2011 (11) TMI 421 - AT - Service Tax

Stay of Demand - The department was of the view that the services of lead managers to the issue and underwritings and other banking & financial services had been received by the Appellant from offshore services provider - ABN and JP Morgan and, therefore, the appellants being service recipients are liable to pay service tax in respect of the same - The services provided by the underwriters is taxable under Section 65(105)(z) read with Section 65(116) & 65(117) of the Finance Act, 1994 - Held that the prima facie view that the services provided by the appellant for which about Rs. 12,34,37,000/- had been paid by the them to the offshore service providers were taxable services of Underwriter s Services and Merchant Banker Services - Pre-deposit ordered partly.

Summary

Issues:
- Liability of the appellant to pay service tax on services received from offshore service providers.
- Adjudication of service tax demand, interest, and penalty by the Commissioner of Central Excise.
- Appeal against the Commissioner's order and stay application filed by the appellant.
- Arguments presented by both parties regarding the tax liability and waiver of pre-deposit.
- Analysis of the services provided by offshore service providers and their taxability under relevant sections of the Finance Act, 1994.
- Decision on the waiver of pre-deposit and the amount to be deposited by the appellant.

Detailed Analysis:

1. Liability to Pay Service Tax:
The appellant, a manufacturer of chemicals and pharmaceutical products, issued Foreign Currency Convertible Bonds (FCCB) through lead managers ABN and JP Morgan. The department claimed that services received from these offshore providers were taxable, leading to a show cause notice for service tax demand, interest, and penalties. The Commissioner confirmed a service tax demand for a specific period and imposed penalties under Section 78 of the Finance Act, 1994.

2. Adjudication by Commissioner:
The Commissioner dropped a portion of the service tax demand but confirmed the liability for another period, along with interest and penalties. The appellant filed an appeal against this order, challenging the tax liability and penalties imposed.

3. Appeal and Stay Application:
The appellant filed an appeal along with a stay application, arguing that underwriting services provided by lead managers were already taxed, and no further tax was due. The appellant requested a waiver of pre-deposit for hearing the appeal and sought a stay on recovery until the appeal's disposal.

4. Arguments by Parties:
The appellant contended that underwriting services were already taxed, and no additional tax was payable. The respondent opposed the stay application, asserting that managing the issue services were taxable under Merchant Banker Services, justifying the tax demand, interest, and penalties imposed.

5. Analysis of Services and Taxability:
The Tribunal analyzed the services provided by offshore service providers, confirming that underwriting and managing the issue services were taxable under relevant sections of the Finance Act, 1994. The services fell under Underwriter's Services and Merchant Banker's Services categories, making them subject to service tax.

6. Decision on Waiver and Deposit:
The Tribunal directed the appellant to deposit a specified amount within a set period, in addition to the amount already paid, to waive the pre-deposit requirement. The balance of the service tax demand, interest, and penalties was stayed pending the appeal's disposal, ensuring compliance by a specified date.

In conclusion, the Tribunal upheld the tax liability on services received from offshore providers, clarified the taxability of underwriting and managing the issue services, and provided a directive on the pre-deposit requirement and stay on recovery pending the appeal's resolution.