Custom, Excise & Service Tax Tribunal
Bbsr Commissionerate vs Kalinga Commercial Corporation Ltd on 18 August, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 76379 of 2018
(Arising out of Order-in-Original No. COMMR/BBSR/ST/01/2018 dated 09.01.2018
passed by the Principal Commissioner, Goods and Services Tax, Central Excise and
Customs, Bhubaneswar, C.R. Building, Rajaswa Vihar, Bhubaneswar - 751 007,
Odisha)
Commissioner of Central G.S.T. and Central Excise : Appellant
Bhubaneswar Commissionerate,
C.R. Building, Rajaswa Vihar,
Bhubaneswar - 751 007 (Odisha)
VERSUS
M/s. Kalinga Commercial Corporation Limited : Respondent
Plot No. HIG, C-112, Housing Board Colon,
Post: Baramunda, Bhubaneswar, District: Khordha,
Odisha - 751 003
APPEARANCE:
Shri Prasenjit Das, Authorized Representative, for the Appellant / Revenue
Shri Narendra Kumar Dash, Advocate, for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 77311 / 2025
DATE OF HEARING / DECISION: 18.08.2025
ORDER:[PER SHRI K. ANPAZHAKAN] The present appeal has been filed by the Revenue against the Order-in-Original No. COMMR/BBSR/ST/01/2018 dated 09.01.2018 passed by the Principal Commissioner, Goods and Services Tax, Central Excise and Customs, Bhubaneswar, C.R. Building, Rajaswa Vihar, Bhubaneswar - 751 007, Odisha, wherein the Ld. Principal Commissioner has dropped the demand raised against M/s. Kalinga Commercial Corporation Limited, Plot No. HIG, C-112, Housing Board Colony, Post: Baramunda, Bhubaneswar, District: Khordha,Odisha, (herein after referred as the Respondent).
Page 2 of 10Appeal No.: ST/76379/2018-DB
2. The facts of the case are that the Respondent is engaged in providing taxable services under the categories of "Mining & Mineral Service," "Transport of Goods by Road," and "Works Contract Services." The Respondent has been filing their statutory ST-3 Returns regularly and duly paying the service tax to the Government. The Department has also conducted audits of the Respondent's unit on a regular basis.
2.1. The Respondent entered into an agreement with Orissa Mining Corporation Limited (hereinafter referred to as "OMC") on 16.04.2010, for the BOT Daitari Project. The Respondent has taken loan from banks and other financial institutions and invested in Plant and Machinery, at the project site to enable the Respondent to providing the services to OMC. The Agreement, executed on 16.04.2010, stipulated that the Respondent shall arrange necessary financing at its own cost, expenses, and risk. However, due to the delay for Commencement of Project, the Respondent approached OMC for repayment of loan, as they had already invested substantial amount of money in plant and machineries by taking loan from different banks and financial institutions for execution of the BOT Daitari Project.
2.2. When the request was not responded by OMC, the Respondent approached the Hon'ble High Court of Orissa by filing W.P.(C) No. 523 of 2013 along with a Miscellaneous Application for early release of funds. The Hon'ble High Court, by order dated 07.01.2015 in Misc. Case No. 22881 of 2014, directed OMC to release an amount of Rs. 20 Crores to the Respondent on the terms and conditions stipulated in the 400th Meeting of the Board of Directors of the OMC .
Page 3 of 10Appeal No.: ST/76379/2018-DB 2.3. Pursuant to the High Court's order, OMC, vide letter No. 3099/OMC/MAT/15 dated 12.03.2015, released the loan amount of Rs. 20 croes and termed it as "recoverable advance", subject to conditions, namely:
• The advance, along with simple interest @ 10% per annum, shall be recovered in monthly instalments of Rs.2 Crores from the R/A bills w.e.f. 01.04.2015.
• Within 15 days' of release of advance by OMC, the contractor shall produce documentary evidence to OMC in support of it clearing all its outstanding loan dues up to 31.07.2013 availed by them for the BOT project from their Bankers/Financial Institutions/Agencies.
3. The Central Preventive Unit of Bhubaneswar-II Commissionerate initiated an investigation in respect of the "BOT Daitari Project" of Orissa Mining Corporation Limited (OMC), Daitari. During the course of investigation, the officers alleged that the Respondent had received an advance of Rs. 20 Crores towards taxable services of mining and not paid service tax on the same. Accordingly, a Show Cause Notice dated 05.05.2017 was issued to the Respondent demanding service tax amounting to Rs.2,20,00,712/- .
