Custom, Excise & Service Tax Tribunal
M/S Axis Bank Ltd vs Commissioner Of Service Tax, Mumbai-I on 30 April, 2014
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. II
IN APPEAL NO. ST/314/12
(Arising out of Order-in-Original No. 60/STC-1/SKS/11-12 dated 23.02.2012 passed by the Commissioner of Service Tax, Mumbai-I)
For approval and signature: Shri S.S. Kang, Honble Vice President
Honble Mr. P.K. Jain, 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 : CESTAT (Procedure) Rules, 1982 for Publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : yes of the order?
4. Whether Order is to be circulated to the Departmental : yes authorities?
M/s AXIS Bank Ltd.
: Appellant
Versus
Commissioner of Service Tax, Mumbai-I
: Respondent
Appearance Shri M.H. Patil, Advocate : For Appellant Shri S.G. Dewalwar, Addl. Commissioner (A.R.) : For Respondent CORAM:
Shri S.S. Kang, Honble Vice President Honble Mr. P.K. Jain, Member (Technical) Date of Hearing :
30.04.2014 Date of Decision:
.08.2014 ORDER NO.......................................................
Per: P.K. Jain, Member (Technical) Brief facts of the case are that in July 2007, appellant offered Global Depository Receipts (GDR) of their company, outside India by availing services of M/s City Groups Global Market Ltd. (CITI Group) and Goldman Sachs International (GOLDMAN SACHS) non-Resident service providers Both these firms were functioning from London, U.K. Appellant paid certain fees/charges to such non-resident service providers for facilitating issue of the said GDRs and the services provided by such non-resident was that of Joint Book Runners and Joint Lead Managers with certain terms and conditions, under an agreement dated 08.06.2007. Service Tax is being demanded under reverse charge mechanism under Section 66A of the Finance Act, 1994. Revenue is demanding the Service Tax as Merchant Banking Services listed at (iii) under the category of Banking and other Financial Services under Section 65 (12) of the Finance Act, 1994 while the appellant claims the service to be underwriting service under Section 65 (105) (z) and 65 (117) of the Finance Act, 1994.
2. Learned advocate for the appellant submitted that two issues are involved in this cess viz.
i) Whether or not Service Tax, under reverse charge mechanism, is payable on underwriting services taxable under Section 65 (105) (z) rendered fully outside India by Joint Lead Managers and Joint Bookrunners, M/s Citigroup Global Markets Ltd. and M/s Goldman Sachs International, as claimed by the Appellants, based on Honble Tribunal judgement in Jubiliant Life Science Ltd. [2013 (29) STR (T)], wherein it has been held that even if entire Foreign Currency Convertible Bonds (FCCBs) are purchased and thereafter resold would be underwriting classifiable and chargeable to tax under the head underwriting services taxable under Section 65 (105) (z), in spite of single contract for carrying out of gamut of functions/activities relating to issue of FCCBs;
ii) Whether demand of Service Tax under show-cause notice dated 13.01.2009 pertaining to issue of GDRs on 23.07.2007 is barred by limitation.
3. In support of above learned Advocate contended:-
i) The said amount was paid towards underwriting commission as is evident from para 5.10 and 5.12 of the show-cause notice.
ii) Underwriter services rendered in July, 2007 were classifiable as underwriting services under Section 65 (105) (z) of Finance Act, 1994.
iii) The purchase agreement dated 23.07.2007 would substantiate that commission of 1.5% upto US$ 200 Million and 2% in excess of US$ 200 Million was payable towards underwriting commission.
iv) The findings of the Commissioner in para 7 of Order-in-Original, in the light of the above substantiation with evidences, would be erroneous.
v) That meaning assigned to underwriter and underwriting under Section 2 (f) and 2 (fa) of Securities and Exchange Board of India (Underwriters) Regulations 1993 would substantiate in favour of their claim of underwriting services.
vi) That Securities and Exchange Board of India (Merchant Bankers) Regulations 1992 would substantiate that merchant banker is not permitted to undertake purchase or sale of GDRs/shares.
vii) That CBEC circulars dated 7.10.98 and 9.7.2001 would further substantiate that both services i.e. underwriting services (taxable from 16.10.98) and merchant banking services (taxable from 16.7.2001) were distinct and different.
viii) That since underwriters services taxable under Section 65 (105) (z) is covered under Rule 3(ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, the same would not be chargeable to tax under Reverse Charge Mechanism as entire service was provided and consumed outside India.
