The Supreme Court has dismissed the claims of the assessee regarding the use of Special Purpose Vehicles. The Supreme Court has allowed the request for condonation of delay made by Revenue
The assessee, M/s ICICI Bank Ltd had been aggrieved by the confirmation of demand of ₹ 25,35,06,456 against them for the period between October 2007 and March 2012, along with accrued interest, and imposition of penalty of like amount under section 78 of Finance Act, 1994.The demand arose from the alleged non-payment of tax under Finance Act, 1994 on the receipts generated from securitization agreements entered into by the appellant prior to February 2006 that continued to subsist during the period of dispute.
The assessee had contended before Customs Excise and Service Tax Appellate Tribunal (CESTAT) that the allegation in the show cause notice issued by revenue wass ill-founded as the agreements entered into prior to February 2006 incorporated a one-time upfront fee of fixed amount that had neither been billed nor paid by the ‘special purpose vehicles’ and that, in accordance with the law prevailing till 2011 requiring discharge of tax liability on receipt basis, liability does not exist. It had also been contended that the demand has been made under the authority of section 72 of Finance Act, 1994 on an erroneous interpretation of its scope.
Respondent argued before CESTAT that in such circumstances of non-inclusion of the consideration for service in the periodical discharge of liability, the failure to reflect the correct assessable value in the half yearly returns warranted recourse to section 72 of Finance Act, 1994 which authorises resort to ‘best judgement’ assessment.The respondent argued that the Revenue had taken an undue amount of time in implementing the authority’s order and contended that the order had become time barred.
Revenue had contended that disproportionate increase in the fees for collection undertaken on behalf of the ‘special purpose vehicle’ in transaction after February 2006 clearly is the standard for consideration charged by the bank and which can be inferred to have been included in the price paid by the ‘special purpose vehicle’ to Revenue. Revenue requested the condonation of delay in implementation of order.
CESTAT had held in the earlier order that “it would appear that the beneficiary of the facility is not the ‘special purpose vehicle’ but the appellant themselves. This clearly does not conform to the concept of service which must, necessarily, be rendered to another person.”
The appellant was represented by N. Venkatraman, Mukesh Kumar Maroria, Nisha Bagchi, Shantanu Sharma, Adwaitya Avasthi, and Mrs. Alka Agarwal. The respondent was represented Sumit Goel, Smita Bharghava, Sreeparna Basak and Jayant Bajaj.
The two judge bench comprising Justice Padimghatam Sri Narasimha and Aravind Kumar in its interim order found no merits in the arguments made by the respondent and granted the request for condonation of delay made by revenue.
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