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of <h1>Tribunal rules in favor of pharmaceutical manufacturer in service tax dispute</h1> <h3>GRACURE PHARMACEUTICALS LTD. Versus COMMISSIONER OF C. EX., JAIPUR-I</h3> GRACURE PHARMACEUTICALS LTD. Versus COMMISSIONER OF C. EX., JAIPUR-I - 2013 (32) S.T.R. 249 (Tri. - Del.) Issues:1. Liability for service tax on payments made to foreign banks for collection of export proceeds.2. Appeal against the order of Asstt. Commissioner confirming service tax demand, interest, and penalties.3. Stay application for waiver of pre-deposit of service tax, interest, and penalty pending appeal.Issue 1: Liability for service tax on payments made to foreign banks for collection of export proceedsThe appellant, a pharmaceutical manufacturer, exported goods against letters of credit issued by M/s. ICICI Ltd. The Department issued a show cause notice alleging that the appellant made payments to foreign banks for collection of export proceeds, resulting in a service tax liability of Rs. 71,049. The Department contended that as a service recipient of banking and financial services from foreign banks, the appellant was liable to pay service tax. The Asstt. Commissioner confirmed the service tax demand, interest, and penalties under relevant sections of the Finance Act, 1994. The Commissioner (Appeals) upheld this decision. The appellant argued that they did not receive any banking or financial services from foreign banks, as they made payments to ICICI Bank Ltd., which had already charged and paid service tax to the Government. The Tribunal found that the appellant had received services from ICICI Bank Ltd., not foreign banks, and waived the pre-deposit requirement for the appeal, staying the recovery pending appeal.Issue 2: Appeal against the order of Asstt. Commissioner confirming service tax demand, interest, and penaltiesThe appellant appealed the Asstt. Commissioner's order confirming the service tax demand, interest, and penalties imposed under the Finance Act, 1994. The Commissioner (Appeals) upheld the Asstt. Commissioner's decision, leading to the filing of this appeal. The appellant argued that they had not received any banking or financial services from foreign banks, as the payments were made to ICICI Bank Ltd., which had already paid service tax to the Government. The Tribunal, after considering submissions from both sides and examining the records, found that the appellant's payments were made to ICICI Bank Ltd., and not foreign banks, for services received. Consequently, the Tribunal concluded that the service tax demand was incorrect, waived the pre-deposit requirement, and stayed the recovery pending appeal.Issue 3: Stay application for waiver of pre-deposit of service tax, interest, and penalty pending appealDuring the proceedings, the appellant requested a waiver of the pre-deposit requirement for service tax, interest, and penalty pending the appeal. The appellant contended that they had a strong prima facie case as they did not receive banking or financial services from foreign banks, and that the service tax charged by ICICI Bank Ltd. had already been paid to the Government. The Department opposed the stay application, maintaining that the appellant was liable to pay service tax for services received from foreign banks. After considering arguments from both sides and reviewing the records, the Tribunal found in favor of the appellant, waiving the pre-deposit requirement and staying the recovery of service tax, interest, and penalty pending the appeal.
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