2013 (11) TMI 603 - AT - Service Tax

Tribunal Waives Service Tax Pre-Deposit for Foreign Loan Charges

The Tribunal granted the appellant's application for a waiver of pre-deposit of service tax, interest, and penalties under the Finance Act, 1994. The ... Import of services - Appellant had paid an amount to the Banks situated abroad as an administration fee for raising loan in foreign currency outside India - Held that:- there is no dispute as to the fact that the Bonds were floated by the appellant abroad and they were subscribed by the individuals or the institutions abroad. In order to receive and deploy the amounts floated under the Bonds, appellants had directed by the bankers over there to open an account and receive the amount and deploy the same. We find prima-facie strong force in the contentions raised by the learned representative that the amounts which were raised abroad, were deployed outside India and also the clients whose accounts were maintained and service charges debited to the appellant, were the persons who are situated abroad and hence, the provider and recipient of the service being in abroad, the service tax liability, in our view, may not arise on the appellant. Appellant has made out a case for the waiver of pre-deposit of the amounts involved. - stay granted. Issues:Waiver of pre-deposit of service tax, interest, and penalties under Finance Act, 1994 for payment made to foreign banks as administration fee for raising loans in foreign currency.Analysis:The appellant filed a stay application seeking a waiver of pre-deposit of an amount confirmed as service tax, interest, and penalties under the Finance Act, 1994. The lower authorities had ruled against the appellant, confirming the demand based on administration fees paid to foreign banks for raising loans in foreign currency. The Revenue argued that these fees constituted a service for maintaining bank accounts. However, the appellant contended that since the bank accounts, bonds, and subscribers were all foreign entities, the service provider and recipient were abroad, and the payment was for service charges to the bank.Upon review, the Tribunal found that the Bonds were indeed floated abroad and subscribed by foreign individuals or institutions. The appellant was directed by overseas bankers to open accounts to receive and deploy the raised amounts. The Tribunal acknowledged the strong argument that the funds raised abroad were deployed outside India, and the service charges were debited by foreign clients, indicating that the service provider and recipient were abroad. As a result, the Tribunal held that the service tax liability might not apply to the appellant, at least prima facie.Consequently, the Tribunal concluded that the appellant had established a case for the waiver of pre-deposit of the amounts in question. The application for the waiver was granted, and the recovery of the disputed amounts was stayed pending the disposal of the appeal. The decision was dictated and pronounced in court by the Tribunal.