Case Law Details
DLF Cyber City Developers Limited Vs CST (CESTAT Chandigarh)
The sole issue is to be decided by us is that the Offshore Upfront Fee paid by the respondent is an interest or a fee.
We find that if it is an interest then service tax is not payable by the appellant in terms of the Circular No. F.No. B2/8/2004-TRU dt. 10.09.2004 wherein interest on loan is not the part of taxable value. We have gone through the facts of the case and the respondent has produced a letter from the Standard Chartered Bank dated 15.12.2014 to show that the Offshore Upfront Fee is nothing but an interest on buyer credit transaction as stipulated by the RBI Guidelines.
On going through the said letter, we hold that the said amount on which the service tax is being demanded and Upfront Fee is nothing but an interest and on interest, no service tax is payable by the respondent, therefore, we hold that the respondent is not liable to pay service tax on the said amount. Accordingly, we do not find any infirmity with the impugned order qua dropping the demand against the respondent. Therefore, we do not find any merit in the appeal filed by the revenue. Accordingly, the same is dismissed.
FULL TEXT OF THE CESTAT JUDGEMENT
Appeal No. ST/60753/2017 and ST/60758/2017 were filed by the appellant-assessee and Appeal No. ST/60857/2017 filed by the Revenue.
2. Appeal No. ST/60753/2017 and ST/60758/2017, as these appeals are having a common issue, therefore, both appeals are disposed by way of a common order. The appellant-assessee is also filed a miscellaneous application to bringing additional evidence on record. The additional evidence produced by the appellant-assessee is very necessary for disposal of the appeal, therefore, the same were taken up on record and the application is allowed.
3. The facts of the case are that appellant-assessee is engaged in the providing various taxable services and are registered with the department paying service tax thereon. During the course of Audit, it was found that the appellant-assessee has provided corporate guarantee to various banks/ financial institutions on behalf of their holding companies/Associate enterprises/ Joint Venture and Other loan facilities. The Revenue alleges that the such activity is taxable under Banking and Finance Institution Services whereas the appellant-assessee is contesting that they are not liable to pay service tax on the said activity as they have not received any consideration for providing corporate guarantee to various banks on behalf of their associates. In these set of facts, the two show cause notices were issued to the appellant-assessee to demand service tax on corporate guarantee provided by the appellant-assessee to various financial institutions on behalf of their holding company/associate enterprises. The matters were adjudicated and the demand of service tax was confirmed. Against the said order, the appellant-assessee is before us.
2. Heard the parties.
3. It is an admitted fact that the appellant-assessee has not received any consideration from either from the financial institutions or from their associates for providing corporate guarantee, in that circumstances, no service tax is payable by the appellant-assessee. Moreover, the demand raised in the show cause notices are on the basis of assumption and presumption presuming that their associates have received the loan facilities from the financial institution at lower rate, therefore, the differential amount of interest is consideration, but there is no such evidence produced by the revenue on that behalf. In that circumstances, we hold that the appellant-assessee are not liable to pay any service tax on corporate guarantee provided by the appellant assessee to various banks/financial institutions on behalf of their holding company/associate enterprises for their loan or over draft facility under Banking and Financial Institutions after or before 01.07.2012.
4. In view of this, we set-aside the impugned orders qua demand of service tax on corporate guarantee provided by the appellant-assessee. Therefore, no penalty is imposable on the appellant-assessee. Therefore, the appeals filed by the appellant-assessee are allowed.
5. Appeal No. ST/60857/2017, the Respondent is engaged in providing various services such as maintenance of Office Complex, Commercial Complex owned by the Group Companies. Two show cause notices were issued to the respondent to levy of service tax on “OFFSHORE UPFRONT FEE” paid to the foreign bankers on “Foreign Currency Buyer Credit Facility” chargeable under Banking and other Financial Services. It is alleged in the show cause notice that Offshore Upfront Fee is a fee charged by the foreign banks in addition to interest on these credit facilities. The respondent stated that the Offshore lender does not provide any service and upfront fee is nothing but the element of cost of capital provided by the Offshore Lenders to the Respondent. In the impugned order, the said demand has been dropped by the Ld. Commissioner, but, revenue filed appeal against the said order on the ground that it is not a fee but interest paid by the respondent, therefore, on the said amount, they are liable to pay service tax.
6. Heard the parties.
7. The sole issue is to be decided by us is that the Offshore Upfront Fee paid by the respondent is an interest or a fee.
We find that if it is an interest then service tax is not payable by the appellant in terms of the Circular No. F.No. B2/8/2004-TRU dt. 10.09.2004 wherein interest on loan is not the part of taxable value. We have gone through the facts of the case and the respondent has produced a letter from the Standard Chartered Bank dated 15.12.2014 to show that the Offshore Upfront Fee is nothing but an interest on buyer credit transaction as stipulated by the RBI Guidelines. For better appreciation, the said letter has extracted herein below:-
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On going through the said letter, we hold that the said amount on which the service tax is being demanded and Upfront Fee is nothing but an interest and on interest, no service tax is payable by the respondent, therefore, we hold that the respondent is not liable to pay service tax on the said amount. Accordingly, we do not find any infirmity with the impugned order qua dropping the demand against the respondent. Therefore, we do not find any merit in the appeal filed by the revenue. Accordingly, the same is dismissed.
(Operative part of the order pronounced in the Court)
