Dishman Pharmaceuticals & Chemicals Ltd Vs C.S.T.-Service Tax (CESTAT Ahmedabad)
Introduction: The CESTAT Ahmedabad issued a significant ruling regarding the service tax liability of Indian banks for foreign bank charges connected to the import or export of goods. The case, Dishman Pharmaceuticals & Chemicals Ltd Vs C.S.T.-Service Tax, delves into the responsibility of Indian banks when foreign banks deduct certain charges from the proceeds of exported goods.
Analysis: The crux of the case revolves around whether Indian banks are liable to pay service tax on bank charges levied by foreign banks in relation to the export realization of goods. The appellant, Dishman Pharmaceuticals & Chemicals Ltd, argued that since the transactions were conducted between Indian and foreign banks, the service tax liability falls on the Indian banks as service recipients. The appellant’s stance was supported by various legal precedents and interpretations of relevant laws.
On the other hand, the Department contended that such services, even when provided by foreign banks, fall under the category of banking and financial services as per the Finance Act, 1994. Therefore, they claimed that the service tax should be imposed on the appellant as the recipient of these services.
The CESTAT Ahmedabad analyzed the facts, the nature of the transactions, and relevant legal provisions. They referred to Circulars and earlier Tribunal decisions to determine whether the appellant could be considered the recipient of services provided by foreign banks. The Tribunal found that in cases where Indian banks are involved in the collection of charges, the Indian banks are the recipients of the services. This conclusion was supported by circulars from the Board and earlier Tribunal judgments.
In view of the above judgment, the issue is no longer res- integra and in the identical facts and transaction the assessee is not held to be liable for payment of service tax.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the overseas banks has deducted certain bank charges from the export realization of the appellant’s export of goods while remitting the export proceeds to the Indian bank of the appellant. The appellant’s Indian Bank has paid service tax on such bank charges, the Indian bank remitted the said export proceed to the appellant’s account. The case of the department is that since the said service although provided outside from India are classified under the category of banking and other financial services under Section 65 (105) of the Finance Act, 1994. The appellant in the capacity of service recipient was required to discharge service tax liability on such charges deducted by the foreign banks and made taxable under Section 66A of Finance Act, 1994 read with Rule 2 (1) (d) (iv) of the Service Tax Rules, 2002.
2. Shri R. Subramanya, Learned Counsel appearing on behalf of the appellant at the outset submits that in the entire admitted transaction the appellant has no dealing with the foreign banks. As regard the deduction made by foreign bank while remitting the export proceeds to the Indian Bank, the dealing is between the Indian Bank and the Foreign Bank, therefore, foreign bank is a service provider and the Indian bank is a service recipient who are legally liable to discharge the service tax, therefore, the demand cannot be raised from the appellant. This issue is no longer res-integra as the same has been decided in various judgments including the decision of this Tribunal in the appellant’s own case. He placed reliance on the following judgments:-
