TaxTMI 
TaxTMI 
2026 (10) TMI 13
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....to waive the interest liability under the statute. Thus, I hold that they are liable to pay interest. Further, as there has been suppression of material facts and contravention of various provision of the Act and the Rules made thereunder with intent to evade payment of service tax, I hold that penalty is imposable on the Appellant under Section 78 of the Act. 18. In view of the above, I do not find any reason to interfere with the impugned order-in-original No.15/ST/AC/RPR-1/2021 dated 23.07.2021 and uphold the same." 2.1 Appellant holding Central Excise registration No AAACR6149LXM001 are engaged in manufacture of Sponge Iron, Billets, Wire rods, Ferro Alloys, Fly Ash Bricks, etc., falling under the Chapter Heading 72, 27 etc., of the CETA 1985 (5 of 1986). The Noticee were availing Cenvat Credit on inputs/ input Services/Capital Goods under the Cenvat Credit Rules 2004. 2.2 During the course of audit of the books and accounts of the appellant, it was noted that they have recorded expenses in favour of overseas entities against services received like "Bank commission" and had also paid charges like "international bank charges", "stamping charges", "correspondence c....
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.... the Finance Act, 1994 read with the Section 174(2) of the CGST Act, 2017 for contravention of Section and rules cited above and for suppression of facts with intent to evade payment of service tax. 2.6 The show cause notice was adjudicated as per the order in original No 15/ST/AC/RPR-I/2021-22 dated 23.07.2021 holding as follows: ORDER i. I determine and order for recovery of service tax amounting to Rs. 1,88,022/- (including Cesses) under Section 73(1) of the Finance Act, 1944 read with Section 174 of the Central Goods & Services Tax Act, 2017. The same should be paid forthwith by the Noticee. ii. I order for recovery of Interest on the amount disallowed, under Section 75 of the Finance Act, 1994 read with Section 174 of the Central Goods and Services Tax Act, 2017. iii. I impose a penalty of Rs. 1,88,022/- equal to the service tax confirmed upon the Noticee, under Section 78 of the Finance Act, 1994 read with Section 174 of the Central Goods & Services Tax Act, 2017. 2.7 Aggrieved appellant filed appeal before the Commissioner (Appeals) which has been disposed of as per the impugned order. 2.8 Aggrieved appellant has filed this appeal. 3....
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....f provision of service shall be the location of the recipient of service. ⮚ Here, the place of provision of service provided by foreign bank is the location of service recipient. In the instant case the recipient of service is the appellant who is located in India; hence they are liable to pay service tax even though the Indian Bank made the payment on behalf of the Appellant which is subsequently debited to the Appellant. Even though the Appellant had not made any remittance to the Foreign Bank directly, but there could be no dispute that the expenses met out for rendering of such service to the Indian Bank were bone by the Appellant. The Indian Bank only plays a role of a mediator between the Indian exporter and the foreign banker representing the foreign importer. This is a general practice that the exporters are required to follow by routing the export document through a banking channel. Thus, it cannot be said that Indian bank received any service from the foreign bank. ⮚ In the case of State Bank of Bikaner & Jaipur Versus CCE Alwar (2021 (45) GSTL 293 (Tri.Del.), the Hon'ble CSTAT, New Delhi has ruled that the Indian Bank was not liable fo....
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....s: "11. The contention of the appellant is that 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, therefore, it is the Banks located in taxable territory who are receiving the service from the foreign banks and as a recipient of service the bank in India is required to pay service tax on bank charges, commission etc, paid to foreign banks against services received from the foreign bank and not the Appellant. They have placed reliance on the Trade Notice No.20/2013-14 dated 10.2.2014 and relied on various decisions of Hon'ble Tribunal on the issue to substantiate their contention that any bank charges paid by Indian Bank to the Foreign Banks even though in connection with import and export of goods and the same was debited to the appellant, the service tax liability does not lie on the Appellant and they are not liable to pay tax thereon under reverse charges mechanism. 12. In the above context, let me examine the relevant provisions of law. I have observed that Rules 2(1)(d)(G) provides as under:- Rule 2 Definitions (1....
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....llant. The Indian Bank only plays a role of a mediator between the Indian exporter and the foreign banker representing the foreign importer. This is a general practice that the exporters are required to follow by routing the export document through a banking channel. Thus, it cannot be said that Indian bank received any service from the foreign bank. 15. Further, I observed that in the case of State Bank of Bikaner & Jaipur Versus CCE Alwar (2021 (45) GSTL 293 (Tri.-Del.), the Hon'ble CSTAT, New Delhi has ruled that the Indian Bank was not liable for service tax under reverse charge mechanism it was more so as Indian Bank had not paid any consideration to foreign bank as required by Section 67(1). Therefore, the contention of the Appellant that foreign bank while remitting the money to the Indian Bank deduct their charges for collection of bills which in turn are charged by the Indian Bank from the appellant, therefore, it is that banks located in India are liable to pay the service tax on the amount of Bank charges, commission etc. paid to foreign banks against services received from foreign bank and not the Appellant is not sustainable and correct. Further, I observe....
