Appellant's Liability Upheld for Service Tax on ECB Payments

The Tribunal upheld the Order-in-Original, determining the appellant's liability for service tax on payments to M/s Jefferies International Ltd. for raising ECB under the reverse charge mechanism. Interest liability was imposed due to the established service tax liability. The penalty imposed on the appellant was upheld as they had not paid the full tax liability and interest. The Tribunal rejected the appeal, affirming the service tax liability, interest liability, and penalty imposition on the appellant.

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Issues:
Service tax liability on amount paid to M/s Jefferies International Ltd. for raising ECB, Interest liability, Penalty imposition.

Analysis:
The appeal challenged an Order-in-Original passed by the Commissioner of Central Excise, Mumbai -V, regarding the taxability of the amount paid by the appellant to M/s Jefferies International Ltd. for services related to raising external commercial borrowings (ECB). The Revenue contended that the amount should be taxed under reverse charge mechanism for service tax under 'banking and other financial services'. The appellant disputed this tax liability, citing a Tribunal decision in the case of Tata Steel Limited vs. Commissioner of Service Tax, Mumbai -I, which settled a similar issue. The Tribunal found that the majority decision in the Tata Steel case established that service tax liability under reverse charge mechanism arises on the person making the payment for services rendered by an intermediary assisting in raising ECB. Consequently, the Tribunal held that the appellant was liable for service tax on the amount paid to M/s Jefferies International Ltd.

Regarding interest liability, the Tribunal determined that since the service tax liability was established, consequential interest liability also arose on the appellant. Therefore, the appellant was held liable to pay interest on the service tax amount.

In terms of penalty imposition, the appellant's counsel requested setting aside the penalty, arguing that the issue was being contested and had to be resolved by a majority decision. However, the Tribunal noted that the appellant had only paid 50% of the service tax liability and interest, and thus, the provisions of Section 80 could not be invoked. As the appellant failed to discharge the full tax liability and interest, the penalty imposed was upheld, as there was no justifiable reason provided to set it aside.

Ultimately, the Tribunal upheld the impugned order, rejecting the appeal and affirming the service tax liability, interest liability, and penalty imposition on the appellant.

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