TaxTMI 
TaxTMI 
2015 (11) TMI 1049
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion is invocable and penalties under Section 76 & 78 are payable as held by the learned Member (Technical) Or Whether the extended period of limitation is not invocable in the facts and circumstances of the case as held by the learned Member (Judicial). 2. Before hearing the points of difference, the appellant made an application pointing out certain mistakes in the order made by the ld. Member (Judicial) requiring rectification by the original Bench. Accordingly, the original Bench, after hearing the said application for rectification of mistakes, had made the following 2 supplementary questions which have also been referred to me: (i) In the facts and circumstances, whether the services have been received by the appellant-assessee beyond the Indian Territory and hence, not liable to Service Tax as held by Member (Judicial) OR Whether the services have been received within Indian Territory and hence liable to Service Tax as held by Member (Technical) (ii) Whether in the facts and circumstances and in law, the benefit of section 80 is available to the appellant-assessee and no penalties are imposable as held by Member (Judici....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he lender banks and the appellant, the borrower. On account of the services provided by the MLAs and the Agent Bank, the appellant paid arrangement fees including road show expenses to the MLAs and agency fees to the agent bank as per Clause 11.1 & 11.2 of the Facility Agreement. 8. The dispute mainly relates to non-payment of service tax on the arrangement fees including road show expenses paid to the MLAs and agency fees paid to the Agent Bank in connection with raising of loans for the appellant from the non-resident banks. The demand on Arrangement Fee is Rs. 5,20,38,021/- and as Agent Bank's Fee is Rs. 1,97,138/-. 9. Heard both the sides at length. 10. ShriA.R. Krishnan, learned CA appearing for the appellant made the following submissions: 10.1. MLA's services are in relation to 'borrowing' and not in relation to 'lending'. Hence MLA's services are not covered by the definition of Banking and other Financial services vide Section 65(12) of the Finance Act, 1994. He contended that if the intention of the Legislature was to bring 'borrowing' within the scope of Banking and other Financial Services, in that event, the word 'bor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the decision of the Hon'ble Karnataka High Court in the case of Commissioner of Service Tax vs. Motor World (2012) 27 STR 225 (Kar) wherein it has been held that penalty under Section 76 is not warranted when penalty has already been imposed under Section 78 of the Finance Act, 1994. Learned CA also submitted that in the facts of this case, the Commissioner ought to have extended the benefit of Section 80 of the Finance Act, 1994. 11. Countering the arguments of the learned CA, learned Special Counsel for the revenue made the following submissions: 11.1. In the present case, admittedly the appellant is located in India. The appellant is also the recipient of services of the MLAs and the agent bank for which the appellant has paid fees to them and the said fees have been remitted from India only. Therefore, the appellant is liable to pay service tax in terms of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 regardless of whether the services were received and consumed abroad. In this connection, he relied on the decision of the Hon'ble Allahabad High Court in Glyph International Ltd. vs. Union of India - 2015 (25) STR 209 (ALL.). He also submitted that the contention ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mand draft, cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts; Section 65(105)(zm) 'Taxable service" means any service provided or to be provided to a customer by a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, in relation to banking and other financial services; 13.2. Section 66A. Charge of service tax on services received from outside India: 1) Where any service specified in clause (105) of section 65 is,- (a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... money by 16 banks to the appellant and the money was received by the appellant. Thus the services were in connection with lending of money and the services were received and used/consumed by the appellant. 15. On a careful reading of clause (a) & (b) of Section 66A, it is quite clear that when the service provider is from outside India and the recipient of the service who has his place of business, fixed establishment, permanent address or usual place of residence in India, then the recipient of such service will be liable to pay service tax. This is also clear from the reading of Rule 3(iii) of Taxation of Services (Provided from Outside India & Received in India) Rules, 2006. As per provisions of this rule, the taxable services provided from outside India & received in India shall be such services as are received by a recipient located in India for use in relation to business or commerce. In the present case, indisputedly the recipient of services is the appellant located in India. The expression "received by a recipient located in India" in Rule 3(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 matches the expression "received....