TaxTMI 
TaxTMI 
2026 (8) TMI 1309
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rule 3 of the Composition Scheme, a person who is liable to pay Service Tax in relation to a Works Contract Service opts to discharge his Service Tax liability under Rule 3 of Composition Scheme by opting to pay an amount equivalent to the percentage of the gross amount charged for the works contract, shall be required to pay the amount equivalent to the same percentage of the gross amount charged for the works contract till the completion of the said contract, even if the percentage is revised subsequently?" 2. We have heard Shri P.K. Sahu, learned counsel for the appellant and Shri Gurdeep Singh, Special Counsel and Shri Rakesh Kumar, learned Authorized Representative for Revenue. 3. Learned counsel for the appellant has submitted that the appellants had provided Works Contract Services to Ministry of Defence, Government of India and were paying service tax in accordance of the Works Contract Composition Scheme at the prevailing rate at the commencement of the contract exclusive of surcharge. At the time, the rate was 2% which was subsequently enhanced to 4% with effect from 1.3.2008 and further to 4.8% with effect from 1.7.2012. The appellant paid service tax under the com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....). 3.3 Learned counsel further submitted that the provisions of composition scheme is incompatible with more than one rate of same contract in terms of Rule 3(1) of Works Contract (Composition Scheme) which requires paying an amount equivalent to certain percentage of the gross amount charged for the works contract. Since the gross amount charged for the works contract is a single quantity, (even if it is invoiced and collected in stages) the percentage of that is also a fixed amount of tax payable for the whole contract. Therefore, it is illogical to apply a higher rate substituted in subsequent modification of the notification in those invoices which were raised later for the same contract. Learned counsel has also relied upon the decision of Hon'ble High Court Madras in the case of State of Madras Vs. Gannon Dunkerley & Co. (Madras) Ltd.- 1959 SCR 379 wherein it has been held that taxing any contract at two different rates based on the date of receipt of interim payments would necessarily mean dividing the contract of tax treatment. Each payment received from the customer does not represent a separate works contract. There is only one composition for a single price to a singl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iability whether under Works Contract Composition Scheme or under Section 66 of Finance Act, 1994. 4.1 Learned Departmental Representative further submitted that the decision of Calcutta High Court relied upon by the appellant is not relevant to the present dispute. The judgment relates to a situation when the rate of tax was changed from 2% to 4% for which the appellant had not raised any objection and the same was not the issue in dispute. The issue was the date as to when the option was exercised as to whether the option was exercised prior to 01.03.2008 or not, with effect where from the rate of tax got enhanced to 4% instead of 2% in the Composition Scheme. Learned Departmental Representative also countered the plea of promissory estoppel as taken by the appellant with the mention that there cannot be any estoppel against law. Decision of Hon'ble Supreme Court in the case of Dai-Ichi Karkaria Ltd. Vs. Union of India-2000 (119) ELT 516 (SC) was relied upon. Another decision in the case of State of Gujarat Vs. Arcelor Mittal Nippon Steel India Ltd.- 2022 (379) ELT 418 (SC) has also been relied upon. With these submissions, the question under reference is prayed to be answered....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ENVAT Credit Rules, 2004. (3) The provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works Service Tax Appeal No.183 of 2010 contract and shall not be withdrawn until the completion of the said works contract." 5.1 This composition scheme has been rescinded vide Notification 35/2012 ST Dated 20.06.2012, with effect from 01.07.2012. Rule 2A of the Service Tax (Determination of Value) Rules, 2006,was substituted by Notification 24/2012 ST Dated 06.06.2012, with effect from 01.07.2012 which covered both cases where the value of the goods portion of the works contract can be determined and where it cannot be determined. As per this new rule, if VAT is paid on actual value, such value can be excluded from gross amount and service tax @ 12 % can be paid on the remaining value. In cases where VAT is not paid on actual basis, the value of service is deemed to be 40 % of gross amount in case of original works; 70 % of gross amount in case of works contract entered into....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition Scheme) Rules, 2007 themselves came into force only on 1.6.2007, there was no vehicle at all to tax this contract before that date. As already observed above that the rate of tax under Composition Scheme was amended from time to time as below: Period Rate Notification Prior 1.6.2007 Nil. (works contract not taxable) L&T (SC) 1.6.2007- 29.2.2008 2% (if one opted for composition scheme) 32/2007-ST dated 22.5.2007 1.3.2008 - 31.3.2012 4% (if one opted for composition scheme) 7/2008-ST dated 1.3.2008 From1.4.2012 4.8% (if one opted for composition scheme) 10/2012-ST dated 17.3.2012 5.4 Now the question is which rate would apply to ongoing works contracts where the assessee has already opted for composition scheme when the old rate was in place in respect of invoices which were raised after the rate has been revised. It must be pointed out that although the Point of Taxation Rules were notified in 2011, when the matter was heard by the Calcutta High Court but these were not brought to the notice of the High Court by the Revenue and hence they could not be considered neither by the learned Single Member Bench of the Calcutta Hi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed within the factory, the date of removal of such goods shall mean the date on which the goods are issued for such use." 5.7 Similarly, duties of customs are levied on the import of goods which is complete as soon as the goods enter the territorial waters of India and this process happens day and night. It is impractical to decide the rate of duty and assess the duty payable at that point. For the sake of convenience, Section 15 of the Customs Act, 1962 stipulates as below: "15. Date for determination of rate of duty and tariff valuation of imported goods.- (1) The rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force,- (a) in the case of goods entered for home consumption under section 46, on the date on which a bill of entry in respect of such goods is presented under that section; (b) in the case of goods cleared from a warehouse under section 68, on the date on which 3[a bill of entry for home consumption in respect of such goods is presented under that section; (c) in the case of any other goods, on the date of payment of duty: Provided that if a bill of entry has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (i) Tax laws (either the parent Act or the Rules) provide for not only the levy of tax but also the relevant date for determining, if tax is payable and at what rate; (ii) Section 15 of the Customs Act, 1962 lays down the date for Customs duties while Rule 5 of the Central Rules 2002 lay down the date for central excise duty; (iii) Before notification of Point of Taxation Rules, 2011, there was no such stipulation for Service Tax either in the Act or Rules; (iv) During the period when there is no such stipulation, as laid down in Association of Leasing and Financial Services and Vistar Constructions, the occurrence of the taxable event, viz., rendition of taxable service is the date for determination of rate of tax and not receipt of consideration. Thus, if the works contract service was rendered on a date and payment was received later, the date to be reckoned is the date on which the service was rendered; (v) On 1.4.2011, the Point of Taxation Rules, 2011 were notified stipulating the relevant date for determining the rate of service tax and these Rules were never brought to the attention of the Calcutta High Court in the case of L&T ei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce. 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 after the change in effective rate of tax, the point of taxation shall be the date of payment; (b) in case a taxable service has been provided after the change in effective rate of tax,-....