Pmt Machines Ltd vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. I

APPEAL No.ST/75/11

(Arising out of Order-in-Appeal No.P-I/RKS/207/2010 dated 28/10/2010 passed by Commissioner of Central Excise (Appeals), Pune-I)

For approval and signature:

Honble Mr.M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical)

1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy :Seen of the Order?

4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================

PMT Machines Ltd., Appellant Vs. Commissioner of Central Excise, Respondent Pune

Appearance: Shri.J.C. Patel, Advocate for appellant Shri.R.K.Das, Dy. Comm. (AR) for respondent

CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical)

Date of Hearing : 09/07/2015 Date of Decision : /07/2015

ORDER NO

Per: M.V. Ravindran

1. This appeal is directed against Order-in-Appeal No.P-I/RKS/207/2010 dated 28/10/2010 passed by Commissioner of Central Excise (Appeals), Pune-I.

2. Heard both sides and perused the records.

3. The issue involved in this appeal is regarding the service tax liability on the appellant as a service recipient from service providers, who are situated abroad. The appellant had sought the services of service providers for raising external commercial borrowings for their business. As per the agreement, the appellant was to pay arrangement fees, underwriting fees, agency fees and legal fees as also out of pocket expenses. The appellant remitted the fees as agreed but did not discharge the service tax liability is the allegation of the Revenue. Both the lower authorities confirmed demands and interest and imposed penalties.

4. Learned Counsel would submit that they are not in challenge against the service tax liability payable under reverse charge mechanism for the amount remitted by them in respect of arrangement fees, underwriting fees and agency fees. It is his submission that in fact they have already discharged their service tax liability and interest thereof and they are only contesting imposition of penalties on these amounts of service tax confirmed. Their main challenge, according to the Counsel is in respect of service tax liability on legal fees and out of pocket expenses, which according to him are actuals and reimburseable expenses incurred by the service providers as per the agreement. He would submit that when it is an actual expense reimbursed by the appellant, the issue is now squarely covered by the judgement of the Honble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd., Vs. UOI  2013 (29) STR 9 (D).

5. Learned DR on the other hand would submit that there is no evidence to show that the legal fees and out of pocket expenses were actual reimbursement, in the absence of any evidence, value needs to be added to the gross value for discharge of service tax liability is the findings of the lower authorities. It is his submission that penalty has been correctly imposed and the claim of the appellant that it is a revenue neutral situation cannot be accepted as there is violation of provisions and hence, the appellant needs to be penalised for not following the provisions of law.

6. We have considered the submissions made both sides and perused the records.

6.1 On perusal of the records, we find that it is not disputed that the appellant has received the service from consortium of Mandated Lead Managers in respect of facility arrangements in relation to raising of external commercial borrowings. It is also undisputed that the appellant had paid the lead managers fees as per the agreement.

6.2 As was submitted before us the service tax liability on an amount paid to the lead managers i.e. service providers, who have raised the external commercial borrowings in form of external commercial borrowings as to fee of arrangement and underwriting fee plus agency fee is undisputedly taxable under the category of banking and other financial service and taxable as per the provisions of Section 66A of the Finance Act, 1994, in hands of the appellant. To that extent, we uphold the service tax liability and interest thereof.

6.3 As regards the penalty imposed under various sections, we find that on this amount, the appellant is having a good case on the revenue neutrality, inasmuch any service tax paid by them under reverse charge mechanism is eligible as Cenvat credit as the external commercial borrowings are for the purpose of business activity of the appellant. Keeping this in mind, we find that the appellant had made out a case for non-imposition of penalty; invoking the provisions of Section 80 of the Finance Act, 1994, we set aside the penalties imposed on the service tax liability which has been upheld by us.

6.4 As regards the service tax liability on an amount paid by the appellant for legal fees and out of pocket expenses, we find that the appellant has not been able to produce any documentary evidence before us to show that these amounts were in fact paid on actual basis. In the absence of any such documentary evidence, we are unable to accept the plea of the appellant. In order to meet the ends of justice, we find it necessary to remit this portion of the demands confirmed to the adjudicating authority to reconsider the issue if any documentary evidence are produced by the appellant that this amount is actual expenses incurred by the service providers. We make it clear that we have not passed any observations on the merits as to whether these expenses are actual or otherwise. The adjudicating authority will also consider the ratio in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. To that extent, the order is set aside and the appeal is allowed by way of remand. The adjudicating authority will also consider the plea of the appellant as to non-imposition of penalty in its correct perspective.

7. In sum, the appeal to the extent it challenges the service tax liability and interest in respect of agency fees, arrangements fees, underwriting fees is rejected but the penalty imposed on this ground is set aside; while the service tax liability on the legal and out of pocket expenses is remanded by the adjudicating authority.

8. Appeal is disposed of as indicate herein above.

(Pronounced in Court on ..)

(Raju) Member (Technical) (M.V. Ravindran) Member (Judicial)

pj

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