Mahindra World City (Jaipur) Ltd. Vs Commissioner (CESTAT Delhi)
CESTAT Delhi held that as per rule 4(b)(iii) of the point of Point of Taxation Rules, 2011, in case payment is received before change in effective rate of tax and invoice is issued after change in effective rate of tax, then, point of taxation will be date of payment. Hence, demand set aside on advance receipt.
Facts- The appellant, M/s Mahindra World City (Jaipur) Ltd., has entered into Memorandum of Understanding (MOU) – DTA land on 7.3.2012 to lease land to M/s JCB India Ltd. for setting up a new project for manufacture of earth moving/material handling equipment. Para 2.1 and 2.2 of the said MOU clearly provided that the lease deed shall be executed only after fiscal incentives had been provided by the Government of Rajasthan; failing which the lease deed will not be entered and the amount paid will have to be refunded to the appellant as provided in para 8.1 of MOU.
Thereafter the appellants received Rs. 10,62,33,750/- in March 2012 and the balance amount of Rs. 60,19,91,250/-was received in October, 2012. The lease deed was executed on 23.10.2012. The appellant discharged the service tax of Rs. 7,44,06,119/- and interest of Rs. 23,31,116/- on delay in payment of service tax of Rs. 1,31,31,492/- payable on Rs. 10,62,33,750/- received in March 2012 on 27.11.2012.
The Department initiated investigation and on completion, show cause notice was issued alleging that service tax was payable in March 2012 on the entire amount, and interest on the delayed payment. The show cause notice also alleged that the appellants had collected Rs. 1,45,89,436/- as excess amount. Vide the impugned order-in-original the demand of (i) Rs. 7,29,47,175/- (ii) Rs. 21,88,416/- collected in excess amount of service tax was confirmed and held to be payable under Section 73A and penalty of Rs. 10,000/- under Section 77(2) was imposed.
Conclusion- Held that Rule 4 of the POTR begins with the nonobstante clause clearly stating that where there is a change in the effective rate of tax, the provisions of rule 4 would invariably override the provisions of rule 3.
Held that the service was provided after change in effective rate of tax and the invoice also has been raised after the change in effective rate of tax, though the part payment of Rs 10,62,33,750/- was received before the change in effective rate of Thus, we hold that the case of appellant gets squarely covered under Rule 4(b)(iii) POTR. In the given set of facts and applicability of Rule 4(b)(iii) POTR there remains no service tax liability on advance received by the assessee.
FULL TEXT OF THE CESTAT DELHI ORDER
The present appeal has been filed by M/s Mahindra World City (hereinafter referred to as the appellant) to assail the order-inoriginal dated 01.02.2017 confirming the demand of Rs.7,29,47,175/- + Rs. 21,88,416/- along with penalty.
2. The brief facts are as follows-M/s Mahindra World City (Jaipur) Ltd. is engaged in providing the services taxable under the category of renting of immovable property and construction services and were registered under both the categories. The appellant entered into Memorandum of Understanding (MOU) – DTA land on 7.3.2012 to lease land to M/s JCB India Ltd. for setting up a new project for manufacture of earth moving/material handling equipment. Para 2.1 and 2.2 of the said MOU clearly provided that the lease deed shall be executed only after fiscal incentives had been provided by the Government of Rajasthan; failing which the lease deed will not be entered and the amount paid will have to be refunded to the appellant as provided in para 8.1 of MOU. Thereafter the appellants received Rs. 10,62,33,750/- in March 2012 and the balance amount of Rs. 60,19,91,250/-was received in October, 2012. The lease deed was executed on 23.10.2012. The appellant discharged the service tax of Rs. 7,44,06,119/- and interest of Rs. 23,31,116/- on delay in payment of service tax of Rs. 1,31,31,492/- payable on Rs. 10,62,33,750/- received in March 2012 on 27.11.2012. The Department initiated investigation and on completion, show cause notice bearing C. No. V(H)/AdjI/ST/03/2016 dated 31.1.2016 was issued alleging that service tax was payable in March 2012 on the entire amount, and interest on the delayed payment. The show cause notice also alleged that the appellants had collected Rs. 1,45,89,436/- as excess amount. Vide the impugned order-in-original No. JAI-EXCUS-000-COM-25-16-17 dated 1.2.2017 the demand of (i) Rs. 7,29,47,175/- (ii) Rs. 21,88,416/- collected in excess amount of service tax was confirmed and held to be payable under Section 73A and penalty of Rs. 10,000/- under Section 77(2) was imposed.
