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2012 (6) TMI 723 - AT - Service TaxPlea for waiver of pre-deposit - Banking and Financial Services - assessee alleged of not discharging tax liability on import of service on the basis of transactions entered into with ADB and IFC - payments made towards commitment charges, up-front fee, arrangement fee, agency fee and out of pocket expenses paid to ADB and IFC in respect of funds borrowed from aforesaid institutions - Held that - Since issue involves interpretation of various provisions of law such as Article 246, 253 of the Constitution of India, the various provisions of ADB and IFC Act and the provisions of United Nations (Privileges and Immunities) Act, 1947 and Finance Act, 1994. Therefore, appellant has made out a case for 100% waiver of pre-deposit, accordingly, we waive the requirement of pre-deposit of entire amount of service tax, interest and various penalty and recovery thereof stayed during the pendency of the appeal.
Issues:
Stay of demand for service tax confirmed against the appellant under the category of "Banking and Financial Services" on reverse charge mechanism. Analysis: The appellant filed an application for stay of demand amounting to Rs.8,22,79,928/- of service tax, interest, and penalties confirmed for the period March 2008 to September 2010. The demand was related to payments made towards commitment charges, up-front fee, arrangement fee, agency fee, and out of pocket expenses to lenders like International Finance Corporation (IFC) and Asian Development Bank (ADB) under the External Commercial Borrowing (ECB) scheme for an upcoming UMPP at Mundra. Three show-cause notices were issued, and demands were confirmed against the appellants. The appellant sought stay on grounds of exemption from service tax on transactions with ADB and IFC, citing provisions of the ADB Act and IFC Act. The appellant's contentions were opposed on the basis that the Tribunal's powers are limited to Customs and Excise Acts, and it cannot deal with issues related to ADB/IFC Acts. The respondent argued that as the service was availed outside India, the appellant was liable to pay service tax on reverse charge mechanism under section 66A of the Finance Act. The Tribunal heard both sides and examined the provisions of the ADB Act, IFC Act, and United Nations (Privileges and Immunities) Act, 1947, which provide exemptions from taxation for international organizations like ADB and IFC. The Tribunal noted the wide powers of Parliament under Article 253 of the Constitution, allowing it to make laws for implementing treaties or agreements with other countries. Considering the interpretation of various legal provisions, including Article 246, 253 of the Constitution, ADB and IFC Acts, and the Finance Act, the Tribunal found that the appellant had made a prima facie case for 100% waiver of pre-deposit. Therefore, the requirement of pre-deposit of the entire amount of service tax, interest, and penalties was waived, and recovery stayed during the appeal's pendency. The Registry was directed to seek an opinion from Chairman, CBE & C to clarify the taxability of the activity involved in the matter. This judgment delves into the complex interplay of legal provisions governing taxation, international agreements, and legislative powers, ultimately leading to a decision in favor of the appellant regarding the stay of demand for service tax.
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