The New Delhi bench of Customs, Excise and Service Tax Appellate Tribunal allowed the appeal by Mahindra World City (the Appellant) against the order issued by The Commissioner of Central Excise (CCE) as the service was provided after a change in effective rate of tax.
Mahindra World City had entered into a Memorandum of Understanding (MOU) to lease land to JCB India Ltd for setting up a new project for the manufacture of earth-moving/material handling equipment. Thereafter the appellant received Rs. 10,62,33,750/- in March 2012 and the balance amount of Rs. 60,19,91,250/-. The lease deed was executed on 23.10.2012. The appellant discharged the service tax of Rs. 7,44,06,119/- and interest of Rs. 23,31,116/- on delay in payment of service tax of Rs. 1,31,31,492/- payable on Rs. 10,62,33,750/- received in March 2012 on 27.11.2012.
The department initiated an investigation and on completion, a show cause notice was issued alleging that service tax was payable in March 2012 on the entire amount, and interest on the delayed payment. The notice also alleged that the appellants had collected Rs. 1,45,89,436/- as excess amount. In the impugned order the demand of (i) Rs. 7,29,47,175/- (ii) Rs. 21,88,416/- collected in excess amount of service tax was confirmed and held to be payable under Section 73A and a penalty of Rs. 10,000/- under Section 77(2) was imposed.
The counsel who appeared on behalf of the appellant submitted that the Commissioner had erred in arriving at the point of taxation for Rs. 10,62,33,760/-, to be March 2012. Consequently, the impugned order had levied interest for the period April 2012 to November 2012, which was erroneous and the point of taxation for this amount was October 2012, therefore no interest was payable as per Rule 4 of the Point of Taxation Rules, 2011. He also contended that as per Rule 6 of Service Tax Rules, 1994, service tax is required to be paid in the month in which the service is deemed to be provided. Hence the liability to pay service tax arises on the point of taxation.
The counsel further submitted that in para 35(iv) of the impugned order the Commissioner had acknowledged that the appellants had raised two invoices both dated 23.10.2012 and the lease deed was signed on 27.11.2012 and he also admitted in the impugned order that the service was complete only on the signing of the lease agreement. Thus, the two events of raising of invoice and providing service occurred after the change in the rate of service tax. Therefore, service tax was payable at the revised rate and not at the old rate.
The counsel who appeared on behalf of the revenue submitted that the Point of Taxation for the advance amounts should be the date of receipt of the amount and the appellant had received the amount of Rs. 10,62,33,750/- in March 2012. Therefore, as per the Point of Taxation Rules, 2011, the point of taxation was March 2012 and the appellant never challenged the said date of taxation before the adjudicating authority and had already deposited the interest amount for the period along with service tax, even before issuance of the show cause notice.
The counsel for the revenue further submitted that the appellant should have reflected the amount of advance of Rs. 10,62,33,750/- in their return due for the half year ending March 2012 which they failed to do. Therefore, the Commissioner had correctly imposed the penalty on the appellant under Section 77(2) of the Finance Act, 1994.
The two-member bench consisting of Dr. Rachna Gupta (Judicial Member) and R. Priya (Technical Member) after hearing both sides held that” In view of the above discussions, we hold that the impugned order cannot be upheld and is therefore set aside. Consequently, the appeal is allowed with consequential relief, if any, to the appellant” and the appeal was allowed.
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