TMI Blog2023 (3) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... r service tax in the ST-Returns, the same have been erroneously raised. As admittedly, the appellant maintained their accounts on accrual basis (Mercantile basis). Whereas service tax for the period was payable on cash basis or receipt basis in terms of Section 68 of the Finance Act read with Rule 6 of Service Tax Rules, 1944 upto 31.03.2011. With effect from 01.04.2011, there was change in the basis of charge of service tax, which became payable immediately following the calendar month, in which the service is deemed to be provided as per Rules framed (i.e. on Mercantile basis) or immediately on raising the invoice or providing of service, as amended vide Notification no. 3/2011-ST dated 01.03.2011 - this demand for alleged short payment of tax is erroneous and is set aside. Demand of service tax of Rs.5,93,02,321/- on account of amounts received from DAMEPL - HELD THAT:- From perusal of the Concession Agreement, it is found that the appellant was entitled to receive certain amounts as concession fee and share a small percentage (1 to 5%) of the fare collection from the passengers. The arrangement between the parties have all the features of Joint Ventures or partnership - Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Sahu, Advocate for the Appellant assessee Shri Mihir Ranjan, Special Counsel for the Respondent/Revenue ORDER ANIL CHOUDHARY: In these Cross Appeals, for the period 2008-09 to 2011-12 the following issues are involved in the appeal of assessee (51771/2016):- i. Wrong utilisation of cenvat credit of service tax paid on consulting engineering service, received for Delhi MRTS project, for providing consultancy service to other metro projects. Period 2008-09 to 2011-12, Tax demand: Rs. 30,12,86,790/- ii Short payment of service tax found on reconciliation of commercial accounts with service tax returns Period 2008-09 to 2011-12-Tax demand: 8,17,58,940/- iii Non payment of service tax on amounts received from Delhi Airport Metro Express Private Limited, under the head-Renting of Immovable property service Period: 2010-11 to 2011-12-Tax demand: 5,93,02,321/- iv Non-payment of service tax on L.C. charges paid to foreign banks under reverse charge mechanism 3 ST/50500 51771/2016-DB Period: 2008-09 to 2011-12- Tax demand: Rs. 87,26,504/- V) Penalty Imposed Rs. 24,88,12,120 penalty u/s 78 of the Finance Act, 1994 read with rule 15 of Cenvat Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3.2. It is further urged that Sl.No.39 of Notification No.25/2012-ST provides services by the Government, a local authority or a Government Authority by way of activity in relation to any function entrusted to a Municipality under Article 243 W of the Constitution are exempt from the whole of the service tax. The Government Authority have been defined in paragraph 2 (s) of the Notification as follows:- 2. Definitions. For the purpose of this notification, unless the context otherwise requires (s) government authority means an authority or a board or any other body; (i) set up by an Act or Parliament or a State Legislature; or (ii) established by Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under Article 243 W of the Constitution. 3.3 Admittedly, appellant is established by Government with 90% or more participation by way of equity and also under the control of the Government. 3.4 Further, Article 243 W of the Constitution read with Schedule 12 empowers Municipalities with respect to the matters, inter alia, planning for economic development and social jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of works contract of Rs. 101,67,48,009, and not on the gross value of works contract of Rs. 256,90,35,889, which has been wrongly taken in the reconciliation of account prepared by the special auditor. In the impugned order, the Pr. Commissioner has not given any basis to adopt higher value of taxable service on accrual basis for the years 2008-09 to 2011-12. She has ignored the calculation of taxable services given by the appellant without any justification. Further, till 31.03.2011, service tax liability arose only on receipt of payment for service provided . From 01.04.11, tax (vide Notification No. 3/2011-ST) tax was payable on accrual basis, i.e., immediately on providing of service, or raising of invoice, irrespective of payment received. 7.1 It is the cardinal principle of taxation law that if the revenue authorities want to demand tax, it is for them to establish that the amount shown in the accounts by the assessee falls in the tax net. Without pointing out the nature of service, parties to the transaction, the Revenue cannot assume that the apparent difference on debtors reconciliation amount represents value of service on which the appellant has evaded tax. In Gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signalling, track system, platform screen doors, ventilation, architectural finishing etc. were to be provided by DAMEPL. The commercial operation was achieved on 23.02.2011. After commencement of commercial operation, on 22.03.2012, DAMEPL requested the appellant for a joint inspection of Via ducts and its bearings before expiry of the defect liability period of the civil contractors. Another letter was written by DAMEPL to appellant