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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 ..... ch 2015 11.03.2016 32,09,862/- Since the issues involved in all these appeals are identical, therefore, all the three appeals are taken up together for discussion and decision. For the sake of convenience, we may take the facts of the Appeal No. ST/40637/2015 as a lead case. 2.1 Briefly stated facts of the case are that the appellant is a private limited company incorporated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, it appears that the appellant has contractually agreed to avail the service of M/s Amsco for realization of the sale proceeds through Trade Payment Arrangement on payment of service fee equivalent to 3% of the purchase value of M/s C&A, which is deductible from the payment due for their invoices presented for collection. 2.7 It has further come to the knowledge of the department that Deutsche Bank, located in Singapore has been transferring 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual relation with either M/s Amsco or the foreign banks. All 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 transfer and payment and the appellant had no role in this regard. The appellant also stated that mere non-disclosure does not tantamount to suppression of facts or willful mis-statement to evade tax. In support of their submissions, the appellant relied upon various judicial pronouncements of the Hon'ble Apex Courts as 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntractually engaged by the appellant in any manner. * C&A terminated their agreement with Amsco from 20.01.2012 and thereon, C&A directly processed the payment of invoices and took the 3% deduction in the purchase value as discount. * Annexure-4 in Appeal No. ST/42267/2017 Letter from C&A intimating the above to the appellant. * Annexure-8 in Appeal No. ST/42267/2017 Payment realization advice evidencing remittance made directly by C&A and not by Amsco. 4.3 The learned Counsel further submits that the appellant is not liable to pay service tax on the services provided 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase value was continued to be provided as discount even after the termination of TPA. 4.11 As regards the second issue that the appellant has received services from foreign banks that makes the payments of consideration owed by the foreign buyer to the appellant, the learned Counsel submits that the Deutsche Bank by remitting the payment to the appellant, provides no services to the appellant for following reasons: (i) There is no agreement between Deutsche Bank and the appellant for Deutsche Bank to remit the payment. (ii) Deutsche Bank is chosen by M/s C&A and not by the appellant. (iii) Deutsche Bank remits the payment required to be 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, D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has received services from foreign banks that makes the payments of consideration owed by the foreign buyer to the appellant. 7.1 As regards the first issue, we find 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. 7.2 We also find that the appellant is only a recipient of the funds for the goods sold to M/s C&A and the amount received is the net amount as per the invoice. 7.3 Further, we find that 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. 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, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l situation, has been held by the Tribunal, in Rogini Garments and ors v. Commissioner of Customs, Central Excise & Service Tax, Coimbatore [final order no. 41819-41832/2017 dated 29th August 2017], to be unsustainable in law. On perusal of the said order at '6. The case of the department is that when the foreign bank deducts the charges towards transfer of foreign exchange to the Indian bank, since the same Is deducted from the sale proceeds, it is a service rendered by the foreign bank to the appellants and that there is a service provider and service recipient relationship between the foreign bank and the appellant. It is to be noted that the foreign bank deducts such charges and transfers the foreign exchange 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 forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 66A read with Rule 2(l)(2)(iv) of the Service Tax Rules, 1994. Moreover, we also find that in Appellant's own case for the previous period similar order had been passed by the original adjudicating authority and on appeal being filed against the same, the Commissioner (Appeals), vide order-in-appeal dated 12-112008 has set aside that order and as per the appellant's counsel, no appeal has been filed against that order, in view of this, the impugned order is not sustainable. The same is set aside and the appeal is allowed. 7. We have to say that the decision relied upon by the Id. AR in the case of Lupin Ltd. (supra), was rendered on 12.2,2013 which is much before the clarification issued by the Trade Notice and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.3, M/s. AKR Textile are receiving the Banking and Financial service rendered by M/s Amsco Finance Ltd., and they are person who is making the payment of service fee for the service received. M/s C& A is neither receiving the service of M/s Amsco Finance Ltd nor paying the payment. It is M/s. AKR Textile (who are having a permanent establishment in the taxable territory) who are making the payment actually, hence, they are liable to pay service tax under Section 68 (2) of the Finance Act, 1994 for the receipt of service from the non-taxable territory to the taxable territory i.e. in India. Further it Is held that it is not the mere transfer of money is involved the issue to attract the negative list . What M/s. AKR Textile is receiving the comprehensive Banking 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the overseas entity, it is the overseas customer who is, contractually, bound to repatriate value of exports to the appellant and, instead of doing so, authorises M/s Amsco Finance Ltd as delegate to effect that responsibility. It is not the contractual responsibility of the appellants to collect the dues and, therefore, by no stretch can it be held that the mediation of M/s Amsco Finance Ltd is a substitution for the task that would, otherwise, fall to the appellants. If at all, the Hong Kong entity is an 'intermediary' within the meaning assigned in Place of Provision of Service Rules, 2012 to render the service, it has been performed in Hong Kong and, thus, not in the taxable territory. The demand for the period after 1st July 2012 also fails. Consequently, the liability for allegedly having received services 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 ..... 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