Commitment of Performance towards Machines Supplied not liable for rendering Declared Service u/s 66E (e) of Finance Act: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) observed that the commitment of performance towards machines supplied not liable for rendering declared service u/s66E (e) of Finance Act, 1994.

The Department while scrutiny of appellant’s records for the year 2014-15 to June,2017, observed that they have shown an amount of Rs.29,57,753/- as miscellaneous income and receipts under head the “balance written back” in the balance sheet of 2016-17. From further enquiry of ledger, the department found that the appellant has write off above said payable amount to their debtors/vendor of contract drill. Department formed an opinion that the appellants have tolerated the situation and thus are covered under the ambit and scope of declared service as provided under section 66E (e) of the Finance Act, 1994.

The counsel for the petitioner submitted that the appellant otherwise has paid excise duty on the machines supplied, at the applicable rate on the full transaction value of supplied goods of Rs.29,57,753/-. The amount on which duty has been proposed is the part of said transaction value on which excise duty stands already discharged. Resultantly, the appellant is not liable to pay Rs.4,43,663/- in the name of service tax merely on the basis of “balance written back” entries amounting to Rs.29,57,753/-. The written back entries were duly in view of the provision towards the performance deduction charges.

A Single Bench of Dr Rachna Gupta, Judicial Member observed that “What has been agreed by the appellant, as discussed above, is commitment of performance towards the machines supplied by them in case those perform subdued as per the standard committed performance. The alleged tolerance, in the given circumstances, is possible on the part of the receiver of machines. Hence, the question of tolerating any act by the appellant does not at all arise. The Appellant, therefore, cannot be held liable for rendering any declared service as defined under section 66E (e) of Finance Act, 1994.”

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates