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2018 (8) TMI 1179 - AT - Service TaxForeign Banks Charges - liability of service tax - reverse charge mechanism - appellant have made payment of ₹ 3,16,46,565/- under the head of Foreign Banks Charges to the Foreign Banks towards interest, Foreign Bank Commission / Charges, Foreign Bank Charges for LC-retired and other charges - Held that - From the Circular 20/2013-14-ST-I (Commissioner of ST-I, Mumbai T.N.) dated 10.02.2014 , it is clear that when the Indian Banks are collecting charges including the charges of Foreign Banks toward import and export of the goods of their client. In such case, as regard the service tax liability under Reverse Charge Mechanism, the Indian Banks are recipient of service, therefore, the appellant cannot be held as recipient of service provided by Foreign Banks to the Indian Banks. Accordingly, the appellant is not liable to pay service tax under Reverse Charge Mechanism. This very same issue has been considered by this Tribunal in the case of Greenply Industries Ltd 2015 (12) TMI 80 - CESTAT NEW DELHI , wherein Division Bench of this Tribunal has held that when the assessee is not directly making the payment to the Foreign Banker towards any service provided by the said Foreign Banker to the Indian Bank, the assessee is not liable to pay service tax. Any bank charges paid by Indian Bank to the Foreign Banks even though in connection with import and export of the goods and the same was debited to the appellant, the service tax liability does not lie on the appellant. Matter remanded to adjudicating authority to verify the quantification and if any service tax liability arises, the same may be demanded from the appellant - appeal allowed by way of remand.
Issues involved:
1. Liability of service tax under Reverse Charge Mechanism on payments made to Foreign Banks by an Indian company for various charges. 2. Interpretation of the Circular dated 10.02.2014 and its applicability to the case. 3. Determination of the service recipient in transactions involving Indian Banks and Foreign Banks. 4. Assessment of service tax liability when payments are made indirectly to Foreign Banks through Indian Banks. Detailed Analysis: 1. The appellant, engaged in the manufacture of excisable goods, made payments to Foreign Banks for various charges. A show cause notice (SCN) was issued proposing a service tax demand for the period 2008-08 to 2012-13. The adjudicating authority confirmed the demand, imposing penalties and interest. The appellant contested, arguing they were not the service recipient from the Foreign Banks as payments were made by Indian Banks. The Tribunal referred to relevant judgments and Circulars to determine the liability under Reverse Charge Mechanism. 2. The Circular dated 10.02.2014 clarified the obligations of foreign banks, Indian banks, and importers/exporters. It highlighted the implied contract between Indian and Foreign Banks, indicating that services were provided by Foreign Banks to Indian Banks. The Circular emphasized that the Indian Banks were the recipients of services and liable to pay service tax. This interpretation guided the Tribunal in determining the service recipient and the consequent tax liability. 3. The Tribunal analyzed the Circular and previous judgments to establish that when Indian Banks paid charges, including those of Foreign Banks, for import and export transactions, they were considered the service recipients. Therefore, the appellant, not being the direct recipient of services from Foreign Banks, was not liable to pay service tax under Reverse Charge Mechanism. The Tribunal referred to a specific case where a similar demand was set aside due to the absence of direct payments to Foreign Banks. 4. The Tribunal concluded that the appellant was not liable for service tax on bank charges paid indirectly through Indian Banks to Foreign Banks. However, it allowed for verification of any direct payments made by the appellant to Foreign Banks. The matter was remanded to the adjudicating authority for further assessment based on the principles established regarding the service recipient and tax liability in transactions involving Indian and Foreign Banks. In conclusion, the Tribunal's judgment clarified the service tax liability under Reverse Charge Mechanism in transactions involving Indian and Foreign Banks, emphasizing the role of Indian Banks as the service recipients. The decision provided a nuanced interpretation of the Circular and previous judgments to determine the appellant's liability and remanded the case for further verification if necessary.
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