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2018 (8) TMI 902 - AT - Service TaxLevy of service tax - outstanding advances along with interest - Consulting Engineer Services - Pure agent services - Held that - The respondent has provided only Consulting Engineer Services , on which they have discharged the service tax liability. The work order issued by the Government Department is in the nature of cost plus contract, wherein the respondent has been appointed as the implementing agency on behalf of the Government Department and the money has been received as a trustee. Further, the respondent is liable to account for every single rupee spent for on behalf of the Government. They are not entitled to appropriate a single rupee more than the agreed 7% as agency charge or administrative charges. Further, the activity of the respondent is held to be in the nature of pure agent. As such, no service tax can be demanded on the amount of advance received and /or on the amount spent out of that advance for the purpose of the project. Extended period of limitation - Held that - There is absence of the condition precedent for invocation of the extended period of limitation - the show cause notices is not maintainable for invocation of the extended period of limitation. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Classification of services provided by the respondent. 2. Liability of service tax on advances received. 3. Invocation of the extended period of limitation for demanding service tax. Detailed Analysis: 1. Classification of Services Provided by the Respondent The Revenue contended that the services provided by the respondent should be classified under "Erection, Commissioning or Installation Services" (ECIS) rather than "Consulting Engineer Services." The respondent, National Informatics Centre Services Inc. (NICSI), argued that they acted as an implementing agency and provided consulting engineer services, discharging service tax accordingly. The Tribunal observed that NICSI was appointed by various government ministries and autonomous bodies to coordinate and complete projects such as computerization and networking through various vendors. NICSI did not execute these projects themselves but acted as an intermediary, providing technical expertise and administrative support. The Tribunal concluded that NICSI's activities were indeed in the nature of "Consulting Engineer Services" and not ECIS. 2. Liability of Service Tax on Advances Received The Revenue alleged that the respondent had not paid service tax on advances received, violating Rule 6 of Service Tax Rules, 1994, and Rule 3 of Point of Taxation Rules, 2011. NICSI had received advances from clients and used these funds to pay vendors for project execution. The Tribunal noted that NICSI acted as a pure agent, disbursing payments on behalf of government departments and not appropriating any funds beyond the agreed administrative charges. The Tribunal held that no service tax could be demanded on the advances received or the amounts spent from these advances for project purposes, as NICSI was acting in a fiduciary capacity. 3. Invocation of the Extended Period of Limitation for Demanding Service Tax The show cause notice issued by the Revenue invoked the extended period of limitation, alleging suppression of facts by the respondent. NICSI argued that they had regularly filed service tax returns and maintained proper books of accounts, making the invocation of the extended period unjustified. The Tribunal found that NICSI had acted transparently, and there was no evidence of suppression, fraud, or intent to evade tax. Consequently, the Tribunal held that the conditions for invoking the extended period of limitation were not met, rendering the show cause notice invalid. Conclusion The Tribunal dismissed the Revenue's appeal, affirming that NICSI provided "Consulting Engineer Services" and had correctly discharged service tax on administrative charges. The Tribunal also ruled that NICSI acted as a pure agent, and no service tax was due on advances received or amounts spent for project execution. Furthermore, the Tribunal found no grounds for invoking the extended period of limitation, making the show cause notice unsustainable. The respondent was entitled to consequential benefits in accordance with the law. Order Pronounced The appeal by Revenue was dismissed, and the respondent/assessee was entitled to consequential benefits as per the law. The order was pronounced on 16.08.2018.
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