Lingeswara Creation Vs Commissioner of Central Excise And Service Tax (CESTAT Chennai)
The appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai arose from an order rejecting the appellant’s challenge against service tax demand under the reverse charge mechanism in relation to charges deducted by foreign banks from export sale proceeds. The appellant was engaged in manufacture and export of knitted garments.
During verification of records, the department noticed that export proceeds received by the appellant in its Indian Bank account were remitted through foreign banks situated abroad. These foreign banks deducted certain charges before transferring the balance amount to the appellant’s Indian bank account. The department treated the deducted amount as consideration paid by the appellant for “Banking and other Financial Services” rendered by foreign banks and alleged liability under Section 66A read with Rule 3(iii) of the Taxation of Services (Provided from Outside India and received in India) Rules, 2006.
A show cause notice dated 17.04.2015 was issued alleging failure to discharge service tax liability, failure to obtain registration, and non-filing of ST-3 returns. The adjudicating authority confirmed the demand along with interest and imposed penalties under Sections 77 and 78 of the Finance Act. The Commissioner (Appeals) upheld the order, leading to the present appeal.
