Dishman Pharmaceuticals & Chemicals Ltd Vs C.S.T.-Service Tax – Ahmedabad (CESTAT Ahmedabad)
CESTAT Ahmedabad held that as appellant is not a service recipient, service tax cannot be demanded from the appellant under reverse charge mechanism (RCM) in case of bank charges paid by Indian Bank to Foreign Bank and reimbursed from the appellant.
Facts- The issue involved in the present case is that whether, the Foreign Bank charges, charged by Foreign to Indian Bank and the Indian bank collected as reimbursement from the appellant is liable to be taxed under the category of Banking and other Finance Services.
Conclusion- It is clear that if at all there is a service provider and Service recipient relationship, it is between the Foreign Bank and Indian Bank. Accordingly in India the actual service recipient is Indian Bank for liable to pay the Service Tax under reverse charge mechanism in terms of Section 66A of the Finance Act, 1994. Therefore in any case the service tax demand cannot be raised from the appellant being not covered under category of service recipient.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issue involved in the present case is that whether, the Foreign Bank charges, charged by Foreign to Indian Bank and the Indian bank collected as reimbursement from the appellant is liable to be taxed under the category of Banking and other Finance Services.
2. Shri. R. Subramanya, Learned Counsel, appearing on behalf of the appellant submits that this issue is no longer res-Integra, as in the appellant’s own case the issue has been considered and appeal was allowed. He placed reliance on the following Judgments:
1) 2018 (8) TMI 1179-CESTAT AHMEDABAD-Raj Petro Specialties Pvt Ltd VS CCE
2) 2017 (9) TMI 96-CESTAT CHENNAI – Cylwin Knit Fashions & Others VS CCE
3) 2015 (38) STR 605 (Tri- Delhi) – Greenply Industries Ltd VS CCE
4) Circular No. 20/2013-14-ST-I (Commr.of ST-I, Mumbai T.N.) dated 10-02-2014
5) Final Order No. A/85816/2018 dated 23-3-2018 in Appeal No. ST/88384/2014 of Hon’ble CESTAT, Mumbai
6) 2017 (10) TMI 1231 – CESTAT New Delhi – Dileep Industries Pvt Ltd vs CCE
7) Final Order No. A/12243/2022 dated 22-12-2022 in Appeal No. ST/474/2012 (Dishman Pharmaceuticals & Chemicals Ltd) passed by Hon’ble CESTAT Ahmedabad
3. Tara Prakash, Learned Deputy Commissioner(AR), appearing on behalf of the revenue and reiterates findings of the impugned order.
4. On careful consideration of the submission made by both the sides and perusal of the records, we find that the revenue proposed demand of Service Tax on the banking charges, which was charged by Foreign Bank to the Indian Bank and the Indian Bank has recovered the same from the appellant as reimbursement.
4.1 In this fact, it is clear that if at all there is a service provider and Service recipient relationship, it is between the Foreign Bank and Indian Bank. Accordingly in India the actual service recipient is Indian Bank for liable to pay the Service Tax under reverse charge mechanism in terms of Section 66A of the Finance Act, 1994. Therefore in any case the service tax demand cannot be raised from the appellant being not covered under category of service recipient. This issue in the appellant’s own case has been considered by this Tribunal vide order No A/12243/2022 dated 22-12-2022, Wherein this Tribunal passed the following order:
“This appeal has been filed by M/s Dishman Pharmaceuticals against the demand of service tax under the category of Banking and other Financial Services on charges paid by them in respect of their foreign currency transaction on reverse charge basis.
2. Learned counsel for the appellant pointed out that the appellant is manufacturer of bulk drugs. In the process of realization of export proceeds from buyers use services of foreign bank as well as Indian Bank. In this process some commission is paid to Foreign Bank by Indian Bank. The Indian Bank charge the reimbursement of the said commission from the appellant. He pointed out that’s revenue is seeking to tax this charges paid by the appellant to the Indian Bank for the Services provided by the Foreign Bank on reverse charge basis. Learned counsel pointed out that this issue has been examined in the following judgments :
