2017 (9) TMI 1558 - AT - Service Tax

Banking & Financial Services - amount paid by the Appellant as fee/ charges to service providers - revenue neutrality - time limitation - Held that - on the issue of Revenue Neutrality, the said defence was not taken by the Appellant before the lower authorities so that this aspect cannot be ascertained - This aspect of revenue neutrality also requires to be verified from the factual matrix of the present case. Extended period of limitation - Held that - the adjudicating authority has invoked the extended period of limitation for demanding service tax from the appellant by holding that they had suppressed vital information with the intention to evade payment of tax - this issue was also not considered. The Appellant should be given a chance to prove their case on ground of revenue neutrality and time bar - appeal allowed by way of remand.

Summary

Issues involved:
1. Liability of service tax on services related to External Commercial Borrowings
2. Revenue neutrality defense
3. Time bar for demanding service tax

Analysis:

Issue 1: Liability of service tax on services related to External Commercial Borrowings
The appellants, engaged in transportation, availed services from providers outside India in connection with loans raised through External Commercial Borrowings. The adjudicating authority confirmed the demand of service tax against the appellants, who argued that since the services were rendered and received outside India, they were not liable to pay service tax. The appellants contended that the services were in relation to borrowings, not lending, and thus not taxable under banking and financial services. They also emphasized that the demand was revenue neutral as the service tax paid was available as credit, indicating no intention to evade tax. The case was referred to the Larger Bench due to a difference of opinion among members. The Tribunal found the appellants liable for service tax based on precedents but acknowledged the need to reevaluate the revenue neutrality aspect.

Issue 2: Revenue neutrality defense
The appellants raised the issue of revenue neutrality, asserting that the service tax paid was available as credit and there was no intention to evade payment. They cited previous tribunal judgments to support their claim. The Tribunal noted that the defense of revenue neutrality was not raised before the lower authorities, necessitating further verification from the factual context of the case. The Tribunal emphasized the importance of examining the revenue neutrality claim in detail to determine its validity.

Issue 3: Time bar for demanding service tax
The period involved in the case was 2006-08, during which the levy of service tax on services from providers outside India was disputed until upheld by the Supreme Court in 2011. The adjudicating authority invoked the extended period of limitation, alleging that the appellants suppressed vital information to evade tax. However, the Tribunal observed that the aspects of revenue neutrality and time bar were not adequately considered. Therefore, the Tribunal remanded the case to the adjudicating authority to reevaluate the issues of revenue neutrality and time bar, providing the appellants with a fair opportunity to present their case. The determination of penalty, if applicable, was also left for the adjudicating authority to decide afresh.

In conclusion, the appeal was allowed by remanding the case to the Adjudicating Authority for a comprehensive review based on the issues of revenue neutrality and time bar, ensuring a fair assessment of the appellants' contentions.