The Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that service tax not leviable on advance amount received for construction of commercial building which in turn returned.
M/s. Ozone Projects Private Limited, the appellant is registered with the Service Tax Commissionerate for various services including works contract service. During the course of audit of accounts, it was noticed that the appellant was engaged in providing construction services for a project viz. “Metro Zone” at Anna Nagar, Chennai. Later, the appellant did not provide the services and also had to return the advance received along with compensations.
The Department viewed that the appellant was liable to pay Service Tax on the advance received; further, that the appellant had engaged various services for residential construction to be handed over to an assessee Shri G.N. Pandian, for which also Service Tax was not paid by the appellant. For the period from August 2009 to June 2010, there was belated payment of Service Tax for which the appellant had to pay interest.
Again, the appellant had collected electricity charges, water / CMWSSB charges and infrastructure charges from various allottees, which were includible in their taxable value and the appellant had not discharged Service Tax on such charges contending that these are reimbursable expenses. That they had availed ineligible credit on architectural fees, construction charges incurred for interior work of guest house, Sodexo Pass, insurance, air travel, etc., which according to the Department was wrongly availed; that the appellant had to pay interest on the irregularly availed CENVAT Credit which was also utilized by them.
Further, the appellant had not discharged Service Tax on the expenses incurred by them during the import of professional and technical consultancy service under reverse charge mechanism. A Show Cause Notice dated 24.10.2011 was issued proposing to demand Service Tax along with interest and for imposing penalties, by invoking the extended period. After due process of law, the original authority dropped certain demands, however confirmed a portion of the Service Tax demand.
Counsel Shri S. Sankaravadivelu appeared and argued on behalf of the appellant. It was submitted that the appellant had received an amount of Rs.85 crores as advance for the aforesaid project; since the project failed, the advance was returned to the client and no services were provided and that the adjudicating authority has dropped the demand of Service Tax raised in the Show Cause Notice in respect of such advance amount of Rs.85 crores received by the appellant but, interest on such demand proposed in the Show Cause Notice has been confirmed.
It was submitted that the appellant had collected electricity charges, water charges, sewerage charges and infrastructure charges from the allottees of the project; that these charges have been deposited with the concerned authorities. The original authority has confirmed the demand of Service Tax observing that the appellant has collected mark-up on these charges.
It was argued that the appellant was not allowed to collect any mark-up as the allottees would not pay such higher amount to the appellant. Authorized Representative Shri M. Ambe appearing for the Revenue supported the findings in the impugned order.
A two member bench comprising Mrs. Sulekha Beevi C S, Member (Judicial) and Mr. Vasa Seshagiri Rao, Member (Technical) observed that the adjudicating authority has categorically held that there is no tax liability on the advance amount of Rs.85 crores received by the appellant and returned thereafter. However, the adjudicating authority has proceeded to confirm the demand of interest on such Service Tax.
The CESTAT viewed that the demand of interest on the advance (of Rs.85 crores) received by the appellant and returned thereafter was set aside. Further set aside the demand of Service Tax on the reimbursable expenses. The Tribunal modified the impugned order to the extent of setting aside these demands without disturbing the remaining portion of the order.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
