TaxTMI 
TaxTMI 
2025 (8) TMI 934
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.... provide services to the exporters for collection of the remittance made by the overseas buyers towards the proceeds of export which involved three different types of transactions. These are (i) 'Do Not Send; - document sent directly by Indian exporter to foreign importer (ii) 'Bank to customer' - document directly sent through bank situated in India to overseas importer through approved courier, and (iii) Bank to Bank - document sent by Indian exporters' bank to overseas importers' bank. During the course of collection of foreign remittances, the foreign banks deduct charges and remit the net amount to the bank situated in India. In this regard, the Department had called for various details/documents for the purpose of ascertaining the taxability of the above transaction. On the basis of the verification, the Department had interpreted that in cases where the foreign banks are recovering certain charges for processing of import/export documents regarding remittances of foreign currency, the banks in India or the recipient of service. Therefore, the Department had proceeded against the banks in India, being a recipient of service, for demand of service tax under the provisions of N....
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....from the remittance amount of the exporter and remit the net amount to the banks in India, as the appellants Indian banks act as an agent of their customer-exporter. Therefore, the appellants bank is not the service recipient; and no services have been received by them. He also stated that even in case, where such value of deduction by foreign banks has been alleged by the department to be part of the service, it is well settled law now that such re-imbursement expenditure will not be included in the value of services as held by the Hon'ble Supreme Court in the case of Intercontinental Consultants and Technocrats. Further, he stated that Trade Notice No.20/2013-14-ST-I dated 10.02.2014 issued by the Commissioner of Service Tax-I, Mumbai on the basis of certain decisions of the Tribunal are more in the nature of stay orders in favour of the appellants and these have no application to the present facts of the case, where final orders have been passed in favour of the appellants therein. 3.3 Learned Chartered Accountant had relied upon the following case laws: (i) Commissioner of Central Goods and Service Tax, Excise and Customs, Bhopal Vs. Central Bank of India- 2025 (1) ....
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....to play their role in making and collecting the payments. If the banks of the importer and exporter are different, then the settlement transactions are governed by the URC 522 and UCP 600 protocols issued by International Chamber of Commerce. The protocols define the obligations of each party (i.e. exporter, importer and their respective banks) to International trade. In the absence of any specific agreement to the contrary, all contracts are governed by these protocols. xxx xxx xxx xxx 19. As noticed above, the issue that needs to be decided is whether the Foreign Banks have provided any service of transfer/exchange of documents and transfer of money relating to exports made by the exporters in India, who receive money through the Appellant Bank against the said exports. According to the Department, the Foreign Bank provides "banking and other financial services", as defined under Section 65(12) of the Finance Act, which is taxable under Section 65(105)(zm) of the Finance Act at the hands of the Appellants under a reverse charge mechanism. The contention of the Appellant Bank is that no service has been provided by the Foreign Bank or the Foreign Intermediary Bank to t....
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....a, the charges for which are deducted at source on the export bill. The Appellant Bank merely acts on behalf of the Indian exporter and facilitates the service. The Appellant Bank, therefore, would not be liable to pay service tax under the reverse charge mechanism. xxx xxx xxx xxx 36. It is, thus, clear that where service tax is chargeable on any taxable service with reference to its value, then such value shall be determined in the manner provided for in (i), (ii) or (iii) of sub-section (1) of Section 67. What needs to be noted is that each of these refer to "where the provision of service is for a consideration", whether it be in the form of money, or not wholly or partly consisting of money, or where it is not ascertainable. In either of the cases, there has to be a "consideration" for the provision of such service. Explanation to sub-section (1) of Section 67 defines "consideration" to include any amount that is payable for the taxable services provided or to be provided, or any reimbursable expenditure, or any amount retained by the lottery distributor or selling agent. It is clear from the aforesaid definition of "consideration" that only an amount that is payab....
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....as no nexus whatsoever with the taxable services for which value is sought to be determined." (emphasis supplied) 39. The aforesaid view was reiterated by the Supreme Court in Union of India v. Intercontinental Consultants and Technocrafts [2018 (10) G.S.T.L. 401 (S.C.)] and it was observed : "23. Obviously, this Section refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various sub-clauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the "value of taxable services". Thus, service tax is reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 24. In this hue, the expression "such" occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing "such" taxable services. As a fortiori, any other amount which is calculated not for providing such taxab....
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....ed by the Chief Commissioner, Central Excise, Mumbai Zone-I, as it is this Trade Notice that has been relied upon in the decisions referred to by the Learned Authorized Representatives. The relevant portion of the Trade Notice is reproduced below : "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 the 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 foreig....
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....tioner was issued by the Mumbai Commissionerate in view of a stay order passed by the Tribunal and the Appeal was still pending before the Tribunal. The Madras High Court referred to the decision of the Supreme Court in Commissioner of Central Excise, Bhopal v Minwool Rock Fibres Ltd. [2012 (278) E.L.T. 581 (S.C.)] and held that Departmental Circulars were not binding on the assessee or quasi judicial authority or courts. The High Court then examined whether the exporter or its Indian banker was liable to pay service tax for the service rendered by the Foreign Bank or the Foreign Intermediary Bank and in this connection observed that though the Indian exporter had not made any remittance to the Foreign Intermediary banks directly, but there could be no dispute that the expenses met out for rendering of such service to the Indian Bank were borne by the Indian exporter. Thus, it cannot be said that the bank of the exporter in India was the recipient of service provided by the Intermediary Bank or the Foreign Bank situated in Iraq. In fact, the Indian Bank of the exporter had only facilitated the service to be rendered by the Foreign Bank for the purpose of providing Bank Guarantee on....
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....namely, the banker of the petitioner has facilitated the service to be rendered by the intermediary banks and the foreign bank in Iraq only for the purpose of providing bank guarantee on behalf of the petitioner. Therefore, the petitioner is not justified in shirking its liability to pay Service Tax relatable to the bank guarantee commission and realisation charges involved in this case. 19. Further, as rightly pointed out by the Appellate Authority in his order made in Appeal Nos. 489-492/2018, dated 17-9-2018, the recipient of service involved in this case namely, furnishing of bank guarantee, is only the petitioner and not the banker. Since the service receiver is the petitioner and the place of provision of such service is also the location of the petitioner, which is within India, the Service Tax liability is rightly fastened on the petitioner, with which, I find no reason to interfere. Since the only point raised in this writ petition is based on the trade circular issued by the Mumbai Commissionerate and that the said issue is answered against the petitioner as discussed supra, I find that both the writ petitions are devoid of any merit. Accordingly, both the writ p....