CE, CGST, Delhi-III Versus National Informatics Centre Service Inc.
Service Tax
2018 (8) TMI 902 – CESTAT NEW DELHI – 2019 (22) G. S. T. L. 394 (Tri. – Del.)
CESTAT NEW DELHI – AT
Dated:- 16-8-2018
Appeal No. ST\/53521\/2015-CU ( DB ) – Final Order No. 52777\/2018
Service Tax
HON'BLE SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) And HON'BLE SHRI C.L. MAHAR, MEMBER (TECHNICAL)
\nFor the Appellant : Shri Amresh Jain, DR
\nFor the Respondent : Shri Vibhav Narang, Advocate and Shri A.K. Batra, CA
\nORDER
\nPer Anil Choudhary
\nThis appeal by Revenue is against order-in-original dated 16th June, 2015 passed by the Principal Commissioner Service Tax, Delhi – III Commissionerate, wherein the ld. Commissioner confirmed the demand on outstanding advances along with interest and further proceeded to drop the proposed demand under the head “Erection, commissioning or installation services”.
\n2. The ld. Commissioner has, for dropping the demand, observed as follows: –
\n “….The assessee is <\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n hereinafter referred as sponsors) whose project is being implemented by the assessee. The payment against these invoices is settled by the assessee from the funds allocated in terms of administrative approval of the Ministry. The assessee charges\/retains a definite amount from the allocated funds as his administrative charges as settled between the concerned Ministry and them.” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ugh empanelled vendors, who are empanelled based on Open Tender process, as prescribed in the General Financial Rules of the Government of India. NICSI further provides vairus services like website design & development services, IT support service, etc. Various clients primarily ministries (both state and central) (herein after referred to as “clients”) approaches NICSI in order get their projects executed. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n vances are only routed through the balance sheet under “other long term liabilities”\/”Current Liabilities.” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n calculated on advance outstanding being Rs. 50.17 crore along with interest on delayed payment of tax Rs. 13.94 crores. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ment in January 2001 with Forster Wheeler Energy Ltd. for project management consultancy in relation to setting up and operating the above LNG terminal. The agreement detailed the various areas in which Forster Wheeler was required to advise and assist in relation to the execution of the project. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n g and implementing the procurement, establishment, engineering commissioning etc. i.e. comprising of all aspects of execution of the project. After receipt of the advance money, the respondent alone is responsible for overall execution of the projects and there seems to be no other agency as an independent entity involved in the execution of the entire project. All agencies involved in execution of any project are only working in the capacity of vendors\/subcontractors of NICSI, the respondent. As the project is given to the respondent on turn-key basis, therefore, the gross amount received by the respondent towards execution of the project constitutes the gross taxable value. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n advisory role and has not executed the projects themselves and hence, undoubtedly, are providing “Consulting Engineering Services”. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n n of the duration of the project. Further, provided that the respondent will spend the grant-in-aid exclusively in pursuance of the objectives envisaged in rules\/memorandum of DIT and for the purpose, it is being sanctioned. Further, provided that grant-in-aid shall be utilised for the purposes for which it has been sanctioned and as per the guidelines are annexed to the Administrative Approval dated 28.01.2009 and respondent and NIC will be liable to refund the unspent balance, if any, to the comment of India. Further, provided that the respondent and NIC will maintain and will present their annual accounts in the standard format as required under GF Rules, 2009. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n in actual execution of the project. The project management functions relating to the project continued to be with Petronet L& G Ltd., which was engaged in the business of setting and operating LNG terminal for receiving storage degasification etc. It was Petronet, which have entered into an EPC contract with the Japanese company to develop, design, engineer and procure equipment, materials and supplies to erect and construct storage tanks of 5 MMTPA capacity with potential to expand. The EPC contract also envisaged other works and involved offshore supply, offshore services, onshore supply, onshore services and construction and erection. Petronet had entered into an agreement with Foster for project management consultancy in relation to setting up and operating the LNG terminal and required to advise and assist in relation to the execution of 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 standa<\/p>\n = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n de Notice No.53 – CE- ST\/97 of the New Delhi Commissionerate dated 4th of July 1997, wherein giving clarification, it is provided “Consulting Engineer” means any professionally qualified engineer or engineering firm, who either directly or indirectly renders any advice consultancy or technical assistance, in any manner, to a client in one or more disciplines of engineering. The taxable service rendered by a Consulting Engineer means any service provided to a client by a Consulting Engineer in relation to advise consultancy or technical assistance, in any manner, in one or more disciplines of engineering. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s 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 the project. It is also an admitted fact that the respondent has themselves not done any erection, commissioning or installation. Such work has been done by the vendors and\/or by agencies appointed by the respondent \/assessee. We further find that the assessee\/respondent herein has only done the work of advising and assisting the sponsoring agency in selecting various venders, who would supply and \/commission various<\/p>\n = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" CE, CGST, Delhi-III Versus National Informatics Centre Service Inc.Service Tax2018 (8) TMI 902 – CESTAT NEW DELHI – 2019 (22) G. S. T. L. 394 (Tri. – Del.)CESTAT NEW DELHI – ATDated:- 16-8-2018Appeal No. ST\/53521\/2015-CU ( DB ) – Final Order No. 52777\/2018Service TaxHON'BLE SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) And HON'BLE SHRI C.L. MAHAR, MEMBER … Continue reading “CE, CGST, Delhi-III Versus National Informatics Centre Service Inc.”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-13263","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/13263","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13263"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/13263\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13263"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13263"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13263"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
For full text:-Visit the Source <\/a><\/p>\n
\n3. The brief facts are that the respondent, National Informatics Centre Services Inc. (NICSI) is a Government Company incorporated under Section 25 of the Companies Act 1956. They are registered with Service Tax Department under the taxable category of ” Consulting Engineer Services”.
