2018 (8) TMI 902 – CESTAT NEW DELHI – TMI – Levy of service tax – outstanding advances along with interest – Consulting Engineer Services – Pure agent services – Held that:- The respondent has provided only “Consulting Engineer Services”, on which they have discharged the service tax liability.
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The work order issued by the Government Department is in the nature of cost plus contract, wherein the respondent has been appointed as the implementing agency on behalf of the Government Department and the money has been received as a trustee. Further, the respondent is liable to account for every single rupee spent for on behalf of the Government. They are not entitled to appropriate a single rupee more than the agreed 7% as agency charge or administrative charges. Further, the activity of the respondent is held to be in the nature of pure agent. As such, no service tax can be demanded on the amount of advance received and /or on the amount spent out of that advance for the purpose of t
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d. Commissioner has, for dropping the demand, observed as follows: – ….The assessee is appointed by various ministries of Government of India & other autonomous bodies to co-ordinate & gets the projects such as computerization/networking completed from various vendors. The scheme is like this, that once some project is approved by the competent authority in the Government of India, its administrative approval is granted with a total estimate cost and the period within which it has to be implemented by National Informatics Centre (NIC)/National Informatics Centre Services Inc.(NICSI). The assessee identifies different vendors for execution of various items of work required to be done for complete execution of the project. Entire budget is put at the disposal of assessee by the Government Department or autonomous bodies which had approved the project. The assessee advertises and identifies the vendors and also negotiates the rate etc. by using their technical expertise. Th
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T solutions to the Government Organisation. The primary aim of NICSI is to strengthen Government Services those are accessible to the common man through the medium of common service delivery outlets. NICSI provides state-of-the-art technology and cost effective solutions to ensure cost-effectiveness, efficiency, transparency and reliability of such services. As a leading e-Governance software solution provider, NICSI has the following main objectives:- a. to provide economic, scientific, technological, social and cultural development in India; b. to speed up e-Governance implementation across the various arms of the government at national, state and local levels; c. to enable government organizations to become e-Governance ready so that they can provide better services to the citizen through common service delivery outlets ensuring efficiency, transparency, reliability of services at affordable costs; 5. NICSI acts as an implementing /nodal agency or project management consultant for v
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see examines the kind of services to be provided and accordingly appoint the empanelled vendor. (ii) On the basis of above examination, assessee raises proforma invoice /quotation (which includes the estimated value of goods, services and admin charges, etc.) to the clients and assessee receives advance(s) from its clients. Further, as per the payment terms, any unspent portion of the advances has to be returned to the clients. (iii) After completion of the projects, the empanelled vendors raise invoices directly in the name of the clients (not in the name of assessee). As a consideration to implement the project, assessee charges only administrative charges from the clients. (iv) Presentation in the financial statement; It is pertinent to highlight there that neither gross amount received is shown as revenue nor payment made to vendor claimed as an expense. In other words, only the consideration charged by the assessee in respect of implementing the projects, is reflected in the Incom
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, there is short payment of service tax, as the taxable value, should have included the value of goods pertaining to all the projects undertaken by the respondent as implementing agency under the various contracts. Accordingly, demand for the period 2008 – 2009 to 2012-2013 of ₹ 389.02 crores was proposed. The taxable turnover calculated by adding the advance receipts pertaining to the project(s) involving exclusive services with advance receipt pertaining to the projects involving supply and service both. From such taxable turnover, the service tax was calculated at ₹ 474.55 crores and after reducing the amount of service tax already paid ₹ 85.52 crores, the balance demand was proposed at ₹ 389.02 crores. 7. Further, Revenue alleged that the respondent has not paid the tax on the advances at the time of receipts, thereby violating provisions under Rule 6 of Service Tax Rules, 1994 read with rule 3 of Point of Taxation Rules, 2011, as applicable during the perio
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t. The Adjudicating Authority also erred in observing that the respondent themselves has not executed any of the projects but has acted as an intermediary in between the sponsoring agency and the executing agency. 9. He has further drawn our attention to the reliance placed by the ld. Commissioner on the ruling of this Tribunal in the case of Foster Wheeler Energy Ltd versus CCE- 2007 (7) STR 443 (Tribunal-Ahmd.), which is not relevant to the present case. In the above said decision, PLL (Petronet LNG Ltd.) entered into an EPC contract with M/s. Ishikawajma-Harima Heavy Industries Ltd., to develop, design, engineer and procure equipment, materials and supplies to erect and construct storage tanks of 5 MMPTA capacity, with potential expansion to 10 MMTPA capacity at the specified temperatures. The EPC contract also envisaged providing marine facility (jetty and island brake water) for transmission and supply of LNG to purchasers. The project involved, inter alia, offshore supply, offsho
