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TMI Blog2017 (5) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... th interest thereon, and penalties under section 76, 77 and 78 of Finance Act, 1994. The impugned order holds that the appellant is a recipient of 'banking and other financial services' and 'maintenance and repair' services provided by foreign entities and, hence, liable to be taxed, in accordance with section 66A of Finance Act, 1994, as the deemed provider of those very services. Of the total demand set out in the show cause notice, the adjudicating authority has dropped Rs. 1,64,69,166 as it pertained to the period prior to 18th April 2006 when section 66A was incorporated in Finance Act, 1994. 2. Appellant, a wholly owned subsidiary of Air India, operates the low cost carrier, Air India Express, flying to West Asia and South East Asia. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense owing to the repairs/maintenance being carried in the establishment of the appellant. 4. The appellant also contends that the demand is barred by limitation as, being a public sector enterprise, ill-gotten fruits of evasion of taxes would not accrue to their benefit and that the levy of tax under section 66A of Finance Act, 1994 carries with it the privilege of availment of CENVAT credit rendering this revenue neutrality to be a disincentive for evasion of tax. 5. Learned Chartered Accountant, appearing for the appellant, reiterated these arguments and sought to buttress the submissions by reference to various decisions of the Tribunal, different High Courts and the Hon'ble Supreme Court. We have also heard Learned Authorised Represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute or rules pertaining to service tax. There is not a whit of evidence that the lessor has, at any stage, undertaken repairs of the aircraft. The funding of repairs or maintenance undertaken by a third party or by the appellant will not transform the lessor into a service provider; indeed, it is far-fetched to consider a paymaster to be a provider of any service. Furthermore, the fund appears to be a mere accumulation of amounts as a security to be utilised if the appellant were to default in its contractual undertaking to maintain the aircraft according to prescribed standards. To hold contributions to be a consideration for taxable service would not be in conformity with the definition of the taxable service which, in section 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viation Leasing Ltd, incorporated in Ireland. It is from M/s Linster Aviation Leasing Ltd that the appellant takes possession of the aircrafts through a further lease agreement. The contents of the agreement between the appellant and M/s Linster Aviation Leasing Ltd does not appear to have been ascertained by the adjudicating authority. Neither do we find any ascertainment of the scope of the agreement, if any, between the various financial institutions and the appellant and of the mechanism by which M/s Golden State Aircraft LLC is permitted to avail of any loan negotiated by the appellant. Without subjecting the various inter-relationships to scrutiny, the existence of back-to-back arrangements by which the appellant becomes a recipient o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order holds that it is the appellant who has, effectively, made the payments to the financial institutions and, as the beneficiary, was the recipient on whom the tax liability is to be fastened. Our comprehension of the factual matrix is otherwise in that the manner in which the appellant has transferred payments overseas to the financial institutions has not been recorded by the adjudicating authority. 11. We note that the tax liability is sought to be fastened on payments made in connection with acquisition of aircraft by availing loans from financial institutions outside the country. The adjudicating authority has relied upon the concatenation of the fact of payments made by an overseas entity established as a subsidiary of the ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough an overseas branch or establishment with intent to take shelter behind mutuality and, thus, evade the tax liability. 12. It is, therefore, all the more essential that the provision of the service, the nature of the relationship between the overseas entity that purportedly received the service and the entity in India, and the manner in which the payment for service has, in effect, moved from the Indian entity be examined in detail as a prelude to crystallising the tax liability. A mere linking of the various segments of section 66A of Finance Act, 1994 and the payment made by a remotely connected overseas entity which has entered into a distinct agreement with other overseas entities would not suffice to justify the levy of tax on re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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