2008 (8) TMI 201 - AT - Service Tax

Delay in payment of tax demand and penalties - though the loan arrangement fee was paid by appellant to ICICI Bank in September 2006 the appellants paid the service tax due on the same at the instance of the Department on 31-5.2007, before issue of show-cause notice - Considering the fact that the appellants have paid the service tax amount of Rs. 67,62,355 promptly before the issue of SCN, pre-deposit is waived and stay granted for recovery of the remaining dues

Summary

Issues:
1. Liability of the appellants to pay service tax on loan processing fee.
2. Imposition of penalties under different sections of the Finance Act, 1994.
3. Applicability of interest for belated payment of tax.
4. Waiver of pre-deposit and stay on recovery of remaining dues.

Analysis:

Issue 1: The appellants, M/s. JSW Steels Ltd., took a loan from a Consortium of Financiers arranged by ICICI Bank and paid the loan processing fee to the bank. The ICICI Bank paid the service tax under the Banking and Financial Institution Service and recovered the same from the appellants. The Commissioner demanded service tax towards the loan arrangement fee, and penalties were imposed under various sections of the Finance Act, 1994. The appellants paid the service tax promptly before the show-cause notice was issued, leading to a waiver of pre-deposit and stay on recovery of remaining dues until the final disposal of the appeal.

Issue 2: The Commissioner imposed penalties on the appellants under different sections of the Finance Act, 1994, including a penalty of Rs. 67,62,355 under section 78 of the Act. The appellants were found liable to pay these penalties along with the service tax amount. However, due to the prompt payment of the service tax before the show-cause notice, the Tribunal decided to waive the pre-deposit and stay the recovery of the remaining dues as per the impugned order.

Issue 3: Apart from the service tax and penalties, the appellants were also liable to pay applicable interest for the belated payment of the tax demanded by the Commissioner. The Tribunal acknowledged the timely payment of the service tax amount before the show-cause notice and decided to waive the pre-deposit and stay the recovery of the remaining dues until the final disposal of the appeal.

Issue 4: Considering the circumstances where the appellants paid the service tax promptly before the show-cause notice, the Tribunal decided to waive the pre-deposit and stay the recovery of the remaining dues as per the impugned order until the final disposal of the appeal. This decision was made in light of the facts presented regarding the payment of the service tax and the agreement between the appellants and the ICICI Bank.