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TMI Blog2023 (3) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... reconciliation of commercial accounts with service tax returns Period 2008-09 to 2011-12-Tax demand: 8,17,58,940/- iii Non payment of service tax on amounts received from Delhi Airport Metro Express Private Limited, under the head-Renting of Immovable property service Period: 2010-11 to 2011-12-Tax demand: 5,93,02,321/- iv Non-payment of service tax on L.C. charges paid to foreign banks under reverse charge mechanism 3 ST/50500 & 51771/2016-DB Period: 2008-09 to 2011-12- Tax demand: Rs. 87,26,504/- V) Penalty Imposed Rs. 24,88,12,120 penalty u/s 78 of the Finance Act, 1994 read with rule 15 of Cenvat Credit Rules, 2004 Rs. 12,25,83,912 penalty u/s 78 of the Finance Act, 1994 Rs. 10,000 u/s 77(2) of the Finance Act, 1994 for not filling correct ST-3 return Rs. 5,000 under rule 15A of the Cenvat Credit Rules, 2004 2. The issue in revenue appeal (50500/2016) is that in the Orderin- Original, r.w. the rectification/corrigendum order dated 18.03.2016, wherein Ld. Commissioner has erroneously omitted, by not confirming the admitted demand of Rs. 32,63,417/- alongwith interest of Rs. 1,35,389/-, which the respondent-assessee have deposited against proposed short payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (i) set up by an Act or Parliament or a State Legislature; or (ii) established by Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under Article 243 W of the Constitution. " 3.3 Admittedly, appellant is established by Government with 90% or more participation by way of equity and also under the control of the Government. 3.4 Further, Article 243 W of the Constitution read with Schedule 12 empowers Municipalities with respect to the matters, inter alia, planning for economic development and social justice and performance of functions and implementation of schemes, as may be entrusted to them. Further, these functions may include matters listed in 12th Schedule of the Constitution, which inter alia contains the activities - planning for economic and social development, roads and bridges, provision for urban amenities, including street lighting, parking lots, bus stops and public conveniences. Thus, the appellant satisfies the definition as a Government Authority and is also performing the activities under Article 243 W of the Constitution read with 12th Schedule therein. As such, all activities of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2011-ST) tax was payable on accrual basis, i.e., immediately on providing of service, or raising of invoice, irrespective of payment received. 7.1 It is the cardinal principle of taxation law that if the revenue authorities want to demand tax, it is for them to establish that the amount shown in the accounts by the assessee falls in the tax net. Without pointing out the nature of service, parties to the transaction, the Revenue cannot assume that the apparent difference on debtors reconciliation amount represents value of service on which the appellant has evaded tax. In Greenwich Meridian Logistics (I) Pvt. Ltd. Vs. CST, Mumbai, 2016 (43) STR 215 (Tri.- Mumbai), this Tribunal has held that the manner or mode of booking the profit in the accounts of a commercial organisation has no bearing on the application of section 65(105) to a taxable activity. Without giving findings on the nature of taxable service, the recipient of service and the amount or consideration payable for the service, there cannot be any tax demand on the basis of entry in the commercial accounts. 8. The next ground of dispute is regarding levy of service tax of Rs. 5,93,02,321/- on account of amounts received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having sunk at some locations, as a result there is deformation/cracks. Pursuant to inspection, appellant informed DAMEPL that no bearings were found damaged. However, admitted that grouting material filled above/below the bearings was loosened for which action would be taken to repair on priority. Subsequently, the meetings were convened by the Ministry of Urban Development, Government of India in July, 2012, and pursuant to joint inspections by the Joint Inspection Committee, DAMEPL stopped operations of the line on 08.07.2012. Thereafter, DAMEPL issued notice dated 08.10.2012, terminating the Concession agreement as according to them, the defects that were pointed out in the earlier notice dated 09.07.2012 etc., were not cured within the stipulated period of 90 days, resulting in default under the Concession agreement by appellant DMRC. Thereafter, DAMEPL invoked Arbitration under Article 36.2 of Concession Agreement on 23.10.2012. Thereafter, after running the service intermittently, DAMEPL finally stopped the operations on 30.06.2013 and handed over the line to DMRC the very next day. 8.1 The revenue have misunderstood the provisions of the Concession Agreement and have alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 days from the date of notice by DAMEPL to cure the defects by DMRC and thus were DMRC in breach of the CA as per Article 29.5.1(i)?" 8.3. The Arbitral Tribunal considered the defects pointed out by DAMEPL and if cured, and/or effective steps to cure them were taken by DMRC within the stipulated time. Finally, the arbitral Tribunal held DMRC guilty of not fulfilling its obligation under the Concession Agreement, as rightly cracks were found spread in large number of Girders. Thus, the Tribunal held DMRC-appellant was in breach of the Concession Agreement resulting in material adverse effect on the concessionaire-DAMEPL. In the 'Award' the Arbitral Tribunal awarded a total amount of Rs. 2782.33/- crores alongwith further interest, as termination payment, in favour of DAMEPL. 8.4 The learned Counsel further relies on the ruling in the case of Marmugao Port Trust vs. Commissioner of Customs and Central Excise 2017-48-STR-69, wherein revenue had alleged that the amount towards royalty recovered on account of renting/leasing land and water front to Southwest Port Ltd., Marmugao, was liable to service tax. This Tribunal held that both parties had undertaken a co-venture and, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation) and includes a service fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facilities which has not been utilised. Thus, interest is the amount paid to the lender over and above the loan amount, and such amount may be paid as service fee or other charges in respect of loan amount. It is understood in the financial world that fees and interest payable by the borrower to the lender are part of the price of loan. Further, loan pricing is defined as the interest rate charged on the loan, plus any associated fee payable as part of the financing package. Most