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TMI Blog2024 (5) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Amsc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated in the year 2005 and has been engaged in manufacture and export of knitted garments to various buyers located abroad i.e. M/s C A Buying GMBH Co., Germany (hereinafter referred to as M/s C A ) and M/s Gap International, USA. 2.2 The information gathered by the department indicated that the appellant has been paying service fee to an intermediary for collection of the payments relating to their goods exported to M/s C A. The information also indicated that the foreign banks, transmitting the export sale proceeds to the account of the appellant, were also collecting service charges from them. To verify the service tax liability on the service fee paid to the intermediate agent and to the foreign banks, certain documents were called for from the appellant for further scrutiny. 2.3 In response, the appellant submitted a copy of Balance Sheets for the year 2008-09 to 2012-13; a copy of agreement entered with M/s Amsco Finance Ltd, Hong Kong (hereinafter referred to as M/s Amsco ); payment details to M/s Amsco and details of foreign bank charges paid for the period 2008-09 to 2012-13. The appellant also submitted sample copy of Purchase Orders, sample copy of Invoices, sample copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the export proceeds received from M/s Amsco to the account of the appellant via db-ebills, an online mechanism. During this process the said bank has deducted their charges from the supplier invoice value towards their service like Telegraphic Transfer of export proceeds to the Indian account. In respect of the exports effected to buyers other than M/s C A also, the appellant has been paying bank charges to the respective banks stationed abroad as is evident from the bank transaction advices. These banks have transferred the payments to the appellant's account held in the local banks. As per the foreign bill transaction advice/settlement advice issued by various banks in India to the appellant, it is seen that the amount transferred to India is net of charges deducted by M/s Amsco and the foreign banks, as the case may be, for their respective services rendered to the exporter. 2.8 On these allegations, the department entertained a view that the service tax was payable on these charges on reverse charge but the same had not been paid. A summon was issued to the appellant by which various documents and information were sought. Further, the statement of Shri Prakash Kumar Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the High Courts. 2.11 After following the due process, the learned Commissioner confirmed the demand for the various periods along with interest and penalties as cited supra. Aggrieved by the said orders, the appellant preferred the present appeals. 3. Heard both the parties and perused the material on record. 4.1 The learned Counsel for the appellant submits that the impugned orders are not sustainable in law and are liable to be set aside, as the same have been passed without properly appreciating the facts and the law; and binding judicial precedents on the identical issues. 4.2 The learned Counsel has filed the detailed written submissions. As regards the first issue that 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, the learned Counsel submits that it is pertinent to shed light on the flow of transaction between the appellant and the foreign buyers, which is reproduced as below: Purchase Orders are received by the appellant vide e-mail from RSC Commercial Services OHG, a part of the buyer C A Buying. Mondial Orient Limited is in-charge of Order processing and quality che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided by M/s Amsco to M/s C A because the agreement for processing payment due to the appellant by M/s C A is between M/s C A and M/s Amsco, and it is M/s C A who has engaged M/s Amsco and not the appellant. M/s Amsco is not contractually obligated to provide any services to the appellant and the appellant is also not obligated to make any payment of consideration to M/s Amsco. Therefore, it cannot be stated that any service is being provided by M/s Amsco to the appellant. 4.4 He further submits that the appellant cannot be considered as the recipient of service from M/s Amsco in the instant case and no service tax liability can be imposed on the appellant. In this regard, he makes reference to the following Education Guide and case-laws, wherein it has been clearly held that a service recipient would be one under whose instruction the service is provided and who is obligated to make the payment: Para 5.3.3. of Service Tax Guide released by CBEC (CBIC) GAP International Sourcing (India) Pvt Ltd vs. Commissioner of S.T., Delhi - 2015 (37) S.T.R. 757 (Tri.Del.) Paul Merchants Ltd vs. CCE, Chandigarh - 2013 (29) S.T.R. 257 (Tri.-Del.) Verizon Communication India Pvt Ltd vs. Assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by M/s C A. (iv) The appellant is not under any obligation to make payment to Deutsche Bank. 4.12 He further submits that when the appellant is not the recipient of the services, no tax can be sought to be levied on the appellant. Further, it is also submitted that the charges collected by Deutsche Bank is only charges collected from the Indian bank, which the Indian bank recovers from the appellant. It is not charge collected by Deutsche Bank directly from the appellant for any services provided to the appellant. If anything, Deutsche Bank only provides service to the Indian bank by collecting export proceeds and remitting it to the Indian bank. Therefore, the appellant is not liable to pay service tax on the same. 4.13 Further, he submits that this issue has been considered by various benches of the Tribunal and it has been held that the service of remittance by foreign bank to Indian bank of an Exporter is not liable to service tax at the hands of the Exporter. For this, he relies on the following decisions: Cylwin Knit Fashions vs. CCE, Coimbatore - 2017 (9) TMI 96 CESTAT CHENNAI SKM EGG Products (I) Ltd. vs. CCE - 2023 (3) TMI 1384 CESTAT CHENNAI Kadri Mills (CBE) Ltd. vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Purchase Order for the goods issued by M/s C A and therefore it was nothing but a trade discount for the appellant. 7.4 Further, we find that the deductions are clearly disclosed in the invoice and also in the shipping bills. The drawback is also claimed for the net amount as per the invoice only. The deduction from the invoice is also allowed for in terms of the master circular on exports of goods and services issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999. 7.5 Further, we find that 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. 8.1 As regards the second issue, we find 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. 8.2 Further, we find that the service, if any, is received only by the State Bank of India which has received the funds and has separately levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to the Indian bank from where the appellant receives the money. The foreign bank in which the overseas buyer deposits the sale proceeds is chosen by the foreign buyer and not by the appellant, who is situated in India. By no stretch of imagination can such foreign bank be considered as a service provider for the appellant who in most cases would not even be aware of the identity of such foreign bank. The act of deduction of an amount as charges for transfer of the foreign exchange to the Indian bank from the sale proceeds of the appellant is only a facility for collecting such charges from the Indian bank. This cannot be considered as payment of charges for services by the appellant to the foreign bank. It is actual charges deducted being bank to bank transaction. The department by the Trade Notice dated 14.2.2014 has clarified the very same situation. The relevant portion is extracted as under:- 5. The views of the banks that services provided by the foreign bank are-received by the importer or exporter in India is not factually and legally correct because, for a person to be treated as recipient of service, it is necessary that he should know who the service provider is and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also the decision in the case of Greenply. Industries (supra). Therefore, following the judicial discipline in the case of Greenply Industries (supra), and the facts being identical, the levy of service tax is unsustainable. The impugned orders are set aside and the appeals are allowed with consequential relief, if any. We find that the issue is no longer res integra and that demand pertaining to other financial services has been erroneously confirmed in the orders impugned before us. 6 . On the amounts retained by M/s Amsco Finance Ltd, which is sought to be taxed under cash management within section 65(12) of Finance Act, 1994, the definition comes into play for services rendered by banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern and the question that requires resolution is the nature of activity intended by cash management which has been invoked in the show cause notice for the period prior to 1st July 2012. Admittedly, the omission by specific exclusion of such activity, effected on 1st June 2007, is the sole description that could be fastened on the appellants for taxability as deemed pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king and Financial Service with effect from 1.7.2012 i.e. as stated earlier processing of export Invoices, making the prompt payment through assistance of customized portal created with the help of foreign banks etc. Hence, it is held that it is not the mere transfer of money to attract the exemption but the comprehensive Banking and Financial Service is involved in the issue in hand. Hence, it is held that M/s. AKR Textile are liable to pay service tax Under Section 68 (2) of the Finance Act, 1994 with effect from 1.7.2012. implies that the adjudicating has not ascertained the nature of the activity in terms of consideration received to determine extent of service and the person for whom such activity is provided by M/s Amsco Finance Ltd which are the essential characteristics for conformity to service in section 65B(44) of Finance Act, 1994. The significance of the architecture of the negative list regime is elaborated thus 12. With this ontogeny, and, coincidentally, corresponding to the age of attainment of majority, the stage was set to give free rein to taxation of services by phasing out the classificatory regime to make room for the negative list regime. Not unnaturally, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by M/s Amsco Finance Ltd also does not sustain. 9 . With the findings supra pertaining to the appeal of M/s AKR Textiles applicable equally to the several other appeals, the demands impugned therein also do not sustain. 10 . Accordingly, all the orders impugned before are set aside and appeals allowed. 11. Further, we find that 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. In this regard, we may also refer to the decision of Chennai Bench of the Tribunal in the case of M/s SKM EGG Products Export (supra) wherein the Tribunal after relying upon the decision of M/s Dileep Industries Pvt Ltd vs. CCE, Jaipur 2017 (10) TMI 1231 CESTAT NEW DELHI, has observed in para 5.2 as under: 5.2 We find 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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