2009 (7) TMI 717 - HC - Service Tax

Service tax based on service entry rate, not billing rate. Gujarat HC affirms Tribunal decision.

The Gujarat HC held that service tax is to be paid based on the rate applicable at the time of service entry, not billing. The appeal was dismissed, ... Date of entry in service - rate of service tax applicable on relevant date - substantive provisions of the Finance Act, 1994 - procedural provisions of the Service Tax Rules, 1994Date of entry in service - rate of service tax applicable on relevant date - substantive provisions of the Finance Act, 1994 - procedural provisions of the Service Tax Rules, 1994 - Service tax is payable at the rate prevailing on the date of entry in service and not at the rate prevailing at the time of billing or receipt of payment. - HELD THAT: - The Tribunal's conclusion that the relevant date for determining the applicable rate of service tax is the date of entry in service was accepted. The Court examined the substantive provisions of the Finance Act, 1994 (Sections dealing with service tax) and held that those provisions indicate the date of entry in service is determinative for the rate of tax. Reliance placed by the Revenue on procedural provisions under the Service Tax Rules, 1994 was considered and rejected as insufficient to override or alter the substantive statutory test; procedural rules cannot change the substantive legal criterion for determining the applicable rate. Having applied this legal principle, the Court found no merit in entertaining the Appeal from the Tribunal's view. [Paras 1, 2, 3]Appeal dismissed; tax to be charged at the rate prevailing on the date of entry in service.Final Conclusion: The High Court upheld the Tribunal's view that the applicable service tax rate is that prevailing on the date of entry in service, not on billing or receipt; the appeal was dismissed. The Gujarat High Court held that service tax is payable at the rate prevailing on the date of entry in service, not at the time of billing. The court dismissed the appeal as the Tribunal's decision was deemed correct based on the substantive provisions of the Finance Act, 1994. Tax Appeal was dismissed.