TMI Blog2011 (8) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... s during the year 2004. The rate of service tax on such services increased from 8% to 10.2% with effect from 10.9.2004. They had received advance payment before 10.9.2004 for providing services part of which was provided after 10.9.2004. They had paid Service Tax @ 8%, the rate prevalent at the time of paying service tax on the amounts received by them. However the Supdt. of Service Tax, vide his letters dated 11.4.2005 and 1.7.2005, requested the Appellants to deposit differential Service Tax on that part of the advance fee collected by them during the period from 1.4.2004 to 9.9.2004 against which services were rendered during the period from 10.9.2004 to 31.3.2005. Responding to this letter the Appellants deposited an amount of Rs.2,24,624/- under protest, on 26.7.2005. They felt that they need not have paid tax on the higher rate as advised by the Supt. of Service Tax and they filed a refund claim. The Assistant Commissioner rejected such refund claim. Aggrieved by the said order, the Appellants filed appeal with the Commissioner (Appeals) who upheld the order of Assistant Commissioner. Aggrieved by the order of Commissioner (Appeals), the Appellants have filed this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 9.9.2004 and therefore the Appellants are not liable to pay the differential amount demanded. (viii) The argument of the adjudicating authority on page marked as 8 reading 'The clear inference is that at time of receipt of payment towards the value of services is immaterial when question of leviability of service tax arises' is patently wrong because as per Rule 6 of Service Tax Rules, 1994, service tax is to be paid as and when value is realized. (ix) With reference to argument given by lower authorities relying on Circular 65/2003-ST issued by CBEC, the Appellants argue that a circular issued cannot override the provisions of the statute. In this matter they rely on the following case laws :- (1) State Bank of Travancore Vs. Commissioner of Income Tax - 158 ITR 102 (SC) (2) Commissioner of Income Tax Vs. Sirpur Paper Mills [1999] 237 ITR 41 (SC). (3) Commissioner of Sales Tax Vs. Indra Industries [2001] 248 ITR 338 (SC). 4. The Ld. SDR on the other hand argues that service tax is levied on services and not just on receipt of money. So he argues that rate of tax as applicable at the time of providing the service will apply and not the rate of tax when the value was real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce became taxable, but the entire or part of coaching is provided after that date). 2. In this regard it may be noted that rule 6 only prescribes the procedure of payment of tax. The liability to tax is created by section 66 of the Finance Act, 1994 as amended from time to time. The liability to pay tax is fastened on the service provider by section 68 of the said Act. These two sections read together imply that service tax is payable by the service provider on the value of taxable services. Thus if a service provided is taxable, tax has to be paid on its value. Section 67 also clarifies value of service as the amount charged for the taxable service by the service provider. In other words, an amount becomes value of taxable service only when it has a nexus with the service provided. That is the reason why the expression used in rule 6 is 'value of taxable services' and not amount. The implication is that the tax has to be paid on the value of taxable services attributable to the service provided in a month/quarter as and when it is received. Thus, rule 6(1) can not be read in isolation. When read along with the provisions of the Act, it becomes clear that where the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... armonious construction would result in the interpretation that they are canvassing. Revenue is also relying on a harmonious construction of these provisions and according to them such harmonious construction will result in the interpretation they are canvassing. They rely heavily on the Circular 65/2003-ST dated 05/11/2003 issued by CBEC. 9. What we notice is that the Circular 65/2003-ST was issued on 05-11-2003. At that time section 65 (105) defined 'taxable service' to mean 'any service provided' as defined in the said sub-section. With effect from 16-06-2005 the said subsection was amended and thereafter taxable service means 'any service provided or to be provided' as defined in the said sub-section. This amendment has very crucial relevance to the issue at hand and Revenue is relying on the circular issued in 2003 without taking this change in law into account. 10. For a harmonious construction of the relevant provisions it is necessary to quote them. They are quoted below: "65 (105) "taxable service" means any service provided or to be provided - as defined in the various clauses "66. Charge of service tax- There shall be levied a tax (hereinafter referred to as the ser ..... X X X X Extracts X X X X X X X X Extracts X X X X
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