Annur Cotton Mills Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The appeal before the CESTAT Chennai arose from a dispute concerning the levy of service tax under the Reverse Charge Mechanism (RCM) on bank charges recovered by foreign banks in connection with export transactions undertaken by the appellant. The appellant, engaged in activities involving receipt, processing, and return of goods between its units, had initially operated under the 100% Export Oriented Unit (EOU) Scheme until 9 June 2011, after which both units functioned as Domestic Tariff Area (DTA) units following de-bonding.
In relation to export transactions, the appellant realised export proceeds from foreign buyers through banking channels involving both Indian banks and foreign banks. The Revenue took the view that the charges recovered by foreign banks for services rendered in these transactions constituted taxable services under the category of “Banking and Financial Services” (BFS). Since the appellant was considered the recipient of such services, it was alleged that service tax was payable under the Reverse Charge Mechanism. A show cause notice dated 6 March 2024 was issued proposing recovery of the tax demand. The adjudicating authority confirmed the demand through Order-in-Original dated 6 April 2016, and the Commissioner (Appeals) upheld the order through Order-in-Appeal dated 2 March 2017.
