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TMI Blog2022 (11) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, the appellant is the manufacturer of specific machines. He was approached by a buyer for manufacturing a customized machine for him. Vide the purchase order the buyer agreed to make an advance payment accepting the terms and conditions of the purchase order including the condition of said advance to be forfeited in case of failure on part of the buyer to receive the manufactured goods. For this advanced deposit to become a consideration received by the appellant against a declared service being provided by him, it is necessary that there has to be some concurrence/assumption of an obligation to refrain from an act or to tolerate the same on the part of the appellant. But in the present case it was an agreement between the parties that in case any term of the purchase order gets breached which may cause some damage or loss to the appellant, the advance deposit made by the buyer to the appellant shall be forfeited by the appellant owing to the said breach. Larger Bench of this decision in M/s. South Eastern Coalfields Ltd. [ 2020 (12) TMI 912 - CESTAT NEW DELHI ] has dealt with the impugned issue with the clarity. It has been held that any amount received fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation has wrongly been invoked by the appellant. Appeal allowed - decided in favor of appellant. - Service Tax Appeal No. 51056 of 2022 [SM] - FINAL ORDER No. 50734/2022 - Dated:- 18-7-2022 - DR. RACHNA GUPTA, MEMBER (JUDICIAL) Mr. O.P. Agarwal, C.A. for the Appellant Mr. Divey Kumar Sethi, Authorised Representative for the Respondent ORDER Present appeal has been filed to assail the Order-in-Appeal No. 117/2019 dated 11.02.2019, wherein, demand for an amount of Rs.64,96,178/- has been confirmed holding it to be (an amount against declared service) by the appellant on account of forfeiture for not lifting the ordered goods in terms of purchase order. 2. The facts in brief for the impugned adjudication are as follows: 2.1 M/s. Mec Shot Blasting Equipments pvt. Ltd., the appellant, is engaged in Manufacturing of shot blasting machines. The appellant is also registered under service tax but for the service tax liability under Reverse Charge Mechanism. During the course of audit of the appellant s record, the department observed that the appellant on cancellation of an order of supply, has retained the amount of advance i.e. Rs.64,96,178/- as was paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Commr. of C.Ex. S.T, Raipur reported as 2021 (55) G.S.T.L. 549 (Tri.-Del.) and M/s. Ruchi Roya Industries Ltd. Vs. Commr. of Cus., CGST C.Ex., Indore 2022 (56) G.S.T.L. 303 (Tri.-Del.) to impress upon that even in a case of a contract/agreement between the service providers for providing any particular service the forfeiture of advance, if any paid, as a consequence of non-compliance of the contract of providing service, the retention thereof is denied to be the amount received against the declared service. The order under challenge is accordingly, prayed to be set aside and appeal is prayed to allowed. 5. While rebutting the submissions learned DR has mentioned that irrespective the agreement between the appellant and his buyer was a purchase order, but there still was an element of services tax. The moment the buyer has failed to take the delivery of goods from the appellant consequent to the said failure, there is no option with the appellant except to tolerate the said failure. It is this toleration that has been defined as declared service under Section 66E (e) of the Finance Act, 1994. Hence, Commissioner (Appeals) has committed no error while holding the said tol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are not mentioned in negative list of Section 66 D is being made liable, under Section 66 of Finance Act, 1994 to service tax at the rate specified therein. Section 67 of Finance Act, 1994 which deals with the valuation of taxable service. According to this Section where service tax is chargeable on any taxable service with reference to its value, then such value shall be determined in the manner provided for in (i), (ii) or (iii) of sub-section (1) of Section 67. What needs to be noted is that each of these refer to where the provision of service is for a consideration , whether it be in the form of money, or not wholly or patly consisting of money, or where it is not ascertainable. In either of the cases, there has to be a consideration for the provision of such service. Explanation to sub-section (1) of Section 67 clearly provides that only an amount that is payable for the taxable service will be considered as consideration . This apart, what is important to note is that the term consideration is couched in an inclusive definition. The Larger Bench of this Tribunal also in the case of M/s. Bhayana Builders Pvt. Ltd. Vs. Commissioner of Service Tax reported as 2013 (32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made subsequently, was separate and independent agreement. In this agreement, there was no consideration to be given to the promisor and thus that agreement could not be enforced in law. It was claimed that in the supplemental agreement consideration was that the bank guarantees were not to be encashed, but it was found that there was no mention of such a consideration in the supplemental agreement. Although if a party promised to abstain from doing something, it could be regarded as consideration for the contract, but in the present case there was no such case of abstinence and there was no consideration for supplemental contract. 10. Reverting back to the facts of the present case it is observed that appellant is the manufacturer of specific machines. He was approached by a buyer for manufacturing a customized machine for him. Vide the purchase order the buyer agreed to make an advance payment accepting the terms and conditions of the purchase order including the condition of said advance to be forfeited in case of failure on part of the buyer to receive the manufactured goods. For this advanced deposit to become a consideration received by the appellant against a decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court also found the there was no evidence that any loss was suffered by the plaintiff in consequences of the default by the defendant, the Court, therefore, held that plaintiff would be entitled to retain only such amount that was received as earnest. 12. Larger Bench of this decision in M/s. South Eastern Coalfields Ltd. (supra) has dealt with the impugned issue with the clarity. It has been held that any amount received from the buyer in advance when forfeited for non-compliance of the contract, the same shall not be the consideration for tolerating an act and as such shall not be leviable to service tax under Section 66 E (e) of Finance Act, 1994 as declared services. Particularly, when contract nowhere provided obligation on assesse to refrain from an act or tolerate an act. Otherwise also when it was an agreed term and condition that in case of failure or non-compliance of any condition of contract the amount deposited shall be liable to be forfeited, the forfeiture thereof is actually an act in furtherance of the aforesaid terms and conditions, cannot be called as the tolerance on account of non-compliance of any condition of contract by the other party. To my opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of forfeiture of not lifting the ordered goods. I am of the opinion that the present case was purely a case of supply of goods. The above discussion has already held, Commissioner (Appeals) to be wrong while holding the retention of the advance deposit as a consideration for providing the declared service. It has already been held that there was no service tax liability upon the appellant. There arises no question of mentioning the same while self assessing the liability. Otherwise also, mere failure to declare can never amount to be an act of suppression. Hon ble Apex Count in M/s. Pahwa Chemicals (P) Ltd. Vs. CCE 2005 (189) E.L.T. 257 (SC) has held that there has to be some positive act on part of the party which must establish the willful mis-declaration or willful suppression on part of the said party. In the present case the entire show cause notice is silent about any such act on part of the appellant which may amount to suppression of a fact. The element of intent on the part of the appellant to evade the tax liability is miserably missing. Based on the facts herein, the above discussion has already held that, in fact, here is no service tax liability on the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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