importing any extraneous
consideration on a presumption.
8.The Tribunal has decided the matter in accordance with law and based on
the facts and material available on record.
9.In absence of any legal infirmity in the impugned order of the Tribunal,
no interference is called for.
10. Accordingly, in absence of any substantial question of law, the appeal
is dismissed.