The main legal point established in the judgment is that the absence of deliberate wrong doing and deception, along with the payment of service tax and interest, constituted reasonable cause for waiver of penalties under Section 80 of the Finance Act.

RAJIV SHAKDHER, J.

1. This is an appeal preferred by the Revenue against the judgment and order dated 09.11.2015 passed by the Customs, Excise and Service Tax Appellate Tribunal (in short the Tribunal).

1.1. The Tribunal, by virtue of the impugned judgment and order, partially allowed the appeal of the respondent/assessee. In sum, the Tribunal, while confirming the amounts paid by the assessee towards service tax and interest, set aside the penalties imposed under various Sections of the Finance Act, 1994 (in short the Finance Act).

1.2. The Revenue, being aggrieved with that part of the judgment and order, whereby penalties levied on the assessee have been set aside, has come up with the instant appeal to this Court.

2. The record shows that the appeal was admitted on 03.11.2016, when, the following substantial questions of law were framed for consideration by this Court:

(i) Whether the Tribunal is correct in allowing the appeal of the assessee by deleting the mandatory penalty imposed on them?

(ii) Whether the Tribunal committed an error in concluding that the respondent is eligible for cenvat Credit on the service tax paid on the reverse charge mechanism?

2.1. We must state at the very outset that after we had heard the submissions of learned counsels for parties, there was a consensus that apart from anything else, the following additional substantial question of law ought to have been framed. Accordingly, we would frame a question of law which would examine the tenability of the impugned judgment and order of the Tribunal, in the light of the provisions of Section 80 of the Finance Act.

2.2. Therefore, before we proceed further, it will be useful to formulate the said question of law:

Whether in the facts and circumstances of the case, the Tribunal had misdirected itself in applying the provisions of Section 80 of the Finance Act?

3. In order to adjudicate upon the appeal and to answer the questions of law, which have been set out hereinabove, the following broad facts are required to be noticed.

3.1. The assessee before us is a company by the name of M/s. JSW Steel Ltd. (formerly known as M/s. Southern Iron & Steel Company Ltd.). The assessee appears to be in the business of manufacturing iron and steel bars and rods in their factory situate at Pottaneri. The assessee, admittedly, stands registered with the Central Excise Department for the purpose of service tax and has, accordingly, been accorded a registration number.

3.2. It appears that the Government of India (GOI), in 1992, introduced a Scheme which allowed Indian companies to access global capital markets through External Commercial Borrowings (ECBs). The ECBs, apparently, operated under Global Depository Mechanism (GDR) and American Depository Mechanism (ADR). Thus, under the Scheme formulated by GOI, the Indian companies having good track record, which included good financial performance generally, could access International Banks / Financial Institutions for ECBs. The manner in which ECB operated was that every borrower, who was based in India, was required to pay commercial charges in the form of Agency fees as well as Arrangement fee, i.e., fee for arranging of loans. It appears that lending services, which were received by the Indian borrower such as, the assessee, were brought within the tax net under section 65 (12)(a)(ix) of the Finance (No. 2) Act, 2004, with effect from 10.09.2004.

3.3. Evidently, on 18.04.2006, an amendment was made to the Finance Act with the insertion of Section 66A. Alongside the insertion of Section 66A in the Finance Act, the Taxation of Service (provided from outside India and received in India) Rules, 2006, were also framed. The result of this development was that the recipients of services, who were located in India such as, the assessee, were liable to pay service tax on gross fee paid by them to overseas service providers, i.e. lead arrangers.

4. The record shows that the assessee entered into a Facility Agreement dated 18.09.2