ix) That the judgment of Tribunal in M/s Jubiliant Life Sciences Ltd. [2013 (29) STR 529 (T)] would squarely cover the case and hence, the findings in Order-in-Original would not sustain. Inasmuch as in that case also J.P. Morgan were working as lead manger and also were carrying out underwriting services and entire FCCBs were purchased by them and subsequently sold to general public.
x) That in the present case, M/s Citigroup Global Markets Ltd. and M/s Goldman Sachs International also had purchased entire GDR and subsequently sold to general public.
xi) That the said Honble CESTAT judgement and order in the case of Jubiliant Life Sciences Ltd. has been accepted by CBEC and CBEC decided not to file Civil Appeal on merits.
xii) That in spite of purchase of GDRs by underwriters, the essential character of underwriting activity does not get vitiated based on the following:
(a) Perfect Circle Victor Ltd. 1992 (60) ELT 676 (SC)
(b) CCE Vs. D.C.M. Textiles- 2006 (193) ELT 129 (SC)
(c) Apar Industries- 2009 (92) RLT 968 (T)
(d) Bhopal Sugar Inds. (1997) 3 SCC 147
xiii) That Hon'ble Supreme Court judgement in Naini Gopal Lahiri And Ors. [1965 35 CompCas 30 SC] has held in para 13, it has been held that ............. The underwriting agreement being a contract that the underwriter will either himself purchase or procure purchasers for the shares underwritten by him, it is no concern of the company as to how the underwriter procures the purchasers .......... in any case, sale of GDRs to the said underwriters was symbolic and not true sale.
(xiv) That Honble Tribunal is obliged to implement the said judgment of Tribunal in Jubilant Life Sciences Ltd. [2013 (29) STR 529 (T)], as the same has not been appealed against by the Ld. Revenue and also not distinguishable, based on the following judgments:
(a) Gammon India Ltd. 2011 (269) ELT 289 (SC)
(b) Metador Foam 2004 (179) ELT 257 (SC)
(c) Jindal Dye 2006 (197) ELT 471 (SC)
(d) Mercedes Benz - 2010 (252) ELT 168 (Bom)
(xv) As per Section 2(11) of US Securities Act, 1933 underwriter means any person who has purchased the securities from the issuer thereof. Likewise, as per UK VAT, Financial Manual (VATFIN900) underwriter is a person who undertakes to apply for or to find other Applicants for all or part of an issue which is not otherwise taken up. (xvi) In foreign countries, underwriters under respective laws are permitted to purchase the stocks in entirety and re-sale thereafter and there is nothing like condition of purchase of unsubscribed portion, in support of the said contention, learned advocate quoted various Section relevant of US and UK Acts. (xvii) The meaning assigned to underwriter and underwriting in Black Law Dictionary is as follows:
One who buys stock from the issuer with an intent to resell it to the public a person or entity, esp. an investment banker, who guarantees the sale of newly issued securities by purchased all or part of the shares for resale to the public, The act of agreeing to buy all or part of a new issue of securities to be offered for public sale.
Best-effort underwriting Underwriting in which an investment banker agrees to direct, but not guarantee, the public sale of the issuers securities. The underwriter, or selling groups, sells the securities as agent for the issuer and any unsold securities are never issued.
Firm-commitment underwriting Underwriting in which the underwriter agrees to buy all the shares to be issued and remain financially responsible for any securities not purchased. The underwriter or the underwriting group, buys the securities from the issuer and resells them as principal. In this type of underwriting, securities that cannot be sold to the public are owned by the underwriter, and the issuer is paid for those securities as well as the others.
Standby underwriting Underwriting in which the underwriter agrees, for a fee, to buy from the issuer any unsold shares remaining other the public offering.
(xviii) Thus underwriters, in other countries, have to purchase and resell. This is because of the possibility that the potential investors may not have heard the name of the Indian company and would, therefore, hesitate to invest in its GDRs. It is only because of the well-known reputation of M/s.Citigroup Global Markets Ltd., M/s.Goldman Sachs International etc. the investors are attracted for subscribing the GDRs. In view of the above, legal and factual position purchase and resale of GDRs by the underwriter is a well known phenomenon.