on 23.05.2012, complaining of issues relating to design and quality in the installation of via duct bearings. It was mentioned in the said letter that there were signs of Girder having sunk at some locations, as a result there is deformation/cracks. Pursuant to inspection, appellant informed DAMEPL that no bearings were found damaged. However, admitted that grouting material filled above/below the bearings was loosened for which action would be taken to repair on priority. Subsequently, the meetings were convened by the Ministry of Urban Development, Government of India in July, 2012, and pursuant to joint inspections by the Joint Inspection Committee, DAMEPL stopped operations of the line on 08.07.2012. Thereafter, DAMEPL issued notice dated 08.10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement. 8.2. The Arbitral Tribunal formulated the following primary issues for consideration in relation to the termination notice dated 8-10- 2012: (i) Were there any defects in the civil structure of the airport metro line? (ii) If there were defects, did such defects have a material adverse effect on the performance of the obligation of DAMEPL under CA? (iii) If there were defects in the civil structure, which had a material adverse effect on the performance of the obligations under the CA by DAMEPL, have such defects been cured by DMRC and/or have any effective steps been taken within a period of 90 days from the date of notice by DAMEPL to cure the defects by DMRC and thus were DMRC in breach of the CA as per Article 29.5.1(i)? 8.3. The Arbitral Tribunal considered the defects pointed out by DAMEPL and if cured, and/or effective steps to cure them were taken by DMRC within the stipulated time. Finally, the arbitral Tribunal held DMRC guilty of not fulfilling its obligation under the Concession Agreement, as rightly cracks were found spread in large number of Girders. Thus, the Tribunal held DMRC-appellant was in breach of the Concession Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits shall be payable to the creditor, that profit is interest, by whatever name it is called. Further, reliance is placed on Central Bank of India vs. Ravindra 2002 (1-SCC-367) wherein the constitution bench of the apex court held, interest is the compensation paid by borrower to the lender for deprivation of use of his money. A person deprived of the use of money to which he is legitimately entitled, had the right to be compensated for the deprivation, call it by any name. Further, interest means interest payable in any manner, in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes a service fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facilities which has not been utilised. Thus, interest is the amount paid to the lender over and above the loan amount, and such amount may be paid as service fee or other charges in respect of loan amount. It is understood in the financial world that fees and interest payable by the borrower to the lender are part of the price of loan. Further, loan pricing is defined as the interest rate charged on the loan, plus any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower. Limitation: 10. The alleged wrong availing of cenvat credit for tax paid on consulting engineering service received was in the knowledge of the Department since 2010. The audit of the appellant was conducted by Director General of Audit between 08.03.2010 to 15.03.2010 and the audit objected to availing of such credit. On the basis of the said audit, a show cause notice was issued on 19.10.2010 covering the earlier period 2006-2009. Hence, demand is time barred as there is inordinate delay in issuing of the present show cause notice, even after the Department came to know about the activities and compliance pattern of the appellant. In Nizam Sugar Factory v. Collector, 2006 (197) E.L.T. 465 (S.C.), the Hon ble Supreme Court has held that while issuing the subsequent show cause notices on similar facts, the Revenue could not allege suppression of facts on the part of the assessee as the facts were already in the knowledge of the authorities while issuing the earlier notice and, therefore, extended period of limitation could not be invoked. In CCE vs. Pals Microsystems Ltd., 2009 (234) ELT 428 (Kar.) the High court has upheld the decision of the Tribunal wherein it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 79/5/2014-ST dated 24.09.2014, regarding the tax liability on the transaction between the members of a joint venture, wherein, referring to Explanation 3(a) of the definition of service, it is provided- an unincorporated association or a body of persons, as the case may be, and the member thereof shall be treated as distinct persons. In accordance with this Explanation, JV and the members of the JV are treated as distinct persons and, therefore, taxable services provided for consideration, by the JV to its members or vice versa and between the members of the JV are taxable. 