2023 (8) TMI 1149 - AT - Service Tax

Non-payment of service tax - amount deducted by foreign banks being bank charges - Banking and Other Financial Service or not - period from 1.4.2007 to 31.5.2012 - HELD THAT - Section 65(105)(zm) of the Finance Act, 1994 falls under Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. To attract this provision, services must be received in India. In the instant case, no services are received in India. Therefore, it is not a taxable service. A similar matter came to be decided by a co-ordinate Bench of this Tribunal in the case of M/S. SKM EGG PRODUCTS EXPORT (I) LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE (APPEALS) , ANNAI MEDU SALEM. 2023 (3) TMI 1384 - CESTAT CHENNAI , where relying in the case of M/S. THEME EXPORTS PVT. LTD. VERSUS C.S.T., DELHI 2018 (5) TMI 825 - CESTAT NEW DELHI it was held 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. When it is so, then the appellant are not entitled to pay the service tax. The matter is squarely covered by the judgment - appeal allowed.

Summary

Issues involved: Taxability of amount deducted by foreign banks towards banking charges under 'Banking and Other Financial Services' for the period from 1.4.2007 to 31.5.2012.

Summary:
The appeal was filed against an Order in Appeal passed by the Commissioner of Central Excise (Appeals), Salem, demanding service tax, interest, and penalties from the appellant, a manufacturer of textile products exporting to various countries. The appellant received lesser amounts than due from foreign banks for export proceeds, leading to a Show Cause Notice for non-payment of service tax under 'Banking and Other Financial Services.' The original authority confirmed the tax demand and penalties, which was upheld by the Commissioner (Appeals), prompting the appellant to approach the Tribunal.

The main issue revolved around whether the amount deducted by foreign banks towards banking charges was taxable under the service 'Banking and Other Financial Services' during the mentioned period. The appellant argued that since no services were received in India, it should not be considered a taxable service, citing relevant case laws. The Tribunal referred to similar cases and held that the appellant was not directly dealing with the foreign banks, and the service was rendered to the Indian bank, thus not subject to service tax. Consequently, the impugned order demanding service tax was set aside, and the appeal was allowed.

In conclusion, the Tribunal found that the issue was no longer res integra and had been resolved by previous Tribunal orders. Therefore, the impugned order demanding service tax under 'Banking and Other Financial Services' was set aside, and the appeal was allowed with consequential relief, if any, as per law.