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| DATE: | February 2, 2013 (Date of publication) |
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| Click here to download the judgement (Delhi_CAs_service_tax.pdf) |
CBEC Circulars on CA’s liability to pay higher service tax rate on services rendered/ invoice raised before 01.04.2012 but payment received thereafter is ultra vires
Rule 2(e) of the Point of Taxation Rules, 2011 inserted w.e.f. 01.04.2011 defined “point of taxation” as the point in time when a service shall be deemed to have been provided. Consequent to the insertion of s. 66B, the rate of service tax was enhanced from 10% to 12% w.e.f. 01.04.2012. The High Court had to consider what would be the rate of tax where (a) the service is provided by the chartered accountants prior to 01.04.2012 (b) the invoice is issued by the CAs prior to 01.04.2012 but (c) the payment is received after 01.04.2012. On facts, as the services were rendered before 01.04.2012 and even the invoices were raised before that date and it was only that the payment was received after the said date, the Petitioner claimed that Rule 4(a)(ii) of the Point of Taxation Rules, 2011 applies and the point of taxation shall be the date of issuance of the invoice. However, the service tax authorities issued Circular No.154 dated 28.03.2012 and Circular No.158 dated 08.05.2012 that in respect of invoices issued on or before 31st March 2012 the point of taxation shall be the date of payment. The Petitioner filed a Writ Petition to challenge the said Circulars. HELD by the High Court upholding the plea:
Rule 4 of the Point of Taxation Rules, 2011 which has continued even after 01.04.2012 is clearly the answer. It provides for a specific situation namely determination of the point of taxation in case of change in effective rate of tax. As per Rule 4, whenever there is a change in the effective rate of tax in respect of a service, the point of taxation shall be determined in the manner set out in the Rule. Sub-clause (ii) of Clause (a) of Rule 4 provides that where the taxable service has been provided before 01.04.2012 and the invoice was also issued before 01.04.2012, but the payment is received after 01.04.2012, then the date of issuance of invoice shall be deemed to be the date on which the service was rendered and, consequently, the point of taxation. The result is that where the services of the chartered accountants were actually rendered before 01.04.2012 and the invoices were also issued before that date, but the payment was received after the said date, the rate of tax will be 10% and not 12%. The circulars in question have not taken note of this aspect, and have proceeded on the erroneous assumption that the old Rule 7 continued to govern the case notwithstanding the introduction of the new Rule 7 which does not provide for the contingency that has arisen in the present case. Consequently, the circulars are quashed as being contrary to the Finance Act, 1994 and the Point of Taxation Rules, 2011. A Circular which is contrary to the Act and the Rules cannot be enforced (Ratan Melting & Wire Industries followed)
court view is correct and quashing is reasonable. In fact what a delegated legislation? that delegated legislation i e executive instructions are invariably ill thought out ideas. So delegated legislation has to be tested on anvils of constitution of India. Delegated legislation is called jittery legislation by Executive to do something rightly or wrongly,mostly wrongly.
Courts have to closely read between lines of these executive instructions, most of them necessarily to be quashed as they are ill thought out thought, with scant legal knowledge of executive!
See what is service tax? it is a tax on your professional service and it is an indirect levy on clients as professionals like business establishment push that on clients.
Clients to CAs and Advocates.
to CAs:
Government prescribed accounting rendering service to people, business man is asked to pay through professional accountant. so this tax is another levy of indirect tax on business man or any one who takes services of the professionals application of mind on business accounts or any one’s accounts.
to Advocates
Advocates serve clients and if they are asked to pay service tax, only advocates has clients who pay fees to them, but advocates are not as lucky as CAs to get paying clients and a lot of advocates use touts to get clients unlike CAs but CAs to started touts, as too many professionals surface more and more with some blessed degrees and diplomas.
so getting clients is just a few and far in between.
that leads to unhealthy competition which is encouraged by great education policies of governments.
the culprit is great governments which governments again clamp these poor so called ill educated professionals as colleges really do not properly teach things properly except symphonic of moneys under great fees which again is increased by great government with ultimate result of poor knowledge delivered to the so called professionals as they do not get any salary like a government employee who with least knowledge nets several thousands as salaries and facilities but these self propelled professionals are being taken for granted both by clients and governments.
clients tell professionals, look man we do not know what you will do in my case, so i cannot pay more than this much as i have to test your abilities and if i lose naturally my stake is high. if you load service tax we cannot pay, like Confucius says, ‘No credit today but cash today’ that Advocate can say if he says he is told look i will give you cash or cheque this much and in this you cut your coat, says client.
while CAs some what better.
So service tax idea is indeed ill thought out as what government helps these professionals? Absolutely nothing> it is like asking you pay tax for air you breath in and breath out as that is the air on government jurisdiction land but in fact land has nothing to do with air as they are two different entities altogether.
Revenue generation is not a source from that you suffer ;and you have to pay for that suffering, is a kind of logic by great government thanks to its immature expenditure public administration, it is like a tail saying .. ‘ Melakku thali katren innikku pondatiyai iru’ meaning ‘ i will tie a marital knot tomorrow today be my wife’ idea of this service tax.
so the service tax has to be outlawed by supreme court, as never such taxation was conceived by Ashoa and like Akbar why this chiddu has to be treated as ‘chanakya while chiddu hails from chanakya clan but he is no chanakya is it not!