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TMI Blog2015 (4) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... into Master Service agreement dated 10th April 2007 with RCM. Investigations also revealed that RCM financed the appellant as per the Master Service Agreement the financial support given to appellant was to be set off against the bills that would be raised by the appellant on RCM. The DGCEI issued a show cause notice demanding service tax liability with interest and also imposition of penalty. The period that involved for demand of the duty by show cause notice dated 18th August, 2011 was 10th April 2007 to 31 st March, 2008. The appellant contested the demand on merits and submitted that the demands raised by the Revenue is incorrect and amount of Rs. 1,210/- crore and Rs. 283/- crores were repaid by them to RCM during the same financial year and they were not, therefore, consideration for the services rendered but interest-free loans received from holding-company. The adjudicating authority after following due process of law, did not agree with the contentions raised by the appellant and confirmed the demand along with interest and also imposed penalties. Aggrieved by such an order appellants are before us. 3. Learned Senior Counsel Shri V.S. Nankani contended that RCM demerged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime when there was no separate entity namely RCM and the appellant. He also submitted that the invoices which have been raised separately indicate service charges from June, 2007 onwards and payment was received until March, 2008 aggregating to Rs. 993/- crores, on which service tax liability of Rs. 109/- crores has been paid as acknowledged in Annexure to the show cause notice. It is his submission that the demand of service tax on the amount of Rs. 1,493/- crores when the service tax has been paid and collected by the by the Department each time the appellant received payment from RCM against the invoices, would amount to double taxation. He would submit that loan was granted by RCM during the period June and September, 2007 with bulk of the amount being paid in August and September, 2007; the repayment of the same started from October, 2007 and thereafter the entire amount has been paid off before 31/12/2007. On this factual matrix, it is his contention in the ordinary to and without prejudice to other submissions that at best the liability is limited to the interest payment for about 3 to 4 months on account of deferred payment of service tax but there cannot be any demand for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y loan, secured or unsecured, which itself is incorrect as the amounts which are reflected in the appellants records were in fact advances to be adjusted for the services rendered. He therefore submitted that the order of the adjudicating authority does not require interference. 5. We have carefully considered the submissions made by both sides and perused the records. We find that on one hand we have Master Service Agreement; auditors report and audited accounts and balance sheets submitted by the appellant for the period ended 30 th September, 2007 and 31st of March, 2008; and on the other statement of the officials of RCM; which needs to be addressed to come to a conclusion whether service tax liability arises on the appellant or otherwise. 6. The short point involved in this case is whether the sum of Rs. 1,493/- crores received by the appellant from RCM is an advance for the taxable services rendered or to be rendered by the appellant to M/s. RCM or is it a loan by way of Inter Corporate Deposits given to the appellant. 7. As we have already stated, the perusal of the Master services Agreements and the clauses therein do not reveal any conflicting position. We find strong f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. On details scrutiny of the balance sheets produced by the learned Counsel for appellant, we find that accounts of the appellant as well as RCM do not indicate any co-relation in the repayment of the loan and receipt of the service charges by the appellant. The emphasis of the Revenue that the agreement between the appellant and RCM very clearly indicates that an amount of Rs. 283/- crores was to be adjusted against the service charges would also not carry the case of the Revenue any further as the appellant as well as RCM being a public limited companies, have clearly indicated in their balance sheets that the amounts have been shown as received and loans repaid. 9. In our considered view, provisions of Section 67 of the Finance Act, 1994 refers to gross service charges paid or payable for the services rendered or to be rendered has to be read as it is. In our view, the entire sum of Rs. 1,493/- crores does not qualify as an advance towards the services to be rendered by the appellant to RCM. 10. Since we have disposed of the appeal on merits, we are not recording any findings on various other submissions made by both sides. 11. In view of the foregoing, we set aside the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RCOM, the amount of Rs. 1,210/- crore is shown as a loan and not as consideration for any services rendered. These books of accounts have been audited and are in the public domain. Therefore, the argument of the Revenue that the amount of Rs. 1,210/- crore is a consideration for the services rendered does not flow from the audited books of accounts of the company. There is also no dispute about the fact that the appellant had repaid the amount of Rs. 1,210/- crore received from M/s. RCOM during the same financial year, by 31/12/2007. 13.2. Similarly, in the case of Rs. 283/- crore said to have been given by M/s. RCOM to the appellant, the said amount was towards the expenditure incurred by M/s. RCOM even before the appellant-firm came into existence by way of expenses towards the initial setting up and also by way of payments made to vendors for supply of materials. When such payments have been made before the appellant-firm came into existence, we do not understand how this amount can be treated as a consideration received for the services rendered by the appellant. It is also seen from the books of accounts, that the said amount has been repaid by the appellant during the same f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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