2023 (10) TMI 814

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nterest under Section 75 of the Finance Act, 1994. 2. The learned counsel on behalf of the appellant submitted that there is no dispute with regard to payment of Service Tax on the mobilisation advances received by them from their customers. During the period of dispute, these mobilisation advances were received from BHEL and Jaipur University. It is claimed that the mobilisation advance received from the customers in advance by way of monetary accommodation is nothing but a loan transaction which is fully secured by a bank guarantee. This advance is given as a loan to enable the contractor (appellant) to obtain machinery, equipments and other resources for the purpose of executing the work undertaken for their customers. It is submitted that the money which is received as a loan cannot be considered as an advance as per the definition of 'Service' in Section 65B(44) or as value of taxable service as defined under Section 67 of the Finance Act. He also submits that the matter is no longer res integra as the issue is settled in their favour as per the following judicial decisions. (i) Gammon India Ltd. vs. CST, Mumbai: 2021 (44) GSTL 373 (Tri.-Mum.). (ii) Therma....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ged 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 prescribed. Explanation. - For the purposes of this section, - (a)"consideration" includes - (i) any amount that is payable for....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....f paying at the time of completion of the project. The dispute is only on the delayed payment of tax on which interest is being demanded. The crux of this allegation is based on "The Point of Taxation Rules" (relevant clause extracted below) where it states "For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance". Hence the demand of interest. The Point of Taxation Rules, 2011 (Incorporating changes made till issuance of notification no 24/2016-Service Tax dated 13-4- 2016) In exercise of the powers conferred under[sub-section (2) of section 67A and](Inserted vide Notification 10/2016- Service Tax to be in effect from the date of enforcement of Finance act ,2016)clause (a) and clause (hhh) of subsection (2) of section 94 of the Finance Act, 1994, the Central Government hereby makes the following rules for the purpose of collection of service tax and determination of rate of service tax, namely,- 3. Determination of point of taxation.- For the purposes of these rules, unless other....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ersonal guarantees of three Directors of the Company. Records are also produced to show that these mobilisation advances are shown as liabilities in their financial records. Therefore, the question of paying Service Tax at the time of receipt of these advances does not arise since they are only to be taken as loans and it became part of the consideration as and when the invoices were raised. 4.3 In the case of Commissioner of Central Excise, Pune-I Versus Thermax Engineering Construction Co. Ltd.: 2019 (22) G.S.T.L. 80 (Tri. - Mumbai) dated 13-11-2017 in similar set of facts held that : "7. ------ there is no doubt to our mind that the advance cum- security bank guarantee to the assessee by the contract awarding party is in the form of earnest money. Thus, the same is not liable to tax. It is also found from the certificate issued by the Chartered Accountant that the assessee has discharged service tax liability on the entire amount of such advances. We thus find no reason to hold that the said amount is liable to be taxed at the time of receipt. It became the part of consideration only when it was proportionately included in the stage-wise completion of work for which ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... by the Hon'ble Supreme Court in re Intercontinental Consultants and Technocrats Ltd., is not permitted to be included in the 'gross amount' envisaged in Section 67 of Finance Act, 1994. 10. For the above reason, and in view of absence of allegation that any part of the contracted value has not been levied to tax, we hold that the demand is not consistent with law and deserves to be set-aside". 5. The reliance placed on by the AR in this case SIEMENS LTD. (Appeal Case No. 11/WBAAAR/APPEAL/2019, dated 16-12- 2019): 2020 (32) G.S.T.L. 790 (App. A.A.R. - GST - W.B.) of is misplaced. In this case, it was held that : "10.   .............In the instant case, the appellant's submission is that they are required to pay GST on the amount of Rs. 13,80,74,549/- as and when they utilize the lumpsum amount for providing the service contracted for. They have also submitted orally that they have already paid the GST against bills raised by them in respect of the entire amount of Rs. 13,80,74,549/-. However, in view of the discussion in paragraph 10 above and the proviso to Section 2(31) of the GST Act, as quoted above, the unutilized part of the lumpsum amount held ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....is case is whether the part of the mobilisation advance remaining unadjusted on 1-7-2017 will be chargeable under the GST Act. Immediately upon introduction of GST Act, that is with effect from the 1st day of July, 2017, the erstwhile Finance Act, 1994 and the notifications issued there under ceased to exist. In the instant matter the only applicable law is the GST Act, 2017. Accordingly, the time of supply of services is to be guided by Section 13(2) of the GST Act. Hence, the remaining unadjusted amount of Rs. 13,80,74,549/- as on 1-7-2017 has to be construed as if it was credited into the account of the appellant on the date of 1-7-2017 only, which will attract GST on such amount on that date itself. Hence, we find no force in the argument of the appellant that Section 13(2) of the GST Act, 2017 will not be applicable in the instant case. 13. In respect of the goods and services provided by the appellant to KMRCL post introduction of GST, the amount of Rs. 13,80,74,549/- can only be considered as advance paid as on 1-7- 2017, and in the absence of any exemption of mobilization advance from tax under GST regime, the entire amount of Rs. 13,80,74,549/- becomes taxable on ....