Appellant not liable for service tax to Indian Banks for services from Foreign Banks. Remanded for verification.

The Tribunal concluded that the appellant was not liable to pay service tax for charges paid to Indian Banks for services provided by Foreign Banks. The demand for service tax was set aside, and the matter was remanded to the adjudicating authority to verify quantification. If any service charges were paid directly to the Foreign Banker by the appellant, the service tax liability would be on the appellant. The appeal was allowed by way of remand, and the demand was not sustained.

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Issues Involved:
1. Liability of the appellant to pay service tax on reverse charge basis for charges paid in respect of foreign currency transactions.
2. Determination of the recipient of services between Indian Banks and Foreign Banks.
3. Application of Board Circulars and precedent judgments to the case.

Issue-wise Detailed Analysis:

1. Liability of the appellant to pay service tax on reverse charge basis for charges paid in respect of foreign currency transactions:
The appellant, a manufacturer of bulk drugs, used services of both foreign and Indian banks for the realization of export proceeds. The Indian Bank reimbursed the commission paid to the Foreign Bank by charging the appellant. The revenue sought to tax these charges under the category of Banking and other Financial Services on a reverse charge basis. The Tribunal examined if the appellant was liable to pay service tax for these charges. It was noted that similar issues had been addressed in previous judgments such as Raj Petro Specialties Pvt Ltd Vs. CCE and Greenply Industries Ltd Vs. CCE.

2. Determination of the recipient of services between Indian Banks and Foreign Banks:
The Tribunal referred to a Board Circular dated 10.02.2014, which clarified the obligations of foreign banks, Indian banks, and importers/exporters. The Circular highlighted that there is an implied contract between Indian and Foreign Banks, where services provided by the Foreign Bank are recognized only by the Indian Bank. The importer/exporter is not considered the recipient of the service as they are unaware of the service provider and the quantum of charges. This was supported by previous Tribunal decisions, including Gracure Pharmaceuticals Ltd. v. Commissioner of Central Excise and Gujarat Ambuja Exports Ltd. v. Commissioner of Service Tax.

3. Application of Board Circulars and precedent judgments to the case:
The Tribunal found that the appellant could not be held liable for service tax under the reverse charge mechanism as the Indian Banks were the recipients of the services provided by the Foreign Banks. This was consistent with the Board Circular and previous judgments, including Greenply Industries Ltd, where it was held that if the assessee did not directly pay the Foreign Banker for services provided to the Indian Bank, the service tax liability did not lie on the assessee.

Conclusion:
The Tribunal concluded that the appellant was not liable to pay service tax for the charges paid to Indian Banks for services provided by Foreign Banks. The demand for service tax was set aside, and the matter was remanded to the adjudicating authority to verify the quantification. If any service charges were paid directly by the appellant to the Foreign Banker, the service tax liability would be on the appellant. The appeal was allowed by way of remand, and the demand was not sustained.

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