Consolidated Advance received for execution of contract - demand of ST on part of advance pertaining to supply of goods is prima facie not sustainable
ON the ground that the applicant had received advance of Rs.11.8 Crores for execution of service contracts, a service tax demand of Rs.1,45,88,969/-, interest and penalties was confirmed.
Before the CESTAT with a Stay application, the applicant submitted that they had entered into three contracts with M/s RINL; two contracts were for providing services regarding which the applicant is paying service tax and one contract is for supply of goods. It is further stated that they had received a consolidated advance of 10% of the total consideration amount of the three contracts. As regards the advance received of Rs.3.08 Crores against the contract for providing service they had already paid an amount of Rs.33.89 lakhs. Since the balance of the 10% advance is in respect of the contract under which the goods were supplied, the demand of service tax on that part of the advance is not sustainable, the applicant submitted.
The Revenue representative submitted that the applicant had received a consolidated advance and the contract is a composite contract artificially bifurcated to evade tax.
The Bench observed -
"5. We have gone through the contracts and find that the two contracts are for service and the applicant had paid service tax and they had received 10% advance in respect of the contracts of service and the applicant had already paid an amount of Rs.33.89 lakhs. In these circumstances, prima facie the applicant has a strong case in their favour. Therefore, the pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal. Stay petition allowed."