Service on the negative list and post 2016 payments cannot be taxed solely because payment was made on or after 01.04.2016

A service falling within the negative list under section 66(D) of the Finance Act, 1994 until 31.03.2016 cannot be made taxable solely because payment for that service was effected on or after 01.04.2016. The analysis follows tribunal precedent and appellate dismissal of challenge, applying the temporal application principle to negative list taxation and rejecting a payment date basis for chargeability; consequence: the earlier demand is set aside and the appeal allowed, so no service tax liability arises only by virtue of post cutoff payment.

---

---

Issues: Whether a service falling under the negative list up to 31.03.2016 under section 66(D) of the Finance Act, 1994 can be subjected to service tax solely because payment for that service was made on or after 01.04.2016.

Analysis: The question was examined with reference to precedent of the Tribunal addressing identical legal proposition and subsequent appellate treatment. The Tribunal's reasoning in S.R. Traders and M/s. Madhya Pradesh State Mining Corporation Limited considered the temporal application of the negative list and the effect of the date of payment on service tax liability. The appellate review before the Supreme Court in the departmental appeal against the Tribunal decision in S.R. Traders resulted in dismissal of the appeal, thereby leaving the Tribunal's conclusion intact. On that basis, the earlier decisions establishing that services covered by the negative list until 31.03.2016 cannot be taxed merely because payment was effected on or after 01.04.2016 are followed.

Conclusion: The demand of service tax confirmed for the service in question is set aside and the appeal is allowed; the service cannot be subjected to service tax solely because payment was made on or after 01.04.2016.

Ratio Decidendi: A service listed in the negative list under section 66(D) of the Finance Act, 1994 up to 31.03.2016 cannot be brought within service tax liability merely by virtue of payment being made on or after 01.04.2016.

---