2023 (7) TMI 262 - AT - Service Tax

Taxability of Foreign Bank charges reimbursed by appellant to Indian Bank under Banking & Finance Services. Indian Bank liable for service tax. Appellant not liable.

Dishman Pharmaceuticals & Chemicals Ltd Versus C.S.T. -Service Tax - Ahmedabad

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 ... Levy of Service Tax - Banking and other Finance Services - Foreign Bank charges, charged by Foreign to Indian Bank and the Indian bank collected as reimbursement from the appellant - HELD THAT:- In this fact, it is clear that if at all there is a service provider and Service recipient relationship, it is between the Foreign Bank and Indian Bank. Accordingly in India the actual service recipient is Indian Bank for liable to pay the Service Tax under reverse charge mechanism in terms of Section 66A of the Finance Act, 1994. Therefore in any case the service tax demand cannot be raised from the appellant being not covered under category of service recipient. This issue in the appellant’s own case has been considered by this Tribunal in DISHMAN PHARMACEUTICALS & CHEMICALS LTD VERSUS C.S.T. -SERVICE TAX - AHMEDABAD [2022 (12) TMI 1146 - CESTAT AHMEDABAD] wherein this Tribunal held that when the assessee is not directly making the payment to the Foreign Banker towards any service provided by the said Foreign Banker to the Indian Bank, the assessee is not liable to pay service tax. Thus, it can be seen that the issue is no longer res-Integra. Accordingly, following the above decision, the demand in the present case is not sustainable - appeal allowed. 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)