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....orter 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 Foreign Bank for the purpose of providing Bank Guarantee on behalf of the exporter. Thus, the Indian exporter could not shirk from its liability of paying service tax relatable to the bank guarantee, commission and realization charges involved in the case. The relevant portion of the judgment of the Madras High Court is reproduced below: "18. In this case, there is no dispute to the fact that the petitioner's bank in this country namely Indian Bank, Adyar has not furnished the bank guarantee to the foreign supplier of the petitioner. On the other hand, the Indian Bank approached the intermediary banks which are admittedly located outside this country, which in turn approached the bank situated in Iraq only for the purpose of furnishing bank guarantee on behalf of the petitioner to its foreign supplier at Iraq. Therefore, there is no doubt that though the event of furnishing the bank guarantee had taken place in three parts, the chain of events connecting those thre....
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....e 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 petitions are dismissed. No costs. Consequently, connected miscellaneous petitions are closed" 5/2022 16. In view of the above judgement of Hon'ble Madras High Court relied by the Hon'ble Tribunal in the case of State Bank of Bikaner & Jaipur Versus CCE Alwar (2021 (45) GSTL 293 (Tri.Del.), the Hon'ble CSTAT, New Delhi, the Trade Notice dated 10.2.2014 and other judicial pronouncements relied by the appellant in support of their defence can not come to the aid of the Appellant. 17. Respectfully following the decision of the Hon'ble Madras High Court in BGR Energy Systems Limited [2020 (32) G.S.T.L. 186 (Mad.)] supra and the relevant provisions of law, I hold that the Indian Bank of the exporter had only facilitated the service to be rendered by the Foreign Bank and, therefore, the Indian exporter could not shirk from its liability of paying service tax relatable to the commiss....
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..... 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 cannot be treated as service recipient and no service tax can be charged vide 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 author....
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....ould 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 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.)]. 6. It is therefore clarified that, in cases where the foreign banks are recoveri....
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....ice to M/s. Lingeswara, located in India the taxable territory, for which M/s. Lingeswara as service recipient is liable to discharge service tax liabilities under reverse charge mechanism...". Thus, it is evident that the SCN is premised on a mere assumption without any evidence that there did exist a service provider and a service receiver relationship between the appellant and the foreign banks, either by way of an agreement between the appellant or the said banks or any invoice/bill raised by the said banks on the appellant. This bench of the Tribunal, inits decision in M/s. Adayar Gate Hotel Ltd v. Commissioner of GST& Central Excise, 2026 (4) TMI 1081- CESTAT CHENNAI, had held that "It is settled that in order to render a transaction liable to service tax, the nexus between the activity of service undertaken and the consideration therefore agreed to, has to be identified. It has to be established that a specified consideration has been agreed upon which has to be paid by the service recipient as quid pro quo for the service provider providing any service, and such payment of consideration cannot be assumed. It therefore becomes necessary not only to identify the taxable servi....
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....in favour of the appellants in their own case vide Final Order No. 40223/2023 dated 31.3.2023 on a Show Cause Notice issued to the appellants covering the period 2006 -2007 and vide Final Order No. 40113/2025 dated 21.1.2025 on a Show Cause Notice issued to the appellants covering the period July 2012 to March 2013. We find that the present proceedings are for the period from1.4.2013 to 30.9.2013. We find that this Bench vide Final Order No.40223/2023 dated 31.3.2023 has held as under:- "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 period2006-2007 to 2010-2011? The other issues involved are whether reinvocation of extended period and imposition of penalties are sustainable in the facts of the case? 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 wh....
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....nd 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." 6. In view of the above, we find that the impugned order cannot be sustained. Hence, we set aside the same and allow the appeal with consequential benefits, if any, as per law." 18. We find no reason to differ from the view taken as noticed above. Therefore, we hold that there arises no liability to service tax on the Appellant on this front. The decision in State Bank of Bikaner & Jaipur v CCE & ST, Alwar, relied upon by the Ld. A.R. was a case wherein the Appellant bank was disputing the levy of service tax on it. The said case would not come to the aid of the Department in support of its contention that the Appellant is exigible to tax, as it is thus clearly distinguishable from the facts of the Appellant's case herein, the facts pertain....