TaxTMI 
TaxTMI 
2021 (3) TMI 1345
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....with External Commercial Borrowings obtained by Appellant from Lender Banks of Federal Republic of Germany. 2. Brief fact of the case is that the Appellant is a manufacturer of BOPP films since January, 2009. In order to expand their production capacity and import Capital Machinery, Appellant has obtained "External Commercial Borrowing [ECB]" from the "Lender Banks" of Federal Republic of Germany, as per their written agreements on consideration of the interest, Management Fees and Commitment Fees. As per the statutory provisions of law in Germany, Lender Banks in Germany can provide such "ECB", only when the Lender Bank has obtained "Insurance Cover" from "HERMES", Agency nominated in Germany and acting on behalf of "Federal Republic of Germany" for securing "Lender Banks" maximum upto 95% of Loan Amount, in case Borrower defaults in making repayment of the Loan Amount to the Lender Banks. As per Loan agreements, "HERMES" Premium amount is first paid by Lender Banks to "HERMES" and then it is reimbursed from Appellant by including in the loan amount and after reimbursing Appellant has been paying interest thereon. Appellant has obtained External Commercial Borrowing[ECB] ....
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.... dt 02-08-2021 and the Order has confirmed total Service Tax demand of Rs. 2,96,70,103/- with interest and equal penalty. Therefore, Appellant is in Appeal before this Tribunal. 3. Shri Paresh M. Dave, Advocate and shri P. P. Jadeja, Authorised representative appearing on behalf of appellant submits that Hermes Premium is for Insurance Cover to the Exporter of Federal Republic of Germany in respect of Goods & Services exported by them from Federal Republic of Germany, and such charges of Premium is for Insurance Cover are collected by Federal Republic of Germany for protecting German Companies in event of political risks as well as commercial risks. "Hermes Costs" or "Hermes Commission" or "Hermes Premium", nature of payment is fee or charges paid to Federal Republic of Germany. The transaction of Hermes Covers are between Federal Republic of Germany and lender Banks, and these transaction are admittedly neither between Federal Republic of Germany and Appellant, nor between Lender Banks and Appellant. Thus, Appellant was nowhere directly connected with Hermes Cover, and hence Appellant could not have been saddled with Service Tax liability in respect of such transactions b....
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....e City Corporation 2010 (18) STR 127 • Chhata Sugar Company Ltd. 2004 (165) ELT 369 (SC). 3.2 They also submit that appellant has borrowed the funds from German Banks and for period prior to April 2015, appellant has entered into similar agreement with Lender Banks. The departmental Audit Officers have verified and audited the appellant's Books of Account for period from February, 2011 to March, 2012; and thereupon raised objection about Service Tax on Management fees and Commitment fees with respect to loan transactions, which involved other elements like Hermes premium and ECA premium trench. When Audit officers brought to appellant's notice that service tax was chargeable on Management fees and Commitment fees with respect to loan agreements dated January 7th/11th, 2011 (Hermes premium and ECA premium trench were also there in Agreement), appellant has discharged Service Tax liability, and appellant has then regularly paid Service Tax on Management fees and Commitment fees for all loan agreements including 4 loan agreements in this case. If Audit Officers, had pointed out that there was a liability to pay service tax on Hermes premium and ECA premium trench....
