Sumeru Knits Vs Commissioner of GST and Central Excise (CESTAT Chennai)
Summary: The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the appeal filed by Sumeru Knits, a manufacturer and exporter of knitted garments, against service tax demands arising from deductions made by an overseas payment intermediary and foreign banks during the financial years 2008-09 to 2012-13. The Department had confirmed demands of ₹72,26,765 and ₹4,74,485, aggregating ₹77,01,250, along with applicable interest and penalties. The demands concerned a 3% service fee deducted from export invoices by AMSCO Finance Ltd. and charges deducted by foreign banks while remitting export proceeds. The Department classified these transactions as banking and financial services received from outside India and sought to impose service tax on the exporter under the reverse charge mechanism pursuant to Section 66A of the Finance Act, 1994 and the applicable place-of-provision rules.
The appellant contended that AMSCO Finance Ltd. had been engaged by the overseas buyer, M/s C&A, to process export payments and that no direct service-provider and service-recipient relationship existed between the intermediary and the Indian exporter. It further argued that the deductions represented trade discounts or payment arrangements rather than consideration for taxable services received by it. Regarding foreign bank charges, the appellant submitted that the banks acted on the overseas buyer’s instructions and that remittance of export proceeds did not constitute cash management services supplied to the exporter. Reliance was also placed on CBEC Circular No. 163/14/2012-ST dated 10 July 2012, which clarified the service tax treatment of foreign currency remittances. The appellant cited decisions including AKR Textiles and Others, Eastman Exports Global Clothing Private Ltd. and Carona Knitwear, contending that identical disputes had already been decided in favour of exporters.
The Tribunal identified two principal issues: whether Sumeru Knits had received payment processing services from AMSCO Finance Ltd., which had been engaged by the foreign buyer, and whether it had received taxable services from foreign banks transferring export proceeds. Following the decision in AKR Textiles and Others v. Commissioner, the Tribunal held that the deductions did not justify service tax liability in the hands of the Indian exporter. The earlier ruling had established that foreign banks selected by overseas buyers could not automatically be regarded as service providers to Indian exporters merely because charges were deducted from sale proceeds. It had also examined the payment intermediary’s role, the statutory meaning of cash management services, the applicable exemption for bill discounting and the place-of-provision framework introduced from 1 July 2012.
The Tribunal further relied on the decisions in SKM Egg Products Export, Theme Exports Pvt. Ltd. and Dileep Industries Pvt. Ltd., which supported the conclusion that foreign bank charges deducted during the collection of export proceeds were not taxable in the exporter’s hands where the banking services were rendered to the Indian bank. Finding the dispute covered by these precedents, the Tribunal held that the entire service tax demand was unsustainable. Consequently, it set aside Order-in-Original No. 08/2015 dated 20 July 2015 and allowed the appeal with consequential relief, if any. Since the underlying demand failed, the questions of invoking the extended limitation period and imposing penalties did not survive.
List of Cases Discussed
- AKR Textiles and Others Vs Commissioner, 2020 (10) TMI 479 (CESTAT Chennai) — Principal precedent followed. The Tribunal had allowed 22 connected appeals involving overseas payment intermediary fees and foreign bank charges deducted from export proceeds.
- Eastman Exports Global Clothing Private Ltd., 2024 (5) TMI 417 (CESTAT Chennai) — Cited as a subsequent decision following the ruling in AKR Textiles on an identical issue.
- Carona Knitwear Vs Commissioner of GST and Central Excise, Coimbatore, 2024 (6) TMI 624 (CESTAT Chennai) — Cited as another decision applying the principles established in AKR Textiles.
- Rogini Garments and Others Vs Commissioner of Customs, Central Excise & Service Tax, Coimbatore; Final Order Nos. 41819-41832/2017; 29/08/2017 (CESTAT) — Relied upon through AKR Textiles for holding that foreign bank charges deducted from export proceeds do not establish a taxable service relationship between the foreign bank and Indian exporter.
- Gracure Pharmaceuticals Ltd. Vs Commissioner of Central Excise, Jaipur-I, 2013 (32) S.T.R. 249 (Tri.-Del.) — Referred to in the clarification reproduced in AKR Textiles concerning foreign bank services and Indian exporters.
- Gujarat Ambuja Exports Ltd. Vs Commissioner of Service Tax, Ahmedabad, 2013 (30) S.T.R. 667 (Tri.-Ahmd.) — Referred to in the same clarification concerning the treatment of overseas bank charges.
- Greenply Industries Ltd. (CESTAT) — Cited for holding that foreign bank charges paid through an Indian bank do not make the exporter the recipient of foreign banking services.