(xix) Ld. Commissioner holds in para 6.3 that the requirement of registration under SEBI would apply only to merchant bankers functioning from India. The very same findings would support the Appellants claim that meaning assigned to underwriting and underwriter under SEBI Regulation/Rules of India would not apply to M/s. Citigroup Global Markets Ltd., M/s. Goldman Sachs International and Overseas underwriters. It may relevantly be stated that the activities undertaken by the said overseas parties would not qualify for coverage under merchant banking by invoking SEBI Rules/Regulations and hence, would qualify to be covered under underwriting activity.
(xx) Ld. ARs contention that Honble Tribunal in JLSL would be distinguishable on the ground that CBEC Circular dated 9.7.2001 was not considered and there was no separate agreement would not be correct as CBEC Clarification cannot override the provisions, particularly in a case where the judgment of Tribunal in JLSL, accepted by CBEC, would have binding effect. Further the facts in JLSL are identical to the facts in the present case except fact that in JLSL it was FCCBs as against GDRs in the present case. In JLSL also there was single agreement between JLSL and JPMorgan as substantiated from paras 6, 8, 9, 12 & 13 and in that case also entire FCCBs were purchased by underwriters. The ratio of judgment in JLSL squarely applies to the present case considering the facts in both of the cases in toto.
(xxi) In view of the above submissions, it is clear that the activities undertaken by M/s. Citigroup Global Markets Ltd. and M/s. Goldman Sachs International was underwriting service under Section 65(105)(z) of Finance Act, and since the same was provided fully outside India ( i.e. in USA and UK), the provisions of Rule 3(ii) of Taxation of Service (Provided from Outside India and Received in India) Rules, 2006 would apply and hence, service tax is not applicable to the present case.
4. As far as invoking the extended period is concerned, it was stated:-
(i) There is no suppression of facts. GDR issue has been widely circulated and appellant also undertook to utilize the proceeds from the issue in accordance with the directions issued by the Ministry of Finance and the Reserve Bank of India from time to time. It was submitted that records were audited and returns filed.
(ii) Further, following case laws were quoted
(a) Collector Vs. Chemphar Dugs [(1999) 40 ELT 276]
(b) Pahwa Chemicals Vs. CCE [2005 (189) ELT 257]
(c) Pushpam Pharmaceuticals appellant Vs. CCE [1995 (78) ELT 401 (SC)]
(d) Tamil Nadu Housing Board Vs. [1994 (74) ELT 9 (SC)]
(e) Padmini Products Vs. [1989 (43) ELT 195 (SC)]
5. Learned A.R. on the other hand argued that in this case Joint Lead Manager had purchased all the GDRs on 23.07.2003 from the appellant and thereafter would have sold to the subsequent purchasers. This is not what is expected of an underwriter. An underwriter, as per the Finance Act, 1994 read with SEBI (Underwriter) Rules, 1993, is expected to subscribe to unsubscribed portion. Even the agreement dated 23.07.2007 is Purchase Agreement and not an Agreement to underwrite. Ld. A.R. further argued that we are not concerned with the scope of underwriting under US or UK Act or underwriting in various dictionaries, our law is specific and very clear on this point. Learned A.R. also argued that issue for consideration in the case of Jubiliant Life Science Ltd. (supra) were different and this issue was not before the Tribunal. Learned A.R. further argued that extended period of limitation is invokable as appellant suppressed the details from the department/assessing officer. If appellant had any doubt, they should have approached the department for clarification. In fact they had issued GDRs twice. In the first case also no Service Tax was paid either by service provider or appellant. Revenue issued demand on appellant. However same has been dropped by the Commissioner as Hon'ble Bombay High Court has held the same cannot be recovered on reverse charge basis prior to 18.04.2006. Thus Service Tax in respect of first GDR issue could not be recovered because of legal difficulties and service provider being abroad. Learned A.R. further argued that appellant is a well known bank having large setup, it is not expected from them not to follow the law and to suppress the facts from the department.
6. We have considered the rival submissions. The main contention of the appellant is that they had received Underwriting services from abroad and payments were made for the said service, and since the said service in is category (II) of Rule 3 of Taxation of service (Provided from outside India and received in India) Rules, 2006, they are not liable to pay the Service Tax. The relevant provisions under the Finance Act, 1994 are as under:-
Section 65 (105) (Z) Taxable service means any service provided or to be provided to any person, by an underwriter in relation to underwriting, in any manner.
Section 65 (116) Underwriter has the meaning assigned to it in clauses (f) of rule 2 of the Securities and Exchange Board of India (Underwriter) Rules, 1993.
Section 65 (117) Underwriting has the meaning assigned to it in clauses (g) of rule 2 of the Securities and Exchange Board of India (Underwriter) Rules, 1993.
