AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 624
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....ellant specified the amount deducted from the invoice value at the importer end and also by the foreign bank while transferring the proceeds to India. Further verification by department revealed that the buyer, M/s C& A is effecting payment through their agent AFL on the basis of a Trade Payment Arrangement (TPA) with service fee of 3% from 01.05.2008 and that AFL had sent an e- mail to the Appellant seeking confirmation of the deduction of 3% from the invoice value of exports which was accepted by the Appellant under due acknowledgement. Therefore, it appeared to the department that the Appellant have contractually agreed to avail the services of AFL for realisation of export proceeds on payment of service fee of 3% of invoice value which was deductible from the payments due for their invoice when presented for payment. 1.3 Investigation also revealed that M/s. Deusche Bank, Singapore and other banks abroad have deducted their charges from the supplier invoice value towards their service charges like Telegraphic Transfer of export proceeds to the Appellant in respect of various exports effected by the Appellant. 1.4 The Department was of the view that AFL and the foreign ban....
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....ices provided to banks abroad, appropriating the Service Tax and applicable interest already paid by the Appellant. 1.7 Aggrieved, the present appeal filed by the Appellant before this forum. 2. The main grounds of appeal filed by the appellant are as specified below:- i. It was submitted that the "other deduction" shown in the export invoice is nothing but trade discount allowed to the buyer in invoice itself for arranging prompt payment and in this regard It was pointed out that the valuation provisions under the Central Excise Act, 1944 and the Customs Act, 1962 have been strictly adhered to in as much as only the transaction value i.e, the sale consideration net of discounts is recorded in the books of accounts. Hence it was contended that the other deductions given by the Appellants to overseas customers cannot be construed as "consideration" payable to AFL for rendering any service to the Appellant. ii. It was contended that there is no contract between AFL and the Appellant as the deduction in the invoice was made as agreed to between the Appellant and the buyer and the Appellant did not approach AFL for early payment. iii. It was pointed out....
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....ention of evading tax and reliance was placed on the ratio of the following decisions in:- a. Modern Petrofils Vs. Commissioner of Central Excise, Vadodara [2010 (20) STR 627 (Tri.-Ahmd.)] b. Commissioner of Central Excise, Jaipur-I Vs. Pushp Enterprises -2011(22) STR 299(Tri-Del.) c. Commissioner of Central Excise, Indore Vs. Medicaps Ltd.- 2011(24) STR 572(Tri-Del.) d. Parekh Plast (India) Pvt. Ltd. Vs. Commissioner of Central Excise, Vapi- 2012(25) STR 46 (Tri.-Ahmd.) e. Commissioner of Central Excise, Kolkata VI Vs. ITC Ltd. [013(291) ELT 377 (Tri.-Kolkata)] f. UOI Vs. Rajasthan Spinning & Weavings Mills [2009 (238) ELT 3 SC] g. Chemphar Drugs and Liniments [1989 (40) ELT 276 SC] h. Cosmic Dye Chemical Vs. Commissioner of Central Excise, Bombay [1995 (75) ELT 721 (SC)] i. Commissioner of Central Excise, Aurangabad Vs. Bajaj Auto Ltd. [2010 (260) ELT 17 (SC)] j. M/s. Uniworth textiles Limited Vs. Commissioner of Central Excise, Raipur [2013-TIOL-13-SC-Cus] 3. The Ld. Counsel Shri M. Karthikeyan appearing for the Appellant submitted that the issue is no more res integra, as on identical f....
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....The exporter does not hold an account in such overseas bank. d. The shipping bill reflects discounted invoice value (i.e Total value minus discount) and the exporter's books of account reflect discounted value billed as export. 8. We find that there is no service provider-recipient relationship between the appellant and M/s. Amsco and if there is any contract, the same is between M/s. C&A (buyer) and M/s. Amsco, both of whom are out of India and the appellant does not have any contract with M/s. Amsco whatsoever. We also find that the appellant is only a recipient of the funds for the goods sold to M/s. C&A and the amount received is the net amount as per the invoice. Further, we find that the deduction of 3% from the invoice price was already indicated in the Purchase Order for the goods issued by M/s. C&A and therefore it was nothing but a trade discount for the appellant. Further, we find that the deductions are clearly disclosed in the invoice and also in the shipping bills. The deduction from the invoice is also allowed for in terms of the master circular on exports of goods and services issued by the Reserve Bank of India under the Foreign Exchange Management ....