- Lupin Ltd. (CESTAT) — Distinguished in the precedent reproduced by the Tribunal because it preceded the relevant trade clarification and the Greenply Industries decision.
- Sabre Travels Network India P. Ltd. Vs Commissioner of CGST & Central Excise, Mumbai Central; Final Order Nos. A/85779-85783/2020; 11/09/2020 (CESTAT) — Referred to in AKR Textiles concerning the meaning of service, consideration and the person for whom an activity is performed under the negative-list regime.
- SKM Egg Products Export (CESTAT Chennai) — Relied upon for holding that foreign bank charges deducted while collecting export proceeds cannot be subjected to service tax in the exporter’s hands.
- Theme Exports Pvt. Ltd. Vs CST, Delhi (CESTAT) — Referred to through SKM Egg Products Export for the treatment of foreign bank collection charges.
- Dileep Industries Pvt. Ltd. Vs CCE, Jaipur, 2017 (10) TMI 1231 (CESTAT New Delhi) — Followed for the proposition that foreign bank collection charges deducted from export proceeds do not attract service tax liability on the exporter.
- Hindalco Industries Ltd. Vs CCE, 2003 (161) E.L.T. 346 (Tri.-Del.) — Cited by the appellant against invoking the extended period of limitation.
- Indian Oil Corporation Ltd. Vs CCE, Kolkata, 2005 (191) E.L.T. 996 (Tri.-Kolkata) — Cited by the appellant on limitation and suppression of facts.
- Pushpam Pharmaceuticals Vs Collector, 1995 (78) E.L.T. 401 (Supreme Court) — Cited by the appellant concerning the requirement of suppression for invoking extended limitation.
- Padmini Products and Chempar Drugs (Supreme Court) — Both decisions were invoked by the appellant in its arguments against extended limitation; separate citations were not provided in the order.
- Tamilnadu Housing Board Vs Commissioner of Central Excise, 1994 (74) E.L.T. 9 (Supreme Court) — Cited by the appellant in support of its objection to the extended period of limitation.
FULL TEXT OF THE ORIGINAL ORDER OF CESTAT CHENNAI
Service Tax Appeal No. S/42188/2015 was filed by M/s. Sumeru Knits, Palladam, Coimbatore (Appellant herein), aggrieved by the impugned Order-in-Original No. 08/2015 dated 20.07.2015 passed by the Commissioner of Central Excise & Service Tax, Coimbatore confirming demands of Rs.72,26,765/- and Rs.4,74,485/- during the periods from 2008-09 to 2012-13 along with applicable interest and imposing equal penalty under Section 78, besides imposing penalties of Rs.200/- per day and Rs.10,000/- under Sections 77(1) and 77(2) respectively of the Finance Act, 1994 (ACT).
2.1 Facts briefly stated are that M/s. Sumeru Knits, engaged in the manufacture and export of knitted garments to overseas customers were utilizing the services of M/s. AMSCO Finance Ltd. (AML) and Foreign Banks located abroad for realisation of export proceeds. It was alleged that the Appellant had made payments for such services received from AFL by way of deduction of service fee @ 3% from the export bills and in respect of foreign banks, by specified charges deducted from their export proceeds realisation. Hence the department was of the view that the Appellant was liable to pay service tax on reverse charge basis on the banking and financial services received from AFL and foreign banks, located in a non-taxable territory in terms of Section 66A of the ACT ibid read with Rule 3(ii) of Taxation of Services (Provided from Outside India )Rules, 2007 and Rule 3 of Place of Provision of Service Rules 2012.
2.2 Consequently, a Show Cause Notice No. 24/2013 dated 24.10.2013 was issued to the Appellant seeking to demand Service Tax of Rs.72,26,765/- and Rs.4,74,485/- on the amounts paid to AML and Foreign Banks respectively, for the period from 2008-09 to 2012-13 along with applicable interest and to impose penalties under Section 76,77 & 78 of the ACT ibid. The adjudicating authority confirmed the demands proposed in the SCN dated 24.10.2013 along with applicable interest and imposed equal penalty under Section 78 of Finance Act, 1994 (ACT), penalties of Rs.200/- per day and Rs.10,000/- under Sections 77(1) and 77(2) respectively.
Being, aggrieved, the appellant has filed the present appeal before this forum.
