TMI Blog2015 (11) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... result of receiving the money which in turn was consequent to the receipt of the said service, is immaterial. 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. Services provided by the MLAs were not in relation to 'borrowing' and in relation to 'lending'. Classification of service - Keeping in view the said trade practices, the definition of the stock broker service clarifies that it is chargeable for both sale or purchase. Services in relation to the lending are different and cannot be compared with the stock broker's services. The contention of the learned counsel does not hold good. The contention of the appellant also rejected that, the Agent Bank provided services to the lender banks not to the appellant. Needless to say that the appellant paid fees to the Agent bank in terms of the Facility Agreement dated 10/10/2006. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical) 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 (Judicial) OR Such benefit is not available and penalties are imposable under Section 76 and 78 of the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 5,20,38,021/- and as Agent Bank's Fee is ₹ 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 'borrowing' would have also been included in the definition of Banking and other Financial servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the appellant that the services received by it were in relation to 'borrowing' and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, such service shall, for the purposes of this section, be the taxable service, and such taxable service shall be treated as if the recipient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumed 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 by a person who has his place of business, fixed establishment, permanent address or usual place of residence, in India in clause (b) of Section 66A of the Finance Act, 1994. Harmon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrower 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- -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 contention was that in Stock Brokers Service, both sale and purchase have been mentioned, while in Banking other Financial Services, only 'lending' has been mentioned. Security service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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's decision in the case of Cox Kings India Ltd. (supra) is therefore, not applicable to the facts of the case. Next decision relied upon by the ld. CA is the unreported decision of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. 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 ₹ 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, similar issue relating to convertible alternative reference securities and letter of credit also came up for which the appellant made payments on 12/10/2007 and on 04/01/2008. Since the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 committed in the course of same transactions or arise out of the same act. However, in the case of Commissioner of Service Tax vs. Motor World - 2012 (27) STR 225 (Kar), the Hon'ble Karnat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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