Tribunal rules foreign bank charges not taxable under financial services

The Tribunal ruled in favor of M/s.S.K.M. Egg Products Export (India) Limited, holding that the foreign bank charges deducted by the State Bank of India were not taxable under the "Banking and other Financial Service." The appellants had no direct dealings with the foreign bank, and services were provided solely to SBI. The decision was based on previous tribunal rulings on similar issues, resulting in the appeal being allowed with consequential relief. As the main issue was resolved in favor of the appellants, the discussion on the extended period and penalties was deemed unnecessary.

---

---

Issues involved:
The main issue is whether the deducted amount by the Foreign bank for bank charges is taxable under the service "Banking and other Financial Service" for the period 2006-2007 to 2010-2011. Other issues include the sustainability of invoking extended period and imposition of penalties.

Issue 1: Taxability of Foreign Bank Charges
The case involved M/s.S.K.M. Egg Products Export (India) Limited, where the appellants were manufacturers and exporters of various egg products. The Revenue demanded service tax under the "Banking and other Financial Service" on Reverse Charge basis on the foreign bank charges borne by the appellants. The appellants contended that the State Bank of India (SBI) charged service tax on the total invoice value before deducting foreign bank charges. They argued that the buyer bank did not provide any direct service to them, and thus, the provisions of Section 66 A of the Finance Act, 1994, were not applicable. The appellants had engaged only SBI for bill collection and had no direct dealing with foreign buyers. The issue was settled in favor of the appellants based on previous decisions involving similar issues.

Issue 2: Extended Period and Penalties
The authorities invoked the extended period for confirming the demand of service tax along with interest and imposing penalties in this appeal. The appellants argued against the invocability of the extended period and the legality of imposing penalties. However, as the main issue regarding the taxability of foreign bank charges was resolved in favor of the appellants based on previous tribunal decisions, there was no need to discuss the invocability of the extended period and the imposition of penalties.

Judgment Summary:
The Tribunal found that the appellants submitted documents for export sale proceeds to SBI, which used the services of foreign banks for collection. The foreign banks deducted charges while remitting the proceeds to SBI. The appellants had no direct dealings with the foreign bank, and any service related to banking and financial services was rendered only to SBI. Citing previous tribunal decisions, the Tribunal ruled in favor of the appellants, setting aside the impugned order that demanded service tax on foreign bank charges. The appeal was allowed with consequential relief, if any. The issue was considered resolved on merits, and therefore, the discussion on the invocability of the extended period and penalties was deemed unnecessary.

---