By TIOL News Service

MUMBAI, OCT 28, 2014: THE facts of the case are that the appellants have an agreement for lending the money by BNP Paribas to purchase aircraft. BNP Paribas agreed to lend the money to the appellant on agreed terms. BNP Paribas secured their loans through COFACE, France for lending the money to appellant and paid insurance guarantee.

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

Accordingly,a service tax demand was made on the insurance premium paid by the lender namely BNP Paribas to COFACE, France.

The aircrafts apparently flew back and the Commissioner of Service Tax, Mumbai vide order dated 26.07.2012 confirmed the service tax demand of Rs.2,84,72,873/- along with interest.

At the time of hearing of the stay application before the CESTAT, the applicant had inter alia submitted that while passing the adjudication order, the Commissioner did not impose any penalty by extending the benefit of section 80 of the FA, 1994 by holding that there was no malafide intention of the appellant not to pay service tax and, if this be so, the extended period of limitation is not invokable and the entire demand would get time barred.

The Bench seemingly agreed to the submissions made and after adverting to various decisions of the Tribunal waived the pre-deposit of service tax and interest.

We reported this order as 2013-TIOL-1467-CESTAT-MUM.

The appeal was heard recently.

Submissions were made by both sides and after hearing the same the Bench observed & held thus –

"6. In this case, the issue as appeared before us is that who is the service provider and who is the service receiver. The facts of the case are clear and show that the money lender BNP Paribas has secured the loan amount lended to appellant from COFACE France and have secured their money they have paid insurance guarantee to COFACE France. When these facts are clear in this case, therefore, the service receiver is BNP Paribas and the service provider is COFACE, France. The appellant is only the beneficiary of the transaction held between BNP Paribas and COFACE, France. As the appellant is neither service provider nor service recipient, the appellant is not liable to pay service tax at all under Reverse charge mechanism."

The order of the Commissioner of Service Tax, Mumbai confirming the ST demand of Rs.2.84 Crores was set aside and the appeal was allowed with consequential relief.

(See 2014-TIOL-2112-CESTAT-MUM )