TMI Blog2022 (5) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... , designing, construction, marketing of the project were to be done by the Development Manager and also Development Manager was required to repay the loan amount availed by the appellant from the Yes Bank - The learned Commissioner further goes on to find that the said financial service is not used by M/s Neelkamal Realtors Towers Pvt. Ltd for providing any output services and that M/s IGSSTPL are not in the business of providing financial service, but are in the construction service. The said financial services are consumed by the Development Manager i.e. M/s IGSSTPL and, therefore, the availment of CENVAT Credit of the same, by the appellant, is contrary to the provisions of CENVAT Credit Rules, 2004. He further finds that transaction in money is outside the ambit of service. The passing on to the burden by the Development Manager to the appellants as to be seen is only the transaction in money and not a financial service provided by M/s IGSSTPL. While deciding the inadmissibility of CENVAT Credit, one needs to be clear as to what is the service rendered; who is the service provider; who is the service recipient; what is the consideration; whether Service Tax has been paid on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and have entered into a Development Management Agreement with M/s Indo Global Soft Solutions Technologies Pvt. Ltd SPV of 2 . Revenue pointed out that M/s IGSSTPL have simply passed on the Service Tax they have paid to M/s Dewan Housing Finance Ltd. while availing the loan from them. The said IGSSTPL have not rendered any kind of services to the appellant and therefore, the appellants are not entitled to avail CENVAT Credit on the basis of a debit note issued by M/s IGSSTPL. A show-cause notice was issued to the appellants and the same was confirmed by the Order-in-Original dated 07.10.2019 i.e. impugned order along with interest and penalties. The appellants are before us challenging this order. 2. Shri Bharat Raichandani, learned Advocate for the appellant submits that the appellant have availed loan of Rs.350 Crores from Yes Bank; due to financial difficulties, the project was stalled and they were not in a position to repay the loan, accordingly, they have entered into a Development Management Agreement with M/s IGSSTPL, appointing them as a Development Manager of the construction project being undertaken by the appellant; in terms of the agreement, M/s IGSSTPL were resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, all the ingredients of Service Tax such as existence of service provider, service recipient and consideration are satisfied; in terms of the Development Management Agreement, M/s IGSSTPL rendered the services to the appellant and the same is pure Business Auxiliary Service provided by M/s IGSSTPL to the appellants. 6. Learned Advocate further submits that it can be argued that money/loan given by M/s IGSSTPL is a transaction in money but the fees charged by M/s IGSSTPL for providing of money to repay the loan is subject to Service Tax like, commission charges of banks etc. for facilitating finance to their customers. While transaction in money, per se, is outside the ambit of Service Tax, the related activities which is separately charged cannot be treated as transaction in money; as an example, a foreign exchange dealer while exchanging one currency for another also charges a commission; the exchange of currency, per se, would be a transaction only in money, the related activity of providing service of conversion of Forex, documentation and other services for which the commission is charged separately would be very much a service . He submits that any related in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has not taken credit in a wrongful manner, Rule 14 is not attracted and as there is no question of suppression of facts, Rule 15 of CENVAT Credit Rules, 2004 and Section 78 of the Finance Act, 1994 are also not invokable. 8. Learned Authorized Representative Shri Dilip Shinde for the Department reiterates the findings of the Order-in-Original and submits that in terms of the agreement entered into by the appellants with M/s IGSSTPL, the service provider is required to undertake all activities including planning, organizing, designing, construction, marketing etc. of the product and repay the loan taken by the appellant from the Yes Bank; in terms of the agreement, M/s IGSSTPL are entitled for a fixed fee of Rs.520 Crores exclusive of indirect taxes; in terms of clause 3(iv) of the agreement, the total development cost shall be on account of the appellant save and except funding thereof to be arranged by the Development Manager and save and except its own employees cost and time. He further submits that M/s IGSSTPL availed the loan of Rs.700 Crores from M/s DHFL; as presanctioned loan, a processing fee of Rs.77,13,33,333/- + taxes has already been collected and the balance of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utilized