3. The main contentions of the appellant as cullet out from the Grounds of Appeal are summarized below: –
i. That there was no service provider and service receiver relationship between AFL and the Appellant and hence the allegation of appellants having received services from AFL was devoid of merits and not sustainable.
ii. That the value of demand alleged on the payments made to AFL represented the actual trade discount on the price of the goods, involving pure sale and there was no service element involved and hence the services received by the overseas buyer of the Appellant could not form part of service tax liability.
iii. With regard to demand of service tax on amount charged by banks, it was contended that the foreign banks collect export proceeds and in turn remit the proceeds to the banks located within India and as the entire transaction was within India only and as the service providing banks were within taxable territory, demands are not sustainable.
iv. It was contended that the foreign banks acting on instructions from overseas buyer remit export proceeds to the Appellant and that activity cannot constitute service of “Cash Management” as no element of service is involved in the transaction.
v. It was submitted that the CBEC Circular No. 163/14/2012-ST dated 10.07.2012 clarified that the above service was a merely transaction in money and outside the scope of levy of service tax. The copy of the Circular cited reads as follows: –
“Circular No. 163/14/2012-S.T., dated 10-7-2012
Subject : Clarification on service tax on remittances – Regarding
Concerns have been expressed in various forums regarding the leviability of service tax on the remittance of foreign currency in India from overseas.
2. The matter has been examined and it is clarified that there is no service tax per se on the amount of foreign currency remitted to India from overseas. In the negative list regime, ‘service’ has been defined in clause (44) of section 65B of the Finance Act 1994, as amended, which excludes transaction in money. As the amount of remittance comprises money, the activity does not comprise a ‘service’ and thus not subjected to service tax.
3. In case any fee or conversion charges are levied for sending such money they are also not liable to service tax as the person sending the money and the company conducting the remittance are located outside India in terms of the Place of Provision of Services Rules such services are deemed to be provided outside India and thus not liable to service tax.
4. It is further clarified that even the Indian counterpart bank or financial institution who charges the foreign bank or any other entity for the services provided at the receiving end, is not liable to service tax as the place of provision of such service shall be the location of the recipient of the service, i.e. outside India, in terms of Rule 3 of the Place of Provision of Services Rules, 2012”.
vi. It was contended that the impugned order had wrongly concluded that the Appellants were service recipients which was factually incorrect as the buyer had engaged the bankers for transfer of proceeds of sale to the Appellants less the amount discounted towards bills raised by Appellants and the discounted amount was actually remitted by the buyer to AFL.
vii. It was averred that the entire demand was not sustainable and hence invocation of extended period was unwarranted. It was submitted that they have disclosed the information in their statutory records and as and when required by the department and hence there was no wilful suppression of facts with an intent to evade payment of service tax. Reliance in this regard was placed on the following judgements: –
(a) Hindalco Industries Ltd. Vs. CCE [2003 (161) ELT 346 (Tri.-Del.)]
(b) Indian Oil Corporation Ltd. Vs. CCE, Kolkata [2005 (191) ELT 996 (Tri.-Kolkata)]
(c) Pushpam Pharmaceuticals Vs. Collector [1995 (78) ELT 401 (SC)]
(d) Apex Court decision in Padmini Products and Chempar Drugs
(e) Tamilnadu Housing Board Vs. Commissioner of Central Excise [1994 (74) ELT 9 (SC)]
4. The Ld. Counsel for the Appellant Mr. M.N. Bharathi reiterated the grounds of appeal and also submitted that the issue is no more res integra in view of the following decisions on the identical issue.
a. AKR Textiles and Others Versus Commissioner [2020 (10) TMI 479 CESTAT CHENNAI]
b. Eastman Exports Global Clothing Private Ltd. [2024 (5) TMI 417 CESTAT CHENNAI]
c. Carona Knitwear Versus Commissioner of GST and Central Excise, Coimbatore [2024 (6) TMI 624 – CESTAT CHENNAI]
It was submitted that the entire demand was based on erroneous presumptions and contrived interpretation and hence stressed that the demand confirmed in the impugned order is legally not sustainable. Hence, it was prayed to set aside the impugned order.
5. Smt. O.M. Reena, Ld. Authorised representative for the Department, reiterated the findings in the impugned order and submitted that the demand was sustainable in terms of Section 66A of the ACT ibid read with Rule 3(ii) of Taxation of Services (Provided from Outside India) Rules, 2007 and Rule 3 of Place of Provision of Service Rules 2012.
6. Heard both sides and carefully considered the submissions and evidences on record.
7. The main issues that arise for consideration in these appeals are: –
i. Whether the appellant has received payment processing services from M/s. AFL engaged by M/s. C&A, the foreign buyer to process payments to the appellant?
ii. Whether the appellant has received services from Foreign Banks that make payments of sale proceeds of exported goods owed by the foreign buyer to the appellant?
