Relief to Adani Enterprises: CESTAT sets aside Service Tax on Management Consultancy Services as POT not applicable to Period before POT Rules [Read Order]

In the case of Adani Enterprises, the Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) set aside service tax on management consultancy services as to Point of Taxation Rule POT not applicable to the period Before Point of Taxation Rule 2011 (POT).

During the audit, it was observed that the appellant Adani Enterprises Ltd had made short payment of service tax under the category of “Management Consultancy Service” amounting to Rs. 10,30,000/- and interest applicable thereon amounting to Rs. 2,03,601/- during the period April 2009 to September 2009.

Detailed scrutiny revealed that the appellant had charged service tax to the tune of Rs. 1 crore on bills raised by the appellant to M/s Adani Energy Ltd., on the taxable value of Rs. 10 Crores, which was paid @10%. The record revealed that for the value of the said services, half of the services were provided before February 2009, when the service tax rate was 12%, according to which the appellant had failed to assess the tax of that half of value at the prevailing rate @12%, thus creating a difference and short payment to the extent of 2%.

The Service tax authorities ascertained that the Appellant did not pay service tax on “Renting of Immovable Property” provided to Adani Wilmar Ltd. and therefore, the appellant was liable to pay Service tax of Rs. 9,51,108/- under the category of “Renting of Immovable Property”. On being pointed out by the audit team, the appellant immediately deposited the entire amount of service tax with interest.

A show cause notice was issued to the appellant proposing to demand service tax under Section 73(1) of the Finance Act amounting to (i) Rs. 10,30,000/- and interest applicable thereon amounting to Rs. 2,03,601/- under the category of “Management Consultancy Service” and (ii) Rs. 10,36,797/- for providing “Renting of Immovable Property Services”.

A two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar Member (Technical) observed that the service was provided before 24.02.2009 invoice was raised and payment was received after 24.02.2009, and therefore, Service tax as applicable after 24.02.2009 (10%) is leviable. 

The CESTAT observed that provisions in Rule 4(b)(ii) and Rule 9 of the new Point of Taxation Rules, 2011 as amended by Notification 25/2011-S.T., dated 30-3-2011 have the same effect. Further viewed that the rule of POT is not applicable in a case where service was provided and an invoice was issued before the introduction of Point of Taxation Rules, 2011. 

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