3. The learned counsel submitted that the Commissioner had erred in arriving at the point of taxation for Rs. 10,62,33,760/-, to be March, 2012. Consequently, the order-in-original had levied interest for the period April 2012 to November 2012, which was He submitted that the point of taxation for this amount was October 2012 and, therefore, no interest was payable. The learned counsel further submitted that the Point of Taxation needs to be determined in terms of Rule 4 of the Point of Taxation Rules, 2011,according to which the point of taxation, in the present case was October 2012. He contended that as per Rule 6 of Service Tax Rules, 1994, service tax is required to be paid in the month in which the service is deemed to be provided. Hence the liability to pay service tax arises on the point of taxation. The impugned order had erred in computing the Point of Taxation in terms of Rule 3 of the Point of Taxation Rules, 2011 which states that the point of taxation is the earliest of the date of invoice / completion of service or the date of receipt of any advance. The Commissioner had failed to observe that there was change in rate of service tax with effect from 1.4.2012, from 10% to 12%.Thus the point of taxation is required to be determined in terms of Rule 4 of Point of Taxation Rules, 2011.
4. The learned counsel also submitted that the Rule 4 of the Point of Taxation Rules, 2011 starts with a “notwithstanding clause” whereby the said rule overrides the applicability of Rule 3 of the said Rules in cases where there is change in effective rate of tax. He stated that the law with respect to the effect of a non obstante clause has been clearly laid down by Hon‘ble Supreme Court in the case of G.M. Kokli and Others – 1984 (Supp) Supreme Court 196 and followed by the Larger Bench of the Tribunal in the case of Das And Company – 2000 (121) ELT 275 (Tribunal – LB).
5. The learned counsel further submitted that in para 35(iv) of the order-in-original the Commissioner had acknowledged that that the appellants had raised two invoices bearing Nos. MWCL/2012- 13/M/06 and MWCL/2012-13/M/07 both dated 23.10.2012 and the lease deed was signed on 27.11.20 12. Further it was also admitted in the impugned order that the service is complete only on signing of the lease agreement. Thus, the two events of raising of invoice and providing of service occurred post the change in the rate of service tax. Therefore, service tax is payable at the revised rate and not at the old rate. He relied on the decision in the case of Paharpur Cooling Towers Ltd. – 2015 (37) STR 550 (Tri. – Del.) and Vistar Construction (P) Ltd. – 2013 (31) STR 129 (Del.) to reiterate his contention that levy of service is on rendition of service and hence service tax is not applicable on the receipt of advances. He further submitted that Section 67A was introduced w.e.f 18.5.2012 and the said section also provides for levy of tax on the services provided or to be provided. Hence the levy of service tax is required to be made based on the rendering of the service.
6. The learned counsel also stated that the demand of interest for the period April 2012 to November 2012 for the amount received in March 2012 was not sustainable as there was no demand for the said interest in the show cause notice. The order in para 44 admits that the show cause notice has not raised the demand for the period April 2012 to November 2012 for the amounts received in the month of March 2012. Therefore, the impugned order had travelled beyond the scope of the show cause notice to confirm the demand of interest for the period April 2012 to November 2012 on the amounts received in the month of March 2012. He submitted that the Commissioner in his order had held that the amount of Rs. 21,88,416/- which was collected in excess of the amount of service tax levied had been worked out on following basis:
