2023 (9) TMI 236 - AT - Service Tax

Tribunal rules no tax on advance amount, sets aside interest demand

The Tribunal held that there was no tax liability on the advance amount of Rs.85 crores received by the appellant and returned later. The demand of ... Demand of interest on the advance returned by the appellant in respect of “Metro Zone” Project - HELD THAT:- The adjudicating authority has categorically held that there is no tax liability on the advance amount of Rs.85 crores received by the appellant and returned thereafter. However, the adjudicating authority has proceeded to confirm the demand of interest on such Service Tax - It cannot be understood how the liability of interest would arise when there is no liability to Service Tax. Hence, the same is required to be set aside, which we hereby do. Demand on reimbursable expenses - HELD THAT:- The issue as to whether demand of Service Tax can be made on reimbursable expenditure has been settled by the Hon’ble Apex Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [2018 (3) TMI 357 - SUPREME COURT]. Following the same, the demand cannot sustain and requires to be set aside. The demand of interest on the advance (of Rs.85 crores) received by the appellant and returned thereafter, as confirmed in paragraph 14.1 of the impugned order, cannot sustain and requires to be set aside - the demand of Service Tax on the reimbursable expenses, as discussed in paragraph 17 of the impugned order requires to be set aside - penalties imposed in respect of these two demands are set aside. Appeal allowed in part. Issues involved:The issues involved in the judgment are:1. Classification of services under Works Contract Service or Commercial Construction Service and liability of Service Tax on advance received.2. Liability of Service Tax on constructed area of residential construction.3. Payment of interest on belated Service Tax payment.4. Inclusion of electricity charges, water/CMWSSB charges, and infrastructure charges in taxable value.5. Eligibility of CENVAT credit on various expenses.6. Payment of interest on irregularly availed CENVAT credit.7. Liability of Service Tax on expenses incurred during import of professional and technical consultancy service under reverse charge mechanism.8. Invocation of extended period of limitation for demanding Service Tax.9. Imposition of penal action under relevant sections of the Finance Act, 1994.Judgment Details:Issue 1 - Advance Amount Liability:The Tribunal held that there was no tax liability on the advance amount of Rs.85 crores received by the appellant and returned later. The adjudicating authority confirmed the demand of interest on the Service Tax, which was deemed incorrect as there was no Service Tax liability. Therefore, the demand of interest was set aside.Issue 2 - Reimbursable Expenses:Regarding reimbursable expenses like electricity charges, water charges, and infrastructure charges, the Tribunal referred to a Supreme Court case to conclude that the demand of Service Tax on such expenses cannot be sustained. The appellant had collected only the actual charges, not any mark-up, and hence, the demand was set aside.Conclusion:The Tribunal allowed the appeal partly by setting aside the demand of interest on the advance amount and the demand of Service Tax on reimbursable expenses. The penalties imposed in relation to these demands were also set aside. The impugned order was modified accordingly without affecting the rest of the order.This summary provides a detailed breakdown of the issues involved in the judgment and the Tribunal's findings for each issue.