Aurobindo Pharma Ltd. Vs Commissioner of Central Excise (CESTAT Hyderabad)
Summary: The Customs, Excise and Service Tax Appellate Tribunal, Hyderabad considered an appeal by M/s Aurobindo Pharma Ltd. against an Order-in-Original dated 28.08.2014 confirming Service Tax demands, interest and penalties principally under “Banking and Other Financial Services” and “Scientific or Technical Consultancy Services” for 2011-12 and 2012-13 up to June 2012.
The first dispute concerned charges deducted by foreign/intermediary banks while export proceeds were transmitted from foreign buyers through banking channels. The appellant, a manufacture-exporter of pharmaceutical products, contended that the foreign buyers remitted consideration through their banking arrangements and that the foreign/intermediary banks deducted charges before the balance reached the appellant’s Indian bank. The Department proceeded on the basis that, because the deductions economically reduced the amount received by the appellant, the appellant was the recipient of banking services and was liable to Service Tax under Reverse Charge Mechanism. The Tribunal rejected that approach. It found no evidence that the appellant had engaged the foreign banks, entered into contractual arrangements with them, or was otherwise obliged to pay consideration to them for services rendered to it. Merely bearing the economic impact of deductions did not establish a service provider-service recipient relationship. The Tribunal also relied on the appellant’s own earlier decision, Final Order No. 30919/2020 dated 09.09.2020, where the same issue for the earlier period had been decided in the appellant’s favour, and on Eastman Exports Global Clothing Pvt Ltd. The demand under Banking and Other Financial Services was accordingly held unsustainable.