often, loan pricing is negotiated between the 'lead arranger' and the issuer during the initial negotiation of the loan, alongwith the other key structural and pricing issues, including fees etc. These terms are summarised in a term sheet. There are four main types of fees seen in a credit agreement -commitment fee, facility fee, utilisation fees and letter of credit fees. 9.2. The learned Counsel further refers to Indian Accounting Standard (Ind AS) 23, which gives guidelines for borrowing cost. The core principle is borrowing cost are directly attributable to the acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. In Nizam Sugar Factory v. Collector, 2006 (197) E.L.T. 465 (S.C.), the Hon'ble Supreme Court has held that while issuing the subsequent show cause notices on similar facts, the Revenue could not allege suppression of facts on the part of the assessee as the facts were already in the knowledge of the authorities while issuing the earlier notice and, therefore, extended period of limitation could not be invoked. In CCE vs. Pals Microsystems Ltd., 2009 (234) ELT 428 (Kar.) the High court has upheld the decision of the Tribunal wherein it was held that the show cause notice was time barred as it was issued on 20.06.2000 whereas suppression of facts had come to its knowledge on 25.10.1996. This order has been affirmed by the Hon'ble Supreme Court in CCE vs. Pals Microsystems Ltd, 2011(270) E.L.T. 305 (S.C.). 10.1 Further, extended period of limitation cannot be invoked in this case as the appellant was under the bonafide belief that it was not liable to pay the demanded service tax for the reasons discussed above. The Commissioner has noted that there must be a deliberate attempt on the part of the appellant to suppress facts from the Department with an intention to evade payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of service tax short paid on the allegation of suppression of turnover is concerned, this demand is based on the report submitted by the Special auditor. The opening debtors as on 01.04.2008, was correctly taken. The appellant have not provided any bifurcation of the figure to ascertain the factual position relating to the value of taxable service for the respective financial years. Further, the adjudicating authority after going through the financial records for the relevant years vis-a-vis, the Special auditor's report, found that the amount of taxable service on accrual basis as per the audited P&L account was correctly considered by the Special auditors in computing the taxable value. Further, the amount offered for taxation during the relevant years have been taken from the return(s) submitted by the assessee. Taking all this into consideration, the suppression in the taxable value have been worked out at Rs. 72,20,10,134/- as follows: Particulars Amount Amount Opening Debtors as on 01.04.2008 28,67,03,870/- Add: Taxable services on accrual basis as per audited P &L account 1,14,91,31,024/- Year 2008-09 Year 2009-10 2,00,58,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue urges that the appellant-assessee is working under self-assessment regime and were required to make a proper assessment of their service tax liability. Further, the appellantassessee never sought any clarification from the department, and have suo moto utilised inadmissible Cenvat credit on consulting engineering service. Thus, extended period of limitation have been rightly invoked. 15. Having considered the rival contentions and after going through the records, we record our findings as follows:- 15.1 The first issue regarding disallowance of cenvat credit of Rs.30,12,86,790/- alleging wrong utilization of cenvat credit on receipt of consultancy engineering service, the said issue already stands decided in favour of the appellant in appeal no.53176/2016. Thus, this ground is allowed in favour of appellant - assessee and the demand is set aside. 15.2 So far the next ground with regard to short payment of service tax of Rs.8,17,58,940/- as short paid, we find that in reconciling the account of debtors with the amount offered for service tax in the ST-Returns, the same have been erroneously raised. As admittedly, the appellant maintained their accounts on accrual basis (Merc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ro Line was being jointly run by both the parties in mutual benefit. 16.1 We find that all the features of Joint Venture Agreement are present in the Joint Venture Agreement/Concession Agreement like - (i) Community of interest; (ii) Joint control of ventures; (iii) Sharing of revenue in agreed manner. 16.2 Both the parties have jointly rendered services to the passengers or users of the Metro line under the Concession Agreement. Both parties have undertaken their assigned rights and have performed their specified tasks to run the Metro line service on the Airport Metro line. Further, such service could not be run without active involvement of the appellant as the service was aligned with the existing Metro network of the appellant. Accordingly, we hold that no service has been provided by DAMEPL to the appellant. Accordingly, this ground is allowed in favour of the appellant and the demand is set aside. 17. The next ground is service tax levy on the LC charges paid by the appellant to foreign bank (Bank of India-Tokyo), where the service tax is demanded under RCM. We find that under the admitted facts, it is the Government of India, which have entered into loan agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleted in the prescribed form. ix. After completion of the project, the borrower shall cause the executing agency to furnish the Bank with a project completion report in the prescribed form. x. Proceeds of the loan are meant for a) Construction works and procurement of goods and services related to Delhi Mass Rapid Transport Systems, Phase-2, b) Consulting services. xi. When JICA (formerly JBIC) finds the request for Disbursement in order and in conformity with the provisions of the Loan Agreement, JICA shall make disbursement in Japanese Yen. Disbursement will be made within fifteen (15) business days from the date of receipt of the Request by paying into the non-resident Yen Account of the borrower in Bank of India, Tokyo, which shall be opened in advance and, in accordance with the relevant laws and regulations of Japan. xii. The amount of disbursement of Japanese Yen shall be calculated at the T/T selling rate quoted by Bank of India, two (2) business days before the day when the disbursement is actually made. xiii) After receiving the disbursed amount, Bank of India, shall immediately transfer the exact amount mentioned in the claims for payment to the respecti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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