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TMI Blog2024 (5) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the appellant is not liable to make reversal of Cenvat Credit in respect of receipt of interest as per new Explanation 3 to Rule 6(1) of Cenvat Credit Rules. The impugned show cause notice has been issued based on a frivolous ground. Hence the same is held void. The findings arising out of such show cause notice are not sustainable. The order under challenge is therefore set aside - Appeal allowed. - HON BLE DR. RACHNA GUPTA , MEMBER ( JUDICIAL ) Shri Kabir Rishi and Shri Himesh Pathak , Advocates for the Appellant Shri Rohit Issar , Authorized Representative for the Respondent ORDER DR. RACHNA GUPTA M/s. Ashiana Housing Ltd., Alwar, Rajasthan has filed the present appeal assailing the Order-in-Appeal No. 296/2022 dated 29.12.2022. The facts relevant for the purpose are as follows : 1.1 The appellants are engaged in providing taxable services as that of Construction of residential complex service, Business support service, Renting of immovable property service, Work Contract service, Legal Consultancy service, Rent-a-cab scheme operator service, Transport of goods by road/transport agency service, Accommodation in hotels, inn, guest house, club or camp site etc., Manpower rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion received from sale of flats (prior to obtaining completion certificate) after aviling abatement at the rate of 70% in terms of Notification No. 26/2012-ST dated 20.06.2012 which was duly mentioned in ST-3 Returns. During the disputed period also the appellant had discharged the service tax liability on the consideration received from the sale of flats, however, since the buyer had paid the said amount of consideration after a considerable delay that the appellant has also received interest on that account. It is submitted that the said interest is specifically excluded from the taxable value of service in terms of Rule 6(2)(iv) of Service Tax (Determination of Value) Rules, 2006 (hereinafter referred to as Valuation Rules). Service tax was not collected by the appellant on the said amount of interest. The activity of receiving interest is wrongly alleged to be an exempted service. However, after being pointed out and being pressurized, the appellant had reversed the Cenvat credit availed on the input services amounting to Rs.1.5 crores (approximately). 3.1 While acknowledging that separate accounts with respect to rendering taxable and exempted services have not been maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the correct findings having logical and legal basis. With these submissions learned Departmental Representative has prayed for the dismissal of appeal. 5. After hearing rival contentions and perusing the relevant paragraphs of the orders of adjudicating authorities below and keeping in view the case law relied upon by the appellants, I observe and hold as follows: 5.1 The foundation of the impugned show cause notice is that the amount of interest received by the appellant on the delayed payment of the amount of consideration received from the sale of flats/villas/shops is alleged to have been received for rendering a taxable service. To adjudicate the said proposition of the department, foremost, I, need to look into as to what activity can be called as service. Definition of service is provided in Section 65B(44) of the Act which reads as follows: (44) Service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include (a) An activity which constitutes merely, (i) A transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) Such transfer, delivery or supply of any goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Credit Rules. On perusal of the above Explanation, it is evident that there should be an activity that is to be performed by the provider of service for the receiver thereof. In the present case, appellant has recovered interest on delayed payment of consideration towards construction service as penalty to deter or discourage such situation of delay. It is thus clear that the appellant has not carried out any activity in specific for receiving such amount of penal interest. Hence, the same cannot be fall under the ambit neither of being called as consideration received for rendering exempted service nor of being exempted service per se. 5.4 The term 'activity' as mentioned under the aforesaid explanation has not been defined anywhere under Finance Act, 1994. However, department vide its circular bearing D.O.F. No. 334/1/2012-TRU dated 16.03.2012 has clarified the meaning and scope of term activity as under: 2.1.1 Activity' has not been defined in the Act. In terms of the common understanding of the word activity would include an act done, a work done, a deed done, an operation carried out, execution of an act, provision of a facility etc. It is a term with very wide co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant to impose any penalty upon the other party nor is it the intention of the other party to get penalized. 28. It also needs to be noted that Section 658(44) defines service to mean any activity carried out by a person for another for consideration. Explanation (a) to Section 67 provides that consideration includes any amount that is payable for the taxable services provided or to be provided. The recovery of liquidated damages/penalty from other party cannot be said to be towards any service per se, since neither the appellant is carrying on any activity to receive compensation nor can there be any intention of the other party to breach or violate the contract and suffer a loss. The purpose of imposing compensation or penalty is to ensure that the defaulting act is not undertaken or repeated and the same cannot be said to be towards toleration of the defaulting party. The expectation of the appellant is that the other party complies with the terms of the contract and a penalty is imposed only if there is non-compliance. 5.7 I also draw support from the case of Steel Authority of India Ltd. Vs. Commissioner of GST C. EX., SALEM reported as 2021 (55) G.S.T.L. 34 (Tri. - Chennai) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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