DBS Bank India Limited Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
Summary: DBS Bank India Limited, successor in business of DBS Bank Limited, challenged Order-in-Original No. MUM.SOUTH/CGST/Pr.Commr-110-111/20-21 dated 24.03.2021 passed by the Commissioner of CGST & Central Excise, Mumbai South Commissionerate. The dispute concerned service tax on amounts received by the Indian banking operation from its Singapore head office in connection with support activities relating to External Commercial Borrowings (ECB) provided by DBS Singapore to Indian borrowers.
During an EA-2000 audit, the Department noticed income under “Commission & Brokerage and Miscellaneous income” received from DBS Singapore during Financial Years 2012-2013 to 2015-2016. On examining the agreement dated 28.05.2015, the Department considered activities such as origination/referral, structuring and coordination, credit assessment and approval, disbursement, monitoring and credit facility management to constitute intermediary services between DBS Singapore and Indian borrowers. The Department consequently proposed service tax for the periods 01.04.2013 to 31.03.2016 and 01.04.2016 to 30.06.2017, invoking the extended limitation period under the proviso to Section 73(1) of the Finance Act, 1994, along with interest and penalties under Sections 77 and 78. The Commissioner confirmed the proposals.
The appellants submitted that they had originally operated in India as a Foreign Branch of DBS Bank headquartered in Singapore and were subsequently established as DBS Bank India Limited with effect from 01.03.2019. According to the appellants, the Indian operation provided support services to DBS Singapore in relation to ECB transactions, including loan structuring and coordination, credit assessment and approval, disbursement, monitoring and credit facility management. The consideration was received from DBS Singapore in foreign exchange against periodic debit notes. The appellants stated that they had discharged service tax on the entire consideration up to 31.03.2013 but, after reviewing their tax position, treated the services from 01.04.2013 as exports and discontinued payment of service tax.
The appellants contended that the services were provided to DBS Singapore on their own account and therefore did not fall within the definition of “intermediary” under Rule 2(f) of the Place of Provision of Services Rules, 2012. They further submitted that although the Indian operation interacted with Indian borrowers, the actual grant of loans and the terms of lending were decided by DBS Singapore, and the appellants had no authority to offer or agree to the lending terms without approval from DBS Singapore.
