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CESTAT allowed the appeal by appellant banks and set aside the adjudged service tax demands, interest and penalties in the impugned order dated 28.02.2017. The Tribunal held that charges levied by foreign correspondent/intermediary banks in export-related remittance and document-transfer transactions do not attract service tax on a reverse charge mechanism basis where Indian banks act for client exporters, and confirmed that liability under RCM is unsustainable. Relying on coordinate-bench reasoning, the Tribunal found no legal basis to treat Indian banks as recipients of taxable services rendered by foreign banks in such export settlements, and therefore quashed the departmental demand and related consequential penalties.
CESTAT allowed the appeal by appellant banks and set aside the adjudged service tax demands, interest and penalties in the impugned order dated 28.02.2017. The Tribunal held that charges levied by foreign correspondent/intermediary banks in export-related remittance and document-transfer transactions do not attract service tax on a reverse charge mechanism basis where Indian banks act for client exporters, and confirmed that liability under RCM is unsustainable. Relying on coordinate-bench reasoning, the Tribunal found no legal basis to treat Indian banks as recipients of taxable services rendered by foreign banks in such export settlements, and therefore quashed the departmental demand and related consequential penalties.
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