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....uring relevant period, and cenvat of entire amount of Service Tax under dispute could have been utilized by Appellant. They have relied upon the following case laws in support of their claim of Revenue Neutrality :- • 2000 (119) E.L.T. 718 (Tribunal - LB) - JAY YUHSHIN LTD vs CCE • 2010 (254) E.L.T. 628 (Guj.) - CCE vs INDEOS ABS LIMITED • 2016 (339) E.L.T. 467 (Tri. - Ahmd.) -KANSAI NEROLAC PAINTS LTD vs CCE-I • 2013 (290) E.L.T. 538 (Guj.) - CCE vs GUJARAT GLASS PVT. LTD • 2014 (313) E.L.T. 789 (Tri. - Bang.) - PRECOT MILLS LTD vs CCE • 2014 (308) E.L.T. 535 (Tri. - Ahmd.)- ALEMBIC LTD vs CCE, Vadodara-I • 2015 (329) E.L.T. 449 (Tri. - Mumbai) - CCE vs SPECIAL STEEL LTD, which is also maintained vide 2016 (334) E.L.T. A123 (S.C.)] • 2016 (333) E.L.T. 124 (Tri. - Mumbai) - Mahindra & Mahindra Ltd. Vs CCE • 2018 (15) G.S.T.L. 291 (Tri. - Del.) - V.E. Commercial Vehicles Ltd vs CCE, which is maintained vide 2019 (31) G.S.T.L. J96 (S.C.)] • 2019 368) E.L.T. 105 (Tri. - Mumbai) - MAHINDRA & MAHINDRA LTD. Vs CCE, Mumbai, which is maintained vide 2019 (368) E....
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....ubmitted to uphold the impugned Order and dismiss the Appeal filed by the Appellant. He also relied upon the following decisions:- • 2020 (32) G.S.T.L. 186 (Mad.) - BGR ENERGY SYSTEMS LIMITED vs CCE, CHENNAI • 2016 (41) S.T.R. 689 (Tri. - Mumbai) - TATA STEEL LTD. vs CST, Mumbai-I • 2014 (36) S.T.R. 808 (Tri. - Ahmd.) - GUJARAT BOROSIL LTD vs CCE, Surat • 2019 (29) G.S.T.L. 322 (Tri. - Del.) - PARAMOUNT COMMUNICATIONS LTD. vs CCE, New Delhi-I • 2019 (22) G.S.T.L. 55 (Tri. - Chennai) - S. GURUMURTHY vs CCE&ST, Chennai-III • 2015 (324) E.L.T. 656 (S.C.) - STAR INDUSTRIES vs CC (IMPORTS), RAIGAD • 2000 (119) E.L.T. 718 (Tribunal - LB) - JAY YUHSHIN LTD vs CCE, New Delhi • 2019 (29) G.S.T.L. 304 (Tri. - Mumbai) - Board of Control For Cricket In India vs CST, Mumbai-II • 2014 (306) E.L.T. 635 (Tri. - Ahmd.) - NATIONAL CONDUCTORS vs CCE, Daman • 2017 (4) G.S.T.L. 340 (Tri. - Del.) - SHREE RANIE GUMS & CHEMICALS PVT. LTD vs CCE, Jaipur • 2017 (355) E.L.T. 562 (Tri. - Del.) - NITIN SPINNERS LTD. vs CCE, Jaipur-II • 201....
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....e or commercial concern, in relation to banking and other financial services. External Commercial Borrowing (ECB), is Expression used to refer to the Commercial Loans from overseas Lenders as finance or Loans. "Lending" of funds, is also included under "Banking and Other Financial Services". Thus, Appellant has received servicesi.e."Banking and other Financial Services" from Lender Banks in Federal Republic of Germany. For purpose of Service Tax levy, charges for providing such actual Taxable services recovered by Lender Banks from Assessee are gross amount charged by the Service Provider for such service provided or to be provided. 5.1 We find that Service Tax is levied on transactions of "Taxable Services" between Service Providers and Service Recipients under forward charge or reverse charges, as applicable in appropriate cases. Hence, it is essential first to ascertain who is the Service Provider and who is the Service recipient before considering one's liabilities on the Taxable Services in question. In the present case, we find that Service Tax is confirmed on the Insurance premium amount paid to HERMES by the lender Banks in Germany for providing Insurance cover to ....
