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2018 (4) TMI 613

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..... ext of the preparation of financials, addresses the how much of the transaction over the term of contract whereas Rule 3 of the Rules addresses the when in relation to the rendition of service for computing taxability under the Finance Tax Act 1994. The foundation of the assessment is flawed. Rule 3(a) provides for a situation where the accrual of service is predicated upon the raising of an invoice. In the present case, the admitted position is that the petitioner does not raise invoices as and when a particular landmark is reached and the accrual of the consideration stage-wise is occasioned automatically upon completion of the stage of construction set out in the agreement itself - It is a well settled position that when a statutory provision or Rule addresses a specific scenario, such rule/provision is liable to be interpreted on its own strength and context and one need look no further to alternate sources to seek clarity in regard to the issue that has been addressed by the aforesaid rule/provision. Insofar as Rule 3 sets out a specific modus operandi in this regard, it assumes priority and is the only relevant factor to be taken into account in the determination of .....

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..... 2013-14 and 2014-15. The service tax actually payable as per Profit and Loss account, service tax actually paid and service tax due were calculated and it appeared that the assessee are liable to pay the differential Service Tax amount of ₹ 1,70,07,530/- from January 2013 to March 2015 on account builder's portion and ₹ 16,34,586/- on account of land owner's portion which were already handed over to the owner.' (iii)The petitioner filed a reply dated 22.09.2016 to the effect that the entire amount demanded has already been remitted by the petitioner and as such, the present show cause notice makes a double levy upon the petitioner that is impermissible in law. (iv)The petitioner specifically relied upon the provisions of Rule 3 of the Point of Taxation Rules, 2011 (hereinafter referred to as 'Rules') to state that the methodology followed by it was in line with the prescription contained in the Rule and as such no further demand could be made. (v)The petitioner also relied upon Circular No.144/13 of 2011 dated 18.11.2011 issued by the Central Board of Excise and Customs (in short CBEC ) providing various clarifications on the aspect o .....

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..... cognized as income in the subsequent years. The assessee has not given any details of Advance received from the buyers project wise year wise and details of payment of service tax within relevant date on such advances received during notice period. The assessee have all along stated the method of computation in ST-3 and AS-7 but not furnished any details for the difference in value between ST-3 Return and Balance sheet. In absence of any details, mere averment by the assessee that they had paid service tax at the time of receipt of advance is not acceptable and the allegation of the assessee that the demand of service tax results in double taxation is not correct. Hence I hold that the assessee are liable to pay service tax on the differential value as detailed in para 13.3 above.' 6.A counter has been filed by the respondent raising two main defenses - firstly, that the impugned order is statutorily appealable and as such the present Writ Petition is not maintainable and secondly that no materials have been furnished to support the stand of the petitioner that the service tax, as computed on the builders' portion, has, in fact, been paid. Thus, according to the Reven .....

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..... service receives a payment up to rupees one thousand in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of clause (a).] Explanation For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provisions of taxable service, the point of taxation shall be the date of receipt of such advance.] 10.Rule 3 finds part in the Point of Taxation Rules, 2011 applicable with effect from 01.04.2011. It provides for a methodology for determining the accrual and quantification of services, the exact delivery of which is not certain or ascertainable, and that may also be continuous in nature. 11.Before me, two legal issues arise for determination: (i) Relevance of the P and L accounts of the petitioner in the determination of point of rendition of service and the method of quantification of receipts in respect thereof and (ii) The application of Rule 3 itself in the admitted facts and circumstances of the present case. 12.Rule 3 specifically provides .....

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..... ost plus contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: (a) it is probable that the economic benefits associated with the contract will flow to the enterprise; and (b) the contract costs attributable to the contract, whether or not specifically reimbursable, can be clearly identified and measured reliably. 24. The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed. This method provides useful information on the extent of contract activity and performance during a period. 25. Under the percentage of completion method, contract revenue is recognised as revenue in the statement of profit and loss in the accounting periods in which the work is performed. Contract costs are usually recognised as an expense in the statement of profit and loss in the accounting periods in .....

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..... a) contract costs that relate to future activity on the contract, such as costs of materials that have been delivered to a contract site or set aside for use in a contract but not yet installed, used or applied during contract performance, unless the materials have been made specially for the contract; and (b) payments made to subcontractors in advance of work performed under the subcontract. . . . . 15. AS 7 thus provides for a detailed methodology for the reporting and determination of the percentage of income from the contract over the term of the project and sets out the mode of computation for arriving at the same. The basis of such recognition and reporting is the apportionment of the income earned and expenditure incurred over the tenure of the project. This is entirely different and distinct from the scope, object and application of the Point of Taxation Rules that seeks to set out a methodology for determination of when the service was rendered and consequently when the receipt of income from such rendition be taxed. 16.The emphasis and thrust of each methodology is in alignment with the different purposes that they bear reference to AS 7, in the contex .....

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..... ore Seventy Five Lakhs Forty Three Thousand Three Hundred And Twenty Only) for the construction of a Three Bed Room Flat measuring 2055 sq. ft. as per the specifications mentioned in Schedule B and Schedule C in the following manner: At the time of booking - ₹ 25,43,320/- On completion of Basement work - ₹ 26,00,000/- On completion of Ground Floor Roof - ₹ 18,00,000/- On completion of First Floor Roof - ₹ 18,00,000/- On completion of Second Floor Roof - ₹ 18,00,000/- On completion of Third Floor Roof - ₹ 18,00,000/- On completion of Brick Work - ₹ 18,00,000/- On completion of Internal Plastering - ₹ 18,00,000/- On completion of Tile Laying in your flat - ₹ 12,00,000/- On Handing Over Possession of your flat - ₹ 4,00,000/- 2. The Party of the Second Part has paid a sum of ₹ 87,43,320/- (Rupees Eighty Seven Lakhs Forty Three Thousand Three Hundred And Twenty Only) by the way of cheque no.049006 drawn on ICICI Bank, dated 05.11.2014., to the Party of the First Part as Advance, the receipt of which sum, the party of the First Part hereby acknowledges. 3. The P .....

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..... e/provision is liable to be interpreted on its own strength and context and one need look no further to alternate sources to seek clarity in regard to the issue that has been addressed by the aforesaid rule/provision. 27.I am conscious of the fact, and indeed Mr.Sundar has repeatedly emphasized, that there is an alternate statutory remedy available in respect of the impugned order and as such there is no warrant for the interference of this court in extra-ordinary jurisdiction under Article 226 of the Constitution of India. However, all relevant facts are on record. Both learned counsel concur on the position that the agreements that provide for the landmarks or stages of completion of work by the petitioner and consequential payments by the customers, is available with the Department. 28.The petitioner has also filed an Annexure tabulating the consideration actually received from the customers as a lump-sum as against the amounts that would be payable in accordance with the landmarks under contract to illustrate that in almost all cases, the advance received is in excess of what would have been received, if the consideration had been received stage-wise. It is for the assess .....

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