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2020 (10) TMI 477 - AT - Service TaxAccrual of Service Tax liability - ‘mobilization advance’ paid to the appellant - payment to be made on which stage? - on receipt or on issue of the bill? - HELD THAT:- The several contracts provide for the payment to be made at different, pre-determined stages of performance and are, generally, subject to evaluation of the work undertaken. It is also seen that such appraisal, as a prelude to making payments, is not undertaken until after the execution of the work in relation to the taxable service has commenced and that all the contracts, while linking such measurable stages, provide for payment of only 90% of contracted amount for the entirety of the work. The ‘mobilization advance’ is adjusted against the final payment due and is not linked to the work but as a pledge of the contract between the appellant and principal. It is also subject to furnishing of prescribed ‘bank guarantee’; there is no connection with the performance of the contract. It is not in dispute that the ‘mobilization advance’, carrying interest, is granted to enable the contractor to prepare for undertaking the contracted work. The subsequent adjustment with the final payment due does not suffice to construe this as an advance payment for the work to be done merely because the recipient and payee happened to be the provider of service. The payment of ‘mobilization advance’ is but a separate financial transaction within the contract for providing of service and, within the limits laid down by the Hon’ble Supreme Court in re Intercontinental Consultants and Technocrats Ltd, [2018 (3) TMI 357 - SUPREME COURT] is not permitted to be included in the ‘gross amount’ envisaged in section 67 of Finance Act, 1994. In view of absence of allegation that any part of the contracted value has not been levied to tax, the demand is not consistent with law and deserves to be set-aside - Appeal allowed - decided in favor of appellant.
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