2017 (4) TMI 855 - AT - Service Tax

Banking and financial services - Extended period of limitation - amounts paid by appellant to various service providers who had facilitated raising of External Commercial Borrowings (ECB) during March 2007 - taxability - Held that - the service tax liability arises under Section 66A of the Finance Act, 1994 and is already discharged by the appellant. At the same time, there cannot be any intention to evade the service tax liability as the entire service tax paid under reverse charge mechanism can be availed as CENVAT credit by the appellant for the discharge of Central Excise duty on the various products manufactured by them - impugned order set aside on revenue neutral situation - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Service tax liability on appellant under 'banking and financial services' for amounts paid to service providers facilitating External Commercial Borrowings (ECB) during March 2007; Contesting limitation and revenue neutrality aspects.

Analysis:

1. Service Tax Liability on Appellant:
The appeal was against an Order-in-Original passed by the Commissioner of Service Tax regarding service tax liability on the appellant under 'banking and financial services' for payments made to service providers assisting in raising ECB during March 2007. The appellant had raised ECB and paid charges to overseas service providers. The appellant contended that the issue was decided against them on merits in a previous case but contested it on limitation and revenue neutrality grounds.

2. Arguments Presented:
The appellant's counsel argued that the service tax discharged under reverse charge mechanism allowed for credit of the entire amount as the ECBs were used for manufacturing activities, creating a revenue-neutral situation. Citing judgments, the counsel contended that there was no intention to evade tax. The Authorized Representative, however, reiterated lower authorities' findings, emphasizing the need to establish revenue neutrality based on individual case facts, referring to relevant tribunal decisions.

3. Tribunal's Decision:
After considering submissions and records, the Tribunal noted that the appellant had indeed paid overseas service providers for raising ECB, which was utilized for manufacturing activities. The Tribunal observed that the service tax liability arose under Section 66A of the Finance Act, 1994, and had already been discharged by the appellant. Notably, the Tribunal found that the entire service tax paid under reverse charge mechanism could be availed as CENVAT credit for discharging Central Excise duty on manufactured products. Given this, the Tribunal held that the show cause notice demanding service tax for March 2007 appeared time-barred, citing precedents involving British Airways, Jet Airways, and Reclamation Welding.

4. Conclusion:
Considering the undisputed use of ECB amounts for manufacturing activities subject to Central Excise duty, the Tribunal, in line with previous decisions, set aside the impugned order on revenue neutrality grounds. The appeal was allowed with consequential relief, if any, based on the established facts and circumstances, emphasizing the revenue-neutral nature of the transactions and the availability of CENVAT credit for Central Excise duty payment.