TaxTMI 
TaxTMI 
2013 (11) TMI 1073
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....t towards charges for the service so rendered, they were not discharging their service tax liability. Investigation conducted revealed that M/s. RIL had entered into a master service agreement dated 10/04/2007 with M/s. RCOM. In this agreement, apart from the nature of the services to be provided by M/s. RIL and the service charges payable, it was specifically mentioned that financial support also would be provided by the service recipient to M/s. RIL as advances or customer credit which should be settled by way of set-off against the service charges payable to M/s. RIL. 2.1. Investigations revealed that M/s. RCOM, the service recipient had incurred expenditure to the tune of Rs. 283 crore in setting up the business of RIL and also payments to the vendors of M/s. RIL towards material cost at the time of inception of M/s. RIL. Further, M/s. RIL had received advance amounting to Rs. 1,210/- crore from RCOM during the period June 2007 to September, 2007. It therefore appeared that even though M/s. RIL did not receive any consideration from the service recipient against the invoices raised by them, they had already recovered considerable sum from the service recipient. Inasmuch as M....
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....r supply of materials. The above amounts were also completely paid back by the appellant to RCOM on 31/12/2007 and the ledger extracts placed on record reveal these transactions. The Revenue has sought to add a sum of Rs 1,493/- crores received as loans and duly returned within the same financial year as consideration for the services rendered which is completely incorrect. The balance sheet of RCOM, which is the holding company of the appellant, very clearly indicates this amount of Rs. 1,210/- crore as loans and advances. Similar loans have been given not only to the appellant but to various other group companies and these amounts have been indicated as unsecured loans in the balance sheet. 3.1. As regards Rs. 283/- crore incurred by RCOM prior to the de-merger of the appellant as a 100% subsidiary of the RCOM was towards expenses and vendor payments made by RCOM and these were duly returned to RCOM by the appellant. Thus, it is undisputed that the amounts of Rs. 1,493/- crore received were returned in December, 2007 within the same financial year and, therefore, these amounts are not service charges or consideration paid by RCOM to the appellant. For the financial year 2007-0....
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....le apex Court in the case of Life Insurance Corporation of India vs. Dharam Vir Anand (1987) 7 SCC 348, those expressions have different meanings and both the expressions cannot be held to be conveying one and the same meaning and, therefore, Article 4.2 and Article 4.3 cannot be construed in the same manner. In the case of Jagannath Baksh Singh vs. State of U.P. (1963) 1 SCR 220; AIR 1962 SC 1563, the hon'ble apex Court was pleased to hold that the expression 'may' cannot mean 'shall' or 'must'. The apex Court in the case of Jamatraj Kewalji Govani vs. The State of Maharashtra AIR 1968 SC 178 has held that when a section uses both the expressions 'may' and 'shall', it firmly establishes a difference. Part which uses 'may' gives a discretionary power and the part which uses 'shall' makes it obligatory/compulsory. 3.4. Section 67(3) of the Finance Act, 1994 reads that: "The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. Explanation 'c' to Section 67 (4) defines: "gross amount charged" includes payment by cheque, credit card....
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.... (b) As informed, the Company has not taken any loans, secured or unsecured form the companies, firms and other parties covered in the register maintained under Section 301 of the Act." 4.1. Since the balance sheets reveal that both the appellant and the recipient of the service have not given or taken any loan, the contention of the appellant that the transactions were one of interest-free loans given by M/s. RCOM to the appellant cannot be accepted. Therefore, these transactions have to be considered as "advances" towards service charges which are liable to service tax. He relies on the decisions of the hon'ble High Court of Andhra Pradesh in the case of Commissioner of Central Excise, Guntur vs. Sri Chaitanya Education Committee (2011 (22) STR 135; the hon'ble High Court of Calcutta in the case of Simplex Infrastructure Ltd. vs. Commissioner of Service Tax, Kolkata (2011 (21) STR 11 (Cal.) and the hon'ble High Court of Rajasthan in the case of Mayo College General Council vs. Commissioner of Central Excise (Appeals), Jaipur -II (2012 (28) STR 225 (Raj.) wherein it has been held that, at the interim stage of stay the three factors which would merit consideration....
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....imilarly, in schedule B of the appellant-company's balance sheet for the year 2008, an amount of Rs. 1200 crore is shown as unsecured loan taken and the said schedule also shows that the amount has been repaid during the same financial year. Thus, both in the books of accounts of the appellant as also in the books of accounts of M/s. RCOM, the amount of Rs. 1,210/- crore is shown as a loan and not as consideration for any services rendered. These books of accounts have been audited and are in the public domain. Therefore, the argument of the Revenue that the amount of Rs. 1,210/- crore is a consideration for the services rendered does not flow from the audited books of accounts of the company. There is also no dispute about the fact that the appellant had repaid the amount of Rs. 1,210/- crore received from M/s. RCOM during the same financial year, by 31/12/2007. 6. Similarly, in the case of Rs. 283/- crore said to have been given by M/s. RCOM to the appellant, the said amount was towards the expenditure incurred by M/s. RCOM even before the appellant-firm came into existence by way of expenses towards the initial setting up and also by way of payments made to vendors for supply....