Bank not liable for service tax under reverse charge mechanism; Commissioner's order set aside.

The Tribunal held that the Appellant Bank was not liable to pay service tax under the reverse charge mechanism as it was not considered the recipient of the service provided by the Foreign Bank. The order passed by the Commissioner demanding service tax was set aside, and the appeal was allowed in favor of the Appellant Bank.

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Issues Involved:
1. Whether the Foreign Banks provided any service to the Appellant Bank.
2. Whether the Appellant Bank is liable to pay service tax under the reverse charge mechanism.
3. Whether the extended period for the issue of a show cause notice was valid.
4. Whether the Appellant Bank was the recipient of the service provided by the Foreign Bank.

Issue-Wise Detailed Analysis:

1. Whether the Foreign Banks provided any service to the Appellant Bank:
The Appellant Bank facilitates the settlement of payments related to the export of goods by sending export documents to the importer's bank abroad and collecting payments. The Appellant Bank charges a commission/fee for these services and pays service tax on such services provided to the exporter. The dispute is regarding the charges collected by the Foreign Bank or the Foreign Intermediary Bank. The Appellant Bank contended that it did not receive any service from the Foreign Bank and merely acted on behalf of the Indian exporter to facilitate the service. The Commissioner, however, held that the services provided by the Foreign Banks were received by the Appellant Bank and thus, service tax was payable under the reverse charge mechanism.

2. Whether the Appellant Bank is liable to pay service tax under the reverse charge mechanism:
The Commissioner confirmed the demand of service tax on the Appellant Bank under the reverse charge mechanism for services provided by Foreign Banks. However, the Tribunal found that the Appellant Bank did not receive any service from the Foreign Bank. The Appellant Bank only facilitated the service as a mediator between the Indian exporter and the Foreign Bank. Therefore, the Appellant Bank was not liable to pay service tax under the reverse charge mechanism.

3. Whether the extended period for the issue of a show cause notice was valid:
The Appellant Bank argued that the show cause notice issued on February 08, 2016, for the period from October 01, 2010, to March 31, 2015, was time-barred as there was no evidence of willful suppression on its part. The Commissioner invoked the extended period under the proviso to section 73(1) of the Finance Act. The Tribunal did not specifically address the validity of the extended period, but since the primary demand was set aside, the issue of the extended period became moot.

4. Whether the Appellant Bank was the recipient of the service provided by the Foreign Bank:
The Tribunal held that the Appellant Bank was not the recipient of the service provided by the Foreign Bank. The Foreign Bank provided services to the importers/exporters, and the charges were deducted from the export proceeds. The Appellant Bank merely facilitated the transaction and did not pay any consideration to the Foreign Bank. Therefore, the Appellant Bank could not be considered the recipient of the service, and no service tax was payable under the reverse charge mechanism.

Conclusion:
The Tribunal concluded that the Appellant Bank was not liable to pay service tax under the reverse charge mechanism as it was not the recipient of the service provided by the Foreign Bank. The order dated March 30, 2017, passed by the Commissioner was set aside, and the appeal was allowed.

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