2018 (11) TMI 1023 - AT - Service Tax

Tribunal rules in favor of appellant, finding mobilization advances, expenses, and goods not taxable under service tax laws.

M/s Hindustan Shipyard Ltd. Versus Commissioner of Central Excise, Customs & Service Tax, Visakhapatnam-I

M/s Hindustan Shipyard Ltd. Versus Commissioner of Central Excise, Customs & Service Tax, Visakhapatnam-I - 2019 (21) G. S. T. L. 394 (Tri. - Hyd.) Issues Involved:1. Taxability of amounts received from Indian Navy for building facilities at the shipyard.2. Taxability of amounts reimbursed by Indian Navy for income tax and VAT paid.3. Taxability of amounts received for procuring Repair Technical Documents (RTDs) on behalf of Indian Navy.Analysis:1. Taxability of amounts received for building facilities:The appellant, a government-owned undertaking, received amounts from the Indian Navy for upgrading their shipyard facilities. The Revenue argued that these amounts were advance payments for taxable services and thus subject to service tax. However, the appellant contended that the amounts were mobilization advances for strengthening their infrastructure and not linked to any specific service provided or to be provided at present. Citing relevant case law, the Tribunal held that no service tax was payable on the mobilization advance received, as it was not linked to any signed contract for services at the time. The decision was based on the principle that advances not linked to specific services should not be taxed.2. Taxability of reimbursed amounts (income tax and VAT):Regarding amounts reimbursed by the Indian Navy for income tax and VAT paid by the appellant, the Revenue argued that these should be considered part of the consideration for services rendered and thus subject to service tax. However, the appellant relied on a Supreme Court judgment to argue that reimbursable expenses should not be included in the value of taxable services. The Tribunal agreed with the appellant, holding that the reimbursed amounts could not be taxed as they were considered reimbursable expenses and not part of the taxable service value.3. Taxability of amounts for procuring RTDs:The Revenue contended that amounts received for procuring Repair Technical Documents (RTDs) on behalf of the Indian Navy were for Consulting Engineering Services and thus subject to service tax. In response, the appellant argued that RTDs were goods imported from abroad and not services, therefore not liable for service tax. The Tribunal agreed with the appellant, stating that RTDs were goods imported by filing a bill of entry and exempted from VAT and CST, hence not subject to service tax. The Tribunal set aside the impugned order and allowed the appeal, concluding that the amounts received for RTDs were for goods, not services, and thus not taxable under service tax laws.In conclusion, the Tribunal ruled in favor of the appellant on all three issues, holding that the amounts received for building facilities, reimbursed income tax and VAT, and procuring RTDs were not subject to service tax.