Service Tax on Hire Purchase Transactions - Impact of increase in Service Tax Rate

In the present case:

L.F.C. HIRE PURCHASE CO. LTD. Versus COMMISSIONER OF CUSTOMS & CENTRAL EXCISE (APPEALS), COCHIN Reported in 2008 -TMI - 30422 - CESTAT, BANGALORE  

Hire purchase agreement was entered prior to 14-5-2003

At the time of agreement, rate of service tax was 5%.

Rate of service tax enhanced to 8% w.e.f. 14-5-2003.

Department raised demand @8% for the amount collected on or after 14-5-2008.

Assessee disputed the demand on the ground that the service tax is levied at the time of provision of services and not at the time receipt of amount for the services provided earlier - Section 68

CESTAT, found the contention of the appellant correct and set aside the demand.

While making the decision, CESTAT has followed the principle evolved from the circular dated 9-7-2001 (See paragraph no. 2.1.4 of part VII of the circular no. F.No.B.11/1/2001-TRU, in which CBEC has clarified applicable of service tax on lease or hire purchase transactions)