2024 (5) TMI 417 - AT - Service Tax

Levy of service tax - appellant has received payment processing services from M/s Amsco engaged by M/s C A, the foreign buyer to process payments to the appellant or not - appellant has received services from foreign banks that makes the payments of consideration owed by the foreign buyer to the appellant - extended period of limitation. Whether the appellant has received payment processing services from M/s Amsco engaged by M/s C A, the foreign buyer to process payments to the appellant? - HELD THAT - There is no service provider-recipient relationship between the appellant and M/s Amsco and if there is any contract, the same is between M/s C A (buyer) and M/s Amsco, both of whom are out of India and the appellant does not have any contract with M/s Amsco whatsoever - the deduction of 3% from the invoice price was already indicated in the Purchase Order for the goods issued by M/s C A and therefore it was nothing but a trade discount for the appellant. The appellant does not have any legal recourse or any binding contract with M/s Amsco to enforce any of its rights. Further, the email from M/s Amsco is only an information and does not bind M/s Amsco to any contract with the appellant. Whether the appellant has received services from foreign banks that makes the payments of consideration owed by the foreign buyer to the appellant? - HELD THAT - The contract for service is only between M/s C A, M/s Amsco and the foreign banks; and the appellant in fact is not receiving any services from the foreign banks and there is no service agreement/contract between the foreign banks and M/s Amsco - the service, if any, is received only by the State Bank of India which has received the funds and has separately levied fee on the appellant for the credit to the bank account for which service tax has been charged by Bank. Extended period of limitation and levy of penalties - HELD THAT - In the present case, there was no intent to evade tax as the appellant had no contractual relation with either M/s Amsco or the foreign banks; and all the transactions such as payment, transmission of funds are the liability of M/s C A and it is up to them to decide the mode of the transfer and payment; and the appellant had no role in this regard. Further, the deduction in respect of M/s Amsco was clearly shown in the shipping bills for export; drawback was also claimed only on the net amount; and further, being an exporter the service tax payable, if any, would anyway be allowable as a rebate to the appellant; and the entire situation would have been revenue neutral. Therefore, there is no question of lack of bonafides on the part of the appellant in the present case. The service of remittance by a foreign bank to Indian bank of the exporter is not liable to service tax at the hands of the exporter - reference made to the decision of Chennai Bench of the 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 wherein the Tribunal relied upon the decision of M/S DILEEP INDUSTRIES PVT. LTD. VERSUS CCE, JAIPUR 2017 (10) TMI 1231 - CESTAT NEW DELHI . The impugned orders in all the three appeals are not sustainable in law and are set aside - appeal allowed.

Summary

Issues Involved:
1. Whether the appellant received payment processing services from M/s Amsco engaged by M/s C&A.
2. Whether the appellant received services from foreign banks that make the payments of consideration owed by the foreign buyer to the appellant.

Summary:

Issue 1: Payment Processing Services from M/s Amsco
The Tribunal found no service provider-recipient relationship between the appellant and M/s Amsco. The contract was between M/s C&A and M/s Amsco, both located outside India. The appellant only received net payment for goods sold to M/s C&A, with a 3% deduction from the invoice price treated as a trade discount. The deductions were disclosed in the invoices and shipping bills, and the appellant had no legal recourse against M/s Amsco. The Tribunal referenced the case of M/s AKR Textile and Others vs. Commissioner (2020), where it was held that no service tax was liable to be paid by the exporter in similar circumstances.

Issue 2: Services from Foreign Banks
The Tribunal determined that the contract for services was between M/s C&A, M/s Amsco, and the foreign banks, not the appellant. The appellant did not receive any services from the foreign banks, and there was no service agreement between them. The service, if any, was received by the State Bank of India, which levied fees on the appellant separately. The Tribunal cited CBEC Circulars Nos. 163/14-2012-ST and 180/06/2014-ST, supporting the appellant's contention. The Tribunal also referenced decisions in Cylwin Knit Fashions vs. CCE, SKM EGG Products (I) Ltd. vs. CCE, and Kadri Mills (CBE) Ltd. vs. CCE, where it was held that the service of remittance by foreign banks to Indian banks of an exporter is not liable to service tax at the hands of the exporter.

Extended Period of Limitation and Penalties
The Tribunal found no intent to evade tax by the appellant, who had no contractual relation with either M/s Amsco or the foreign banks. All transactions were the liability of M/s C&A, and the appellant's role was limited to receiving net payments. The deductions were clearly shown in shipping bills, and any service tax payable would be allowable as a rebate, making the situation revenue-neutral. Therefore, there was no lack of bonafides on the appellant's part.

Conclusion
The Tribunal set aside the impugned orders in all three appeals, allowing the appeals with consequential relief as per law, following the precedent set in M/s AKR Textile and Others and other cited cases.