3.1. On adjudication, the adjudicating authority, vide the impugned order, held that the advance was received to clear the loans taken from banks and financial institution and was not given for provision of any service. Accordingly, he dropped the demands raised in the Notice.
Page 4 of 10Appeal No.: ST/76379/2018-DB 3.2. Aggrieved by the dropping of the demands, Revenue has filed this appeal.
4. In the grounds of appeal, Revenue has made the following submissions:
(i) The adjudicating authority, on the one hand, in his findings at para 5.10 of the O-I-O dated 09.01.2018 has held that the said amount of Rs.
20 Crores received by the Respondent was an 'Advance' and not 'Loan', as contended by the Respondent. Whereas, on the other hand, at para 5.14 of the O-I-O, he has held that since the advance of Rs.20 Crores was not received against provision of any service, present or future, the same will not attract any Service Tax, which is quite ambiguous so far as service tax law is concerned.
(ii) In this case, the advance received by the Respondent is covered by the provisions of Section 67(3) of the Finance Act, 1994, which reads as under:-
"(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service"
(iii) It is an undisputed fact that an advance of Rs.20 Crores has been received by the Respondent before completion of service, and hence, it should have been treated as gross value charged for taxable service to be provided and liability of service tax on the said advance should have been discharged by the due date prescribed under the law.
Page 5 of 10Appeal No.: ST/76379/2018-DB
(iv) As per clause (b) of Rule 3 of the Point of Taxation Rules, 2011, the point of taxation, where the person providing the service, receives the payment before completion of service provided or agreed to be provided, shall be the date when he receives such payment. Thus, in the instant case the date of advance i.e 18.03.2015, for which due date for payment of Service Tax was 31.03.2015. But, the Notice failed to discharge the Tax liability accrued on the advance of Rs.20 Crores, received from OMC, by the due date. As per Explanation under clause (b) of Rule 3 of the Point of Taxation Rules, 2011, the point of taxation shall be the date when any advance is received by the service provider towards the provision of taxable service.
(v) The adjudicating authority has placed reliance on the decision of CESTAT, Mumbai in the case of M/s. SMS Infrastructure Ltd. Vs.CCE, Nagpur, reported in [2017(47) S.T.R. 17 (Tri- Mumbai)], wherein, it has been held that the Service Tax is not payable on mobilisation advance received from the principals, which is basically payments received towards obtaining necessary equipment and creating basic facilities before commencement of rendering of service. However, the said decision of the Tribunal has not been accepted and appealed against by the Department before the Hon'ble Supreme Court. Hence, the decision cited by the adjudicating authority has not attained finality.
(vi) The adjudicating authority has also placed reliance on decision of the CESTAT, South Zonal Bench, Chennai in the case of M/s. GB Page 6 of 10 Appeal No.: ST/76379/2018-DB Engineering Enterprises Pvt. Ltd. vs CCE, Tiruchirappalli, reported in [2017 (52) S.T.R. 313 (Tri. Chennai)], wherein it has been held that adjustment is crucial point of time that may give rise to levy of Service Tax in the event adjusted against advance, resulted in provision of taxable service. The said decision, has been accepted on the ground of low revenue and not on merits and hence does not have a binding precedence.
(vii) The Adjudicating Authority has relied upon the decision of CESTAT, Mumbai in the case of M/s. Thermax Instrumentation Ltd. Vs. Commissioner of Central Excise, Pune-I, reported in [2016 (42)S.T.R.19(Tri-Mumbai)], wherein it has been held that when advance is not received towards value of taxable services provided, then the Service Tax is to be paid on the advances at the time of raising of invoices. However, the said pertains to the period, prior to coming into existence of the Point of Taxation Rules, 2011 i.e. prior to 01.04.2011. Therefore, ratio of the said decision is not applicable to the instant case.
