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2024 (12) TMI 948
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....e that M/s. Sumeru Knits, engaged in the manufacture and export of knitted garments to overseas customers were utilizing the services of M/s. AMSCO Finance Ltd. (AML) and Foreign Banks located abroad for realisation of export proceeds. It was alleged that the Appellant had made payments for such services received from AFL by way of deduction of service fee @ 3% from the export bills and in respect of foreign banks, by specified charges deducted from their export proceeds realisation. Hence the department was of the view that the Appellant was liable to pay service tax on reverse charge basis on the banking and financial services received from AFL and foreign banks, located in a non-taxable territory in terms of Section 66A of the ACT ibid read with Rule 3(ii) of Taxation of Services (Provided from Outside India )Rules, 2007 and Rule 3 of Place of Provision of Service Rules 2012. 2.2 Consequently, a Show Cause Notice No. 24/2013 dated 24.10.2013 was issued to the Appellant seeking to demand Service Tax of Rs.72,26,765/- and Rs.4,74,485/- on the amounts paid to AML and Foreign Banks respectively, for the period from 2008-09 to 2012-13 along with applicable interest and to impose p....
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.... list regime, 'service' has been defined in clause (44) of section 65B of the Finance Act 1994, as amended, which excludes transaction in money. As the amount of remittance comprises money, the activity does not comprise a 'service' and thus not subjected to service tax. 3. In case any fee or conversion charges are levied for sending such money they are also not liable to service tax as the person sending the money and the company conducting the remittance are located outside India in terms of the Place of Provision of Services Rules such services are deemed to be provided outside India and thus not liable to service tax. 4. It is further clarified that even the Indian counterpart bank or financial institution who charges the foreign bank or any other entity for the services provided at the receiving end, is not liable to service tax as the place of provision of such service shall be the location of the recipient of the service, i.e. outside India, in terms of Rule 3 of the Place of Provision of Services Rules, 2012". vi. It was contended that the impugned order had wrongly concluded that the Appellants were service recipients which was factually incorrec....
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....ng services from M/s. AFL engaged by M/s. C&A, the foreign buyer to process payments to the appellant? ii. Whether the appellant has received services from Foreign Banks that make payments of sale proceeds of exported goods owed by the foreign buyer to the appellant? 8. We find that the impugned order has confirmed demand of service tax on two counts, both under one taxable service viz., Banking and Financial Services. These demands have been confirmed alleging that the appellants are liable to pay the service tax on reverse charge mechanism in terms of the provisions of Section 66A of the Finance Act, 1994 for the services received from outside India. The first one is the demand with regard to the services received by the appellants from AFL, Hong Kong during the course of realization of export proceeds which includes 3% fee and specified charges for transfer of money to the account of the appellants. The second one is demand of service tax on various specified charges deducted by the foreign banks from the sale proceeds of the exports made by the appellants for transferring the foreign exchange to the accounts of the appellants maintained in India. 9. We find that ....
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....e service provider is and there should be an agreement to provide service, which may be oral or written. In the present case, the importer and exporter does not even know who the service provider is, as they are not aware of the identity of the foreign banks which would be providing services. Exporter or importer in India does not have any formal or informal agreement with the foreign bank, importer or exporter in India does not even know the quantum of charges which the foreign bank would be recovering. Therefore, in view of the above mentioned factual position and also in view of the various articles of URC 522/UCP 600, it is clear that services are provided by the foreign bank to the bank in India. Further, Tribunals have also prima facie held that in such cases, services are provided by the foreign bank to the Indian bank and not to the Indian Exporter. [M/s. Gracure Pharmaceuticals Ltd. v. Commissioner of Central Excise, Jaipur-1 -2013 (32) S.T.R. 249 (Tri.-Del.), M/s. Gujarat Ambuja Exports Ltd. v. Commissioner of Service Tax, Ahmedabad - 2013 (30) S.T.R. 667(Tri.-Ahmd.)]." Similar issue was considered by the Tribunal in the case of Greenply Industries Ltd. (supra). ....
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....ty, effected on 1st June 2007, is the sole description that could be fastened on the appellants for taxability as deemed provider of service. From the clarification in circular no. 96/7/2007-ST dated 23rd August 2007 of Central Board of Excise & Customs, issued soon after the legislative change, it would appear that the intent was limited to 'chit funds' as seen from 'Reserve Bank of India has clarified that the business of a chit fund is to mobilize cash from the subscribers and effectively cause movement of such cash to keep it working and, therefore, the activity of chit funds is in the nature of cash management.' thus negating the recourse to section 65(105)(zm) as taxable service for which appellants were liable till 30th June 2012. On the other hand, this may have the scope of inclusion within the taxable service as 'bill discounting' for which exemption is afforded by notification no. 29/2004-ST dated 22nd September 2004 when provided to customers. As a customer of the provider of the service is not, under the notification, required to be an account holder, the benefit of such exemption is not deniable to the appellants. 7. ....
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.... '12. With this ontogeny, and, coincidentally, corresponding to the age of attainment of majority, the stage was set to give free rein to taxation of services by phasing out the classificatory regime to make room for the 'negative list' regime. Not unnaturally, the principal, and adjunct, machinery that had evolved till then were embedded in the new scheme of Finance Act, 1994, as section 66B, 66C, 66D and 66E, to resonate with '(44) ...any activity carried out by a person for another for consideration, and includes a declared service, but shall not include - ..' assigned to 'service' in section 65B of Finance Act, 1994 not only to cover all 'activities' save those exogenic to, and excepted in, the definition but also those excluded out of, and exempted from, levy in 'negative list' or by notification. Also, here the expression 'for another', as substitute for 'to any person', eliminates the erstwhile touchstone of 'recipient' for determination of the rendering of service and thus conflates the definition and 'service' in its essential form; resort to 'recipient' was hencef....
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....this Tribunal. 10. 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) TMI 1231 CESTAT NEW DELHI], has observed in para 5.2 as under: - "5.2 We find that the appellants have submitted the documents for realization of export sale proceeds to their bank namely SBI, which in turn has used the services of the foreign bank for collection of export sale proceeds. Obviously, the foreign banks who have rendered their services, have deducted their charges while remitting the export sale proceeds to SBI. The appellant has never dealt with the foreign bank on his own and the Banking and Other Financial Service if at all was rendered only to SBI. Amount charged by the foreign bank while remitting export sale proceeds, whether can be subjected to service tax or not has been decided by the CESTAT Principal Bench, New Delhi in the case of....