10
V2(ST)95/A-IV/2011
ORDER – IN – APPEAL
M/s. Shapoorji Pallonji & Co. Ltd. Iscon Center, 210 Shivranjani Char Rasta, Satellite, Ahmedabad-380015 (hereinafter referred to as “the appellant”) have filed an appeal along with stay application against the OIO No.STC/74/N-Ram/AC/D-III/2011-12 dated 10.02.2012 issued on 13.02.2012 (hereinafter referred to as ‘the impugned order’) passed by the Assistant Commissioner, Service Tax, Division-III, Ahmedabad (hereinafter referred to as ‘the adjudicating authority’).
2. The facts of the case, in brief, are that the appellant is engaged in the business of providing Construction Services in respect of “Commercial or Industrial Construction” and " Erection Commissioning and Installation Agency", “Construction of Complex”, “Works Contract Service and “Goods Transport Agency”, as defined under Section 65 of the Finance Act, 1994 (herein after referred to as “the said Act”), holding Service Tax registration bearing No. AAACS6994CST017. The appellant had entered into Contract with M/s Tata Motors Ltd (hereinafter referred to as “the TML”) to construct the Tata Nano factory at sanand. The total contract value was Rs. 297.28 crores (exclusive of Service Tax). They have received mobilization advance of 15% of contract value which comes to Rs 44.59 crores and 5 crores for material advance. Thus, they have received an advance of Rs. Rs 49.55 crores towards, rendering of the above mentioned Services. The appellant has considered the advance received as ‘inclusive of Service Tax’ and worked out their Service Tax liability on the said amount @ 12.36% which comes to Rs. 5,41,80,005/-. Later, they have adjusted the said advance payment of Service Tax against actual payment of Service Tax at 10.30% (which was reduced in budget w.e.f. 24.09.2009). The appellant filed ST-3 returns for the period from April-2010 to September-2010. On scrutiny of the said return, it was observed that appellant has short paid Service Tax of Rs. 4,03,827/-. On being asked from the department, the appellant has provided the details of service tax payment made during the said period on 02.08.2011. The details are as below:-
Month / Mobilizationadvance adjusted
in case of M/s TATA
Motors / Tax at 12.36%
(Adv/ 112.36*12.36) / Tax at 10.30%
(Adv/ 110.3*10.3) / Difference
April-2010 / Rs.12103080/- / Rs.1331382/- / Rs.1130206/- / Rs.201176/-
May-2010 / Rs.10294900/- / Rs.1132476/- / Rs.961355/- / Rs.171121/-
June-2010 / Rs.1896931/- / Rs.208669/- / Rs.177139/- / Rs.31530/-
Total / Rs.24294911/- / Rs.2672527/- / Rs.2268700/- / Rs.403827/-
As per the above table it is clear that the appellant has collected the Service tax on the advance payment received from their client @ 12.36% but they have paid to the Govt. @ 10.30%. Thus the appellant has short paid the Service tax of Rs. 403827/-. Accordingly a show cause notice bearing No. STC/599/DEM/Shapoorji/D-III/11-12 was issued on dated 19.10.2011. The adjudicating authority confirmed the said demand in the said impugned order. He also demanded interest under section 75 and imposed penalties under Section 76 & 77 of the Finance Act’1994.
