TMI Blog2013 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ar No.158, insofar as it states that in the case of the eight specified services (which includes the services of chartered accountants), if the payment is received or made, as the case may be, on or after 01.04.2012, the service tax needs to be paid at 12% is again without any statutory basis. The new Rule 7 does not cover the services which were earlier referred to in Clause (c) of Rule 7 (including services of chartered accountants) as it existed up to 31.3.2012. The circular seems to have overlooked this crucial aspect. In the present case rule 4 is applicable - where the services of the chartered accountants were actually rendered before 01.04.2012 and the invoices were also issued before that date, but the payment was received after the said date, the rate of tax will be 10% and not 12%. The circulars have to be in conformity with the Act and the Rules and if they are not, they cannot be allowed to govern the controversy. – Thus circulars are quashed as being contrary to the Finance Act, 1994 and the Point of Taxation Rules, 2011 as Circular which is contrary to the Act and the Rules cannot be enforced [Commissioner of Central Excise, Bolpur vs Ratan Melting & Wire Indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 the Point of Taxation Rules, 2011 were notified. Rule 2(e) of the said Rules defines ―point of taxation‖ as the point in time when a service shall be deemed to have been provided. 4. Rule 4 provided as follows: - 4. Determination of point of taxation in case of change in effective rate of tax - Notwithstanding anything contained in rule 3, the point of taxation in cases where there is a change in effective rate of tax in respect of a service, shall be determined in the following manner, namely:- (a) in case a taxable service has been provided before the change in effective rate of tax,- (i) where the invoice for the same has been issued and the payment received after the change in effective rate of tax, the point of taxation shall be date of payment or issuing of invoice, whichever is earlier; or (ii) where the invoice has also been issued prior to change in effective rate of tax but the payment is received after the change in effective rate of tax, the point of taxation shall be the date of issuing of invoice; or (iii) where the payment is also received before the change in effective rate of tax, but the invoice for the same has been issued aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing the service is located outside India, the point of taxation shall be the date of credit in the books of account of the person receiving the service or date of making the payment whichever is earlier.‖ 6. The petitioner is an association of chartered accountants; services rendered by chartered accountants are taxable services u/s 65(105)(s) of the Act. Accordingly, sub-rule (c) of Rule 7 would apply, with the result that the date on which the payment for the services of the chartered accountants is made or received will be deemed to be the date on which the services were provided or rendered. 7. It is not in dispute that consequent to the insertion of Sec 66B into the Act, the rate of service tax was enhanced from 10% to 12%. The question before us is what would be the rate of tax where- (a) the service is provided by the chartered accountants prior to 01.04.2012; (b) the invoice is issued by the chartered accountants prior to 01.04.2012 but (c) the payment is received after 01.04.2012. 8. In the present case there is no dispute that all the services were rendered before 01.04.2012 and even the invoices were raised before that date and it was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t March 2012 where the payment has not been received before 1st April 2012. 3. The issue has been examined. For invoices issued on or before 31st March 2012, the point of taxation shall continue to be governed by the Rule 7 as it stands till the said date. Thus in respect of invoices issued on or before 31st March 2012 the point of taxation shall be the date of payment. 4. Trade Notice/Public Notice may be issued to the field formations accordingly. 5. Please acknowledge the receipt of this circular. Hindi version to follow. (Shobhit Jain) OSD, TRU Fax: 011-23092037 Circular No. 158/9/ 2012 ST F.No 354/69/2012- TRU Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs Tax Research Unit Room No 146, North Block, New Delhi Dated : 8th May 2012 To Chief Commissioner of Customs and Central Excise (All) Chief Commissioner of Central Excise Service Tax (All) Director General of Service Tax Director General of Central Excise Intelligence Director General of Audit Commissioner of Customs and Central Excise (All) Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 8 specified services, though the services were rendered and the invoices were issued but payments were received after 01.04.2012, are ultra vires the Act/ Rules. 10. Before dealing with the grievance of the petitioner, it would be necessary to note that Rule 7 of the Point of Taxation Rules, 2011 was substituted by a new Rule w.e.f. 01.04.2012. The new Rule notified on 17.3.2012 by notification No.4/12-ST is as under:- 7. Determination of point of taxation in case of specified services or persons. Notwithstanding anything contained in these rules, the point of taxation in respect of the persons required to pay tax as recipients of service under the rules made in this regard in respect of services notified under sub-section (2) of section 68 of the Act, shall be the date on which payment is made: Provided that, where the payment is not made within a period of six months of the date of invoice, the point of taxation shall be determined as if this rule does not exist: Provided further that in case of associated enterprises , where the person providing the service is located outside India, the point of taxation shall be the date of debit in the books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B of the Finance Act, 1994 inserted by the Finance Act, 2012 w.e.f. 1.7.2012 vide notification No.19/2012-ST, dated 5.6.2012. This Section is as follows:- 66B.Charge of service tax on and after Finance Act, 2012 There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent, on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.‖ 13. Rule 4 of the Point of Taxation Rules, 2011 which has continued even after 01.04.2012 is clearly the answer. We have already extracted the Rule hereinabove. It provides for a specific situation namely determination of the point of taxation in case of change in effective rate of tax. The words earlier used in the Rule were change of rate. In the place of these words, the words change in effective rate of tax were inserted w.e.f. 01.04.2011. This was done by the Point of Taxation (Amendment) Rules, 2011 vide notification No.25/11-ST dated 31.3.2011. The petitioner has pointed out to sub-clause (ii) of Clause (a) of Rule 4. This R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note of this aspect, and as noted earlier have proceeded on the erroneous assumption that the old Rule 7 continued to govern the case notwithstanding the introduction of the new Rule 7 which does not provide for the contingency that has arisen in the present case. 16. In view of the foregoing discussion the circulars are quashed as being contrary to the Finance Act, 1994 and the Point of Taxation Rules, 2011. The Point of Taxation Rules, 2011 have been notified in exercise of the powers conferred upon the Central Government under Clause (a) and Clause (hhh) of sub-section (2) of Section 94 of the Finance Act, 1994 and they are also required to be placed before both the Houses of Parliament under sub-section (4) of Section 94. They thus have the force of law. The circulars have to be in conformity with the Act and the Rules and if they are not, they cannot be allowed to govern the controversy. 17. It is well-settled that a Circular which is contrary to the Act and the Rules cannot be enforced. In Commissioner of Central Excise, Bolpur vs Ratan Melting Wire Industries 2008 (13) SCC (1) a Constitution Bench of Supreme Court held as under:- 7. Circulars and instructions is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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