TMI Blog2017 (5) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... red into a distinct agreement with other overseas entities would not suffice to justify the levy of tax on reverse charge - In order to ascertain the liability to tax, pertaining to ‘banking or financial service’, it would be in the interest of justice the remand the matter back to the adjudicating authority to determine the tax liability after considering the various aspects - we exclude that portion of the demand pertaining to ‘maintenance or repair service’ which we have held to be without authority of law - appeal allowed by way of remand. - ST/373/2012 - A/86853/17/STB - Dated:- 17-4-2017 - Shri M V Ravindran, Member (Judicial) And Shri C J Mathew, Member (Technical) Shri Piyush Chhajed with Shri Ajay Kumar Tahisara, Chartered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed at ₹ 13,42,71,746 for 2006-07 to 2009-10. As part of the operating lease agreement, the upkeep and maintenance of aircraft, in accordance with prescribed standards, is the responsibility of the appellant and the lessors insist upon a maintenance reserve fund contributed by the appellant as a guarantee. The appellant is reimbursed from out of this fund for any maintenance or repair undertaken upon the aircraft on submission of prescribed documentation. On a total remittance of ₹ 1,39,22,12,424 made by appellant between 1 st April 2005 and 31 st March 2010, tax liability of ₹ 16,14,51,980 has been computed. 3. The appellant has, all along, been questioning the tax liability with the claim that the borrower of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious decisions. 6. Considering the contention of the appellant that maintenance and repair of leased aircraft are handled by themselves, the ground for confirmation of demand on reverse charge as the recipient of maintenance and repair service should receive our attention at the outset. That the appellant undertakes maintenance and repair, and that the lessor does not, is undisputed. Levy of service tax is contingent upon rendering of taxable service by a provider to recipient and is charged on the consideration made over to the former by, or on behalf of, the latter. At first sight, it would appear from the transactions that the relationship between the lessor and the lessee is not one of provider and recipient of the service of maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rer any person authorised by him, in relation to- Xxxx 7. The finding of the adjudicating authority on the taxability of the contributions made by the appellant to the maintenance reserve fund of the lessor rests, thus, on unstable foundations and is not sustainable in law. In the absence of any evidence that the payments have been made as quid pro quo for maintenance and repair of aircraft, the contributions cannot be subject to tax. 8. Before we proceed to consider the grounds of appeal relating to the tax demanded on the costs incurred for availment of external commercial borrowings, it is necessary to take note of the circumstances in which the appellant was issued with notice for recovery of tax. The capital cost incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the financial flows that are described in the show cause notice, as well as the impugned order, seems to be a jigsaw that is not yet the completed puzzle. It appears from the various statements recorded during the investigation, and the conclusions arrived at by the adjudicating authority, that M/s Air India Charters Ltd, New York had made various payments to the financial institutions in connection with sourcing of the external commercial borrowings. It is also discernible from the records that M/s Air India Charters Ltd, New York is a fully owned subsidiary established there by M/s National Aviation Company of India Ltd (as M/s Air India was known then) just as the appellant is another fully owned subsidiary established in India by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant without connecting the three aspects. This runs counter to the very grain of taxation of services under Finance Act, 1994. To be taxed, a taxable service within the definition enumerated in section 65 of Finance Act, 1994 should be evidenced as having been rendered. Normally, the obligation to discharge the tax liability vests in the provider of the taxable service; however, in view of the legal non-existence of the overseas entity, being beyond the jurisdiction of the taxing statute, the recipient of the service is deemed to be the provider and the obligation to discharge tax liability transferred accordingly. Such a deeming fiction does not erase the primary requirement to identify the taxable service as provided to the recipient ..... X X X X Extracts X X X X X X X X Extracts X X X X
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