Case Law Details
SKM Egg Products Export (India) Limited Vs Commissioner of Central Excise & Service Tax (CESTAT Chennai)
The case revolved around whether the amount deducted by foreign banks towards bank charges was taxable under “Banking and other Financial Services” for the fiscal year 2011-12. The CESTAT noted that the same issue had already been settled in favor of the appellant in a previous case and concurred with the same conclusion. The tribunal recognized that the service was essentially rendered to the State Bank of India (SBI), with which the appellant dealt directly, not the foreign bank. This decision aligns with previous CESTAT decisions and establishes a consistent approach towards the taxation of bank charges deducted by foreign banks.
This CESTAT Chennai ruling marks a significant legal precedent in the realm of service tax on bank charges deducted by foreign banks during export transactions. It reiterates that such charges should not be taxable, providing a boost to exporters in India who have to deal with the complexities of international banking procedures.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This appeal is filed by the assessee-appellant against the Order-in-Appeal Nos. SLM-ST-40 & 41-2014 dated 29.01.2014 passed by the Commissioner of Customs and Central Excise (Appeals), Salem.
2. Brief undisputed facts, as recorded in the impugned Order-in-Appeal, are as under: –
“The facts of the case in brief are that the appellant are the manufacturers of Whole Egg Powder, Egg Yolk Powder and Albumen Powder and export them to various countries. The appellant while receiving the export proceeds, had received lesser amount than what is due to them from the foreign banks. The amount deducted by such foreign banks being Bank Charges and for that amount, the appellant had not paid any Service Tax since the service would fall under “Banking and Other Financial Service” in terms of Section 66A of the Act and thus contravened the Section and Rule 2(1)(d) and 6 of Service Tax Rules, 1994. Hence a Show Cause Notice dated 11.2.2013 was issued demanding Service Tax of Rs.79,930/- with interest and proposal to impose penalties under Sections 76, 77 & 78 of the Finance Act, 1994. After due process of law, Service Tax of Rs.79,930/- was confirmed with applicable interest under Section 75 and a penalty of Rs.79,930/- under Section 78 of the Act, was imposed.”
(Emphasis added by us, in bold)
3. Heard Ms. Manne Veera Niveditha, Ld. Advocate for the appellant, who contended at the outset that the issue involved is no more res integra as the same is settled in favour of the appellant in the appellant’s own case for the period 2006-07 to 2010-11 by this very Bench of the Tribunal vide Final Order No. 40223 of 2023 dated 31.03.2023.
4. Per contra, Shri N. Satynarayanan, Ld. Assistant Commissioner appearing for the Revenue, supported the findings of the lower authorities.
5. We have heard the rival contentions and we have gone through the orders referred to during the course of arguments.
6. Upon hearing both sides, we find that the only issue to be decided by us is: whether the amount deducted by the foreign bank towards the bank charges were taxable under “Banking and other Financial Services” for the period 2011-12?
7. We find that the very same issue has been settled in favour of the appellant in its own case in Service Tax Appeal No. 40204 of 2013 decided by this very Bench vide Final Order No. 40223 of 2023 dated 31.03.2023 wherein this Bench, after following other orders of co-ordinate CESTAT, New Delhi in the cases of M/s. Theme Exports Pvt. Ltd. v. Commissioner of Service Tax Delhi [2019 (26) G.S.T.L. 104 (Tri. – Del.)] and M/s. Dileep Industries Pvt. Ltd. v. Commissioner of Central Excise, Jaipur [2017 (10) TMI 1231 – CESTAT, New Delhi], has held as under: –
“5.1 The main issue involved in this case is whether the amount which was deducted by the Foreign bank towards the bank charges are taxable under the service “Banking and other Financial Service” for the period 2006-2007 to 2010- 2011? The other issues involved are whether invocation of extended period and imposition of penalties are sustainable in the facts of the case?
5.2 We find that the appellants have submitted the documents for realization of export sale proceeds to their bank namely SBI, which in turn has used the services of the foreign bank for collection of export sale proceeds. Obviously, the foreign banks who have rendered their services, have deducted their charges while remitting the export sale proceeds to SBI. The appellant has never dealt with the foreign bank on his own and the Banking and Other Financial Service if at all was rendered only to SBI. Amount charged by the foreign bank while remitting export sale proceeds, whether can be subjected to service tax or not has been decided by the CESTAT Principal Bench, New Delhi in the case of Theme Exports Pvt. Ltd. Vs. CST, Delhi (supra), by relying on the ratio laid down by the Tribunal in the case of M/s. Dileep Industries Pvt. Ltd. Vs. CCE, Jaipur (supra), where the Tribunal held as under:-
4. We find that the issue arising out of present dispute is no more res integra, in view of the decision of this Tribunal in the case of M/s. Dileep Industries Pvt. Ltd. Vs. CCE, Jaipur -2017 (10) TMI 1231-CESTAT, New Delhi. The relevant paragraph in the said decision is extracted herein below:-
“4. After hearing both the parties and on perusal of record, it appears that the first issue is pertaining to the collection charges of the Indian bankers who in turn send the same to the appellant for collection to the foreign bankers. The department has demanded Rs. 2,37,087/- from the appellant. From the record, 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 collection of bills which in turn are charged by the Indian Banks from the appellants. When it is so, then the appellant are not entitled to pay the service tax. The identical issue has come up before the Tribunal in the case of Greenply Industries Ltd. vs. CCE, Jaipur (Final Order No. 50149/2014 dated 03.01.2014) where it was observed that-
“4. We find that no documents have been produced showing that foreign bank has charged any amount from the appellant directly. The facts as narrated in the impugned order clearly indicate that it is the ING Vyasa Bank who had paid the charges to the foreign bank. In view of this, the appellant cannot be treated as service recipient and no service tax can be charged under Section 66A read with Rule 2 (1)(2)(iv) of the Service Tax Rules, 1994. Moreover, we also find that in appellants own case for the previous period similar order had been passed by the original adjudicating authority and on appeal being filed against the same, the Commissioner (Appeals), vide his order in appeal dated 12.11.08 has set aside that order and as per the appellant’s counsel, no appeal has been filed against that order. In view of this, the impugned order is not sustainable, the same is set aside and appeal is allowed”.”
5. By following our earlier decision (supra), we allow the claim of the appellant in this regard.”
5.3 As the issue is resolved on merits, there is no need to discuss about invocability of extended period in this case and also regarding legality of imposition of penalties.”
8. In view of the above, we agree with the contentions of the Ld. Advocate that the issue in the case on hand stands settled in their favour and consequently, set aside the impugned order.
9. Resultantly, the appeal stands allowed with consequential benefits, if any, as per law.
(Order pronounced in the open court on 14.07.2023)