by the Company only for repayment of proportionate loan of the said Yes Bank Loan. (ii) To enable the Development Manger to arrange for the Development Manager Loan, the Company has created a pari passu mortgage and charge against the Land and/or Project and/or Realisation in favour of DHLF being the lender of the Development Manager ( DHLF ) (iii) The servicing (interest and/or principal) of the loan of the Development Manager shall be simultaneous to the servicing (interest and/or principal) of the loan by the Development Manager to DHFL 4.12 Third Party Capital (i) To meet the Project Costs (including the repayment of the Yes Bank Loan and/or the Development Manager's Loan), the Development Manager shall cause to arrange Third Party Capital in the Company. Such Third-Party Capital shall be raised in the Company and the Company shall be the borrower. The Company shall give the necessary security by causing the creation of the mortgage and Encumbrances on the said Land, the Project, the Sale Building, the Premises, the Realisation and/or the right of the Company and any combination of the aforesaid as may be required by the Development Manager for this pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Clarification (i) The service tax, VAT, GST, or any other tax or levy in respect of development of the said Land, the Property and the Project and on this Agreement (if payable under Applicable Law) and the transaction contemplated thereby shall be come and paid by the Company and shall be a Project Cost. (ii) Each Panty will bear its own income tax and such income tax will not form part of the Project Costs. 11. On going through the various clauses of the agreement, we find that the appellants have entered into an agreement with M/s IGSSTPL; as a consideration of the agreement, a sum of Rs.520 Crores, was to be paid to the Development Manager; all the development activities including planning, organizing, designing, construction, marketing of the project were to be done by the Development Manager and also Development Manager was required to repay the loan amount availed by the appellant from the Yes Bank. For further purpose of execution of the terms of the contract, the Development Manager have availed a loan of Rs.700 Crores from M/s DHFL, for which a processing fee of Rs.77,13,33,333/- plus taxes was collected by the Bank and the balance of Rs.6,86,66,667/- was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t service can be availed; the appellants submit that M/s IGSSTPL have provided financial services and the processing fee, component of such service, is subjected to Service Tax. The learned Commissioner further goes on to find that the said financial service is not used by M/s Neelkamal Realtors Towers Pvt. Ltd for providing any output services and that M/s IGSSTPL are not in the business of providing financial service, but are in the construction service. The said financial services are consumed by the Development Manager i.e. M/s IGSSTPL and, therefore, the availment of CENVAT Credit of the same, by the appellant, is contrary to the provisions of CENVAT Credit Rules, 2004. He further finds that transaction in money is outside the ambit of service. The passing on to the burden by the Development Manager to the appellants as to be seen is only the transaction in money and not a financial service provided by M/s IGSSTPL. 12. However, we find that neither the learned Commissioner not the appellants have appreciated the facts of the case in proper perspective. It was the appellant s claim that the amount transferred to them by the Development Manager is a financial service and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered financial service to the appellants, M/s IGSSTPL can charge and recover such Service Tax paid from the appellants, on the value of the service rendered. It defies logic as to how the entire service tax burden on loan of Rs 700 Cr availed by M/s IGSSTPL can be transferred to the appellants. It is also not clear from the findings of the Commissioner and submissions of rival parties as to what was the component of Service Tax paid by the Development Manager while rendering the said service to the appellants. We are of the considered opinion that in the absence of such rendering of service and payment of service tax by M/s IGSSTPL the Development Manager to the appellants, a simple transfer of Service Tax credit by them on the processing fee collected by the finance leasing company directly to the appellant will not entitle the appellants to avail CENVAT Credit of the same and not certainly on the entire amount as it is not disputed that the amount transferred to the appellant was only to the extent of Rs.100 Crores for repayment of loan to Yes Bank. The balance was utilized by M/s IGSSTPL for construction related activity in terms of the agreement. 14. Secondly, it is also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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