Order Date: 15 November 2022

Facts:

• The appellant, Org Informatics Limited, availed services of the foreign-based companies for raising/ collecting financial funds through External Commercial Borrowings (ECB) and Foreign Currency Convertible Bonds (FCCB).
• The appellant had received services from the service providers based outside India in the course of raising funds i.e. foreign borrowings.
• Revenue is of the view that the amount paid by the appellant to said foreign service providers is liable to be taxed under the reverse charge mechanism for service tax under ‘banking and other financial services.
• The show cause notice was adjudicated after following due process of law, the demands were confirmed along with interest and a penalty has been imposed vide impugned order.
• Therefore the present appeal.

Issue:

• Whether the appellant is liable to pay Service tax under reverse charge along with interest and penalty ?

Order:

• The Tribunal find that appellant only disputed the service tax demand of Rs. 2,26,213/- on the ground that amount was refunded by the Foreign Financial Institution to the Appellant and they have not received the services to that extent. The Tribunal accepted the contention of the Appellant.
• Further, it is evident from the records that the appellant discharged the service tax liability along with interest thereon as soon as they came to know about the liability of service tax in this matter and they also paid the same much before the show cause notice. It is also a fact that they have not disputed to service tax liability on merits and the disputed transactions were reflected in the balance sheets of the appellant for the relevant years.
• Further whatever Service Tax was required to be paid by the appellant, was available to them as Cenvat credit and there was no need for them to evade any payment of tax. As such, the entire situation is revenue neutral, in which case, no mala fide can be attributable to the appellant.
• Hence, penalty is not imposable on the appellant under the provisions of Sections 77 & 78 of the Finance Act.
• As per the above case the appeal is allowed.