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CESTAT held that Indian banks are not recipients of services of foreign banks in export/import transactions for settlement of foreign remittances and therefore are not liable to pay service tax under the Reverse Charge Mechanism for bank charges deducted by foreign or correspondent banks. The Tribunal relied on prior coordinate bench reasoning and relevant High Court authority distinguishing exporter/importer liability from the bank's role. The adjudged demands, interest and penalties levied on the appellants for alleged service tax liability on such bank charges were found legally unsustainable. The impugned orders confirming liability are set aside and the appeal is allowed, with the contested demands, interest and penalties quashed.
CESTAT held that Indian banks are not recipients of services of foreign banks in export/import transactions for settlement of foreign remittances and therefore are not liable to pay service tax under the Reverse Charge Mechanism for bank charges deducted by foreign or correspondent banks. The Tribunal relied on prior coordinate bench reasoning and relevant High Court authority distinguishing exporter/importer liability from the bank's role. The adjudged demands, interest and penalties levied on the appellants for alleged service tax liability on such bank charges were found legally unsustainable. The impugned orders confirming liability are set aside and the appeal is allowed, with the contested demands, interest and penalties quashed.
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