Tribunal upholds service tax liability on advances but allows CENVAT credit on essential goods.

The Tribunal partially allowed the appeal, upholding the liability of the appellant to pay service tax on advances received from clients. The denial of CENVAT credit on certain goods was set aside, as they were deemed essential for the appellant's services. The invocation of the extended period of limitation was upheld due to the appellant's actions indicating an intent to evade tax.

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Issues Involved:
1. Non-payment of service tax on advances received from clients.
2. Irregular availment of CENVAT credit on goods not defined as capital goods.
3. Invocation of the extended period of limitation.

Issue-wise Detailed Analysis:

1. Non-payment of Service Tax on Advances Received from Clients:
The appellant received an advance of Rs. 6,72,23,160/- from M/s Indus Tower Ltd., which the department contended was a consideration towards services to be provided and not a security deposit. The Commissioner confirmed the demand for service tax amounting to Rs. 69,23,985/- on this advance. The Commissioner observed that the agreement explicitly mentioned the amount as an advance to be adjusted against the last two months' fees, and there was no indication that it was a security deposit. The Tribunal upheld this view, citing the decision in Central Power Research Institute, which stated that any amount received towards taxable service, irrespective of its name, is liable to service tax under Section 67(3) of the Finance Act, 1994. Thus, the appellant was liable to pay service tax on the advance received.

2. Irregular Availment of CENVAT Credit on Goods Not Defined as Capital Goods:
The appellant availed CENVAT credit on goods such as MS angles, GI sheets, Bolts, Shelter Cabins, and Structures of iron & steel, which the department argued were not covered under the definition of 'capital goods' as per rule 2(a) of the CENVAT Credit Rules, 2004. The Commissioner disallowed the credit amounting to Rs. 2,28,64,576/-. However, the Tribunal referred to its own decision in AST Telecom Solar, which allowed CENVAT credit on similar items used in providing taxable output services. The Tribunal found that these items were utilized in the making of the solar system, which was essential for the appellant's services. Therefore, the appellant was entitled to avail the CENVAT credit, and the Commissioner's disallowance was unjustified.

3. Invocation of the Extended Period of Limitation:
The department invoked the extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994, alleging suppression of facts by the appellant. The Commissioner recorded that the appellant's attempt to treat the advance as a security deposit indicated an intention to evade tax. The Tribunal upheld this finding, noting that the agreement clearly mentioned the amount as an advance, and the appellant's actions demonstrated an intent to evade payment of service tax. Consequently, the invocation of the extended period of limitation was deemed appropriate.

Conclusion:
The Tribunal allowed the appeal in part, setting aside the denial of CENVAT credit but maintaining the rest of the Commissioner's order. The appellant was held liable for the service tax on the advances received, and the extended period of limitation was validly invoked due to suppression of facts.

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