TMI Blog2013 (9) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... ale do not fall within the scope of any of the various clauses of the definition of BOFS under Section 65(12) of the Finance Act, 1994. It was so contended by the assessee in their reply to the show-cause notice also. But what appears from the impugned order is that this aspect was also not not examined by the learned Commissioner. This is another reason for de novo adjudication of the case. - matter remanded back. - E/820 and 1024/2009 - 283-284/2012 - Dated:- 16-4-2012 - Shri P.G. Chacko and M. Veeraiyan, JJ. Shri S. Naganand, Sr. Advocate and Laxminarayanan, Advocate, for the Appellant. Shri M.M. Ravi Rajendran, Deputy Commissioner (AR), for the Respondent. [Order per : P.G. Chacko, Member (J)]. - The appellant in appeal No. E/820/2009 has pre-deposited 50% of the service tax in terms of the judgment dated 4-3-2011 passed by the Hon ble High Court of Karnataka in CSTA No. 1 of 2011 (M/s. Rajesh Exports Ltd. v. Commissioner of Service Tax, Bangalore). 2. M/s. Rajesh Exports Ltd. (REL, for short) is a company registered in India with its registered office in Bangalore and is engaged in the business of manufacture and export of gold and diamond jewellery. The comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of Silverdale. (g) Overall co-ordination amongst various agencies to the issue. Silverdale will co-ordinate with the agencies involved in the issue, including any appointed by the investors for conducting due diligence on the Company, to ensure a smooth execution of the transaction and to ensure that agencies adhere to the time frames agreed upon. (h) As Lead Manager, advise on the allocation of the securities to various (potential] investors. (i) Assist in obtaining approvals from the relevant authorities - such as, in principle approvals from the BSE (Bombay Stock Exchange Limited] and NSE (National Stock Exchange of India Limited). (j) Any other services that may reasonably be required to facilitate the Transaction. For the above services, REL was liable to pay to Silverdale aggregate fee of 3% of the aggregate subscription towards the FCC Bonds. In absolute terms, this fee amounted to US $ 4.5 millions (3% of US $ 150 millions). As per the agreement between Silverdale and REL, the former was entitled to deduct the fee (if not paid by the latter) from the aggregate subscription proceeds of the FCC Bonds. Accordingly, Silverdale deducted the fee from the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the Commissioner s order reads as follows :- (i) I confirm the demand under proviso to Section 73(1) of Finance Act, 1994 amounting to Rs. 2,44,83,060/- (Rupees two crore forty four lakh eighty three thousand sixty only). (ii) I order payment of appropriate amount of interest under Section 75 of the Finance Act, 1994. (iii) I order penalty of Rs. 200/- (Rupees two hundred only) per day from due date of payment of service tax till the date of payment under Section 76 of Finance Act, 1994. (iv) I order penalty of Rs. 1000/- (Rupees one thousand only) under Section 77 of Finance Act, 1994. (v) I order penalty amounting to Rs. 2,44,83,060/- (Rupees two crore forty four lakh eighty three thousand sixty only) i.e. equal to the service tax amount confirmed under Section 78 of Finance Act, 1994. The entire order of the learned Commissioner is under challenge in the assessee s appeal No. E/820/2009, while in the Department s appeal No. E/1024/2009, the limited grievance of the appellant is that a penalty to the appropriate extent was not imposed by the adjudicating authority under Section 76 of the Act. 6. We have perused the records and heard both sides in both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) As REL was not liable to pay service tax on Silverdale s services which were not received in India, the question of imposing penalties under Sections 76 and 77 of the Act also does not arise. For this very reason, the Department s appeal is only liable to be dismissed. 7.2 The learned counsel for the assessee, while adverting to the nature of the transaction between them and Silverdale, claimed support from certain decisions of the Apex Court. Relying on T.N. Kalyan Mandapam Association v. UOI [(2004) 5 SCC 632 = 2006 (3) S.T.R. 260 (S.C.) = 2004 (167) E.L.T. 3 (S.C.)], the learned counsel invoked the pith and substance rule in his endeavour to show that there was no element of taxable service in the transactions between Silverdale and the assessee. Relying on All India Federation of Tax Practitioners and Others v. UOI Others [(2007) 7 SCC 527 = 2007 (7) S.T.R. 625 (S.C.)], he submitted that service tax was destination-based consumption tax in the sense that it was a tax on the consumer and would be leviable only on services provided within the country. In the context of comparing service tax with other taxes, the learned counsel referred to Gujarat Ambuja Cements Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be treated as if the recipient had himself provided the service in India. The services rendered by Silverdale to REL in the present case satisfy these parameters laid down under Section 66A and, therefore, the demand of tax cannot be resisted by the assessee on the ground that the services were not received in India. The services were admittedly received by REL having their place of business, fixed establishment and permanent address in India and, therefore, REL is liable to pay service tax under Section 66A. (v) The tax liability of REL would not have come to light but for the departmental investigations. REL suppressed the relevant facts with intention to evade payment of service tax and therefore the extended period of limitation was correctly invoked in this case. 8.2 The Deputy Commissioner (AR) also reiterated the grounds of the Department s appeal and prayed for enhancement of the quantum of penalty imposed under Section 76 of the Act. 9. We have given careful consideration to the submissions which centred around Section 66A of the Finance Act, 1994. This provision of law, which was brought into force w.e.f. 18-4-2006, reads as follows :- SECTION 66A. Charge of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n located in India. Section 66A lays down that such services (specified in clause (105) of Section 65 of the Act) shall be treated as having been provided in India by the recipient. This deeming provision of Section 66A makes the Indian recipient liable to pay service tax on the services provided by the foreign service provider. This exception to the general scheme of levy of service tax is also called reverse charge mechanism . 10. The Taxation of Services (Provided from Outside India) Rules, 2006 were made by the Central Government for carrying into effect the provisions of Section 66A of the Act. Rule 3 of these rules, shorn of inapplicable portions, reads as under :- 3. Taxable services provided from outside India and received in India : Subject to Section 66A of the Act, the taxable services provided from outside India and received in India shall, in relation to taxable services - i. ii. iii. specified in clause (105) of Section 65 of the Act, but excluding - (a) (b) (c) be such services as are received by a recipient located in India for use in relation to business or commerce. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person located outside the country can be deemed to have provided the service in India. This fundamental issue was not framed or examined by the adjudicating authority in this case. In our view, the issue requires to be addressed in de novo proceedings. 12. It is not in dispute that the services provided by Silverdale were received by REL, and it cannot be gainsaid that the latter paid for the services by permitting the former to deduct their fees from the proceeds of the FCC Bonds. The limited case of REL is that the services were not received in India. They claim to have received the services outside India. Did they have any office or establishment in UK or elsewhere outside India to receive Silverdale s services outside India? Through whom did REL maintain/operate the Escrow Account in London? The learned counsel could not give any convincing reply to these queries of ours. We are of the view that, for the ends of justice, the party should get an opportunity to discharge their burden of proof in fresh proceedings. 13. Both sides have relied on case law on the substantive issue. The learned counsel has relied on the Hon ble Supreme Court s decision in All India Federation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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