TaxTMI 
TaxTMI 
2024 (7) TMI 423
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt should have discharged the service tax on gross amount charge for taxable service which as per the explanation 3 included amount received in advance towards taxable services before, during or after provision of such service. A show cause notice dated 18.09.2012 came to be issued demanding service tax of Rs. 2,81,05,210/- under section 73 (1) of the Finance Act, 1994 by invoking the extended time proviso, the provision interest under section 75 and penalty under section 76 and 78 of the Finance Act, 1994 have also been invoked. The matter had been adjudicating by the impugned order in origin dated 09.01.2014 whereunder all the charges as invoked in the show cause notice has been confirmed by the learned adjudicating authority. 2. The learned advocate appearing for the appellant had submitted that the appellant has entered into various contracts for undertaking work of erection, Commissioning, fabrications of / machineries etc. since the services to be provided by the appellant to his clients required heavy investment in capital goods. The appellant used to receive a lump sum amount as an advance from its customers wherein, the appellant has to provide a bank guarantee, to thei....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reiterated the findings has given in the order in origin. 4. Having heard rival submissions, we find that only issue which is to be decided by us is whether of an advance payment received by execution a particular contract can be considered as an advance payment towards rendering the service by the appellant. In this case, from the facts of matter we find that the entire amount of advance was received by the appellant in the nature of a loan for purchasing of necessary capital goods, which were required for execution of the service contract obtaining such advance/loan. Same was backed by the appellant by providing bank guarantee of equal amount to the provider of such advance. i.e. service recipient. We also find that subsequently, as per the contract between the appellants and its customers, the advances so received were adjusted towards supply of service charges. We agree with the submissions of the appellant that the advances are adjusted against the bills received on completion of stages of the contract and therefore same are in the nature of earnest money and not liable to tax at the time of receipt. We also agree that if contract does not materialize the advance has to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount which spread over years, the service provider needs to have specific performance guarantee from their customer. The in turn of such security amount has issued Bank Guarantee amount obvious that for big contract Chettinand Cement Corporation Ltd, produced by the Appellant that it provides for Advance cum-security and in turn the to their customer. We find from the contract with assessee is liable for equal amount of performance security Bank Guarantee Thus the amount is guarantee from both the sides. Such amount cannot be considered as advance receipt since it is normal feature of contracts. Even the Hon'ble Supreme Court in case of Shri Hanuman Cotton Mills and Ors. v. Tata Aircraft Limited, AIR 1970 SC 1986 held that the amount is to be in case considered as earnest money if following principles are followed : (i) It must be given at the moment at which the contract is concluded. (ii) It represents the guarantee that the contract will be fulfilled or contract. other words, "earnest is given to bind the (iii) It is a part of purchase price when the transaction is came out. (iv) It is forfeited when the transaction fall through b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t v. Commissioner, 2014 (35) S.T.R. 529 (Tri.) has allowed the credit. Even the Board Circular No 122/3/2010-ST dated 30-4-2018 permits the credit where the amount of service tax has been paid in full to the provider of services or goods We thus do not find any reason to take a different view from the adjudicating authority and hold that the credit is available to the assessee in such circumstances. 9. Similarly in case of non-payment of service tax on Engineers sent abroad we find that it is not in dispute that the services were rendered abroad It is also not in dispute that the main contractor of the assessee received the consideration in foreign currency who in turn made payment to the assessee. In such case we find that the services rendered by the assessee falls under the Export of Service which is eligible for exemption from service tax. Our views are also based upon the orders in cases of Suprasesh General Insurance Ser. & Brokers P Ltd CEST 2015 TIOL-2225-HC-MAD HC 2016 (41) STR. 34 (Mad) Nipurna Services Lid v. CCE. CUS & ST. 2009 (14) STR 706 Paul Merchants Ltd v CCE, Chandigarh, 2012-TIOL-1877 CESTAT DEL We thus hold that the assessee is not liable for payment o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r as consideration for taxable service are manifested in the several disputes between the tax authorities and assessees. It is of interest to note that, since the issue of the impugned order, several changes by statutory enactment and by judicial determination-have intervened to restrain the administration within the constitutional mandate of Article 265 of Constitution of India. 6. Much emphasis has been placed by the adjudicating authority, as well as by Learned Authorized Representative, on the unarguable implications of amendment to Sections 65 and 67 of Finance Act, 1994. The first of such was the incorporating of or to be provided in Section 67 to enlarge the reach of the taxable services and the insertion of Explanation 3 below by Finance Act, 2005 The second, effected in 2004, is the incorporation of Explanation below the proviso in Rule 5(1) of Service Tax Rules, 1994. The combined consequence. in the finding of the adjudicating authority, is that advance is payment of consideration for taxable services to be provided and, hence, liable to tax upon receipt. The explanation offered by the appellant of discharge of tax liability on the entire contractual value did n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sequent judicial pronouncements can only be assigned presently The decision in re Sunil Hi-Tech Engineers Ltd a very restricted frame and to which we shall turn our attention was not called upon to determine this issue but to decide if the proceedings could continue in the light of prompt payment of computed liability mere acceptance of a proposition of Revenue by one or more assessees is no measure of the sanctity of interpretation by the tax administration. In re Central Power Research Institute the taxability of the service for which payment was received in advance was not in dispute, therein, the security deposit sought from clients before undertaking the service to be rendered presented as a business model, and the claim of the appellant of the issue being limited to delayed payment of lax to be ascertained by the tax authority was. 8. The Hon'ble Supreme Court in Union of India v intercontinental Consultants and Technocrats Pvt. Ltd (2018 (10) G.S.T.L. 40 (SC) has held that the latitude available in the commodity tax statutes pertaining of manufacture of import of goods for construing the valuation provision on its own is not extended to Finance Act, 1994 in whic....