TaxTMI 
TaxTMI 
2026 (5) TMI 370
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....e amount to the Appellant's Indian Bank account. It appeared to the department that such amounts deducted was the consideration paid by the Appellant for the services rendered by the foreign bank while transferring the export proceeds. The department therefore issued a Show Cause Notice dated 17.04.2015 (SCN) alleging that the Appellant has failed to pay service tax on the taxable service of "Banking and other financial Services" by the Appellant from a non-taxable territory, as envisaged under reverse charge mechanism in terms of Section 66A read with the provisions of Rule 3 (iii) of erstwhile Taxation of Services (Provided from Outside India and received in India), Rules 2006. The notice invoked the extended period of limitation under proviso to Section 73 (1) alleging that the Appellant had failed to discharge the service tax liability, and had not taken registration and also has failed to file the ST-3 returns. After due process of law, the Adjudicating Authority confirmed the demand along with appropriate interest, imposed an equivalent penalty under Section 78 and penalties under Section 77 (1) (a) and Section 77 (2) of the Act. Aggrieved, the Appellant preferred an appeal b....
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....export proceeds is a 'transaction in money expressly excluded from the definition of 'service' under Section 65B(44)(a)(iii) of the Finance Act, 1994. As affirmed in Vodafone India Ltd. v. Commissioner, 2015 (39) STR 145 (Bom) and clarified via CBIC Circular No. 163/14/2012-ST, the mere transmission of funds lacks the 'activity for consideration' required for a levy. This principle is no longer res-integra, having been settled in Paul Merchants Ltd, 2013 (29) STR 257 (Tri-Del), which held that such financial movements do not constitute a taxable service in the hands of the Indian exporter. 7. It is further contended that there is no privity of contract between the Appellant and the foreign remitting bank. The foreign bank acted on instructions from the foreign buyer to fulfil the buyer's obligation to remit payment. The service provider (Foreign Bank) and the service recipient (Foreign Buyer) are both located outside India. Per Section 68(2), RCM liability only triggers for the "recipient" of the service. Since the Appellant did not engage the foreign bank, it cannot be deemed the service recipient. This principle is settled in Paul Merchants Ltd. v. Comm....
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....MI 184, wherein this Hon'ble Tribunal held that an exporter cannot be burdened with tax for services received by their bankers. 12. It was therefore submitted that in light of the statutory exclusion for "transactions in money" and the neutralization of the BGR Energy precedent, the impugned order is contrary to law and merits being set aside with consequential relief. 13. We have heard the rival submissions and perused the material available on record. 14. The only issue that arises for our determination is whether the amounts deducted by foreign banks towards bank charges on export proceeds while transferring the same to the Appellant's Indian Bank account are exigible to service tax at the hands of the Appellant by virtue of Section 66A read with the provisions of the erstwhile Taxation of Services (Provided from Outside and Received in India) Rules, 2006, under reverse charge mechanism. 15. We find from the records that the SCN issued merely alleges "It appears that various banks stationed abroad deduct their specified charges from the sale proceeds of the exports effected by M/s. Lingeswara for transferring the foreign exchange to the account of M/s. Lingeswara....
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....ttled that demand cannot be based on assumptions and presumptions. The decisions in CCE & ST Pune III v. Intermedia Cable Communication Pvt Ltd, 2016 (41) STR 187 (Tri-Mumbai), A.G. Engineers v CCE, Ghaziabad, 2012 (25) STR 52 (Tri-Del) and Indus Motor Company v. CCE, Cochin, 2008 (9) STR 18 (Tri-Bang) refer for the said principle. Thus, in the absence of the foundational requirement of establishing the rendering of a taxable service to the appellant by the foreign banks, the demand is unsustainable on this count alone. 17. We also find merits in the contention of the Appellant that there is no privity of contract between the Appellant and the foreign remitting bank. Nothing has been brought on record to evidence that the foreign bank has acted on the Appellant's instructions so as to treat the Appellant as the recipient of service in India and consequently to attract the provisions of Section 66A read with read with the provisions of the erstwhile Taxation of Services (Provided from Outside and Received in India) Rules, 2006, so as to make the appellant liable to pay service tax under reverse charge mechanism. Further, we find that a coordinate bench of this Tribunal, on the sa....
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....ter hearing both the parties and on perusal of record, it appears that the first issue is pertaining to the collection charges of the Indian bankers who in turn send the same to the appellant for collection to the foreign bankers. The department has demanded Rs. 2,37,087/- from the appellant. From the record, it appears that while exporting their goods, they lodged their bills for collection to the Indian Bankers who in turn send the same to the foreign banks. The foreign banks while remitting the money to the Indian Bank, deduct their charges for collection of bills which in turn are charged by the Indian Banks from the appellants. When it is so, then the appellant are not entitled to pay the service tax. The identical issue has come up before the Tribunal in the case of Greenply Industries Ltd. v. CCE, Jaipur (Final Order No. 50149/2014 dated 3-1-2014) where it was observed that- "4. We find that no documents have been produced showing that foreign bank has charged any amount from the appellant directly. The facts as narrated in the impugned order clearly indicate that it is the ING Vyasa Bank who had paid the charges to the foreign bank. In view of this, the appellant c....