By TIOL News Service

MUMBAI, OCT 06, 2013: A service tax demand was made on the insurance premium paid by the lender namely BNP Paribas to COFACE in France to purchase an aircraft by the applicant on account of insurance guarantee.

The Revenue was of the view that the service provided by COFACE to BNP Paribas is a service covered under Banking and Financial Institution Services and the same is liable for service tax under reverse charge mechanism.

Resultantly, the Commissioner of Service Tax, Mumbai confirmed the demand of Rs.2,84,72,873/- and hence the applicant is before the CESTAT.

The applicant submitted that no Service Tax is payable as the transaction took place in purchase of aircraft and the same is outside India; that the demand is beyond the period of limitation and adjudicating authority had, therefore, dropped the penalty by invoking Section 80 of the Finance Act, 1994. It is also submitted that the applicants are suffering from heavy losses and the financial position of the applicants is very bad and they are not in a position to pay the amount demanded from them.

The Revenue representative justified the order of the adjudicating authority.

The Bench observed –

“7. We find that while waiving the penalty on the applicants the learned Commissioner have invoked Section 80 of the Finance Act which provides waiver of penalty in case the assessee proves that there was reasonable cause for the said failure. There are several decisions of this tribunal e.g. in the case of Solitz corporation vsCommissioner of Service Tax, New Delhi – 2009 (14) STR 642 (Tri-Del.) and R.N. Singh vsCommisioner of Central Excise, Allahabad- 2012 (28) STR 13 (Tri. Del.), M.P. Water & Power Management Institute vs CCE Bhopal – 2009-TIOL-290-CESTAT-DEL and Indian Petrochemicals Corpn. Ltd. vs. CCE Vadodara – 2009 (237) ELT 317 (Tri.-Ahmd.) wherein this Tribunal has held that when a penalty by invoking Section 80 of the Finance Act, 1994 has been dropped the extended period of limitation is not invokable.”

Holding that the appellant had a made out a prima facie case in favour, the Bench waived the pre-deposit of the adjudged dues and granted stay in the matter.

In passing : Even otherwise the aircrafts have gone back.

(See 2013-TIOL-1467-CESTAT-MUM)