From the above definitions, it is evident that for purpose of Service Tax/Finance Act, 1994, scope of the terms Underwriter and under Underwriting is as per Securities and Exchange Board of India (Underwriter) Rules, 1993. The term Underwriter and Underwriting are defined under the Securities and Exchange Board of India (Underwriter) Rules, 1993 as under-
Underwriter means a persons who engages in the business of underwriting of an issue of securities of a body corporate.
Underwriting means an agreement with or without conditions to subscribe to the securities of a body corporate when the existing shareholders of such body corporate or the public do not subscribe to the securities offered to them.
7. From the above definitions, it is evident that for purposes of Finance Act, 1994, Underwriting means an agreement with or without conditions to subscribe to the securities of a body corporate when the existing shareholders of such body corporate or the public donot subscribe to the securities offered to them. Thus in over view first and foremost condition is that securities are offered to the public or existing shareholders. The next requirement is an agreement to subscribe to the securities when the public or existing shareholders donot subscribe to the securities offered to them. This agreement is to be between the body corporate (whose securities are offered for sale) and the underwriter. Thus in brief, underwriting service as per Finance Act, 1994, would imply an agreement to subscribe the unsubscribed securities which were offered for sale to public or existing shareholders.
8. In order to examine the appellants contention we may look at the agreements viz dated 8th June, 2007 and 23rd July, 2007. Agreement dated 8th June, 2007 is in fact is in form of letter from M/s Citigroup Global Markets Ltd. to the appellant. The relevant portion of letter dated 8th June, 2007 are as under:-
The purpose of this letter is to confirm the agreement in relation to fees and expenses between UTI Bank Limited (UTI Bank or the Company) and Citigroup Global Markets Ltd. and/or any of its affiliates as it determines appropriate to perform the services described herein (Citi) and Goldman Sachs International and its affiliates (Goldman Sachs) as Joint Book-runners and Joint Lead Managers for the proposed issue of Global Depositary Receipts (DGRs) by UTI Bank (the Offering). The offering will be sold outside of the United States pursuant to Regulation S under the U.S. Securities Act of 1933 (the Act), with a portion of the Offering being sold within the US pursuant to Rule 144A under the Act. Our engagement is effective commencing June 6, 2007.
Citi and Goldman Sachs, referred to as the Joint Lead Managers, will be entitled to withhold from the proceeds of the transaction a commission an concession equal to 1.50% of the gross proceeds of the GDRs sold in the offering [up to and including US$600mn]. If the gross proceeds of the issue exceeds US$ 600 mn, the Company will pay a fee of 2% of the gross proceeds of the GDRs sold in the offering in excess of US$ 600mn, to the Joint Lead Managers. The total fees (including any bonus fees) among the Joint Lead Managers will be divided as follows: Citi (50%) and Goldman Sachs (50%) and shall be payable in cash on completion of the issue.
All out-of-pocket costs and expenses (including expenses of the Joint Lead Managers) incurred in the development, preparation and execution of the Offering will be for the account of and paid by the Company, regardless of whether the Offering proceeds to completion. Such expenses include but are not limited to travel costs, documentation, printing, fees and disbursement of international and domestic counsel and auditors, roadshow, registration and listing fees, rating agency fees, and fees and expenses or trustee/fiscal agent or other agents. Out-of-pocket expenses incurred by the Joint Lead Managers will be capped at Rs. 5,00,000/- (excluding all out-of-pocket expenses incurred in the context of the Companys roadshow with investors) and expenses that may be incurred in excess will be subject to the Joint Lead Managers seeking prior approval from the company such approval shall not be unreasonably withheld. The company will also reimburse the Joint Lead Mangers for any sales, use or similar taxes (including additions to such taxes, if any).
The matter relating to underwriting the offer by the Joint Lead Managers would be subject, among other things, to (i) satisfactory completion of our due diligence and the preparation of an offering documents that contains all material information in the context of the offering, (ii) market conditions which are satisfactory to the Company Joint Lead Managers at the time of launch, (iii) receipt of each Joint Lead Managers final internal approvals, (iv) no material adverse change in the Companys business, financial condition or prospects, (v) mutually acceptable offering size, structure and pricing, and (vi) execution and delivery of an underwriting or purchase agreement in a form satisfactory to the Company and Joint Lead Managers to include customary representations and warranties, conditions to closing, termination provisions and indemnification. The company will have no obligation to sell, and the Joint Lead Managers will have no obligation to buy, any securities, except upon the signing by all parties of such underwriting or purchase agreements. Citi and Goldman Sachs are not experts on, and do not render opinions regarding, legal, accounting, and regulatory or tax matters, and the company should consult with its advisors condemning these matters before undertaking the Offering.
