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TMI Blog2025 (2) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.' 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, reference is drawn 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 after relying upon the decision of M/S DILEEP INDUSTRIES PVT. LTD. VERSUS CCE, JAIPUR [2017 (10) TMI 1231 - CESTAT NEW DELHI] has observed 'it appears that while exporting their goods, they lodged their bills for collection to the Indian Bankers who in turn send the same to the foreign banks. The foreign banks while remitting the money to the Indian Bank, deduct their charges for coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co Finance Ltd.), Bill amount, Amount realized, other bank charges etc. These particulars clearly specify the amount deducted from Invoice Value at the importer end and also by the foreign bank towards their charges while transferring the proceeds to India. 2.3 Further inquiry on the flow of payment revealed that the buyer, M/s. C&A is effecting the payment through their agent, M/s. Amsco Finance Limited (AFL), a company based at Hong Kong on the basis of a Trade Payment Arrangement (TPA). Scrutiny of the related documents like emails sent by M/s. C&A and their Retail Service Division (RSC) revealed that M/s. Amsco Finance Ltd. is engaged to facilitate the payments to C&A's supply partners for all orders shipped to C&A Europe with increased TPA figure (service fee) of 3% w.e.f. May 1st 2008. In this regard, M/s. AFL has issued an email letter to M/s. Fashion Knits, with the following content: - "RE: Service engagement on handling settlement on behalf of C&A Buying KG Dear Sirs, "As from July 7th 2000. C&A buying KG, having its office located at Wertheimer Strasse, 7040468 Dusseldorf-Germany engaged our company to render the Trade Payment Arrangement (TPA), covering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ACT ibid along with applicable interest, besides proposal to impose penalties under Sections 76,77(1), 77(2) and 78) of the Act ibid. 2.6 After due process of law, the Adjudicating Authority vide impugned Order-in-Original confirmed the demand as proposed and imposed equal penalties under Section 78 and Sections 77(1) and 77(2) ibid. 2.7 Being aggrieved, the Appellant has filed the present appeal before this forum. 3. The main contentions of the Appellant specified in the grounds of appeal have been summarised below: - (i) It was submitted that there was no service provider and service recipient relationship between the Appellant and AFL and therefore the allegation that the Appellants have imported service or have received service from AFL was not sustainable. It was contended that there is no contract between AFL and the Appellant as the deduction in the invoice was made as agreed to between the Appellant and the buyer and the Appellant did not approach AFL for early payment. It was pointed out that there is no nexus between the Appellant and AFL as the service engagement was made between the foreign buyer and AFL and the consideration flows from the buyer to AFL and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reover, the deductions of 3% from invoice value would only point to deductions allowed only to the buyer. It was pointed out that, if the service receiver and Service provider are in the foreign territory, the payment of Service Tax does not arise as per Board Circular No.16/14/2012-ST dated 10.07.2012. In the instant case, as the services were provided by AFL to the buyer overseas, it was contended that payment of service tax does not arise as per the Circular ibid. (vii) It was submitted that the entire quantification of service tax demand was erroneous as the value of term loans and working capital loans were included in the demand and therefore the impugned order was liable to be set aside on this core. (viii) It was submitted that as there was no Service Tax liability, interest payable under Section 75 of the ACT ibid will not sustain. (ix) It was stressed that the Appellant has not suppressed anything with a mala fide intention of evading tax and hence invocation of extended period and imposition of penalties were not warranted. Reliance was placed on the ratio of various decisions of the Tribunals and the Supreme Court decision in Tamilnadu Housing Board Vs. CCE [1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 essen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." We find that the above decision in M/s. AKR Textiles Vs. Commissioner of Central Excise [2020 (10) TMI 479 CESTAT CHENNAI] have been followed in two other cases Viz. Eastman Exports Global Clothing Private Ltd. [2024 (5) TMI 417 CESTAT CHENNAI], and Carona Knitwear Vs. Commissioner of GST and Central Excise, Coimbatore [2024 (6) TMI 624-CESTAT CHENNAI] decid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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