Custom, Excise & Service Tax Tribunal
Ifb Industries Ltd vs Cce Chandigarh-I on 26 July, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
SCO 147-148, SECTOR 17-C, CHANDIGARH-160017
DIVISION BENCH
Court-I
Appeal No.ST/761/2009-Cu (DB)
(Arising out of OIA No.283/CE/CHD/09 dt.4.8.2009 passed by the CCE (Appeals), Chandigarh)
Date of Hearing/Decision: 26.07.2017
IFB Industries Ltd. Appellant
Vs.
CCE Chandigarh-I Respondent
Present for the Appellant: Shri Pulak Kumar Saha, CA
Present for the Respondent: Shri Tarun Kumar, AR
Coram: Honble Mr.Ashok Jindal, Member (Judicial)
Honble Mr. Devender Singh, Member (Technical)
FINAL ORDER NO. 61371/2017
PER: ASHOK JINDAL
The appellant is in appeal against the impugned order demanding differential amount of service tax on account of revision of rate of service tax after 10.9.2004.
2. The facts of the case are that the appellant is engaged in providing services of maintenance and repair. They are providing annual maintenance contracts to their customers. The AMC charges are received in advance and service tax is paid by them at the rate prevalent at the time of entering the contracts. In the show cause notice, it was alleged that although the contacts of annual maintenance charges were entered before 10.9.2004, but in terms of Notification No.05/2004-ST dt.9.7.2004, the appellants are required to pay service tax on higher rate as the rate of service tax was 8% prior to 10.09.2004 which increased to 10% plus 2% education cess on 10.09.2004. Therefore, the appellant is required to pay differential amount of service tax. The matter was adjudicated, the demand of service tax was confirmed along with interest and penalty was also imposed. Aggrieved from the said order, the appellant is before us.
3. Ld. Consultant appearing for the appellant submits that as per AMC, the services were immediately started at the time of entering the contracts and the service tax has been paid thereon, therefore, the provisions of Notification No.5/2004-ST dated 9.7.2004 are not applicable to the facts of the present case. He submits that in a similar issue in the case of insurance where insurance policy started from the date of issuance of policy in the case of Bajaj Allianz General Insurance Co.Ltd. vs. CCE, Pune-2009 (13) STR 259 (Tri.-Mum.) it was held that enhancement of tax rate is not applicable to the insurance policy issued prior to such enhancement. Therefore, the impugned order is to be set aside.
4. On the other hand, learned AR relied on the Notification No. 5/2004-ST dated 9.7.2004 and also relied on the decision of Reliance Industries Ltd. vs. CCE, Rajkot-2008 (10) STR 243 (Tri.-Ahmd.) and in the case of Consulting Engineering Services (I) Pvt.Ltd.-2013 (30) STR 586 (Del.)
5. Heard both sides and considered the submissions.
6. We find that the facts of the case are not in dispute. As all the contracts for annual maintenance have been entered prior to 10.9.2004 and the amount towards service tax were paid by the appellant at the rate of prevalent during the said period. On 10.9.2004, the rate of service tax has been increased from 8% to 10% plus 2% education cess. In that circumstance, the issue before us is that whether the appellant is required to pay differential amount of service tax for remaining part of annual maintenance contract or not. Ld.AR has heavily relied on the Notification No. 5/2004-ST dated 9.7.2004 which reads as under:
Explanation- For the removal of doubt it is hereby clarified that in case the value of taxable service is received before providing the said service tax shall be paid on the value of service attributable to the relevant month, or quarter, as the case may be.
7. We have gone through the explanation of the notification and the circular clarifying that in case the value for the taxable services received before providing services, in that case, the services tax shall be paid on the value attributable to the relevant period. It is not in the case in hand. The case in hand, the service has been started when the annual maintenance contract has been signed by both sides. Therefore, the said notification has no relevance to the facts of the case. We further find that the Ld.AR have also relied on the decisions of Reliance Industries Ltd. (supra) and in the case of Consulting Engineering Services (I) Pvt.Ltd. (supra). In those cases, the services have been provided by the assessee, earlier and the invoices were raised after enhancement in the rate of service tax. In those cases, it was held by the Tribunal as well as Honble Delhi High Court, in such circumstance, the service tax is payable at the rate when the services provided by the assesse. Therefore, the relying on such decisions also, it is fact that when the service is being provided rate prevalent at that time is applicable. Admittedly, in the case in hand, rate of service tax was 8% when the annual maintenance contracts were entered by the appellant with their clients and the service was reckoned prior to 10.09.2004. The service is rendered as and when the contract is entered. The similar issue has been dealt by this Tribunal in the case of Bajaj Allianz General Insurance Co.Ltd. (supra) wherein this Tribunal has observed as under:
15.?It can be noticed from the above re-produced provision of the Insurance Act that the insurers risk was covered only, after the premium payable is received by insurance company or a guarantee that it will be paid. This would indicate that the insurer is expected to render the services on the day when the premium is received by him. It is also to be noted that the insurance business is covered by the provisions of Insurance Act and, hence, the appellants herein has to issue policy in consonance with the provisions of Insurance Act. Appellant cannot assure the coverage of risk of an insurer, unless the premium payment is received in advance. In other words, the services rendered by the appellants as a general insurance company will take place on the date when appellant receives the insurance premium on the policy. We find that the dispute in this case is regarding the discharge of differential service tax liability from 10-9-2004 and subsequently, when the rates of service tax are increased by the Finance Act. It is undisputed that the appellants has discharged the service tax liability as was prevalent at the relevant period on the amount of premium received.