9. The other agreement dated 23 July, 2009 is titled Purchase Agreement and relevant portion are as under:-
UTI BANK LIMITED, a company incorporated under the laws of the Republic of India as a public Limited company (the Company), proposes to issue and sell to the joint lead mangers named in Schedule A hereto (the Joint Lead Managers) 14,132,466 equity shares, par value Rs. 10 pre-deposit share of the Company in the form of 14,132,466/- global depositary receipts (the offered DGRs). The companys outstanding equity shares, including equity shares represented by the Offered GDRs, are hereinafter referred to as the Shares. Citigroup Global Markets Ltd. (Citigroup) and Goldman Sachs International (Goldman Sachs) will act as joint book runners (the Joint Bookrunners) as well as the Joint Lead Managers.
The Company understands that the Joint Lead Managers propose to make an offering (the Offering) of the Offered GDRs on the terms and in the manner set forth herein and agrees that the Joint Lead Managers may resell, subject to the conditions set forth herein, all or a portion of the Offered GDRs to purchasers (subsequent purchasers) at any timeon or after the date of this Agreement. The Offered GDRs are to be offered and sold through the Joint Lead Managers without being registred under the US. Securities Act of 1993, as amended (the 1933 Act), in reliance upon exemptions there from or in transactions not subject thereto. Purchasers that acquire Offered GDRs may only resell or otherwise transfer such Offered GDRs if such Offered GDRs are hereafter registered under the 1933 Act or if an exemption from the registration requirements of the 1933 Act is available (including the exemption afforded by Rule 144A) (Rule 144A) or Regulation S (Regulation) of the rules and regulations promulgated under the 1933 Act by the US Securities and exchange Commission (Commission).
SECTION 2. Sale and Delivery to Joint Lead Managers; Closing
(a) Offered GDRs. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the company agrees to allot and issue the number of Offered GDRs set forth in Schedule A opposite the name of each Joint Lead Manager, and each Joint Lead Manager, severally and not jointly, agrees to purchase from the company, at a price per GDR of US$ 15.4306 (the Purchase Price) the number of Offered GDRs set forth in Schedule A opposite the name of such Joint Lead Managers, plus any additional number of Offered GDRs which such Joint Lead Managers may become obligated to purchase pursuant to the provisions of Section 11 hereof, subject in each case, to such adjustments among the Joint Lead Managers as the Joint Lead Managers in their sole direction shall make to eliminate any sales or purchases of fractional securities.
(b) Payment. Payment for the Offered GDRs shall be made at 10.00am (New York time) on 27 July, 2007 (unless postponed in accordance with the provisions of Section 11), or such other time not later than ten business days after such date as shall be agreed upon by the Joint Lead Managers and the Company (such time and date of payment and delivery being herein called Closing Time).
Payment shall be made to the Company in US dollars by wire transfer in immediately available funds to a bank account designated by the company and notified to the Joint Lead Managers by 4.00 pm on the second business day prior to the Closing Time.
Payment shall be made against delivery to the Joint Lead Managers of the Offered GDRs to be subscribed for or purchased by the Joint Lead Managers. Citigroup, individually and not as representative of the Joint Lead Managers, may (but shall not be obligated to) make payment of the purchase price for the Offered GDRs to be purchased by any Joint Lead Managers whose funds have not been received by the Closing Time but such payment shall not relieve such Joint Lead Managers from its obligation hereunder.
10. From the above agreements it is evident that appellant has issued and sold the GDRs to Joint Lead Manger who is turn would resell, all or a portion of the offered GDRs by making an offering to the subsequent purchasers. This is not what is envisaged in underwriting as defined under Finance Act, 1994. What is envisaged is to make offer to public or existing shareholders, whatever is not subscribed that has to be purchased/subscribed in terms of an agreement by a person i.e. underwriter. Thus the Joint Lead Manger who purchased GDRs cannot be considered as underwriter providing underwriting service. Even the agreement dated 23.07.2007 is titled as Purchase Agreement. We therefore hold that services provided by M/s Citi and M/s Goldman Sach Ltd. are not underwriting service within the meaning of Finance Act, 1994.