12.1. So far, the issue of service tax confirmed Rs. 8,17,58,940/- on account of service tax short paid on the allegation of suppression of turnover is concerned, this demand is based on the report submitted by the Special auditor. The opening debtors as on 01.04.2008, was correctly taken. The appellant have not provided any bifurcation of the figure to ascertain the factual position relating to the value of taxable service for the respective financial years. Further, the adjudicating authority after going through the financial records for the relevant years vis-a-vis, the Special auditor s report, found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-examination of the Special auditor. 12.3 As regards the demand of service tax on letter of credit charges paid to Bank of India at Tokyo, under RCM, the contention of the assessee that these are in the nature of interest is baseless and misplaced. Interest charged on a loan refers from the cost of credit. L.C. charges are not interest. The Government of India is the guarantor and has authorised Bank of India, Tokyo. The Bank of India has directly paid to the suppliers of appellant-DMRC on the strength of the LC, which shows, the service was provided to DMRC directly. Further, there was no involvement of any consideration between the Government of India and the Bank of India at Tokyo. Further, LC charges are taxable under the head banking and financial services and accordingly, tax have been rightly demanded under RCM at Rs. 87,26,504/-. 13. As regards the ground of exemption under Notification No.25/2012-ST raised by the appellant, ld. Special Counsel for Revenue urges that the said notification is applicable w.e.f. 1.7.2012. Whereas the period of dispute in the present appeals is prior to 30.06.2012. Accordingly, the said ground is fit to be dismissed. As regards to the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Further, we find the contention of the appellant is cogent that opening balance of debtors as on 01.04.08 also includes brought forward amounts of earlier financial years. Further, the reconciliation was prepared by the appellant and filed in the adjudication proceedings and have been reproduced in para 16.5 of the impugned order-in-original. We find that without the same been found erroneous, have been rejected arbitrarily. 15.3 In this view of the matter, we find that this demand for alleged short payment of tax is erroneous and accordingly, we allow the ground and set aside the demand. 16. So far the demand of service tax of Rs.5,93,02,321/- on account of amounts received from DAMEPL, we find that these amounts have been received as the Co-venture by way of receipts under a joint business of establishing and running the service on Airport Metro line. Both the parties under the Concession Agreement have contributed in construction/fabrication of the project by investing their capital as well as expertise. From perusal of the Concession Agreement, we find that the appellant was entitled to receive certain amounts as concession fee and share a small percentage (1 to 5%) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystem Project, Phase-2, which was being implemented by the appellant. The proceeds of the loan were to be used for purchase of eligible goods and services for the implementation of the project from suppliers, contractors or consultants (collectively referred to as the suppliers ). Other important features of the loan agreement are as follows:- i. The borrower shall repay the loan to JICA (formerly JBIC) as per amortization schedule. ii. The borrower shall pay interest to JICA (formerly JBIC) at the prescribed rate. iii. The borrower shall pay commitment charge to JICA (formerly JBIC) at the prescribed rate. iv. The name and address of successful bidder, concerning the award of contract, the name and address of supplier, the award date and amount of the contract may be made public by JICA (formerly JBIC). v. The borrower shall authorize DMRC, the executing agency, to implement the project. vi. The borrower shall cause the executing agency to employ consultants for the implementation of the project. vii. If the funds available from the proceeds of the loan become insufficient for implementation of the project, the borrower shall make arrangements promptly to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh there is no privity of contract between the appellant and the Bank of India, Tokyo. However, appellant as the Implementing Agency, have stepped into the shoes of Govt. of India, and is acting accordingly. Further, Government of India has signed agreement with the Corporate Office, Bank of India located in India for availing banking service of its branch in Tokyo, in relation to Yen credits and grant-in-aid. It is only at the instance of the Government of India that the Bank of India, Tokyo opens the letters of credit, though as per arrangement, the appellant pays certain charges(L.C. Charges) for the service. Thus, there is defacto privity of contract between the appellant and the Bank of India, Tokyo, accordingly, the LC charges are paid towards ensuring payment to suppliers from the loan amount sanctioned by JICA. Further, we find that loan agreement provides that in case of any dispute between the Government of India and Bank of India, relating to any provisions of the contract, the same shall be resolved by arbitration. 17.3 In the facts of the present case, we hold the LC charges/fee paid to the bank are taxable, under Reverse Charge. However, as the appellant is entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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