Taxability of Mobilization Advances: CESTAT Remands Matter to Commissioner for Fresh Adjudication [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal(CESTAT) of Mumbai Bench remanded the matter to the Commissioner for fresh adjudication after the taxability of mobilization advances was disputed.

Ahluwalia Contracts India Ltd,appellant-assessee, provided construction-related taxable services between 2007-08 and 2011-12. During an EA-2000 audit, it was found that the assessee had received advances of ₹15.66 crore in 2007-08 and ₹48.63 crore in 2008-09 but did not pay service tax on these amounts. Even when the advances were later adjusted against bills for services rendered, service tax was not paid.

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The department found the assessee’s explanations unsatisfactory and issued a show cause notice on October 1, 2012, by invoking the extended period of limitation. A demand of ₹6.37 crore was raised along with interest and penalty, which was later confirmed by the Order-in-Original dated March 29, 2016.

The assessee's counsel said the service tax demand on mobilization advances was wrong, as these were not payments for services but were meant to arrange equipment and set up infrastructure before starting work. He added that the advances were backed by bank guarantees and that service tax was already paid on the actual work done.

He also said the order was passed without giving a fair hearing. The assessee couldn’t attend due to the serious illness of their Senior Taxation Manager, but all documents were submitted. However, the authority didn’t consider them.

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The departmental representative supported the order, saying no proof was given to show the amounts were loans against guarantees. He also noted the assessee didn’t appear despite several chances.

The two member bench comprising Ajay Sharma (Judicial Member) and Anil.G.Shakkarwar (Technical Member) heard both sides and reviewed the case records and submissions. It noted the counsel’s claim that the order was passed without a fair hearing and without considering submitted documents. To examine this, the tribunal referred to the impugned order, which showed that seven chances were given and six adjournments were granted. The assessee ’s Manager-Taxation appeared twice but failed to file any documents.

The bench found that while the illness of the Manager-Taxation was a genuine reason, someone else could have represented the assessee. It held that the adjudicating authority was right in deciding the case ex parte after giving multiple opportunities.

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However, since the assessee had now submitted documents, the tribunal felt they should be properly examined. It stated that the adjudicating authority was the right forum to verify them.

In the interest of justice, the appellate tribunal remanded the case to the Commissioner for fresh decision after considering all documents and giving the assessee a fair hearing. It also directed the assessee to fully cooperate and avoid unnecessary delays.

In short,the impinged order was set aside and the appeal was allowed.

To Read the full text of the Order CLICK HERE

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