11. In support of the his contention learned advocate for appellants have taken pains to quote the definition & scope of the term underwriter / underwriting in the laws of other countries such as USA and UK. Learned Advocate has also quoted Blacks Law Dictionary. In over view, these might be of help if the term was not defined in Finance Act, 1994. Once the term underwriter and underwriting are defined in the Finance Act, 1994, meaning and scope as per that definition alone has to taken. We also note that definition and scope in the Finance Act, 1994 read with SEBI (Underwriting) Rule, 1993 is not vague or ambiguous but clear and precise. Under these circumstances, we donot consider it necessary to discuss the scope as per the definition in the laws of USA or UK or Dictionary.
12. Another important contention of the Ld. Advocate is this Tribunals decision is the case of M/s Jubiliant Life Science Ltd. Vs. Commissioner of Central Excise, Noida reported in 2013-TIOL (580) CESTAT (DEL). We have carefully gone through said judgement. In the said case, issue raised were different and case proceeded on the assumption that one of the services provided by the Joint Lead Manger is that underwriting. This is evident from para 13 of the said judgement which reads as under:-
13. We have considered arguments on both the sides. We are not in agreement with the argument of Revenue that the service of Underwriting has to be necessarily provided by merchant bankers. We also do not agree with the argument that providing Underwriting Service is incidental to the services rendered as a Lead Manager to the issue. This is basically because the latter involves basically organizing an event viz. issue of the FCCBs and the former involves financial risk to the underwriters and the two matters are totally different in nature. We are also not in agreement with the argument that the contract has to be considered as a whole and classified considering it as a single service and subjected it to tax. This is because the services are distinct in nature and the contract lays down the services as distinct services with separate remuneration fixed for the two services. Further if at all it is to be considered as one single bundle we do not agree with the contention of Revenue that the dominant nature of the service is that of Lead Managers services, since JPMS is earning a higher commission by underwriting the issue taking the risk involved. Further from the facts of the case as stated by JLSL, that the issue was wholly subscribed by JPMS, the Lead Manager service was a minimal part of the contract in this particular case. Further Underwriting Service is specified in a sub-clause of Section 65(105) which occurs earlier than the sub-clause in which Lead Managers Service occurs. So going by the criterion laid down in Section 65A(c) of Finance Act, 1994, the service will get classified under Underwriting Services. Therefore we hold the view that the Underwriting Service rendered by JPMS to JLSL is distinct from the Lead Manager service provided. Since the underwriter service is to be subjected to tax under Section 66A of Finance Act 1994 taking into consideration the place of performance as per Rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. In this case Underwriting was done outside India. So we do not see any reason to tax the impugned service. Since the issue whether the service provided by the service provider can be considered as underwriting service within the meaning of Finance Act, 1994 was neither raised nor discussed in the said case, the same does not help the cause of appellant. The said judgement has to be considered as per incuriam. The fact that Board decided not to file an appeal will not change the legal position as held by us.
13. During the hearing, ld. Advocate pressed that in view of the judgement of this Tribunal in the case of M/s Jubiliant Life Science Ltd. (supra) appellants are entitled to get relief and the Tribunal is prohibited form taking a contradictory decision in view of the Hon'ble Supreme Court decision in the case of Gammon India Ltd. (Supra) Metader Foam (Supra), Jindal Dye (Supra) and Hon'ble Bombay High Court decision in the case of Mercedes Benz. We have carefully gone though the said judgements. At the outset, we observe that we entirely agree with the reasoning of this Tribunal in the case of M/s Jubiliant Life Science Ltd. and are not taking a conflicting or different decision. However we find that issue raised by the Revenue in the impugned order was not an issue in the said case and in the said case discussion started on the assumption that activities are under writing while in the present case this itself is being questioned and is the main issue before us. None of the judgements of Hon'ble Supreme Court & Hon'ble High Court cited by learned Advocate prohibits this Tribunal to examine an issue not examined in decision of other appellant. In view of this position the said judgements donot support the cause of appellant. Learned Advocate also wanted us to refer the matter to Larger Bench. In our view, we are not taking different/conflicting view on issue, rather issue being decided being different, in our view, the matter it cannot be referred to Larger Bench.
