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9.4 As stated in the Show Cause Notice, the service provider is Barclays Capital PLC, UK (herein after referred to as 'Barclays UK') who do not have an office in India. Based on an application made by the Appellant through Barclays UK, the Reserve Bank of India issued a Loan Registration Number (LRN) for the Appellant's Foreign Currency Convertible Bond (FCCB) to be subscribed by investors abroad. As per RBI's permission cited in the SCN the borrower (Appellant) is required to give the details of the drawls, utilization, repayment, conversion, redemption etc on a monthly basis to the RBI. Barclays UK is paid a consideration by the appellant for advice and assistance to the Appellant in raising funds through issue of FCCB and in the process receive a fee of 2% of the gross proceeds received in respect of the issue of the FCCB bonds. It is seen that the activity is not linked to an identifiable immovable property, the benefits of these services are received in India and are provided for the benefit of the Indian Company. Although the appellant states that service tax cannot be levied on this activity as the entire activity takes place outside India, they do not indicate what is the service being referred to and who are the provider and recipient of the service abroad. Pleadings are not proof.

9.5 FCCB is a type of convertible bond issued for raising capital abroad in a currency different than the issuing Company's domestic currency. An FCCB investor abroad can purchase these bonds at a stock exchange, and has the option to convert the bond into equity in the Appellants company after a certain period of time. The question then arises as to who is the recipient of service provided by Barclays UK when the Appellant is allowed by RBI to access funds abroad by the issue of FCCB? Is it the FCCB investor abroad or the Indian company issuing the FCCB?

9.7 The providing of advice and assistance to the Appellant, who is a juristic person based in India and the only one who entered into a contract / agreement to receive the service from Barclays UK as per the terms of the Agreement, constitutes the taxable event. The liability to pay Service Tax under FA 1994 arises whenever a taxable event occurs. Taxable events in fulfillment of an agreement / contract may arise at several stages across a period of time. Collection of tax is normally at a subsequent stage depending on administrative convenience and as per Rules made in this regard. The consideration that Barclays UK receive is only for the contractual obligations of Banking and Financial Services rendered to the Appellant Company based in India. No contractual obligation exists between Barclays UK and the investors or any third party abroad in relation to the Appellant issuing FCCB, even if the investor / third party's participation may have been caused based on consultancy and advice received from Barclays UK and implemented by the Appellant. To what use the Appellant puts the contractual services and where, post the taxable event, is not the subject matter of the levy. The amount received as consideration by Barclays UK is a lumpsum fee of 2% of the gross proceeds received in respect of the issue of the FCCB bonds. The person who is legally entitled to receive a service is the one obliged to pay the consideration as per the Agreement which in this case is the appellant only. Further, the question to be asked is did the parties have in mind or intend separate payments for separate activities demarcated in the agreement. If there was no such intention, then it is a composite agreement for a service which cannot be vivisected. Hence it is the Appellant who facilitates the foreign currency investors by offering them the opportunity to invest in their (Appellants) company through the bonds with the potential for equity conversion. In the absence of an agreement, it was deduced that all such activity which takes place outside the taxable territory in connection with the FCCB and involving investors, third parties etc. abroad are on account of the Appellant and are not to be counted as service rendered by Barclays UK to such investor or third party abroad.

K. A Foreign Currency Convertible Bond (FCCB) is a type of convertible bond issued for raising capital abroad in a currency different than the issuing Company's domestic currency. The taxable services provided from outside India by Barclays UK, who advices the issuing company (Appellant) on all aspects of the FCCB issuance, is received by the Appellant who is a juristic person situated in India, which constitutes the taxable event. This service is exigible to tax under the Reverse Charge Mechanism as per section 66A(1) of FA 1994. All such activity which takes place outside the taxable territory in connection with the FCCB and are consumed by investors, third parties etc abroad are on account of the Appellant and are not to be counted as service rendered by Barclays UK to such investor or third party.