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2023 (3) TMI 1384 - AT - Service TaxLevy of service tax - Banking and other Financial Service - amount which was deducted by the Foreign bank towards the bank charges for the year 2006-2007 to 2010-2011 - reverse charge mechanism - invocation of extended period - imposition of penalties - HELD 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 while remitting the export sale proceeds to SBI. The appellant has never dealt with the foreign bank on his own and the Banking and Other Financial Service if at all was rendered only to SBI. Amount charged by the foreign bank while remitting export sale proceeds, whether can be subjected to service tax or not has been decided by the CESTAT Principal Bench, New Delhi in the case of M/S. THEME EXPORTS PVT. LTD. VERSUS C.S.T., DELHI 2018 (5) TMI 825 - CESTAT NEW DELHI , by relying on the ratio laid down by the Tribunal in the case of M/S DILEEP INDUSTRIES PVT. LTD. VERSUS CCE, JAIPUR 2017 (10) TMI 1231 - CESTAT NEW DELHI , where the Tribunal held 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. Extended period of limitation - penalties - HELD THAT - 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. Appeal allowed.
Issues involved:
The main issue is whether the deducted amount by the Foreign bank for bank charges is taxable under the service "Banking and other Financial Service" for the period 2006-2007 to 2010-2011. Other issues include the sustainability of invoking extended period and imposition of penalties. Issue 1: Taxability of Foreign Bank Charges The case involved M/s.S.K.M. Egg Products Export (India) Limited, where the appellants were manufacturers and exporters of various egg products. The Revenue demanded service tax under the "Banking and other Financial Service" on Reverse Charge basis on the foreign bank charges borne by the appellants. The appellants contended that the State Bank of India (SBI) charged service tax on the total invoice value before deducting foreign bank charges. They argued that the buyer bank did not provide any direct service to them, and thus, the provisions of Section 66 A of the Finance Act, 1994, were not applicable. The appellants had engaged only SBI for bill collection and had no direct dealing with foreign buyers. The issue was settled in favor of the appellants based on previous decisions involving similar issues. Issue 2: Extended Period and Penalties The authorities invoked the extended period for confirming the demand of service tax along with interest and imposing penalties in this appeal. The appellants argued against the invocability of the extended period and the legality of imposing penalties. However, as the main issue regarding the taxability of foreign bank charges was resolved in favor of the appellants based on previous tribunal decisions, there was no need to discuss the invocability of the extended period and the imposition of penalties. Judgment Summary: The Tribunal found that the appellants submitted documents for export sale proceeds to SBI, which used the services of foreign banks for collection. The foreign banks deducted charges while remitting the proceeds to SBI. The appellants had no direct dealings with the foreign bank, and any service related to banking and financial services was rendered only to SBI. Citing previous tribunal decisions, the Tribunal ruled in favor of the appellants, setting aside the impugned order that demanded service tax on foreign bank charges. The appeal was allowed with consequential relief, if any. The issue was considered resolved on merits, and therefore, the discussion on the invocability of the extended period and penalties was deemed unnecessary.
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