TMI Blog2013 (11) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... received towards services rendered, the same would get adjusted in the bills raised - only payment made towards services provided can be brought under the ambit of consideration received and not any other amount. At best, the interest saved by the appellant by securing interest-free loans from the holding company can be considered as a consideration for the services rendered and not the loans per se - Prima facie case not in favour of assessee - Stay granted partly. - ST/86072/2013 - Stay Order No. S/952/2013-WZB/C-I(CSTB) - Dated:- 10-6-2013 - P R Chandrasekharan And Anil Choudhary, JJ. For the Appellants : Mr N Venkataraman, Sr. Counsel with Ms Divya Jeswant, Adv. For the Respondent : Mr D K Acharya, Special Counsel PER : P R Chandrasekharan The appeal and stay application are directed against Order-in-Original No. 38/ST-II/RS/2012 dated 30/11/2012 passed by the Commissioner of Service Tax, Mumbai - II. 2. M/s. Reliance Infratel Ltd (RIL for short) is a subsidiary of Reliance Communications Ltd. (RCOM for short). They are providing taxable services falling under Business Support Service' as defined in Section 65 (104c) read with Section 65(105)(zzzq) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they had entered into a Master Service Agreement' dated 01/04/2007 with RCOM (MSA for short). The appellant was providing passive telecom infrastructure service of Business Support Service' to RCOM since April 2007 and they had raised invoices towards service charges in terms of Article 11of the Master Service Agreement (MSA) which included capital charges, fixed operating charges and variable operating charges on a monthly basis. The value of taxable service raised in the invoice are not in dispute and the appellant received service charges for the services rendered from the service-recipient from December, 2007 onwards. Since obligation to pay service tax is on receipt basis, the appellant started payment of service tax on the service charges received from January, 2008 onwards. Neither in the show cause notice nor in the impugned order there is any dispute raised regarding the value of taxable services raised by the appellant in their invoices and the payments received pertaining to the same. The appellant had received a sum of Rs. 1,210/- crore towards interest-free loan between 07/06/2007 to 17/09/2007 from RCOM. The entire amount was returned to M/s. RCOM in December, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on Article 4 of the MSA dated 10/04/2007 and as per Article 4.2, any advance or credit or any other form of financial support provided by the customer to the service provider may be settled by way of set-off against the service charges and any other receivables payable by the customer to the service provider under this agreement. As per Article 4.3, the parties acknowledge that the customer has till date paid up to Rs. 300/- crore on behalf of the service-provider towards purchase of passive telecom infrastructure from vendors. The said amount of Rs. 300/- crore shall be set-off against the service charges and any other receivables payable by the customer to the service-provider under this agreement. Thus, in Article 4.2 the expression may' has been used whereas in Article 4.3 the expression shall' has been used. As far as payments under Article 4.2 is concerned, though the said article provides an option for setting off but the option has to be exercised by the contracting parties. The evidence on record indicates that the transaction is a pure loan and the same has been duly returned/repaid. 3.3. As regards Article 4.3 relating to Rs. 283/- crore, the said article stipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges to RCOM and has not received the same as advances, the question of payment of service tax before December 2007 does not arise at all. Without admitting, the appellants contends that the maximum that can be considered for liability to service tax is the interest that would have accrued in respect of the transactions and if the interest accrued is taken as the basis for consideration for the services rendered, the liability would be about Rs. 12 crore approximately @13% per annum. 3.6. In the light of the above the appellant pleads for grant of stay and waiver of pre-deposit of the dues adjudged. 4. The Ld. Special Consultant for the respondent, on the other hand, invites attention to Note 3(2) to annexure to the Auditor's report dated 31/03/2008 in the Balance Sheet of RCOM. As per the said note: "the company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms and other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. Accordingly, Para 4(iii) of the order is not applicable." He also points to the auditor's report of M/s. RIL for the same period wherein Note 3(iii) it is stated as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "2. Loans and Advances include loan granted during year of Rs. 1,434.63 crore to Reliance Communications Infrastructure Limited, Rs. 102.00 crore to Reliance Telecom Limited, Rs. 300.30 crore to Reliance Webstore Limited, Rs. 22.59 crore to Campion Properties Limited, Rs. 545.64 crore to Reliance Infocomm Infrastructure Private Limtied, Rs. 1,210.00 crore to Reliance Infratel Limited, Rs. 81.11 crore to Reliance Big TV Limited. and repaid during period of Rs. 871.65 crore by Reliance Communications Infrastructure Limited, Rs. 981.18 crore by Reliance Telecom Limited, Rs. 531.03 crore by Reliance Website Limited, Rs. 1,210.00 crore by Reliance Infratel Limited, Rs. 3.00 crore by Reliance Big TV Limited. (Previous period - Loans and Advances include loan granted during the period of Rs. 175.30 crore to Reliable Internet Services Limited, Rs. 1,283.49 crore to Reliance Telecom Limited, Rs. 933.99 crore to Reliance Webstore Limited, Rs. 36.78 crore to Campion Properties Limited, Rs. 630.00 crore to Reliance Infocomm Infrastructure Private Limited, Rs. 6,342.95 crore to Reliance Communications Infrastructure Limited and loans repaid during the period of Rs. 5,834.37 crore by Relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified period (on a monthly basis) is indicated apart from service tax amounts and there is no dispute in the instant case that for the consideration received in respect of the invoices raised, the appellant has discharged service tax liability. Section 67 of the Finance Act, 1994 provides for payment of service tax on the gross amount charged for the services rendered and consideration includes any amount that is payable for the taxable service provided or to be provided. In other words, only payment made towards services provided can be brought under the ambit of consideration received and not any other amount. At best, the interest saved by the appellant by securing interest-free loans from the holding company can be considered as a consideration for the services rendered and not the loans per se. If service tax liability is computed on such interest amount, it works out to approximately Rs. 12 crore. In view of the above factual position we are of the considered view that, at the interim stage, the appellant should be directed to make a pre-deposit of Rs. 12 crore only towards the service tax liability, if any. 7. Accordingly, we direct the appellant to make a pre-deposit of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