8. We find that the impugned order has confirmed demand of service tax on two counts, both under one taxable service viz., Banking and Financial Services. These demands have been confirmed alleging that the appellants are liable to pay the service tax on reverse charge mechanism in terms of the provisions of Section 66A of the Finance Act, 1994 for the services received from outside India. The first one is the demand with regard to the services received by the appellants from AFL, Hong Kong during the course of realization of export proceeds which includes 3% fee and specified charges for transfer of money to the account of the appellants. The second one is demand of service tax on various specified charges deducted by the foreign banks from the sale proceeds of the exports made by the appellants for transferring the foreign exchange to the accounts of the appellants maintained in India.
9. We find that the identical issues as involved in the present case, were also involved in the case of M/s. AKR Textiles and Others Vs. Commissioner [2020 (10) TMI 479 CESTAT CHENNAI] wherein Chennai Tribunal has allowed 22 appeals of the exporters by setting aside the demand of service tax. It is pertinent to reproduce the relevant findings of the Tribunal in the above cited case infra: –
“5. It has been pointed out that the levy of tax on charges deducted by overseas banks, in identical situation, has been held by the Tribunal, in Rogini Garments and ors v. Commissioner of Customs, Central Excise & Service Tax, Coimbatore [final order no. 41819- 41832/2017 dated 29th August 2017], to be unsustainable in law. On perusal of the said order at
‘6. The case of the department is that when the foreign bank deducts the charges towards transfer of foreign exchange to the Indian bank, since the same Is deducted from the sale proceeds, it is a service rendered by the foreign bank to the appellants and that there is a service provider and service recipient relationship between the foreignbank and the appellant. It is to be noted that the foreign bank deducts such charges and transfers the foreign exchange to the Indian bank from where the appellant receives the money. The foreign bank in which the overseas buyer deposits the sale proceeds is chosen by the foreign buyer and not by the appellant, who is situated in India. By no stretch of imagination can such foreign bank be considered as a service provider for the appellant who in most cases would not even be aware of the identity of such foreign bank. The act of deduction of an amount as charges for transfer of the foreign exchange to the Indian bank from thesale proceeds of the appellant is only a facility for collecting such charges from the Indian bank. This cannot be considered as payment of charges for services by the appellant to the foreign bank. It is actual charges deducted being bank to bank transaction. The department by the Trade Notice dated 14.2.2014 has clarified the very same situation. The relevant portion is extracted as under:-
“5. The views of the banks that services provided by the foreign bank are-received by the importer or exporter in India is not factually and legally correct because, for a person to be treated as recipient of service, it is necessary that he should know who the service provider is and there should be an agreement to provide service, which may be oral or written. In the present case, the importer and exporter does not even know who the service provider is, as they are not aware of the identity of the foreign banks which would be providing services. Exporter or importer in India does not have any formal or informal agreement with the foreign bank, importer or exporter in India does not even know the quantum of charges which the foreign bank would be recovering. Therefore, in view of the above mentioned factual position and also in view of the various articles of URC 522/UCP 600, it is clear that services are provided by the foreign bank to the bank in India. Further, Tribunals have also prima facie held that in such cases, services are provided by the foreign bank to the Indian bank and not to the Indian Exporter. [M/s. Gracure Pharmaceuticals Ltd. v. Commissioner of Central Excise, Jaipur-1 -2013 (32) S.T.R. 249 (Tri.-Del.), M/s. Gujarat Ambuja Exports Ltd. v. Commissioner of Service Tax, Ahmedabad – 2013 (30) S.T.R. 667(Tri.-Ahmd.)].”
Similar issue was considered by the Tribunal in the case of Greenply Industries Ltd. (supra). The relevant portion is reproduced as under: –
“5. We have considered the submissions from both sides and perused the records. 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 from them under Section 66A read with Rule 2(l)(2)(iv) of the Service Tax Rules, 1994. Moreover, we also find that in Appellant’s 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 order-in-appeal dated 12-11-2008 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 the appeal is allowed.”
7. We have to say that the decision relied upon by the Id. AR in the case of Lupin Ltd. (supra), was rendered on 12.2,2013 which is much before the clarification issued by the Trade Notice and also the decision in the case of Greenply. Industries (supra). Therefore, following the judicial discipline in the case of Greenply Industries (supra), and the facts being identical, the levy of service tax is unsustainable. The impugned orders are set aside and the appeals are allowed with consequential relief, if any.’
we find that the issue is no longer res integra and that demand pertaining to ‘other financial services’ has been erroneously confirmed in the orders impugned before us.