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....ercial Borrowing", unless Lender Bank has first obtained "Insurance Cover" from "HERMES", an Agency of "Federal Republic of Germany" for securing "Lender Banks" maximum upto 95 % of Loan Amount, in case Borrower defaults in making repayment of the Loan Amount to Lender Banks. As per Loan agreements, "HERMES" Premium amount is first paid by Lender Banks to "HERMES" and then reimbursed by Lender Banks from the Appellant. However, without giving our final conclusions on merits of the case and on levy of Service Tax, we are prima facie of the view that in the facts of this case, if Appellant as a Borrower defaults in making repayment of the Loan Amount to Lender Banks, Insurance cover provided by HERMES to Lender Banks would operate in favour of Lender Banks. These facts are available on record in loan agreements. The appellant is liable to pay Service Tax under RCM or not in respect of the amount paid by Appellant to Lender Banks towards all HERMES premium charges during the period in question, is the question to be decided on merits, in the facts of this case. 5.2 We find that Order-in-Original that from Loan agreements, adjudicating authority has noted that "Hermes Guara....
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....ch were incurred by Lender Banks for obtaining Insurance cover from HERMES of Federal Republic of Germany. 5.3 Before going into merits of the case, we also find that Appellant has objected Service Tax demand on various grounds including Time Limitation and Revenue Neutrality etc. Since, Appellant had opened their case with submission on time limitation, we also first examine issue of time limitation for demand. Appellant has vehemently submitted that extendedperiod of time limitation cannot be invoked in facts of this case. Demand of Service Tax in this case is for FY 2015-16 to 2017-18 [30-06- 2017] and SCN has been issued on 24-12-2020 invoking extended period u/s 73 of Finance Act 1994. We find that on page No. 5 of SCN dt. 24-12- 2020 it is reflected that during investigation, it is found that Appellant has failed to discharge their service tax liability totally amounting to Rs. 2,96,70,103/- on "Hermes-costs/Premium", "ECA Premium (Euler Hermes)" and on Processing Fee paid as detailed In Table-(IV) below: TABLE-(IV) Sr. No. Loan Amount in Euro Other Charge Amount in Euro Refund Actual Amount (in Euro) Con....
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....iling such ECBs or deducted by bank(s) or financial institution(s) as available with them for F.Y 2015-16 to F.Y. 2017-18 (uptoJune-2017). Appellant submit that due date for demanding Service Tax normally within 30 months is computed as under:- Sr. No. Loan Amount in Euro Amount in INR Date of Payment / Deduction Due date for filling ST-3 Return as per Rule 7(2) of Service Tax Rules 1994 As per Section 73(1) of Finance Act 1994, Time limit of 30 months ends on 1 1,80,81,133 9.98.56,763 30.04.2015 25-10-2015 25-10-2018 2 1,80,81,133 1,48,277 30.04.2015 25-10-2015 25-10-2018 3 l,79,10,760 8,41,52,452 22.12.2016 25-10-2017 25-10-2019 4 39,55,000 1.85,82.246 22.12.2016 25-10-2017 25-10-2019 5 26,31,000 1,26,61,832 25.01.2017 25-10-2017 25-10-2019 Thus, that it is clear from the above table of due date for issuance of SCN under normal perio....
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....st Appellant under Reverse Charge, when the entire amount paid under RCM was available as Cenvat Credit which could have been 14illful14 for payment of excise duty on final products manufactured & cleared in market by the Appellant. As pointed out by Audit Officers, Appellant had paid Service Tax on Commitment Fees and on Management Fees, as calculated by audit officers and Appellants is paying Service Tax on Management fees and Commitment fees on each subsequent ECB. Show Cause Notice issued, invoking extended period of limitation, is not sustainable or justified in the facts of this case. We agree to such submissions on time limitation. We find that the adjudicating authority has not given sound reasons for rejecting this submission. Decisions relied upon on Time Limitation are like HMM Limited - 1995 (76) ELT 497 (SC), Padmini Products and Chemphar Drugs & Liniments reported in 1989 (43) ELT 195 (SC) and 1989 (40) ELT 276 (SC) and others referred to in their submissions in this case. The law on invocation of extended period is well settled, as held by Hon'ble Supreme Court in above landmark cases are applicable in the facts of this case. We have carefully considered the facts on....