16.?The services rendered by the appellants would be akin to the services rendered by the banking and other financial services and more specifically the hire-purchase contracts. We find that the Tribunal in the case of Art Leasing Ltd. (supra) was considering an identical situation in respect of the hire-purchase scheme. The Bench held as under :-
The appellant provides services to clients under Hire Purchase Scheme. When the appellant got registered under Section 69 of the Finance Act, 1994 for providing services under the category of Banking and Other Financial Services, the rate of Service tax was 5% w.e.f. 14-5-2003, the rate was enhanced to 8%. For all Hire Purchase Contracts entered prior to 14-5-2003, the appellant remitted Service tax at the rate of 5%. Revenue proceeded against the appellants on the ground that the appellant is required to remit Service tax @ 8%. The original authority confirmed a demand of Rs. 44,054/- under Section 73 of the Finance Act. The Commissioner (Appeals) upheld the order of the original authority. The appellants are aggrieved over the impugned order.
Shri T.M. Sreedharan, the learned Advocate, appeared for the appellants and Shri K. Sambi Reddy, the learned JDR, for the Revenue.
Heard both sides.
The Banking and Financial Services came under the Service tax net w.e.f. 16-7-2001. At that time, CBEC issued clarification to the effect that in respect of Hire Purchase Contracts entered prior to 16-7-2001 and instalments of which were received after 16-7-2001, there is no Service tax liability. In our view, the same logic is applicable to the present case also. When the Hire Purchase contract is entered, the taxable event occurs. We agree with the appellants that the instalment payments are only obligations of the hirer. The finding of the Commissioner (Appeals) that the appellant continues to provide service during the payment of instalments is not correct. Therefore, the rate of Service tax will be the rate prevailing on the date on which the contract is entered into. Consequently, the demand of differential amount applying the higher rate, which came into effect from 14-5-2003, will not be applicable in respect of the contracts entered prior to that date. Hence, we set aside the impugned order and allow the appeal with consequential relief, if any.
17.?It can be noticed from the above re-produced order, that the Division Bench of the Tribunal was considering an identical situation of enhancement of the rate from a particular date. The facts in the case of Art Leasing Ltd., though may be of hire-purchase agreement/contract, wherein the hire-purchaser receives the payment subsequently by an EMI (Equated Monthly Instalments) but Service tax liability is discharged on the date of signing the hire-purchase contract as per the prevalent rate of service tax, the analogy/logic, will be also applicable in this case, as the CBEC vide Circular dated 2-5-95 clarified as under :-
Premium on insurance - The question of collection is at issue here in the following categories of premium paid on insurance -
(a) Premium paid in advance i.e. payment of premium has been received, where as the risk is covered after 1-7-1994.
(b) Payment of premium in instalment i.e. some installments of the premium have already been received prior to 1-7-1994 while some more are to be received later.
(c) The policy has expired before 1-7-1994, but premium are paid after 1-7-1994 Decision: Service Tax provisions have been made applicable with effect from 1-7-1994 vide Notification No. l/94-Service Tax dated 28-6-94. Thus taxable service provided on or after 1-7-1994, alone will attract service tax. Thus, the policies covering the risk from 1-7-94 and delayed payment after 1-7-1994 for earlier period would not attract service tax.
18.?It can be noticed that the above clarification was given by the Board as early as in the year 1995 and that also in respect of the insurance service. Since an identically worded circular in respect of banking and other financial services is interpreted by the Tribunal in the case of Art Leasing Ltd. (supra), the same reasoning will also apply in this case. Hence, to our mind the enhanced rate of Service Fax is not applicable to the policies, which were issued prior to the enhancement of the rate. We notice that the Tribunal has followed the decision of Art Leasing Ltd. (supra) in LFC Hire Purchase Company Ltd. (supra) and came to the very same conclusion.
19.?Ld. Special Counsel for the revenue made valiant effort to bring to our notice that the amount, which is received as premium by the appellant was an advance payment and, hence, this has to be appropriated as per the clarification by the Board vide its Circular dated 5-11-2003. We are not impressed by the said proposition as the two decisions of the Tribunal in an identical circumstances on enhanced service tax liability held that enhanced rate is not applicable for the amounts subsequently collected as EMI. In this case the appellant is on a more stronger footing, as the premium is received in advance and no further amount is collected, as in the cases of Art Leasing Ltd. (supra) and LFC Hire Purchase Company Ltd. (supra).
8. We find that this Tribunal in the case Bajaj Allianz General Insurance Co.Ltd (supra) has held that enhancement of tax rate is not applicable to the polices issued prior to such enhancement. In that circumstance, we hold that in the case in hand, the enhancement of rate of tax on 10.9.2004 has no application to the facts of this case. Therefore, the appellant is not required to pay any differential amount of service tax.
9. In these terms, the impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Dictated & Pronounced in the open court)
(DEVENDER SINGH) (ASHOK JINDAL)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
mk
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