3. Being aggrieved with the impugned order, the appellants preferred the present appeal along with stay application. In the appeal memorandum they contended that they were awarded a construction contract by M/s T M L to construct the Tata Nano factory at Sanand. Total contract value was Rs.297.28 crores. As per contracts terms and conditions they have received mobilization advance of 15% of contract value which comes Rs.44.59 crores and Rs 5 crores as material advance. Thus they were eligible to receive Rs. 44.59 crores but they have actually received Rs.49.55 crores in the month of Dec.2008. After reducing VAT amount from Rs. 49.55 crores they have paid Service Tax of Rs. 54180005/-(492529565/112.36% *12.365=54180005/-) by treating the advance received as inclusive of Service Tax. In between Service Tax rate were reduced to 10.30%. The appellant submitted that they have started rendering services and raising invoices to their client at the reduced Service Tax rate (10.3% w.e.f. 24.09.2009). As per the trade practice they have received Service Tax only at the prevailing rate of 10.30% and not on the rate of 12.36% made by them earlier. The appellant submitted that the TML has adjusted the mobilization advance of Rs. 2,42,94,911/- during the period April-10 to Sept-10. As they have already paid Service Tax @ 12.36% on the said value, now they have adjusted 10.30% against the said value and remaining 2.06% which works out to Rs. 403827/- was adjusted against their total Service Tax liability. The appellant has clarified that total NET taxable receipt was Rs. 11,35,36,938/- (excluding mobilization advance) and Service Tax works out @10.30% to Rs. 1,16,94,305/-. The appellant contended that when they have already paid excess Service Tax of Rs. 4,03,827/- (12.36%-10.30%=2.06%) they have adjusted the same against their service tax liability.Accordingly, after adjustment of Rs. 4,03,827/- they have paid remaining Service Tax (1,16,94,305-4,03,827=1,12,90,478) of Rs.1,12,90478/-. Thus they have correctly discharged their Service Tax liability. Further appellant contended that the mobilization advance received by them was exclusive of Service Tax.
4. Personal hearing in the case was granted on 3/4/2012 wherein Shri Nitesh Jain, authorised Representative on behalf of the appellants appeared before me and reiterated the ground of appeal. He stated that they have received mobilization Advance 495502581/- in Dec-2008. They have considered it cum-duty and paid service Tax @ 12.36%. Later when Service Tax was actually paid, the Service Tax rate was reduced to 10.30%. So they have adjusted the excess amount of Service tax paid earlier against the actual liability. He stated that they informed the adjustment made by them in the ST-3 returns. As the adjustment made are in order, the demand is not sustainable. Hence, he requested to set aside the demand.
DISCUSSION AND FINDINGS
5. I have carefully gone through the facts of the case on record, grounds of appeal in the respective Appeal Memorandums, as well as the oral and written submissions made by the appellant at the time of personal hearing.
6. The appellant submitted that they have received Mobilization advance and material advance from TML and they have paid excess Service Tax of Rs. 403827/- (12.36%-10.30%=2.06%) on the said advance. Afterwards they have adjusted the excess payment of Service Tax against the Service Tax to be paid on the net receipts (excluding mobilization advance and material advance) under Rule 6(1A) and 6(4A) correctly.
6.1 Thus the issues to be decided are
(i) Whether the appellant was right in treating the advance as inclusive of Service Tax and the initial payment of service tax on the advance @ 12.36% was in order or not;
(ii) Whether the adjustment of excess payment made by the appellant against their actual liability of service tax was in order or not.
With respect to point (1) mentioned above, I find that the appellant has received mobilization advance and material advance together amounting to Rs. 49.55 crores in Dec’2008. It is required to examine the liability of Service Tax on the advance received.
6.2 As per Section 65(105)of the Finance Act,1994 ‘Taxable Service’ means any Service provided or to be provided to the client.
As per 67(3) of the Finance Act, the gross amount charges for the taxable service shall include any amount received towards the taxable service, before, during or after providing of such service.
Thus, the appellant is liable to pay Service Tax on the amount of advance received, in the month of receipt of advance. In their defense the appellant claimed that they have not received Service Tax along with the advance from their clients. As per section 67(2) when Service Tax is not charged separately, then the advance received will be taken as inclusive of Service Tax. Accordingly, I find that the appellant has correctly treated the advance received as “inclusive of Service Tax” and paid Service Tax at the rate prevalent during the time of receipt of advance. So, I hold that the appellant has rightly paid Service Tax @12.36% prevalent at the time of receipt of advance by treating the advance received as inclusive of Service Tax.
