2017 (11) TMI 774 - AT - Service Tax

Reverse charge mechanism - receipt of services - in course of raising fund ECB and FCCB appellant are receiving services of various service provider based outside country like Merchant Bankers, Lead Manager, Advisors, Financial Advisors, Principle Agent, Legal Advisors, Management Consultant, Underwriters etc. - Revenue neutrality - Held that - Ld. Commissioner did not deal with the issue of Revenue neutrality in detail and the same was rejected on the ground that there is suppression of facts, hence the case does not fall under the Revenue neutrality. Whether the service on which service tax is payable and claimed as input service is admissible input service in terms of Rule 2(l) of Cenvat Credit Rules, 2004, whether appellant cleared/provided exempted goods/service etc. therefore in absence of examining all these factual aspect revenue neutrality can neither be rejected nor be allowed. Since these factual aspects have not been examined by the adjudicating authority, in the interest of justice, it is desirable to remand the matter to the adjudicating authority. Appeal allowed by way of remand.

Issues:
1. Jurisdiction of Aurangabad Commissionerate in adjudicating the show cause notice.
2. Classification of services provided by foreign companies under banking and finance service, management consultancy service, and underwriter service.
3. Taxability of services rendered outside India to a recipient in India.
4. Taxability of payments made towards services as interest.
5. Applicability of Section 66A of the Finance Act, 1994.
6. Coverage of services provided by foreign collaborators under banking and other financial services.
7. Availability of Cenvat credit for payment of service tax.
8. Correct computation of tax liability considering cum tax value.
9. Invoking the extended period of demand.
10. Imposition of penalty and interest in the absence of sustainable demand.

Analysis:
1. The appellant argued that services were provided and received outside India, challenging the jurisdiction of Aurangabad Commissionerate. The appellant contended that the show cause notice did not clarify how the services provided by foreign companies fell under banking and finance services, management consultancy services, and underwriter services as defined under the Finance Act, 1994. The appellant also raised concerns about the taxability of services rendered outside India to a recipient in India.

2. The appellant further argued that payments made towards services were in the nature of interest and hence not taxable. They highlighted the introduction of Section 66A of the Finance Act, 1994, emphasizing that services performed outside India should not attract service tax. The appellant contended that the services provided by foreign collaborators did not fall under banking and other financial services, especially since the service providers had business establishments in India.

3. Additionally, the appellant claimed that even if service tax was payable, it should be available as Cenvat credit, making the exercise revenue neutral. They also raised concerns about the incorrect computation of tax liability due to the non-consideration of cum tax value. The appellant argued against the invocability of the extended period of demand, asserting that the demand was time-barred.

4. The appellant relied on various judgments to support their arguments, emphasizing the lack of sustainable demand as a basis for challenging the imposition of penalty and interest. On the other hand, the Revenue contended that the services provided by foreign service providers fell under banking and financial services, making them liable for service tax. The Revenue rejected the appellant's claim of revenue neutrality, stating that the liability to pay service tax was independent of the availability of Cenvat credit.

5. The Tribunal observed that the issue of revenue neutrality needed detailed examination, independent of the extended period of demand. Noting that neither party provided sufficient factual evidence regarding revenue neutrality, the Tribunal decided to remand the matter to the adjudicating authority for a fresh adjudication. The Tribunal directed the adjudicating authority to consider all relevant factual aspects to determine revenue neutrality and instructed them to decide the matter within three months.

6. In conclusion, the Tribunal allowed the appeal by way of remand, emphasizing the importance of a thorough examination of revenue neutrality and other related issues. The Tribunal stressed the need for a detailed assessment of factual aspects before making a final decision on revenue neutrality.

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