2023 (6) TMI 1156 - AT - Service Tax

Levy of service tax - Arrangement Fee - Facility Agent Fee - Processing Fee - Facility Fee - Arrangement Fee - appellant is engaged in generation of electricity at various plants located at West Bengal - requirement to issue SCN. Arrangement Fee - Facility Agent Fee - HELD THAT - The demand pertain to the period prior to 18.04.2006 and as per CBEC Circular F.No.276/8/2009-CX8A dated 26th September, 2011, it has been clarified the service tax liability on any taxable service provided by a non-resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.04.2006, i.e. the date of enactment of Section 66A of the Finance Act, 1994. The Board has accepted this position. Accordingly, the instruction F.No.275/7/2010-CX8A dated 30.06.2010 stands rescinded - thus, the appellant is not liable to pay service tax for the demand. Processing Fee - Facility Fee of USD 15 million- Arrangement Fee - HELD THAT - The appellant has already been paid service tax along with interest. Therefore, the demand against the appellant is not sustainable. Facility Fee of USD 50 million - HELD THAT - The demand has already been dropped by the Adjudicating Authority, accordingly, the same is not in dispute. Requirement to issue SCN - HELD THAT - As the appellant has already been paid service tax along with interest, the show-cause notice was not required to be issued to the appellant. The show-cause notice issued to the appellant is bad in law. Accordingly, the impugned proceedings against the appellant are not sustainable, hence, the same are set aside - Appeal allowed.

Summary

Issues involved: Service tax liability on external commercial borrowing (ECB) charges remitted to a foreign bank, applicability of service tax prior to 18.04.2006, sustainability of show-cause notice, demand confirmation, imposition of penalty.

Summary:

Service Tax Liability on ECB Charges:
The appellant, engaged in electricity generation, raised capital through ECB with M/s ICICI Bank Limited. The Directorate General of Central Excise Intelligence (DGCEI) contended that charges remitted for obtaining ECB loans were taxable under Banking and Other Financial Services. The appellant argued that for ECB prior to 18.04.2006, no service tax mechanism existed. The Tribunal held that appellant is not liable for service tax on charges pre-18.04.2006 as per CBEC Circular.

Sustainability of Show-Cause Notice:
The appellant contended that issuing a show-cause notice despite self-ascertainment of service tax payment was not sustainable under Section 73(3) of the Finance Act, 1994. The Tribunal agreed, stating that as the appellant had already paid service tax with interest, the notice was unnecessary, rendering the proceedings against the appellant unsustainable.

Demand Confirmation and Penalty Imposition:
The Adjudicating Authority confirmed the demand of service tax with interest but waived penalty. The Tribunal found the demand unsustainable for certain charges where service tax was already paid by the appellant. The show-cause notice was deemed invalid, leading to the setting aside of the impugned proceedings against the appellant. The appeal was allowed with consequential relief to the appellant.

This judgment clarifies the applicability of service tax on ECB charges, the necessity of show-cause notices, and the implications of self-ascertained service tax payments on legal proceedings.