14. Ld Advocate has quoted Hon'ble Supreme Court judgement in the case of Naini Gopal Lahiri & others (supra). We have gone through the said judgement, which was in connection with Criminal case under Section 420 read with Section 34 of the Indian Penal Code. Definition of underwriter under Finance Act, 1994 or SEBI (underwriter) Rule, 1993 was not under consideration before the Hon'ble Supreme Court. In fact in para 12 of the said judgement, Hon'ble Supreme Court has observed-
An underwriter is a person who agrees with the company in consideration of a commission payable to him, that if all or a particulars number of the companys share are not taken up by the public, he will make up the deficiency and make up the total number of shares underwritten by him. Underwriting is in the nature of an insurance against the possibility of inadequate subscription. This is exactly what Revenue is saying in the case and this is what is the meaning under SEBI (Underwriter) Rule, 1993. The part quoted by the ld. Advocate is to be read as a whole para and to be understand in the context in which it is said. We therefore reject the said contention. We also hold that said judgement of the Hon'ble Supreme Court support the definition given under Finance Act, 1994 read with SEBI (underwriter), Rule, 1993.
15. Another contention of the learned Advocate is that in spite of purchase of GDRs by underwriter, the essential character of underwriting activity does not get vitiated. We are unable to agree to the said contention. When the law provides scope of the service as an agreement for subscribing to unsubscribed portion offered to public or existing share holder, a different meaning wherein Lead Managers themselves purchase whole of GDRs meant for public and offers for sale in full or part subsequently is quite deferent. As mentioned by Hon'ble Supreme Court in the case of Naini Gopal Lahiri- underwriting is in the nature of an insurance against the possibility of inadequate subscription. Therefore in our view it cannot be said that essential character of underwriting activity does not get vitiated. Learned Advocate has quoted certain case laws, which are relating to excise matter in respect of goods (amounting to manufacture, valuation etc.). In our view it may not be appropriate to considerer these. We also note that Hon'ble Supreme Court decision in the case of Perfect Circle Victor Ltd. is relating to valuation i.e. various discounts on goods. We are not able to appreciate, how it helps the cause of appellant. We find citation Commissioner of Central Excise Vs. DCM Textiles 2006 (193) ELT 129 (SC) pertains to CCE Vs. Pass Pipes Resplendents Ltd. In the said case issue was whether Printing/decorating of plain glazed ceramic tiles amounts to manufacture. We donot consider it necessary to discuss the remaining cases mentioned by learned Advocate.
16. Learned Advocate for the appellant has stated that in para 6.3 of the impugned order it is held that the requirement of registration under SEBI would apply to merchant bankers functioning from India and not from abroad. We observe that Banking and other financial services are defined under Section 65 (12) of the Finance Act, 1994 as under:-
(12) Banking and other financial services means-
(a) The following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern, namely:
(i)
(ii)
(iii) merchant banking services;
(iv)
(v)
(vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy;
(vii)
(viii) banker to an issue services; and
(ix)
(b) Foreign exchange broking and purchase or sale of foreign currency, including money changing provided by a foreign exchange broker or an authorised dealer in foreign exchange or an authorised money changer, other than those covered under sub-clause (a).
Explanation. For the purposes of this clause, it is hereby declared that purchase or sale of foreign currency, including money changing includes purchase or sale of foreign currency, whether or not the consideration for such purchase or sale, as the case may be, is specified separately; Further, Section 65 (105) (zm) is as under:-
(105) "Taxable service" means any service provided or to be provided-
(zm) To any person, by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern, in relation to banking and other financial services; A perusal of above provisions donot indicate that for charging Service Tax, merchant bankers or body corporate or commercial concern is required to be registered with SEBI. As long as the said service is being provided, Service Tax will be chargeable. Further, a perusal of the said definition indicates that services received by the appellant from M/s Citi and M/s Goldman Sach Ltd. will get covered by the scope of the service. We therefore hold that serviced by the appellant is covered by the scope Banking and other financial services.
17. Appellant has argued that notice is time barred as extended period of limitation cannot be invoked as issue of GDRs was known to everyone and receipt have been shown in their Balance Sheets and audit party has audited their records. We note in this case GDRs were issued in July, 2007 and these would be available in Balance Sheets of 2007-08 which will normally be available after Sept. 2008. Even this Balance Sheet is not required to be submitted to the Range Supdt./Asst. Commissioner. We also note that demand notice is issued on 13.01.2009. What is required is whether details were mentioned in the ST-3 returns filed and if so, when? Clearly, no such details were mentioned in ST-3 returns. Department was also not informed about the service received and the payment made thereon in connection with issue of G.D.R. Even the ST-3 returns are self assessed by the appellants. Thus overall department was not aware or in knowledge of the facts relating to service received from abroad. Proviso to Section 73 (1) needs as under:-
PROVIDED that where any Service Tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of -
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made there under with intent to evade payment of Service Tax, by the person chargeable with the Service Tax or his agent, the provisions of this sub-section shall have effect, as if, for the words one year, the words five years had been substituted. Since there was suppression of facts, we hold that extended period is correctly invoked. We also uphold penalties under Section 77 and 78 of the Finance Act, 1994.
