2026-VIL-1492-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Larger Bench Order - Rule 3 Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 - Works Contract Service, Composition Scheme - Point of Taxation - Appellant provided works contract services to Ministry of Defence, Govt of India and exercised option to pay service tax under the Works Contract Composition Scheme at the rate prevailing at the commencement of contract. When the rate was subsequently revised upward, Appellant continued discharging service tax liability at the original rate for ongoing contracts - Department demanded service tax at the enhanced rate for invoices raised after the rate revision - Whether when opting for Works Contract Composition Scheme, an assessee continues to pay at the same rate applicable at time of opting for scheme till completion of contract, or whether revised rate applies to invoices raised after rate revision - HELD – The Rule 3(1) of Composition Scheme provides that the option to avail composition scheme shall be applicable for entire works contract and shall not be withdrawn until completion of said works contract, however the rule does not stipulate that tax rate prevailing at time of opting into scheme will continue until completion of same works contract whether under composition scheme or otherwise. The Point of Taxation Rules, 2011 answer the question by providing that point of taxation shall be the time when invoice for service provided or agreed to be provided is issued or when payment is received, whichever is earlier, and in cases where there is a change in effective rate of tax, the point of taxation shall be determined in the manner specified in Rule 4 of Point of Taxation Rules, 2011 - The rate of tax shall be the rate as on the point of taxation and not the rate prevailing at the time of exercising the option - The Point of Taxation Rules, 2011 were not brought to attention of Calcutta High Court either before Single Bench or Division Bench in the case of L&T and hence those decisions did not consider these Rules. Before Point of Taxation Rules, 2011, service tax was to be paid as applicable when taxable event, viz., rendition of service had taken place, and after these Rules were notified, the earliest of the three events- rendering service, issuing invoice or receiving advance is the point of taxation and rate of tax prevalent at that point would apply - The referred question is answered affirming that rate of tax shall be determined in accordance with Point of Taxation Rules, 2011 and the rate applicable at point of taxation shall be the rate for paying service tax under Works Contract Composition Scheme – Ordered accordingly
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