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ertake the entire range of activities, which, inter alia, comprises of procurement, installation of equipments, installation of hardware, installation of software, testing of equipments, hardware and software, running of pilot projects, commissioning of equipments, systems and network, handing over the operation of the equipment to the respective clients and repair and maintenance of installed equipments and systems, supply of skilled manpower. In the projects executed by the respondent more than one or all of the above activities are involved during execution of the projects. 12. The Department of Information Technology (MT), Government of India has awarded "National Knowledge Network (NKN) project to the respondent/ NICSI, as per the administrative approval dated 30/03/2010. The objective of NKN is to interconnect all universities, libraries, laboratories hospitals and agricultural institutions to share data and resources across the country over the high-speed (of gigabit capabi
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opping the complete demand of ₹ 3,89,02,36,342/- , which also included the demand of ₹ 50.17 crore on non-payment of service tax on the outstanding advance amount, without adequately discussing the nature of projects, whether these were on turnkey basis or otherwise. Further, there is no discussion in the order as to the appropriation of the amount deposited by the respondent of ₹ 50.17 crores prior to the SCN along with interest of ₹ 13 .94 crores. 14. The ld. Counsel for the respondent/assessee further submits that the respondent is providing Consulting Engineer Services and is discharging service tax thereupon. They are engaged in advising and assisting the sponsoring agency in selecting various vendors for supplying and commissioning of various items of work, which are in the nature of computer technology. The personnel, working with the respondent, are also by and large professionally equipped computer engineers, one of the prime requirements of any service
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40 crore towards grant-in-aid to the respondent, to incur expenditure towards the said project. Further, in para-3, it is stated the grant-in-aid given to respondent will be regulated in accordance with the provisions contained in the terms and conditions of the Department of Information Technology and are subject to Chapter 9 of General Financial Rules, 2005, as amended from time to time. It is further provided that the accounts of the respondent, NICSI and NIC shall be audited by C&AG or by any person authorized by him on its behalf in accordance with the statutory provisions. Further, the accounts of respondent shall be open for inspection by the Sanctioning Authority and Audit, both by the Comptroller and Auditor General of India under the provisions of C & AG (DPC) Act 1971 and Internal Audit party by the Principal Accounts Office of the Ministry or Department, whenever it is called upon to do so. Further, the Utilisation Certificate of sanctioned amount of ₹ 240 cro
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ology, Government of India and others, acted as a pure agent. It is established law that the expenses incurred as a pure agent are not liable to be included in the gross value of services under section 67 of the Finance Act read with Rule 5 of STR 2006. Further, the respondent has rightly discharged the service tax liability on the administrative charges charged and received from the Government Department, as implementing agency, and has also paid service tax in respect of other services under the head Consultancy Engineering Services . Further, the appellant paid service tax on the income recognized in their accounts and has shown in the profit and loss account. The Revenue has erred in demanding service tax on the gross amount received from Department of Government of India, out of grant-in-aid. 18. The ld. counsel further relied on the ruling of Coordinate Bench of this Tribunal in Foster Wheeler Energy Ltd versus CCE – 2007 seven STR 443 (Tribunal-Ahmd.), wherein under similar fact
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the project. Foster was in the role of advisers/consultant to petronet so that the work of EPC contractors are as per the requirement and standards envisaged by Petronet. This Tribunal held that from a close reading of the agreement and the report submitted by Foster in the records, sought to maintain, are all of technical nature and, therefore, there is no doubt that the services rendered are essentially, predominantly in the field of engineering. Accordingly, it has been rightly held that Forster surrendered services of Consulting Engineer. 19. The learned Counsel also relied on the ruling of another Coordinate Bench of this Tribunal in the case of M/s. IRCON International Ltd. versus CCE, Patna- 2017 (4) TMI 903 CESTAT-KOLKATA. Accordingly, the ld. Counsel urges that the appeal of Revenue is without merits as the activities of the respondent/assessee are not liable to be classified under ECIS. It is further urged that under similar facts and circumstances, for the subsequent period,
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and the said invoice have shown 7% administrative charges, on the invoice amount. Further, they have paid the service tax on such administrative charges. 21. The ld. Counsel further states that the show cause notice is bad and not maintainable for invoking the extended period of limitation. The appellant is a regular assessee registered with the Service Tax Department, for consulting engineer services, and filed their returns from time to time and have maintained proper books of accounts and have recorded all the transactions therein, which is an admitted fact. Thus, in the facts and circumstances, the conditions precedent for invocation of extended period, being not available like suppression, fraud, intention to evade the duty liability etc, the show cause notice is fit to be held not maintainable. 22. Having considered the rival contentions, we are satisfied that the respondent has provided only Consulting Engineer Services , on which they have discharged the service tax liability.
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