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TMI Blog2024 (7) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... e are in the nature of earnest money and not liable to tax at the time of receipt. This tribunal in case of Commissioner of Central Excise Pune Vs. Thermax Engineering Construction Company Ltd [ 2017 (12) TMI 1191 - CESTAT MUMBAI] as held similar view on the similar facts that ' It is also found from the certificate issued by the Chartered Accountant that the of such advances We thus find no reason to hold that the asseessee has discharged service tax liability on the entire amount said amount is liable to be taxed at the time of receipt. It became the part of consideration only when it was proportionately 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.' The facts of the matter at hand are similar to the one which has been decided by this tribunal, following the same it is held that the impugned order in original is without any merit and therefore the same is set aside - appeal allowed. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of loan is not the taxable event. The learned advocate has submitted that the advances, which were received by the appellant from its client are later on adjusted in the bills raised by them completion of various stages of the contract and therefore the advances in the nature of money are not liable to tax as at the time of receipt of such advance no service has been rendered by them. In support of above submission, the appellant has relied upon the decision of this tribunal in case of CCE Vs. Thermax Engineering Contraction Company Limited reported under 2017 (12) TMI 1191-Cestat Mumbai. The learned advocate has also cited decision of this tribunal in case of Commissioner of Central Excise Pune Vs. Thermal Engineering Construction Company Ltd reported under 2019 (22) G.S.T.L. 80 (Tri. Mumbai) as well as Gammon India Limited Vs. Commissioner of Service Tax (vi) Mumbai reported under 2021 (44) GSTL 373 (Tri. Mumbai). 3.3 The learned advocate has also contended that the impugned order in original has been issued in utter violation of principals of the natural justice as no personal hearing has been accorded to the appellant and the impugned order has been passed ex-parte. 3.4 The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Central Excise Pune Vs. Thermax Engineering Construction Company Ltd reported under 2019 (92) G.S.T.L. 80 (Tri. Mumbai) as held similar view on the similar facts the relevant extract of the above mentioned decision are reproduce here below: 2. Brief facts of the case are that M/s. Thermax are engaged in Commercial Industrial Construction Service and are pay service tax on the same They were issued show cause notice, dated 22-10-2010 proposing demand on the ground that they have not net paid service tax on receipt of advance from their customer which were later adjusted against the bills received on completion of stages of the contract and tax was paid on 5th of the following month when the invoices for services were raised Thus liable to pay interest on same and are also liable to pay service tax on advance appearing in their books Further demand raised on the ground that M/s Thermax has availed full credit on the amount of service tax on their input services whereas they have retained certain portion of the total amount to be paid to vendors as safeguard against completion of their various projects in the form of retention amount is retention amount and thus they were req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of earnest money. Thus the same is not liable to tax. x. It is also found from the certificate issued by the Chartered Accountant that the of such advances We thus find no reason to hold that the asseessee has discharged service tax liability on the entire amount said amount is liable to be taxed at the time of receipt. It became the part of consideration only when it was proportionately 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 Mis. Thermax Instrumentation Ltd CCE. 2015-TIOL-2736-CESTAT-MUM 2015 42 5 19 (Tn. -Mumbai) the Tribunal held that advance cannot be considered as receipt towards taxable service as it is an ooligation 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 JR. Industries, 2009 T j STR 51 (Tri. Del) it was held that when service was not provided the advance receipt cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents to Section 67 of Finance Act, 1994 in 2005, 2006 and 2008 the clarification issued in Circular No B1/6/2005-TRU dated 27th July with effect from 2005 of Central Board of Excise Customs (CBE 1st June central Board C and taxability of works contract service so rendered 2007 by the newly incorporated Section 55(105)(zzza) of Finance Act 1994 which according to the adjudicating authority overcomes the strenuous defence put forth by the notice. 4. Learned Authorized Representative places particular emphasis on Section 67(3) of Finance Act, 1994, the proviso to Rule 6 of Service Tax Rules, 1994 and the circular of Central Board of Excise Customs (CBE C). According to him, the decision of the Tribunal in Central Power Research Institute v Commissioner of Central Excise, Bhopal (2017-1101-2504- CESTAT DEL 2017 (6) G.S.TL. 42 (Tri Del)) has placed the decision in re Thermax instrumentation P. Lid to mobilization advance in the proper perspective and further urges us that the decision in Sunil Hi-Tech Engineers Lid v. Commissioner of Central Excise, Nagpur [Final Order Nos. A/88355-88356/17, dated 13th July, 2017 disposing of Appeal Nos. ST/85373 85379/13] makes it abundantly clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the notification of Point of Taxation Rules, 2011, effective from 1 April 2011 there can be no doubt about the intention to collect tax on payment, received in advance of performance of service for which that, in part or wholly consideration, being made manifest. In the context of this dispute, in which the appellant claims to be compliant with the said Rules, the liability to tax on advance payment is the first issue for consideration Undoubtedly, the definition of taxable service and the value to be adopted for assessment, in accordance with Section 67 of Finance Act, 1994, incorporate to be provided and is not restricted to provided or 'rendered. Therefore, it can be construed that Point of Taxation Rules, 2011, though envisaging tax liability on consideration received an advance, cannot be perceived as the original expression of legislative intent as any comprehensive statutory instrument is bound to encompass the existing provisions, this is particularly so as the notification of the said Rules tax was levied on 'receipt basis and not on accrual basis. The recognition of this principle did not derogate from the inclusion of 'advance payments in the grouping of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement and thereby to be subject to tax whether received an advance or subsequently. 9. The several contracts provide for the payment to be made at different, pro-determined stages of performance and are, generally, subject to evaluation of the work undertaken. It is payments, is not undertaken until after the execution of the work also seen that such appraisal, as a prelude to making in relation the contracts, while linking such measurable stages, provide for payment the work. The 'mobilization advance to the taxable service has commenced and that all of only 90% of contracted amount for the entirety of the work. The mobilization advance is adjusted against the final payment due and is not linked to the work but as a pledge of the contract between the appellant and principal. It is also subject to furnishing of prescribed bank guarantee, there is no connection with the performance of the contract It is not in dispute that the 'mobilization advance, carrying interest, is granted to enable the contractor to prepare for undertaking the contracted work. The subsequent adjustment with the final payment due does not suffice to construe this as an advance payment for the work to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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