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Service Tax Caselaw - No service tax applicable on services provided to Indian Navy
M/s HINDUSTAN SHIPYARD LTD Vs COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, VISAKHAPATNAM-I
Service Tax - mobilization advance from customer - Revenue that the amount received by the
appellant from Indian Navy for building facilities are in the nature of advance payments for
taxable services to be provided and liable to service tax – appellant stand that the amount is in the nature of a grant and to be amortized against future payments. Thus, it is the in the form of mobilization advance and not linked to any service provided or to be provided
HELD - As far as the amounts received by the appellant from the Indian Navy for the purpose of upgrading their facilities are concerned, they are not linked to the present contract and hence can only be termed mobilization advances not linked to any signed contract for rendering services. Of course, in future Indian Navy may award the appellant contracts and the amounts now paid will be adjusted against such contracts. At this stage it is not clear as to what contracts will be signed and whether they will be liable to service tax during that period.
Therefore, there is no ground to charge service tax on the mobilization advance received by the appellant - no service tax is payable on the amount received towards mobilization advance of the contract from the Indian Navy. As far as the amounts received towards reimbursement of income tax and VAT paid including the TDS paid by the appellant and reimbursed by the Indian Navy are concerned, these are in the nature of reimbursable expenses and hence cannot be included in the value of taxable services.
As far as the amounts received towards Repair Technical Documents (RTDs) are concerned, these are goods received by the appellant on behalf of Indian Navy and were imported by filing a bill of entry and no service tax can be levied on the goods - The impugned order is set aside and the appeal is allowed