TMI Blog2020 (10) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax. 2. The demand is founded on the factual matrix of mobilization advance having been received by the appellant in pursuance of contracts entered into with recipients of services rendered by them applied to the legal framework established by amendments to section 67 of Finance Act, 1994 in 2005, 2006 and 2008, the clarification issued in circular no. BI/6/2005-TRU dated 27th July 2005 of Central Board of Excise Customs (CBEC) and taxability of works contract service so rendered with effect from 1st June 2007, by the newly incorporated section 65(105) (zzza) of Finance Act, 1994, which, according to the adjudicating authority, overcomes the strenuous defence put forth by the noticee. 3. It is contended by Learned Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Authorized Representative places particular emphasis on section 67(3) of Finance Act, 1994, the proviso to rule 6 of Service Tax Rules, 1994 and the circular of Central Board of Excise Customs (CBEC). According to him, the decision of the Tribunal in Central Power Research Institute v. Commissioner of Central Excise, Bhopal [2017-TIOL-2504-CESTAT-DEL] has placed the decision in re Thermax Instrumentation P Ltd to mobilization advance in the proper perspective and further urges us that the decision in Sunil Hi-Tech Engineers Ltd v. Commissioner of Central Excise, Nagpur [final order no. A/88355-88356/17 dated 13th July 2017 disposing of appeal no. ST/85373 85379/13] makes it abundantly clear that it was considered normal for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n below the proviso in rule 6(1) of Service Tax Rules, 1994. The combined consequence, in the finding of the adjudicating authority, is that advance is payment of consideration for taxable services to be provided and, hence, liable to tax upon receipt. The explanation offered by the appellant of discharge of tax liability on the entire contractual value did not find favour with the adjudicating authority in the absence of details pertaining to the payment. On the other hand, we also do not find any evidence, that is on record in the impugned order, of any tax liability remaining unpaid on the contracted value and the only finding that emanates from the impugned order is that the liability was not discharged on receipt. The consequence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice Tax Rules, 1994 or the incorporation effected in section 67 of Finance Act, 1994 were intended to tax all payments at the time of receipt. From a plain reading of the newly inserted Explanation in the Service Tax Rules, 1994, it would appear that intent was to ensure the distribution of the said advances to the month, quarter or such other period to which the rendering of service could be attributed. The Explanation in section 67 of Finance Act, 1994, doubtlessly, qualified the inclusions in gross amount which, owing to subsequent judicial pronouncements can only be assigned a very restricted frame and to which we shall turn our attention presently. The decision in re Sunil Hi-Tech Engineers Ltd was not called upon to determine this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be inclusive of tax element and, thereby, to be subject to tax, whether received an advance or subsequently. 9. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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