It is natural that everybody in a fix after reduction of service tax rates from 12% to 10%. Lot of queries has been raised on this issue.

In this regards, our netizens may take reference from some decided case laws as:

In the matter of: THE COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS,VADODARA-II Versus SCHOTT GLASS INDIA PVT. LTD [2009 -TMI - 32436 - HIGH COURT OF GUJARAT] the honorable High Court held that - Where the services have been rendered prior to introduction of service tax on a particular service - no service tax can be levied or collected on the facts that the amount pertaining to services rendered earlier billed and realized after the introduction of such levy.

In the matter of BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. Versus CCE, PUNE [2009 -TMI - 32192 - CESTAT MUMBAI] honorable CESTAT held that - Finance Act, 2004, increased the rate of service tax to 10% from the earlier rate of 8% - revenue contend that appellants are required to pay service tax at the revised rate - held that enhanced rate is not applicable for the amounts subsequently collected as EMI - as the premium is received in advance and no further amount is collected, tax in force on date of payment of premium in advance is leviable - therefore, demand is set aside.

In the matter of Reliance Industries Ltd. Versus CCE, Rajkot [2008 -TMI - 31530 - CESTAT AHMEDABAD] honorable CESTAT held that - rate of service tax was 5% prior to 14.5.03 & it was enhanced to 8% from 14.5.03 and further enhanced to 10% w.e.f. 10.9.04 - clarification of the Board can not considered to be authorizing the application of rate prevailing at the time of billing/payment - hold that in absence of specific provision, the rate of tax applicable shall be the rate prevailing on the date of rendering the services.

In the matter of L.F.C. HIRE PURCHASE CO. LTD. Versus COMMISSIONER OF CUSTOMS & CENTRAL EXCISE (APPEALS), COCHIN [2008 -TMI - 30422 - CESTAT, BANGALORE] honorable CESTAT held that - in respect of hire purchase contract, the rate of tax applicable is the rate prevailing on the day the contract is entered into - higher rate is not applicable for contract entered prior to the hike - demand of differential amount applying the higher rate not justified.

 

Service tax rate applicability determined by date of rendering services; billing, payment or later collection does not alter applicable rate. The controlling principle is that service tax rate applicability is ordinarily determined by the date on which the service is rendered or the contract is entered into, not by subsequent billing or later receipt of payment; advance receipts are taxed at the rate in force on the date of receipt and hire purchase contracts are governed by the rate prevailing on contract date.