18. Learned Advocate for the appellant has quoted number of case laws relating to excise to contend that extended period of limitation is not invokable. Most of these judgments are of the era where assessment was done by officers. Concept of price list, classification list was in existence. Alongwith return all gate passes etc. were to be submitted. Thus most of the time, all facts were known to Revenue. This is in contrast to the concept of self assessment and half yearly return (without any supporting documents) in case of Service Tax. We have gone through the said case laws. In the case of Chemphar Drugs, assessee was manufacturing goods falling under two tariff items viz. 14E and 68 and the period was 1980-81. Under the provisons of clause 2 (ii) of Notification No. 80/80 dated 19.06.1980 and clause a (iii) of Notification No. 71/80 dated 01.03.78, manufacturer would not be eligible for exemption under two notifications. Manufacturer cleared P & P medicines falling under T.I.14E during 1.4.1980 to 29.10.1980 and filed declaration for exemption under Notification No. 71/80. On 30.07.1980, they filed a classification list for P & P medicines claiming exemption under Notification No. 80/80. Based upon these details, this Tribunal came to the conclusion that this in not a case of fraud, but interpretation of the provisions and Department had full knowledge when the declaration was filed. In these circumstances, Tribunal took a view that extended period is not invokable. This reasoning of the Tribunal was upheld by the Hon'ble Supreme Court. In the impugned case, allegation is of suppression of facts. There is no evidence that appellant has through a letter or ST-3 return had informed the department about the issue of GDR. In the case of Pahwa Chemicals Pvt. Ltd. (supra) assessee was putting label of foreign party and Revenue wanted to deny benefit of SSI Notification No. 175/86 CE and 1/93-CE. The classification list was approved by Sector as well as Range officer after carrying out verifications. There were differing views of the Tribunal and issue was settled by Larger Bench, in the case of Namtech systems Ltd. In these circumstances, since all the facts were in the knowledge of department, Hon'ble Supreme Court took a view that this is not a case of wilful misdeclaration or wilful suppression. In the present case, as noted earlier details were not known to the department and allegation is only of suppression of facts. The case of Pushpam Pharmaceutical Company (supra), issue was exactly same as in case of Chemphar Drugs. In this case Hon'ble Supreme Court observed that excisability of exempted goods was settled by Hon'ble Supreme Court in 1989 and before that there were conflicting decisions. In these circumstances Hon'ble Supreme Court observed that appellant cannot be held guilty of suppression when the law was not certain. It was also observed that where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression. In the present case, there was no conflicting decisions. The fact of issue of GDRs was not informed/made known to the department/concerned official, same was not declared in the ST-3 returns. In the case of Tamilnadu Housing Board (supra) the appellant is a non-profit making statutory body, having two units, one a concrete unit whose products were sold to outsider and other a wood unit whose products were not sold but were fixed in the building constructed by the appellant. Licence was taken for first unit but not for second as they were advised orally by Central Excise Authorities that no licence is needed for it. In these circumstances, Hon'ble Supreme Court took the view that intent to evade duty is not proved. In the present case, allegation is only of suppression of facts. In the case of Padmini Products (supra) there was doubt about the dutibility of products viz. Agarbaties and Dhoop because of Trade Notice issued by Central Excise authorities. Under these circumstances Hon'ble Supreme Court took the view that extended period is not invokable. In the present case, there was no Trade Notice or clarification supporting the case of Revenue. On the contrary at the time of introduction of service into Service Tax net, vide Boards Circular No. B 11/98 TR dated 07.10.1998, it was clarified that underwriting means an agreement with or without conditions to subscribe to the securities of a body corporate when the existing shareholders of such body corporate or the public donot subscribe to the securities offered to them. Thus it was clear from the start that activity of Joint Lead Managers were outside the scope of underwriting service.
19. In view of above, we uphold the impugned order and appeal is dismissed.
(Pronounced in open court on ..........08.2014.) (S.S. Kang) (P.K. Jain) Vice President Member (Technical) Sp 25