Textile manufacturer granted waiver on service tax for commission retained by UK bank branch

The Tribunal granted the appellant, a textile products manufacturer, unconditional waiver of pre-deposit of service tax dues demanded on commission retained by the UK branch of Standard Chartered Bank. The Tribunal found that since the contract for collection was between the appellant and the Mumbai branch of the bank, with all relevant parties in India, there was no import of service. Therefore, the demand for service tax on the commission retained by the UK branch was deemed unjustified, leading to the stay of recovery during the appeal process.

---

---

Issues:
Service tax demand on commission retained by UK branch of Standard Chartered Bank.

Analysis:
The appeal and stay petition were filed against the Order-in-Appeal upholding the service tax demand, interest, and penalties imposed by the adjudicating authority. The appellant, a textile products manufacturer, exported goods and handed over export proceeds bills to Standard Chartered Bank in Mumbai. The bank, through its UK office, retained a portion of the amount as collection charges. The appellant was asked to pay service tax on the amount retained by the UK branch under Section 66A of the Finance Act, 1994.

The appellant argued that they had no direct transaction or contract with the UK branch of the bank. The contract for collection was with the Mumbai branch of Standard Chartered Bank, where both the service provider and recipient were in India. The appellant contended that since all relevant parties were in India, there was no import of service, and demanding service tax on the commission retained by the UK branch was unjustified. The appellant highlighted that for subsequent periods, the department had accepted this argument and dropped the service tax demand.

The Revenue, represented by the Superintendent, maintained the stance on demanding service tax on the commission retained by the UK branch. However, the Tribunal, after considering the submissions, observed that the contract for collection was between the appellant and the Mumbai branch of Standard Chartered Bank. As both the service provider and recipient were in India, there was no import of service. The Tribunal concluded that the appellant had established a prima facie case for waiving the pre-deposit. Consequently, the Tribunal granted unconditional waiver of pre-deposit of the dues adjudged in the impugned order and stayed the recovery during the appeal process.

---