2007 (6) TMI 119 - AT - Service Tax

Appellant has received payment for services rendered, in convertible foreign exchange. Further, amount in convertible foreign exchange is paid as dividend from India. Benefit of exemption notification no. 6/99 and 21/2003 was denied on the ground of repatriation from India. Stay Granted

Summary

Issues:
1. Requirement of pre-deposit of Service tax amounting to Rs. 18,55,51,047/-.
2. Imposition of interest at the rate of 13% on alleged evaded Service tax.
3. Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.
4. Application for stay of the impugned order and waiver of pre-deposit.
5. Interpretation of exemption notifications No. 6/99-S.T. and No. 21/2003-S.T.
6. Dispute regarding entitlement for exemption based on repatriation of payment received in convertible foreign exchange.

The judgment by the Appellate Tribunal CESTAT, Mumbai involved a case where the appellants were required to pre-deposit a significant amount of Service tax, along with the imposition of interest and penalties under the Finance Act, 1994. The appellants filed for a stay of the order and requested a waiver of the pre-deposit. The dispute centered around the interpretation of exemption notifications No. 6/99-S.T. and No. 21/2003-S.T., specifically regarding the repatriation of payments received in convertible foreign exchange.

The appellants claimed the benefit of exemption notifications based on receiving payment for taxable services in convertible foreign exchange. However, the adjudicating authority denied the exemption, stating that repatriating dividend payments to shareholders abroad meant the appellants were not entitled to the benefit of the notification. The appellants argued that the proviso to the notification only applied if the entire payment received for services rendered was repatriated, not just a portion. They highlighted that their income came from various sources, including payments for taxable services, and complying with the Companies Act and Income-tax Act required them to declare dividends. The Tribunal, after careful consideration, found that the appellants had a strong case. They concluded that the appellants were not affected by the proviso and ordered a full waiver of the pre-deposit, penalties, and interest, with no recovery until the appeal's disposal.