TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 1917
X X X X Extracts X X X X
X X X X Extracts X X X X
.... working as DTA unit after de-bonding with effect from 10.06.2011. 2.2 A scrutiny of the records of the unit has revealed that they have not paid any service tax on foreign bank charges paid on realization of export proceeds and for other financial services. In the process of foreign trade transactions, the Appellant realizes export proceeds from foreign buyers and makes transactions with foreign customers through their bank in India and also foreign banks. These two banks viz., Appellant's Bank in India and Nodal Bank in foreign country render their services and both of them recover Bank charges for services rendered by them from the Appellant. The Appellant's Bank in India is found to be paying service tax but the bank charges paid to the foreign bank appears to have escaped the service tax liability. The services rendered by the foreign banks are taxable under the category of 'Banking and Financial Services' and in respect of services received from outside India, the recipient of service i.e., the Appellant is liable to discharge the service tax under Reverse Charge Mechanism. As the Appellant has not paid any service tax on the said foreign bank charges paid on the realization....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovisions were not relied upon in the Show Cause Notice dated 06.03.2014 and Order-in-Original dated 26.03.2015. He has pointed out that even in case of Order-in-Appeal, Rule 3 of the Place of Provisions of Services Rules, 2012 was relied upon but not Section 66C and as in the impugned Order-in- Appeal, Section 66A was relied on which is not at all applicable with effect from 01.07.2012. The Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 was superseded by Place of Provision of Services Rules, 2012 w.e.f. 01.07.2012 and demand raised was based on non-existent legal provisions and so, is not sustainable. In support of this contention, reliance was placed upon the Tribunal New Delhi's decision in the case of M/s. Sanjay Electricals Vs. CST [2024 (1) TMI 891 - CESTAT New Delhi] which set aside the demand as the provisions of negative list were not invoked in the Show Cause Notice. That decision was also followed by the Tribunal in the case of M/s. Borthakur and Co. Vs. CCE [2024 (3) TMI 455]. 4.3 He has further submitted that the foreign bank act as an intermediary in terms of Rule 2(f) of Place of Provision of Services Rules, 2012 between the Appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, we find that this Bench of the Tribunal in the case of M/s. Kadri Mills (CBE) Ltd. v. Commissioner of G.S.T. and Central Excise, Salem [Final Order No. 40711 of 2023 dated 24.08.2023 in Service Tax Appeal No. 41066 of 2014 - CESTAT, Chennai], relied upon by the Ld. Advocate, has, while analysing an identical issue, held as under: - "7. We have heard both sides and perused the case records. We find that the main issue involved in this case is whether the amount which was deducted by the foreign banks towards banking charges are taxable under the service 'Banking and Other Financial Services' during the period from 1.4.2007 to 31.5.2012. A similar matter came to be decided by a co-ordinate Bench of this Tribunal in the case of SKM Egg Products Export (I) Ltd. Vs. CCE, Salem - 2023 (3) TMI 1384 - CESTAT Chennai. The relevant portion of the said judgment is extracted below:- "5.1 The main issue involved in this case is whether the amount which was deducted by the Foreign bank towards the bank charges are taxable under the service "Banking and other Financial Service" for the period 2006-2007 to 2010- 2011? The other issues involved are whether invocation of extended period and i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had paid the charges to the foreign bank. In view of this, the appellant cannot be treated as service recipient and no service tax can be charged under Section 66A read with Rule 2 (1)(2)(iv) of the Service Tax Rules, 1994. Moreover, we also find that in appellants own case for the previous period similar order had been passed by the original adjudicating authority and on appeal being filed against the same, the Commissioner (Appeals), vide his order in appeal dated 12.11.08 has set aside that order and as per the appellant's counsel, no appeal has been filed against that order. In view of this, the impugned order is not sustainable, the same is set aside and appeal is allowed"." 5. By following our earlier decision (supra), we allow the claim of the appellant in this regard." 5.3 As the issue is resolved on merits, there is no need to discuss about invocability of extended period in this case and also regarding legality of imposition of penalties. 6. We find that the issue is no more res integra and stands resolved by the orders of the Tribunal as cited supra. So, we set aside the impugned order which demanded service tax under "Banking and Other Financial Service" and allo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 banks that services provided by the foreign bank are-received by the importer or exporter in India is not factually and legally correct because, for a person to be treated as recipient of service, it is necessary that he should know who....