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TMI Blog2022 (8) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... case whereby the amounts realized by the appellant against any of the project undertaken by the appellant were not reflected in their ST-3 return. ST-3 return is based on the revenues realized by the appellant during the period of the return and not on the basis of revenue recognition. Accordingly, there are no merits in the impugned order - the entire demand is for the period of the running contracts during the period 2008 to 2012 and would have been completed by now. Revenue should reconcile the revenue realized contract wise, with the service tax return, and if there all the revenues realized either as advance or on the completion of the contract can be reconciled with the ST-3 returns then demands need to be set aside or restricted to the unexplained amounts realized and not reflected in the ST-3 return. With the above observation, the matter is remanded to the original authority for reconciliation. Appeal allowed in part and part matter on remand. - Service Tax Appeal No.75620 of 2017 - FINAL ORDER NO.75403/2022 - Dated:- 28-7-2022 - SHRI SANJIV SRIVASTAVA, TECHNICAL MEMBER AND SHRI P.DINESHA, JUDICIAL MEMBER Shri Bhaskar Thakkar, Chartered Accountant for the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are paid by the notice within thirty days of the date of communication of this order, the amount of penalty under Sec 78 shall be 25% of the penalty of Rs. 18,01,047/-(Rupees Eighteen Lakh One Thousand Forty seven) only. The benefit of reduced penalty shall be available only if the amount of penalty so determined has also been within the period of thirty days referred above; 4.7 I drop the demand of Interest of Rs.7800/- (Rupees seven Thousand Eight Hundred) only, for the reasons discussed in para-3.8.2 above; I appropriate the amount of Rs. 35,64,560/-(Rupees Thirty- Five Lakh Sixty-Four Thousand Five Hundred Sixty) only as payment towards interest liability, as discussed at paragraph-3.8.3 above; 4.8 I direct the noticee to apply to the concerned Divisional Asst. Commissioner/ Deputy Commissioner immediately from communication of this order, to regularize the issue of quoting of wrong Codes in the challans for payment of interest, as discussed in para- 3.8.3 above. 2.1 Appellant is providing services under the taxable category of Maintenance and Repair Services, Erection, Commissioning or Installation Services, Construction of Residential Complex Services, Work Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and fourteen only) should not be paid by M/s SPML under Rule 14 of the Cenvat Credit Rules 2004 read with Section 75 of the said act. vi. Penalty under Rule 15(3) of the Cenvat Credit Rules 2004 read with Section 78 of the said act should not be imposed upon M/s SPML for irregular availment and/or utilization of cenvat credit by way of willful suppression of material facts with intent to evade payment of service tax. vii. Interest of Rs. 35,72,360/- (Rupees thirty five lakh seventy two thousand three hundred and sixty only) should not be paid by M/s SPML on the amount of service tax paid belatedly. 2.4 The show cause notice was adjudicated as per the impugned order referred in para 1, above. Aggrieved appellants have preferred this appeal. 3.1 We have heard Shri Bhaskar Thakkar, Chartered Accountant for the appellant and Shri J Chattopadhyay, Authorized Representative for the revenue. 3.2 Arguing for the appellant learned counsel submits that: Issue Involved Argument Evidence Reference Service Tax liability on unbilled revenue amount Wrong Interpretation of unbilled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the department. As per the accounting policy the revenue was credited inclusive of service tax component and corresponding debit entries were passed resulting in actual booking of income. Copy of the contract and details of debit entries were submitted in support. Service Tax demanded on the debit balance reflected in Service Tax ledger during the period 2010-2011 2011-2012. Debit balances were merely adjustment and transfe entries from one code to another. Entry wise and project wise breakup of code were submitted along with sample voucher at the time of initial verification. Balance of interim/accrual accounting code of business area COO to which the balance was transferred were not considered by department in spite the fact being disclosed by the Appellant at the time of departmental audit. The trial balance of BA Code 0047 represented in paper book in page no. 1130 shows that there is no closing balance. Page no. 90-93 of paper book reflects the reason for debit entry in these accounts 1) CA certificate marked as Annexure D) certifying the fact that debit entries were transferred 2) Page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompletion of a construction contract fall into different accounting periods. It is due to the nature of activity assumed under a construction contract. Therefore, the fundamental concern in construction contract accounting is the distribution of contract revenue and costs to the accounting periods in which construction work is carried out. Hence, Accounting Standard 7 provides guidelines to recognize contract revenue and costs in the statement of P L. IV. What is Contract Revenue? A contract revenue includes: amount of revenue agreed upon in the contract originally variations in contract work, claims and incentive payments: to the extent it is likely that they will generate revenue they have the potential of being reliably measured Thus, contract revenue is measured when the consideration is received or it is receivable. Furthermore, such a measurement gets impacted by a number of uncertainties that depend upon the outcome of future events. Therefore, you need to revise the estimates pertaining to contract revenue as and when future events occur and the uncertainties are settled. This means that the amount of contract re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osts should be recognized as an expense in the period in which they are incurred. VIII. Recognition of Expected Losses There are scenarios when it is expected that the total contract costs will exceed the total contract revenue. In such cases, the expected loss must be recognized as an expense. Furthermore, the amount of such a loss is determined irrespective of: whether the work has commenced on the contract or not stage of completion of the contract activity profits arising from other contracts which are not treated as a single construction contract IX. Disclosure An organization must disclose: the amount of contract revenue recognized in an accounting period methods used to determine the contract revenue recognized in the accounting period the methods used to estimate the stage of completion of contracts in progress An organization having contracts in progress should disclose: aggregate amount of costs incurred and net profits (recognized profits less recognized losses up to the reporting date) recognized the amount of advances received (advances are the amounts received by the contractor befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reconcile the revenue realized contract wise, with the service tax return, and if there all the revenues realized either as advance or on the completion of the contract can be reconciled with the ST-3 returns then demands need to be set aside or restricted to the unexplained amounts realized and not reflected in the ST-3 return. With the above observation we remand the matter to the original authority for reconciliation in respect of the Issues referred as Issues 1 to 4 in the show cause notice. 4.6 Appellants do not seriously object to the findings recorded in the impugned order in respect of the issues referred as Issue 5 and 6 in show cause notice taking note of the submissions made in respect of these issues we hold the order made in respect of these issues as per the impugned order, except for setting aside the penalties imposed by invoking Section 78. In our view when all facts were in knowledge of the department in respect of these issues invocation of Section 78 for imposing penalty in respect of these demands cannot be sustained. 5.1 In result impugned order is set aside in respect of issues at Issue No 1 to 4 in the Show Cause Notice as observed by us in para 4.5 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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