TaxTMI 
TaxTMI 
2025 (4) TMI 964
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.... to the main appeal. The prayer made by the appellants is considered and accordingly, the additional grounds submitted are also taken as part of the appeal papers for the purpose of hearing and disposal of the appeal. 3.1 Denial of the facility for adjusting Service Tax paid towards amount received as 'mobilization advance' and subsequent adjustment of service tax paid by them under Rule 6(3) of the Service Tax Rules, 1994 towards cancelled mobilization advance, on account of the customer having refused to pay the advance is the subject matter of present dispute. During EA- 2000 audit conducted by the department in January 2012, they had examined the records maintained by the appellants, on the basis of which adjustment of service tax was done by them and the same was reflected in the periodical ST-3 returns. The department had objected to such credit adjustment of service tax paid on the amount received from customer, which subsequently was converted into 'advance' on account of re- negotiation, as the same do not appear to be admissible under Rule 6(3) of the Service Tax Rules, 1994 (referred to as 'Rules of 1994', for short). 3.2 Accordingly, show cause proceedings were in....
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...., the appellants received a work order from one of their customer M/s Jai Prakash Associates Limited, Churk P.O., Dist. Sonebhadra, Uttar Pradesh ('customer') for erection and commissioning of four boilers. The appellants had entered into a contract with the said customer dated 02.09.2009; later, the same was renegotiated vide letter dated 03.08.2010 for erection and commissioning of three boilers, by cancelling the purchase of one of the boilers. As per the contractual terms, the appellants has received 10% advance towards the contract on which the appellants did not discharge any service tax. Since the amount of advance is adjustable against the contract price to be received in future, no service tax was required to be discharged on the said advance, in terms of the decision given by the Tribunal in their own case under the same service tax jurisdiction. In this regard, he submitted that the Tribunal in the case Commissioner of Central Excise, Pune-I vs. Thermax Engineering Construction Co. Ltd., 2019 (22) G.S.T.L. 80 (Tri. - Mumbai), have categorically held that advance received by the appellants was not liable to service tax and service tax is payable only upon raising of the i....
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....nder Rule 6(3) of the Rules of 1994, since the amendment providing for issue of credit note for the value of service not so provided was introduced in the Service Tax Rules, 1994 by issue of Notification No.3/2011-S.T. dated 01.03.2011, brought into effect from 01.04.2011. Therefore, he submitted that the impugned order is sustainable, and appeal filed by the appellants cannot be entertained. 6. Heard both sides and perused the records of the case. We have also examined written submissions, additional grounds, made in the form of paper books submitted in this case. 7. The issue involved in this appeal is to determine whether the appellants are eligible for adjusting of the service tax paid in respect of cancelled 'site mobilization advance' against the service contract for erection and commissioning of boilers, which were converted into 'advance', by re- negotiation; and subsequent adjustment of service tax paid by them under Rule 6(3) of Rules of 1994, is legally sustainable or not?. 8.1 In order to address the above issue of admissibility of adjustment of the service tax paid, by taking recourse to the Rules of 1994, we would like to refer the relevant legal provisions c....
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....or the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received. Subsequent to its substitution w.e.f. 01.04.2011, sub-rule (3) read as under : Substituted by the Service Tax (Amendment) Rules, 2011, w.e.f. 01.04.2011. (3) Where an assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract], the assessee may take the credit of such excess service tax paid by him, if the assessee,- (a) has refunded the payment or part thereof, so received for the service provided to the person from whom it was received; or (b) has issued a credit note for the value of the service not so provided to the person to whom such an invoice had been issued." 8.2 From plain reading of the above legal provisions, it transpires that service tax is liable to be paid in respect of taxable services provided by one person i.e., service provider to the other person i....
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....nce and the amount was received. Thereafter, the customer requested the appellants to renegotiate the terms and thereby not charging the amount towards site mobilisation and treat the same as Normal Advance against the contract price. On perusal of the contractual terms and conditions, it is seen that the appellants was supposed to charge 10% of the Contract Price as "advance" within 7 days of singing the Contract and 10% of the Contract Price against "mobilisation at site". However, subsequently on renegotiation, both the parties agreed that appellants will convert the 10% Mobilization Advance also as 'Normal Advance' and thereby increasing the rate of advance to effectively 20%. Accordingly, the appellants raised a credit note for the equivalent amount of the invoices raised earlier. The appellants adjusted the invoice value against the invoices raised in subsequent periods and adjusted the excess service tax paid in the subsequent period i.e. July 2010 as per Rule 6(3) ibid. An activity which was not recognised by either of the parties cannot be said to be a 'service provided' by the appellants. Hence, the appellants had paid excess service tax in respect of a service which was ....
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....rorata basis as done for boiler number 1,2 and 3. ...." Thus on the facts of the case, in terms of the contract re-negotiated, it is evident that the advance amount has been taken at 20% of the total contractual value as above. 9.1 Further, from the records placed in the file, we also find that in the said EA-2000 Audit Report No.36/12-13 dated 01.05.2022, on the basis of which the SCN dated 01.04.2013 was issued in this case, it was observed by the Additional Commissioner (Audit) that the Department has already initiated proceedings for non-payment of service tax on advances received by the appellants vide Show cause notice No. V/15-37/ST/Adj/11 dated 20.10.2011. In respect of the said proceedings, the Department had filed an appeal before the Tribunal. In disposal of the said appeal, vide Final Order Nos. A/90726-70728/2017-WZB dated 13.11.2017 in the case of appellants-themselves, it was categorically held by the Tribunal that advance amount received by the appellants was not liable to service tax and service tax is payable only upon raising of the invoices for value of services rendered by relying on the judgement delivered by the Hon'ble Supreme Court in the case of Shri....
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....ortionately included in the stage- wise completion of work for which invoices were raised and service tax was paid by the assessee. Even if it is assumed that the said amount was not in the form of earnest money but was received as Advance in that case also no service tax could have been demanded at the time of receipt as the same was not taxable. In case of M/s. Thermax Instrumentation Ltd. v. CCE, 2015-TlOL-2736-CESTAT-MUM = 2016 (42) S.T.R. 19 (Tri.-Mumbai) the Tribunal held that advance cannot be considere d as receipt towards taxable service as it is an obligation on the part of the customer of the mutual commitment between the two parties to honour the contract. Similarly in case of CCE, Ludhiana v. J.R. Industries, 2009 (16) S.T.R. 51 (Tri.-Del.) it was held that when service was not provided the advance receipt cannot be taxed. We thus hold that there is no service tax liability on advance received by the assessee and set aside the demands and penalties confirmed against M/s. Thermax." 9.2 Further, we also find that in the case of the appellant's group entity- Thermax Instrumentation Ltd., the Tribunal in Thermax Instrumentation Ltd. v. CCE, Pune-I - 2016 (42) S.T.R. 19 ....