TaxTMI 
TaxTMI 
2021 (7) TMI 415
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....of the appellant vide agreement dated 17.12.2014 so entered between them. 3. During the course of audit, the officers of Audit, Indore observed that the appellant has shown the receipt of Rs. 1.33 crores in the year 2015-16 from M/s SGSL. To explain the nature of activity conducted for such consideration that the appellant provided the Maintenance Agreement dated 17.12.14. The Department observed that as per the said agreement M/s. SGSL has agreed for providing maintenance services to the appellant who shall be liable to pay operation and maintenance service charges to M/s. SGSL against the invoices as were to be raised from time to time by M/s. SGSL. However, there has been a Machine Availability clause in the said agreement of 17.12.2014. For the purpose thereof M/s. SGSL had issued credit notes on the appellant for the claims raised by the appellant towards Machine availability due to brake down in WTGs. 4. Forming an opinion that under section 65 B(44) of Finance Act, 1944, services includes 'Declared Services' defined under section 66(e) of Finance Act, the department issued a show cause notice bearing No. 3185 dated 1.12.17 to the appellant alleging that "agreeing to the o....
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....ut the said agreement, learned Departmental Representative has impressed upon the definition of 'Declared Services' under section 66E (e) of the Finance Act which clarifies that agreeing to the obligation to tolerate an Act is specifically classified as 'Declared Services'. It is submitted that the machine availability clause of the agreement amounts to agreement on the part of the appellant to tolerate the deficiency in the service provided to him by M/s. SGSL. Accordingly, the amount received by the appellant on account of said tolerance is definitely an amount on which there accrues the payment of service tax liability on the appellant as well. Impressing upon that there is no legality in the impugned appeal and is prayed to be dismissed. 9. After hearing the rival contentions and perusing the record, I hold as follows: The moot question to be adjudicated herein is whether the Machine Availability clause of agreement dated 17.12.2014 creates the service tax liability upon the appellant. 10. For the purpose we need to first understand the concept of service and tax liability thereof. Section 65(64) of Finance Act defines the "Service" to mean any activity carried out by a per....
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....able service with reference to its value, then such value shall, - (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) 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. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribe....
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....t that the appellant/ service recipient, has already suffered service tax on the invoices raised by M/s. SGSL from time to time. The credit note issued by M/s SGSL, service provider is a refund of excessive amount paid by the appellant on account of defined service to be provided by M/s SGSL. It does not represent any service rendered by the appellant to M/s SGSL so as to attract any service liability of the appellant. The basis of transaction between the parties is the agreement dated 17.12.2014. Perusal thereof makes it abundantly clear that the appellant is service recipient and M/s SGSL is service provider. Hence the payment of service tax can be the liability only and only of M/s. SGSL. 16. Coming to the Machine Availability clause as has been taken as a basis by the Department to fasten tax liability on the appellant, I have perused the clause which reads as follows: SGSL warrants a annual average machine availability 95.5% per year for the WTG covered under this agreement. In case the annual average machine availability of the WTG falls below 95.5% and up to machine availability of 92.5% then SGSL shall compensate to the owner and amount equal to @3% of the annual O & M....
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....ils to provide the desired quality of service. 19. The Tribunal Chennai in the case of Futura Polyester Ltd. vs. Commissioner of Central Excise, Chennai reported as [2013 (29) STR 371 (Tri-Chennai)] has held that when on facts it is found that the appellant has neither provided any service nor received any consideration in lieu of providing the said services, no tax can be made payable merely because of the entries made in its book of accounts. Admittedly books of accounts of appellant has shown the receipt of Rs. 1.33 crore approximately in the year 2015-16 but as the compensation on account of failure on part of SGSL, for not providing requisite service to the appellant. The Larger Bench of this Tribunal while deciding the issue in appeal filed by M/s. South Eastern Coalfields Ltd. Final order No. 51651 of 2020 has held that recovery of liquid damage from the other party cannot be said to be an amount towards any service per se. The purpose of imposing compensation is merely to insure that the defaulting act is neither undertaken nor repeated and the same cannot said to be towards tolerance of the defaulting party. 20. It has further been appreciated that contract may provide f....