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s for the service in respect of the lending. In case of commercial borrowing or borrowing from international banking and financial institutions, situation is different and here the borrower takes the help of certain agents or banks to procure the loan. This is what has been done in the present case. In the present case, the so called MLAs are none other than the banking and financial institutions and 10 of them put together has extended 90% of the loan and the remaining six banks have extended only remaining 10% of the loan. Thus, keeping in view the trade practices as also the holistic view of the operations, in my view, no distinction can be made for the services in connection with the loan vis-à-vis borrowing. 18. I, therefore, reject the appellant's contention that the services provided by the MLAs were in relation to 'borrowing' and not in relation to 'lending'. 19. Learned CA for the appellant sought to make a comparison between the definition of 'Banking and other financial services' with that of 'Stock Brokers Service' in connection with sale or purchase of securities vide Section 65(105)(a) of the Finance Act, 1994. His cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngs India Ltd. vs. Commissioner of Service Tax, Delhi- 2014 (35) 817 to say that the services provided and consumed outside the Indian Territory will not be subject to levy and collection of service tax. I have gone through the decision of the Tribunal. In that case, the Tribunal has considered the scope and ambit of 'Tour Operator's service' for arranging outbound tours which were provided and consumed outside India as the tourist toured abroad. The Tribunal held that outbound tours operated outside India will not be subject to levy and collection of service tax. The functioning of tour services in the said case is very different. The tours were being operated outside the territory of India, the person on tour was consuming the said services abroad. It is just that, person happens to be normally resident in India. In the present case, the banking and financial services which lead to lending of the money was received by the appellant for his business and commerce. As mentioned earlier, the fact that the amount was used for acquiring assets abroad or in India will not make any difference. The reasoning of the case in respect of tour operator covered by this Tribunal'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed upon the facts of individual cases. During the relevant period the appellant had not taken registration under the Banking and Financial Services and hence they did not file the ST-3 returns. In the absence of registration and the non-filing of the return, the material fact about the receipt of the above mentioned services was completely suppressed from the department. It is noted that, in the present case, the demand being confirmed is for the period 01/04/2006 to 31/03/2007, Even in this period, a demand of Rs. 69,132/- is for the period 01/04/2006 to 30/09/2006 and the remaining demand is for the period 01/10/2006 to 31/03/2007. I find from the chronological sequence of events submitted by the appellant along with the appeal that, department, as early as 12/07/2007 asked the details of overseas payments towards external commercial borrowings for three years. Certain details were furnished by the appellant on 22/08/2007. Thereafter, on 27/08/2007 department informed the appellant, that they are liable to pay service tax under Banking and Financial Services as recipient of the service. The appellants, however, did not follow the directions of the department. In the meantime, sim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mstances, I am of the view that the relevant information was suppressed from the department and extended period of limitation has been correctly invoked. 26. Penalties: I have already held that the extended period of limitation is invocable in this case inasmuch as the appellant has suppressed the material fact by not disclosing to the department about the payment of fees to the MLAs and the agent bank. Even on asking, the information was furnished after more than a year. Therefore, the plea of bona fide belief on the part of the appellant is not acceptable. In the circumstances, equal amount of penalty under Section 78 of the Finance Act, 1994 is imposable. 27. In so far as imposition of penalty under Section 76 of the said Act is concerned, in the case of ACCE vs. Krishna Poduval - 2006 (1) STR 185 (Ker), the Hon'ble Kerala High Court had held that the penalty under Section 76 is for failure to pay service tax by the person liable to pay the same. Therefore, the incidents of imposition of penalty under Section 76 are distinct and separate from those of Section 78. Therefore, penalty can be imposed both under Sections 76 & 78 simultaneously though the offences are commit....