6.3 The appellant contended that at the time of actual performance of the Service and raising of invoice the rate of duty was reduced to 10.30% and they have received only 10.30% from the customer. I find that the client has been adjusting the part of advance given in the subsequent bills raised. Since the appellant has already paid Service Tax on the advance received at the time of receipt of advance, they are not liable to pay Service Tax on the advance amount adjusted in the regular bills and liable to pay Service Tax only on the balance amount at the prevailing rate of 10.30%. In such a case the question of adjustment does not arise. Also, the question of adjustment will come only when there was any excess payment. As discussed in paras mentioned above, the Service Tax payment made by the appellant on the advance received was in order. There was no excess payment and hence the question of adjustment of excess payment does not arise in this case.
6.4 In their defence, the appellant further stated that at the time of receipt of advance they have not received Service Tax from the customer. They have received Service Tax @10.30% at the time of raising the bill when the actual Service was rendered. In this regard, I find that the appellant has not collected Service Tax on the advance, even though they are liable to pay Service Tax on the advance received at the time of receipt of advance. Hence, they have already considered the advance as inclusive of Service Tax and worked out their Service Tax liability. When the advance received is treated as inclusive of Service Tax, it means that the appellant deemed to have received the Service Tax also along with the advance . Thus, they have rightly paid the Service Tax to the Govt. account. In view of the above, their argument that they have not received Service Tax earlier along with the advance does not merit consideration.
7. Regarding point (ii) mentioned in para 6.1 above, the appellant contended that they have adjusted the excess amount paid as per Rule 6 of Service Tax Rules. The relevant rules regarding adjustment of excess payment of Service Tax is reproduce below:
[Rule 6. Payment of service tax –
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[(1A) Without prejudice to the provisions contained in sub-rule (1), every person liable to pay service tax, may, on his own volition, pay an amount as service tax in advance, to the credit of the Central Government and adjust the amount so paid against the service tax which he is liable to pay for the subsequent period:
Provided that the assessee shall,-
(i) intimate the details of the amount of service tax paid in advance, to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such payment; and
(ii) indicate the details of the advance payment made, and its adjustment, if any in the subsequent return to be filed under section 70 of the Act;]
[(4A) Notwithstanding anything contained in sub-rule (4), where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be.
(4B) The adjustment of excess amount paid, under sub-rule (4A), shall be subject to the following conditions, namely:-
(i) excess amount paid is on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification,
(ii) excess amount paid by an assessee registered under sub-rule (2) of rule 4, on account of delayed receipt of details of payments towards taxable services may be adjusted without monetary limit,
(iii) in cases other than specified in clause (ii) above, the excess amount paid may be adjusted with a monetary limit of [ one lakh rupees] for a relevant month or quarter, as the case may be,
(iv) the details and reasons for such adjustment shall be intimated to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such adjustment.]
From the above Rule, it is clear that the adjustment is warranted only when there is an excess payment. As discussed in paras mentioned above, there was no excess payment in this case. Hence, I hold that the adjustment of Service Tax of Rs. 4,03,827/= made by the appellant is incorrect and they are liable to pay Service Tax on the full value without adjustment. Accordingly, I uphold the demand of Service Tax confirmed by the adjudicating authority. I also direct the appellant to pay the interest under section 75 on the Service Tax amount confirmed as detailed above at the prescribed rate.
8 With regard to the Appellants' request for waiver of penalty under section 76, I find that the Appellants had not paid Service Tax on the total value of taxable service provided by them. They have wrongly adjusted the Service Tax of Rs. 4,03,827/- treating it as excess payment whereas it was not excess payment. This has resulted in short payment of Service Tax to that extent. Thus in this case, it is established that the tax liability was not discharged by them even though they are aware about the applicability and liability of the Service Tax. Penalty under section 76 is imposed for delay in payment of Service Tax. The delay in payment has been proved in this case. The said penalty is imposable whether there is any intention to evade payment of Service Tax or not. Thus, I find no reason to interfere with the impugned order with regard to penalty imposed under Section 76 of the Finance Act1994. Hence the Appellants' request for relief from penalty under section 76 ibid can not be considered.