TMI Blog2021 (7) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... tly clear that the appellant is service recipient and M/s SGSL is service provider. Hence the payment of service tax can be the liability only and only of M/s. SGSL. The Machine Availability clause in the present case, to my opinion when read with the entire agreement, there is an apparent intent that the terms of agreement shall not be violated and that the service provider shall not compromise with the quality of service else the commercial interest of the appellant shall remain safeguarded in the form of compensation to be paid by M/s. SGSL. Hence, it cannot, by any stretch of imagination, be stated that the recovery of sum by invoking the said clause is the reason behind the execution of agreement for a accrued consideration. The amount received by the appellant in terms of Machine Availability clause, from the service provider with reference to maintenance of WTG due to shortcoming in said service is merely an amount to safeguard the loss of appellant. The said amount cannot be called as consideration for the tolerance of service provided and some lacunae thereof nor it makes the appellant the service provider. Infact once the appellant receives compensation for the down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g No. 3185 dated 1.12.17 to the appellant alleging that agreeing to the obligation to tolerate the Act as per said Machine Availability clause amounts to declared services as envisaged under section 66E(e) of Finance Act, 1944, and thus the amount received, through credit notes, by the appellant i.e. ₹ 1.33 crores from M/s. SGSL during the period 2015-16 was alleged to be service liability of the appellant towards said Declared Services and as such, the Service tax of ₹ 19,34,212/- was proposed to be recovered from the appellant along with appropriate interest and the proportionate penalties. This proposal was confirmed vide the order-in-original No. 27 of 2018-19 dated 12.10.2018. The appeal thereof has been rejected vide the order under challenge. 5. I have heard Shri R Sudhinder, learned Counsel for the appellant and Shri P Juneja, learned Authorised Representative for the Department. 6. It is submitted on behalf of the appellant that the appellant has been the owner of WTG and it is M/s. SGSL who has been in the business of operating, managing and maintaining the said WTGs; The agreement dated 17.12.2014 was executed between the two vide which M/s. SGSL ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 65(64) of Finance Act defines the Service to mean any activity carried out by a person for another for consideration and includes a declared service . This section provides an exclusion clause also which is not required to be invoked in the given facts and circumstances. Tax is defined by section 64(50) of the Act to mean an amount of service tax leviable under the provisions of Chapter 5 of Finance Act. As per Sub clause 51 Taxable Service is to mean any service on which service tax is leviable under section 67E. Section 66 B reads as follows: There shall be levied a tax at such specified rate on the value of the services other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. 11. The service involved in the present case is that of maintenance or repair. Accordingly, sub-clause 64 of section 65 is also relevant which defines the service to mean any service provided by (64) management, maintenance or repair means any service provided by (i) any person under a contract or an agreement; or (ii) a manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation . - For the purposes of this section, - (a) [ consideration includes - (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed; (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket. .] 13. This provision clearly indicates that the gross amount has to be charged by the service provider strictly for the services provided by him. The provision has used the words for such service provided makes it clear that the Act has provided nexus between the amount charged and the taxable se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below 95.5% and up to machine availability of 92.5% then SGSL shall compensate to the owner and amount equal to @3% of the annual O M service charges for every 1% of shortfall below 95.5% of average machine availability, subject to maximum of 50% of annual O M charges. Perusal clarifies that in case, the annual machine availability falls below 95.5% then SGSL the service provider has agreed to compensate the service recipient an amount equal to SEB captive power purchase rate (for the corresponding year), subject to maximum of 50% of the annual O M service charges. 17. The said clause fixes the liability upon the service provider M/s. SGSL to render annual average machine availability on 95.5% for the WTG of appellant. It simultaneously deals with the situation where while discharging the said mandate, the machine availability could not be provided by the service provider on the agreed rate, but falls short below the said 95% upto machine availability of 92.5 %. In that case the service provider is burdened with the liability to compensate the service recipient at an amount equal to @ 3% of annual machine maintenance service charges for every 1% of shortfall beyond 95% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r repeated and the same cannot said to be towards tolerance of the defaulting party. 20. It has further been appreciated that contract may provide for penal clause for breach of terms of contract but that will amount to distinction between the condition to contract and consideration for a contract and to ascertain either of the situation, the agreement as a whole has to be read together with the intention and the purpose thereof. The Machine Availability clause in the present case, to my opinion when read with the entire agreement, there is an apparent intent that the terms of agreement shall not be violated and that the service provider shall not compromise with the quality of service else the commercial interest of the appellant shall remain safeguarded in the form of compensation to be paid by M/s. SGSL. Hence, it cannot, by any stretch of imagination, be stated that the recovery of sum by invoking the said clause is the reason behind the execution of agreement for a accrued consideration. 21. In view of entire above discussion, I am of the opinion that the amount received by the appellant in terms of Machine Availability clause, from the service provider with referen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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