(viii) In this regard, it is relevant to mention here that the CESTAT, Delhi, in the case of M/s. Central Power Research Institute vs. Commissioner of Central Excise, Bhopal, reported in [2017(6) G.S.T. 42 (Tri-Del)], which is squarely applicable to the facts of the instant case, has held that it is not in the choice of the appellant about timing of the payment of Service Tax. It has also been held that in terms of Section 67(3) of the Act, when a consideration is received towards a taxable Page 7 of 10 Appeal No.: ST/76379/2018-DB service, Service Tax on the same has to be paid. The appellant cannot take a plea that they will discharge service tax when they adjust the said advance amount as and when there is bill raised after provision of service. The ratio of this decision is squarely applicable to the facts of the instant case.
4.1. In view of the above submissions, the Ld. Authorized Representative of the Revenue prayed for setting aside the impugned order and allowing the appeal filed by them.
5. Heard both sides and perused the appeal records.
6. We find that in this case, an amount of Rs. 20 crores has been paid by OMC to the Respondent as per the direction of the Hon'ble High Court, vide order dated 07.01.2015 in the Misc. Case No. 22881 of 2014 filed by the Respondent. As directed, OMC released an amount of Rs. 20 Crores to the Respondent on the terms and conditions stipulated in 400th Meeting of the Board of Directors of the OMC. The said amount released by OMC, vide letter dated 12.03.2015, clearly mentions that simple interest @ 10% per annum, shall be recovered in monthly instalments of Rs.2 Crores from the R/A bills w.e.f. 01.04.2015. The letter also specifically directs the Respondent to produce documentary evidence to OMC, within 15 days of receipt of the said amount, in support of clearing all their outstanding loan dues up to 31.07.2013 availed by them for the BOT project from the Banks and Financial Institutions/Agencies.
Page 8 of 10Appeal No.: ST/76379/2018-DB 6.1. Thus, we observe that the amount paid by OMC was a 'Loan' for the purpose of repayment of the dues to the Banks and financial Institutions. In this regard, we note that the Revenue has not brought in any evidence to substantiate the allegation that the amount received by the Respondent was 'consideration' received against provision of any taxable service. It is on record that the Respondent has paid interest @10%.
6.2. We also observe that the Respondent has reflected the amount of Rs. 20 crores received from OMC as an "unsecured loan" in its audited financial statements, as certified by P.A. & Associates, Chartered Accountants. The Respondent has also claimed depreciation on the said plant and machinery installed for the BOT Daitari Project, for which the said loan was sought. Thus, it is evident that the Respondent had availed credit facilities for procurement and installation of such plant and machinery as per Clause 4.2 and 4.3 of the Concessional Agreement between OMC and Respondent.
6.3. Thus, we hold that the amount of Rs.20 crores given by OMC to the Respondent was only a 'Loan' and not an 'advance' for rendering any taxable service, as claimed by Revenue. Accordingly, we hold that the Respondent are not liable to pay any service tax on the 'Loan' amount received from OMC.
6.4. In this regard, we find that the Ld. adjudicating authority has given a categorical finding on this issue to drop the demand. The Ld. adjudicating authority has relied on the decision of CESTAT, Mumbai in the case of M/s. SMS Infrastructure Ltd. Vs.CCE, Nagpur, reported in [2017(47) S.T.R. 17 (Tri-Mumbai)], Page 9 of 10 Appeal No.: ST/76379/2018-DB wherein, it has been held that the Service Tax is not payable on mobilisation advance received from the principals, which is basically payments received towards obtaining necessary equipment and creating basic facilities before commencement of rendering of service. In the present case, it is a fact on record that OMC has given the amount to clear all the outstanding loans availed by the Respondent for purchase of machineries and equipment in connection with the BOT project from Banks and Financial Institutions. Thus, we find that the decision cited by the Ld. adjudicating authority in the impugned order is squarely applicable in this case.
6.5. We have also perused the decisions cited by the Revenue in the Grounds of Appeal. In all those decisions, it has been held that service tax is payable on the 'advances' received towards rendering of service. In the present case, it has been established that the amount of Rs. 20 crores received by the Respondent was not towards rendering of any service in future. Hence, we hold that the decisions cited by the Revenue are not relevant to the facts and circumstances of this case.
6.6. Accordingly, we hold that the ld. adjudicating authority has rightly dropped the demands raised in the Notice and we do not find any reason to interfere with the same.
Page 10 of 10Appeal No.: ST/76379/2018-DB
7. In the result, we uphold the dropping of the demands in the impugned order, by the adjudicating authority and reject the appeal filed by the Revenue.
(Operative part of the order was pronounced in open court) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd