2018 (4) TMI 728 - AT - Service Tax

Liability of service tax - services availed for mobilizing finance by using services of foreign company - transaction covered by IFC Act 1958 - Held that - identical issue decided in appellant own case M/s Petronet LNG Limited Versus CCE New Delhi 2017 (3) TMI 120 - CESTAT NEW DELHI where it was held that the IFC Act 1958 clearly provides for immunity of all transactions and operations of IFC - tax liability do not sustain. Penalty - Held that - the disputed amount was paid immediately after the notice and the same was appropriated in the impugned order - penalty not sustainable. Appeal allowed.

Summary

Issues Involved:
Dispute of tax liability for services availed for mobilizing finance by using services of a foreign company, applicability of the International Finance Corporation (IFC) Act, 1958 on tax liability, sustainability of tax liability against the assessee, penalty imposed on the assessee, appropriateness of penalty against the assessee.

Analysis:

1. Tax Liability Dispute for Mobilizing Finance:
The appeal was filed against the Order-in-Original related to tax liability for services used to mobilize finance, specifically focusing on an amount of &8377; 1,31,525/- related to finance mobilized through foreign assistance. The counsel argued that this liability should be exempted under the IFC Act, 1958, which provides immunity for transactions involving the International Finance Corporation. Citing a previous Tribunal decision, it was contended that tax liability excluded by immunity under the IFC Act cannot be sustained.

2. Applicability of IFC Act, 1958:
The Tribunal examined the applicability of the IFC Act, 1958, which grants immunity to all transactions and operations of the International Finance Corporation. Referring to a previous case, it was established that any law contrary to the immunity provided by the IFC Act cannot prevail. The Tribunal concluded that transactions with the IFC are immune to tax liability under the IFC Act, thereby rendering the tax liability unsustainable against the assessee.

3. Sustainability of Tax Liability:
Based on the analysis of the provisions of the IFC Act and the previous Tribunal decision, it was determined that the tax liability related to the finance arrangement for development of SEZ was not sustainable against the assessee. The Tribunal found in favor of the assessee, stating that the tax liability could not be upheld in this context.

4. Penalty Imposed on the Assessee:
Regarding the penalty imposed on the assessee, it was noted that the disputed amount was promptly paid after receiving the notice and was duly appropriated in the impugned order. Considering these circumstances, the Tribunal found that the penalty was not sustainable against the assessee. Therefore, the penalty imposed on the assessee was deemed inappropriate in this case.

5. Conclusion:
The appeal filed by the assessee was partly allowed, with the Tribunal ruling in favor of the assessee in terms of the tax liability dispute and the penalty imposed. The decision was made based on the provisions of the IFC Act, 1958, and the circumstances surrounding the case, ultimately leading to the partial allowance of the appeal.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented, the legal principles applied, and the final decision rendered by the Tribunal.