2014 (8) TMI 585 - AT - Service Tax

Waiver of pre deposit - non discharge of service tax liability on the amounts which were charged by the foreign bank towards service charges - Reverse charge mechanism - Held that - Appellant herein produces the LC to the Indian Bank, makes the payment against such LC. It is his submission that the appellant is not receiving any services from foreign banks for the collection against the LCs. We find that the amount charged by foreign bank, prima facie cannot be considered as service received by the appellant. We are of the view that the appellant made a strong case for the waiver of pre-deposit of the amounts involved. Accordingly, application for the waiver of the pre-deposit of the balance amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Stay granted.

Summary

Issues involved: Stay petition for waiver of pre-deposit of service tax, interest, and penalty amount confirmed by the first appellate authority against the order of the adjudicating authority.

Analysis:

1. Service Tax Liability on Amount Deducted by Foreign Bank:
The issue in this case revolves around the service tax liability on the appellant concerning an amount deducted by a foreign bank while remitting the payment to the appellant. The appellant encashes a letter of credit (LC) to an Indian bank for recovery of the amount, and when the Indian bank presents the LC to the foreign bank, the latter deducts some amount as charges. The Revenue argues that this deduction constitutes services received by the appellant under the reverse charge mechanism. However, the appellant contends that they are not receiving any services from the foreign bank for the collection against the LCs. The Tribunal, after perusing the records and hearing both sides, found that the amount charged by the foreign bank cannot be considered as a service received by the appellant. Citing a previous case, the Tribunal granted an unconditional stay in favor of the appellant, allowing the waiver of pre-deposit of the amounts involved.

2. Reverse Charge Mechanism and Service Tax Liability:
The crux of the matter lies in determining the service tax liability of the appellant under the reverse charge mechanism. The appellant's argument that they do not receive any services from the foreign bank for the deductions made during LC encashment was crucial in the Tribunal's decision to grant the waiver of pre-deposit. The Tribunal acknowledged that the appellant's case presented a strong argument against the service tax liability imposed by the Revenue, emphasizing that the deductions by the foreign bank were not indicative of services received by the appellant. Consequently, the Tribunal allowed the application for the waiver of pre-deposit and stayed the recovery of the amounts until the appeal's disposal.

3. Decision and Stay of Recovery:
After thorough consideration of the submissions from both parties and a detailed review of the case records, the Tribunal concluded that the appellant had made a compelling case for the waiver of pre-deposit concerning the service tax liability issue. Given the nature of the transactions involving the LC encashment and the absence of services received by the appellant from the foreign bank, the Tribunal decided in favor of the appellant. Consequently, the Tribunal allowed the application for the waiver of pre-deposit of the balance amounts involved and stayed the recovery thereof until the appeal's final disposition, ensuring relief for the appellant during the ongoing legal proceedings.

This detailed analysis of the judgment provides a comprehensive understanding of the issues addressed and the Tribunal's decision in granting the waiver of pre-deposit in the case involving service tax liability and deductions by a foreign bank.