Exporter not liable for service tax on payment processing as no service provider-recipient relationship established

CESTAT Chennai held that appellant did not receive taxable payment processing services from M/s Amsco or foreign banks. The Tribunal found no service provider-recipient relationship between appellant and M/s Amsco, as contracts existed only between foreign buyer and M/s Amsco. The 3% deduction was deemed a trade discount, not service consideration. Foreign bank remittance services to Indian banks are not liable to service tax at exporter's hands. Extended period of limitation was rejected due to absence of intent to evade tax, with transactions being revenue neutral for the exporter. Appeals allowed, impugned orders set aside.

---

---

Issues Involved:
1. Whether the appellant received payment processing services from M/s Amsco engaged by M/s C&A.
2. Whether the appellant received services from foreign banks that make the payments of consideration owed by the foreign buyer to the appellant.

Summary:

Issue 1: Payment Processing Services from M/s Amsco
The Tribunal found no service provider-recipient relationship between the appellant and M/s Amsco. The contract was between M/s C&A and M/s Amsco, both located outside India. The appellant only received net payment for goods sold to M/s C&A, with a 3% deduction from the invoice price treated as a trade discount. The deductions were disclosed in the invoices and shipping bills, and the appellant had no legal recourse against M/s Amsco. The Tribunal referenced the case of M/s AKR Textile and Others vs. Commissioner (2020), where it was held that no service tax was liable to be paid by the exporter in similar circumstances.

Issue 2: Services from Foreign Banks
The Tribunal determined that the contract for services was between M/s C&A, M/s Amsco, and the foreign banks, not the appellant. The appellant did not receive any services from the foreign banks, and there was no service agreement between them. The service, if any, was received by the State Bank of India, which levied fees on the appellant separately. The Tribunal cited CBEC Circulars Nos. 163/14-2012-ST and 180/06/2014-ST, supporting the appellant's contention. The Tribunal also referenced decisions in Cylwin Knit Fashions vs. CCE, SKM EGG Products (I) Ltd. vs. CCE, and Kadri Mills (CBE) Ltd. vs. CCE, where it was held that the service of remittance by foreign banks to Indian banks of an exporter is not liable to service tax at the hands of the exporter.

Extended Period of Limitation and Penalties
The Tribunal found no intent to evade tax by the appellant, who had no contractual relation with either M/s Amsco or the foreign banks. All transactions were the liability of M/s C&A, and the appellant's role was limited to receiving net payments. The deductions were clearly shown in shipping bills, and any service tax payable would be allowable as a rebate, making the situation revenue-neutral. Therefore, there was no lack of bonafides on the appellant's part.

Conclusion
The Tribunal set aside the impugned orders in all three appeals, allowing the appeals with consequential relief as per law, following the precedent set in M/s AKR Textile and Others and other cited cases.

---