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.... C&A and the amount received is the net amount as per the invoice. 7.3 Further, we find that the deduction of 3% from the invoice price was already indicated in the Purchase Order for the goods issued by M/s C&A and therefore it was nothing but a trade discount for the appellant. 7.4 Further, we find that the deductions are clearly disclosed in the invoice and also in the shipping bills. The drawback is also claimed for the net amount as per the invoice only. The deduction from the invoice is also allowed for in terms of the master circular on exports of goods and services issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999. 7.5 Further, we find that the appellant does not have any legal recourse or any binding contract with M/s Amsco to enforce any of its rights. Further, the email from M/s Amsco is only an information and does not bind M/s Amsco to any contract with the appellant. 8.1 As regards the second issue, we find that the contract for service is only between M/s C&A, M/s Amsco and the foreign banks; and the appellant in fact is not receiving any services from the foreign banks and there is no service agre....
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....rendered by the foreign bank to the appellants and that there is a service provider and service recipient relationship between the foreign bank and the appellant. It is to be noted that the foreign bank deducts such charges and transfers the foreign exchange to the Indian bank from where the appellant receives the money. The foreign bank in which the overseas buyer deposits the sale proceeds is chosen by the foreign buyer and not by the appellant, who is situated in India. By no stretch of imagination can such foreign bank be considered as a service provider for the appellant who in most cases would not even be aware of the identity of such foreign bank. The act of deduction of an amount as charges for transfer of the foreign exchange to the Indian bank from the sale proceeds of the appellant is only a facility for collecting such charges from the Indian bank. This cannot be considered as payment of charges for services by the appellant to the foreign bank. It is actual charges deducted being bank to bank transaction. The department by the Trade Notice dated 14.2.2014 has clarified the very same situation. The relevant portion is extracted as under:- 5. The views of the ba....
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.... this, the impugned order is not sustainable. The same is set aside and the appeal is allowed. 7. We have to say that the decision relied upon by the Id. AR in the case of Lupin Ltd. (supra), was rendered on 12.2,2013 which is much before the clarification issued by the Trade Notice and also the decision in the case of Greenply. Industries (supra). Therefore, following the judicial discipline in the case of Greenply Industries (supra), and the facts being identical, the levy of service tax is unsustainable. The impugned orders are set aside and the appeals are allowed with consequential relief, if any.' We find that the issue is no longer res integra and that demand pertaining to 'other financial services' has been erroneously confirmed in the orders impugned before us. 6. On the amounts retained by M/s Amsco Finance Ltd, which is sought to be taxed under 'cash management' within section 65(12) of Finance Act, 1994, the definition comes into play for services rendered by 'banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern' and the question that requires resolution is the n....
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.... hence, they are liable to pay service tax under Section 68 (2) of the Finance Act, 1994 for the receipt of service from the non-taxable territory to the taxable territory i.e. in India. Further it Is held that it is not the mere transfer of money is involved the issue to attract the negative list . What M/s. AKR Textile is receiving the comprehensive Banking and Financial Service with effect from 1.7.2012 i.e. as stated earlier processing of export Invoices, making the prompt payment through assistance of customized portal created with the help of foreign banks etc. Hence, it is held that it is not the mere transfer of money to attract the exemption but the comprehensive Banking and Financial Service is involved in the issue in hand. Hence, it is held that M/s. AKR Textile are liable to pay service tax Under Section 68 (2) of the Finance Act, 1994 with effect from 1.7.2012.' implies that the adjudicating has not ascertained the nature of the activity in terms of 'consideration' received to determine extent of service and the person 'for' whom such activity is provided by M/s Amsco Finance Ltd which are the essential characteristics for conformity to 'service' in section 6....
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....of M/s Amsco Finance Ltd is a substitution for the task that would, otherwise, fall to the appellants. If at all, the Hong Kong entity is an 'intermediary' within the meaning assigned in Place of Provision of Service Rules, 2012 to render the service, it has been performed in Hong Kong and, thus, not in the taxable territory. The demand for the period after 1st July 2012 also fails. Consequently, the liability for allegedly having received services provided by M/s Amsco Finance Ltd also does not sustain. 9. With the findings supra pertaining to the appeal of M/s AKR Textiles applicable equally to the several other appeals, the demands impugned therein also do not sustain. 10. Accordingly, all the orders impugned before are set aside and appeals allowed." 11. Further, we find that the service of remittance by a foreign bank to Indian bank of the exporter is not liable to service tax at the hands of the exporter. In this regard, we may also refer to the decision of Chennai Bench of the Tribunal in the case of M/s SKM EGG Products Export (supra) wherein the Tribunal after relying upon the decision of M/s Dileep Industries Pvt Ltd vs. CCE, Jaipur - 2017 (10) ....