Taxability of Foreign Bank charges reimbursed by appellant to Indian Bank under Banking & Finance Services. Indian Bank liable for service tax. Appellant not liable.
The case dealt with the taxability of Foreign Bank charges reimbursed by the appellant to the Indian Bank under Banking and other Finance Services. The court ruled that the Indian Bank, as the actual service recipient, is liable to pay the service tax under the reverse charge mechanism. The appellant was found not liable for the service tax as they were not the service recipient. Citing previous judgments and circulars, the Tribunal set aside the service tax demand from the appellant, allowing the appeal.
Issues Involved:1. Whether the Foreign Bank charges reimbursed by the appellant to the Indian Bank are liable to be taxed under the category of Banking and other Finance Services.
Summary:Issue 1: Taxability of Foreign Bank ChargesThe primary issue in this case is whether the Foreign Bank charges, which are charged by a Foreign Bank to an Indian Bank and subsequently collected as reimbursement from the appellant, are liable to be taxed under the category of Banking and other Finance Services.
The appellant's counsel, Shri R. Subramanya, argued that this issue is no longer res-integra, citing several judgments where similar appeals were allowed. He referenced decisions from CESTAT Ahmedabad, CESTAT Chennai, and CESTAT New Delhi, among others, to support his contention that the appellant should not be liable for the service tax.
Shri Tara Prakash, representing the revenue, reiterated the findings of the impugned order, which proposed a demand for service tax on the banking charges reimbursed by the appellant to the Indian Bank.
Upon careful consideration of the submissions and records, it was found that if there exists a service provider and service recipient relationship, it is between the Foreign Bank and the Indian Bank. Therefore, the Indian Bank, as the actual service recipient, is liable to pay the service tax under the reverse charge mechanism as per Section 66A of the Finance Act, 1994. Consequently, the service tax demand cannot be raised from the appellant, who is not covered under the category of service recipient.
This issue had been previously considered in the appellant's own case by the Tribunal, which ruled that the appellant is not liable to pay service tax under the reverse charge mechanism for charges paid in respect of foreign currency transactions. The Tribunal referred to the Board Circular No. 20/2013-14-ST-I, which clarified that the Indian Banks are the recipients of the service provided by the Foreign Banks and are thus liable for the service tax, not the appellant.
In light of these findings and previous judgments, the Tribunal concluded that the demand for service tax from the appellant is not sustainable. The impugned order was set aside, and the appeal was allowed.
(Pronounced in the open court on 06.07.2023)
TaxTMI 
AI Drafter ✕
TaxTMI 
