2023 (6) TMI 241 - AT - Service Tax

Levy of Service tax - Banking and Other Financial Services or not - fees paid to foreign banks for the External Commercial borrowings under the Reverse Charge mechanism - HELD THAT - In the show cause notice, it is alleged that such banks and financial institutions do not have an office or permanent establishment in India. The respondent has given detailed break up of the demand raised in SCN as well as the table in the grounds of appeal. The table which is reproduced in para 7 above will demonstrate that such financial institutions have a permanent establishment in India. Some amounts relate to the period prior to 18.04.2006 which is before the introduction of Section 66A of the Finance Act, 1994 and therefore not taxable under reverse charge mechanism. From the details furnished by the Ld. Counsel in the synopsis it is found that department has failed to adduce any evidence that the figures of Rs.51,75, 733/- is subject to service tax and these banks and financial institutions do not have permanent establishment in India. In the result, we do not find any grounds to interfere with the impugned order passed by the original authority. Impugned order is sustained. Appeal filed by department is dismissed.

Summary

Issues involved:
The issue is whether the appellant is liable to pay service tax under 'Banking and Other Financial Services' on fees paid to foreign banks for External Commercial borrowings under the Reverse Charge mechanism.

Comprehensive details of the judgment:

1. The appellant, a manufacturer of various products, paid fees to foreign financial institutions for External Commercial borrowings (ECB) without evidence of service tax payment. The Department alleged liability under the reverse charge mechanism due to the non-resident status of the service provider. The original authority dropped proceedings, but the Department appealed.

2. The Department argued that the appellant failed to provide evidence of the foreign service providers having a permanent establishment in India, justifying the appeal for a reduced amount of Rs. 51,75,233.

3. The respondents contended that the foreign banks had permanent establishments in India, and certain amounts were not taxable due to pre-2006 transactions and provisions created in the books.

4. The Tribunal found that the Department failed to prove the liability of the disputed amount under service tax, as the foreign banks had permanent establishments in India. The appeal was dismissed, upholding the original authority's decision.

5. The Tribunal allowed the Respondent's request for a change in the cause title.

This summarized the legal judgment involving the liability of the appellant for service tax on fees paid to foreign banks for External Commercial borrowings under the Reverse Charge mechanism.