\n4. NICSI was set up in August, 1995 by National Informatics Centre (NIC) and Department of Electronics & Information Technology (DEIT), Government of India; with the approval of Cabinet. NICSI is established to provide total IT solutions to the Government Organisation. The primary aim of NICSI is to strengthen Government Service<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n5.1. Work orders undertaken by NICSI can be categorized as under:-
\na) Where NICSI is acting as implementing agency;
\nb) Where NICSI is acting as principal service provider;
\nc) Where projects involves supply of goods exclusively;
\nSample copies of agreements and invoices are enclosed, in appeal paper books.
\n5.2. Where NICS is acting as implementing agency: In order to understand the flow of transactions, the following chronology is noted-
\n(i) On receipt of award letter from the clients, assessee examines the kind of services to be provided and accordingly appoint the empanelled <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n5.3. Where NICSI acts as Principal Service provider, the service tax liability under “Consultant Engineering Services” is duly discharged. Further, in case of projects involving supply of goods exclusively, there is trading of goods, hence, falls outside the purview of Finance Act, 1994, no service tax liability is attracted.
\n6. According to Revenue, as proposed in the show cause notice, invoking the extended period of limitation for the period 2008 – 09 to 2012 – 2013, there is wrong classification of services of the activities by the respondent under “Consulting Engineer Services”. The turnkey services, which involves supply and installation of software \/hardware with testing and commissioning and on site separate services, hence, are liable to be classified under ECIS. Accordingly as per the Revenue, there is short payment of service tax, as the taxable value, should have in<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n8. The ld. AR for Revenue, Mr. Amresh Jain, reiterating the grounds of appeal stated that the ld. Commissioner has erred in dropping the demand of Rs. 389.02 crores concluding that the activity \/service of the respondent was in the nature of “Consulting, Engineering Services” and further, that the respondent was discharging service tax on the amount received as administrative charges from the government\/sponsores on agreed rate, for their services. Further, the ld. Commissioner has observed that the respondent identified the vendors and also negotiated the rates etc. by using their technical expertise. The vendors raised their invoice directly in the name of Ministeries of Govt. of India and other autonomous bodies, whose project was being implemented by the respondent. The Adjudicating Authority also erred in observing that the respondent themselves has not executed<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n10. Whereas in the present case, there are no such agreements. The agreements herein, this case, are between the respondent and the Government Departments \/ Ministries or other organisations for implementing the entire project on turn-key basis and it was nowhere mentioned that the contract is for providing consultancy in relation to execution of the project by different vendors.
\n11. Further, from the copies of project\/documents, agreements, pro forma invoice, etc., pertaining to some sample projects obtained from the respondent on examination appeared that the respondent was required to undertake the entire range of activities, which, inter alia, comprises of procurement, installation of eq<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n13. Further, although the Adjudicating Authority upheld the noticee”s liability of payment of service tax at the time of receipt of advance\/receipt of final payment, whichever is earlier, yet he has erred in dropping the complete demand of Rs. 3,89,02,36,342\/- , which also included the demand of Rs. 50.17 crore o<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n16. The respondent first provided advance from grant-in aid to undertake the activities assigned under the award\/work orders. Such grant-in-aid was given to them by the Ministry of Communication and Information Technology, Department of Information Technology, Government of India, National Knowledge Network Division directing the Pay & Accounts Officer, Department of Information Technology to release the funds for the project “action establishment of national knowledge network” to the respondent, to be implemented by NIC, which was the implementing agency. The letter dated 30.03.2010 issued by the Ministry, wherein in para-2, it is stated that sanction of the President of India is hereby conveyed to release the amount of Rs. 240 crore towards grant-in-aid to the respondent, to incur expenditure towards the said project. Further, in para-3, it is stated th<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n17. Thus, it is evident that the respondent has acted only as an implementing agency and the disbursed the payments to the vendor's on behalf of Department of Information and Technology, 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 <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n20. The ld. Counsel also points out that from the copy of pro forma invoice dated 16.02.2002 raised on the Principle – NIC, a Government of India Enterprises, wherein they have given the quotations for various items required for computerization , and the said invoice have shown 7% administrative charges, on the invoice amount. Further, they have paid the service tax on such administra<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
For full text:-Visit the Source <\/a><\/p>\n