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2017 Supreme(Raj) 2565
RAJASTHAN HIGH COURT (JAIPUR BENCH)
K.S. Jhaveri, Inderjeet Singh, JJ.
Carrier Point - Appellant
Versus
Commissioner Of Central Excise, Jaipur - Respondent
Central Excise Appeal No. 11 of 2009 with D.B. Central Excise Appeal Nos. 12 of 2009 and 18 of 2013
Decided On : 07-09-2017
Sameer Jain with Daksh Pareek and Arjun Singh, Advocates, for the Appellant; Kinshuk Jain and Anuroop Singhi, Advocate, for the Respondent
Headnote:
SERVICE TAX - Levy - Imposition of Service Tax on amount received prior to date of levy - Whether Service Tax can be levied on the amount received prior to date of levy when registration and invoice could not be raised to collect indirect tax and provisions of Provisional Collection Act were not applicable and Section 66 of the Act imposed the levy w.e.f. 1-7-2003? Whether treatment of service under the head of Commercial Coaching Centre and franchisee service on the same issue by the Department can be held to be suppression on the part of appellant and the demand tenable under both the heads simultaneously?
Fact of the Case:
The assessee is running coaching classes. They have entered into a concluded contract prior to April of every year for collecting fees for the whole year. The main contention raised for consideration is whether the law came into force w.e.f. 1-7-2003 and the concluded contract which has entered prior to coming into force of the law where the taxing statute has taken place on 1-7-2003 should be taxed if the contract is concluded and the services are rendered thereafter.
Finding of the Court:
Any payment of contract which are entered after 1-7-2003 will invite Service Tax and any contract which is concluded prior to 1-7-2003 will not invite imposition of Service Tax. Regarding the second issue, any contract of payment received prior to 1-7-2003 is not the condition for taxing. The tax will be imposed on the payment received thereafter. In view of the fact that first issue is answered in favour of the assessee, the second issue will not arise. Therefore omission of any issue in the first notice will not come in the way of the department.
Issues: Whether Service Tax can be levied on the amount received prior to date of levy when registration and invoice could not be raised to collect indirect tax and provisions of Provisional Collection Act were not applicable and Section 66 of the Act imposed the levy w.e.f. 1-7-2003? Whether treatment of service under the head of Commercial Coaching Centre and franchisee service on the same issue by the Department can be held to be suppression on the part of appellant and the demand tenable under both the heads simultaneously?
Ratio Decidendi: The assessee herein has entered into a concluded Contract much prior to coming into force of Service Tax law and in view of the clarification which has been issued in 2005 which clearly made out the case for the appellant inasmuch as the legislation has now used the language after 2005 which clearly states as under; "Taxable service means any service or to be provided to any person by a Commercial training or coaching classes in relation of the Coaching". In that view of the mater, it is very clear that prior thereto, there is authority interpretation of the provision as services which are referred to be provided in future was not covered. Even otherwise in view of the law Concluded Contract cannot be revived in view of subsequent development which will lead to a very odd situation with the assessee and he has to suffer in his business and has to face the breach of contract.
Final Decision: All the appeals stand allowed.
JUDGMENT
K.S. Jhaveri, J. —By way of these appeals, the appellants have challenged the judgment and order of the Tribunal [2009 (14) S.T.R. 34 (Tribunal)] whereby the Tribunal has dismissed the appeals of the assessee confirming the order of Commissioner of Central Excise and Service Tax, dated 1-8-2006 whereby the appellants were directed to pay tax for the services rendered after 1-7-2003.
2. This Court while admitting the matter has framed the following substantial questions of law :
D.B. Central Excise Appeal No. 11/2009 admitted on 16-3-2009
"Whether the clarification dated 5-11-2003 issued by Tax Research Unit (TRU) was ultra vires, null and void and beyond authority delegated under section 37B of the Central Excise Act, 1944, in giving interpretation and authority to collect tax prior to the date of levy, contrary to the provisions of Sections 66, 67, 68, 69 of the Finance Act, 1994, read with Rules 4 and 6 of the Service Tax Rules, 1994?"
D.B. Central Excise Appeal No. 12/2009 admitted on 16-3-2009
"Whether the clarification dated 5-11-2003 issued by Tax Research Unit (TRU) was ultra vires, null and void and beyond authority delegated under section 37B of the Central Excise Act, 1944, in giving interpretation and authority to collect tax prior to the date of levy, contrary to the provisions of Sections 66, 67, 68, 69 of the Finance Act, 1994, read with Rules 4 and 6 of the Service Tax Rules, 1994?"
D.B. Central Excise Appeal No. 18/2013 admitted on 28-9-2016
"Whether Service Tax can be levied on the amount received prior to date of levy when registration and invoice could not be raised to collect indirect tax and provisions of Provisional Collection Act were not applicable and Section 66 of the Act imposed the levy w.e.f. 1-7-2003?
Whether treatment of service under the head of Commercial Coaching Centre and franchisee service on the same issue by the Department can be held to be suppression on the part of appellant and the demand tenable under both the heads simultaneously?"
3. The facts of the case are that the assessee is running coaching classes. They have entered into a concluded contract prior to April of every year for collecting fees for the whole year. It goes without saying that for the services which are rendered after 1-7-2003, the fees are received.
4. The main contention which is raised for our consideration is whether the law came into force w.e.f. 1-7-2003 and the concluded contract which has entered prior to coming into force of the law where the taxing statute has taken place on 1-7-2003 should be taxed if the contract is concluded and the services are rendered thereafter. For which, the counsel for the appellant has taken us to the following Circular which has been issued by the department on 5-11-2003 which reads as under :-
65/14/2003, dated : Nov. 5, 2003 F. No. B3/7/2003-TRU (part)
Sir, Madam,
Subject : Payment of Service Tax in case of advance payment of value of services.
1. I am directed to say that some doubts have been raised regarding payment of Service Tax in cases where a lump sum payment for a service to be provided in future over a certain period of time, is made in advance before the date on which the particular service came under the tax net, but the entire or part of such service is provided after the date on which it became taxable. The doubt appears to have arisen as Rule 6(1) of Service Tax Rules, 1994, provides for payment of tax on the value of service received during a month/quarter, and in the instant case, no payment is received after the date on which the tax came into force (for example a case where payments for coaching service is received before 1-7-2003 i.e. the date on which the service became taxable, but the entire or part of coaching is provided after that date).
2. In this regard it may be noted that rule 16 only prescribes the procedure of payment of tax. The liability of tax is created by section 66 of the Finance Act, 1994 as amended from time to time. The liabili
