2015 (9) TMI 1387 - AT - Service Tax

Supplementary questions - Matter was already referred to larger bench in 2015 (6) TMI 695 - CESTAT MUMBAI - matter to be placed before Third Member on the Supplementary questions - (i) In the facts and circumstances, whether the services have been received by the appellant-assessee beyond the Indian Territory and hence, not liable to Service Tax as held by Member (Judicial) or Whether the services have been received within Indian Territory and hence liable to Service Tax as held by Member (Technical). (ii) Whether in the facts and circumstances and in law, the benefit of section 80 is available to the appellant-assessee and no penalties are imposable as held by Member (Judicial) or Such benefit is not available and penalties are imposable under Section 76 and 78 of the Finance Act, 1994 as held by Member (Technical)

Issues Involved:
Rectification of mistake in the order regarding Service Tax liability on arrangement services and penalties under Section 76 and 78 of the Finance Act, 1994.

Analysis:
1. The applicant filed a modification application seeking rectification of a mistake in the order dated 5/6/2015 due to a difference of opinion, leading to a reference to the Third Member.
2. The issues highlighted were: (i) Whether arrangement services were provided beyond Indian territory, affecting Service Tax liability, (ii) Tax demand prior to 18.4.2006 on arrangement fees, and (iii) Availability of Section 80 benefit affecting penalty imposition under Sections 76 and 78.
3. The applicant's counsel argued that the Third Member's understanding might lead to a miscarriage of justice as the Third Member's scope is limited to the earlier findings and points of difference.
4. Legal precedents from the Hon'ble Gujarat High Court and Bombay High Court were cited to support the argument that rectification applications are maintainable even during the pendency of a reference to the Third Member.
5. The Revenue opposed the rectification application, citing a Supreme Court ruling that rectification is only for obvious and patent mistakes, not issues requiring lengthy reasoning or with multiple possible interpretations.
6. The Tribunal found the rectification application maintainable and allowed it, directing the Judicial Member to provide supplementary findings on the highlighted issues for reference to the Third Member.

Supplementary Findings by Judicial Member:
1. On the issue of arrangement services provided beyond Indian territory, it was held that as the services were initiated, received, and utilized outside India, they were not liable for Service Tax under the Finance Act, 1994.
2. Regarding the tax demand prior to 18.4.2006 on arrangement fees, it was agreed that this amount would not be taxable under the Finance Act, 1994.
3. Concerning the availability of Section 80 benefit and penalty imposition, it was determined that no penalties were applicable as there was no suppression of facts, and the issue was interpretational in nature, allowing for the benefit of Section 80 to the appellant assessee.

Supplementary Questions Referred to Third Member:
1. The Third Member was tasked with determining whether the services were received beyond Indian territory, affecting Service Tax liability, and if the benefit of Section 80 applies, impacting penalty imposition.
2. The Third Member was to resolve the differing opinions between the Judicial and Technical Members on these crucial issues.

This detailed analysis covers the legal judgment comprehensively, addressing the rectification application, supplementary findings, and the questions referred to the Third Member for resolution.

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