6. On the amounts retained by M/s Amsco Finance Ltd, which is sought to be taxed under ‘cash management’ within section 65(12) of Finance Act, 1994, the definition comes into play for services rendered by ‘banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern’ and the question that requires resolution is the nature of activity intended by ‘cash management’ which has been invoked in the show cause notice for the period prior to 1st July 2012. Admittedly, the omission by specific exclusion of such activity, effected on 1st June 2007, is the sole description that could be fastened on the appellants for taxability as deemed provider of service. From the clarification in circular no. 96/7/2007-ST dated 23rd August 2007 of Central Board of Excise & Customs, issued soon after the legislative change, it would appear that the intent was limited to ‘chit funds’ as seen from
‘Reserve Bank of India has clarified that the business of a chit fund is to mobilize cash from the subscribers and effectively cause movement of such cash to keep it working and, therefore, the activity of chit funds is in the nature of cash management.’
thus negating the recourse to section 65(105)(zm) as taxable service for which appellants were liable till 30th June 2012. On the other hand, this may have the scope of inclusion within the taxable service as ‘bill discounting’ for which exemption is afforded by notification no. 29/2004-ST dated 22nd September 2004 when provided to customers. As a customer of the provider of the service is not, under the notification, required to be an account holder, the benefit of such exemption is not deniable to the appellants.
7. For the period after 1st July 2012, the finding in the impugned order that
’20. For the period from 1st July 2012: –
Service tax demand related to M/s Amsco Finance Ltd; – It has been argued by M/s, AKR Textile that after the advent of negative regime, they are not liable to pay service tax under reverse charge. For which, they have reiterated what was already stated and quoted in Issue 1 discussion. The argument put forth were already considered and were rejected as not tenable. From the records available and as per the legal position and in view of the clarification given in the CBEC Education Guide, para 5.3.3, M/s. AKR Textile are receiving the Banking and Financial service rendered by M/s Amsco Finance Ltd., and they are person who is making the payment of service fee for the service received. M/s C& A is neither receiving the service of M/s Amsco Finance Ltd nor paying the payment. It is M/s. AKR Textile (who are having a permanent establishment in the taxable territory) who are making the payment actually, hence, they are liable to pay service tax under Section 68 (2) of the Finance Act, 1994 for the receipt of service from the non-taxable territory to the taxable territory i.e. in India. Further it Is held that it is not the mere transfer of money is involved the issue to attract the negative list. What M/s. AKR Textile is receiving the comprehensive Banking and Financial Service with effect from 1.7.2012 i.e. as stated earlier processing of export Invoices, making the prompt payment through assistance of customized portal created with the help of foreign banks etc. Hence, it is held that it is not the mere transfer of money to attract the exemption but the comprehensive Banking and Financial Service is involved in the issue in hand. Hence, it is held that M/s. AKR Textile are liable to pay service tax Under Section 68 (2) of the Finance Act, 1994 with effect from 1.7.2012.’
implies that the adjudicating has not ascertained the nature of the activity in terms of ‘consideration’ received to determine extent of service and the person ‘for’ whom such activity is provided by M/s Amsco Finance Ltd which are the essential characteristics for conformity to ‘service’ in section 65B(44) of Finance Act, 1994. The significance of the architecture of the ‘negative list’ regime is elaborated thus
’12. With this ontogeny, and, coincidentally, corresponding to the age of attainment of majority, the stage was set to give free rein to taxation of services by phasing out the classificatory regime to make room for the ‘negative list’ regime. Not unnaturally, the principal, and adjunct, machinery that had evolved till then were embedded in the new scheme of Finance Act, 1994, as section 66B, 66C, 66D and 66E, to resonate with
‘(44) …any activity carried out by a person for another for consideration, and includes a declared service, but shall not include – ..’
assigned to ‘service’ in section 65B of Finance Act, 1994 not only to cover all ‘activities’ save those exogenic to, and excepted in, the definition but also those excluded out of, and exempted from, levy in ‘negative list’ or by notification. Also, here the expression ‘for another’, as substitute for ‘to any person’, eliminates the erstwhile touchstone of ‘recipient’ for determination of the rendering of service and thus conflates the definition and ‘service’ in its essential form; resort to ‘recipient’ was henceforth restricted to situations, specifically articulated, where such recognition is necessary for harmony with the charging provision. In the new scheme of tax, ‘consideration’, as also the ‘provider’, continued to be no less vital than before for discerning the service transaction even as ‘recipient’, with the obliteration of carefully crafted boundaries inherent to the definition of ‘taxable services’ by the generalized explication as the substituting of self-performance, had ceased to be.’
by the Tribunal in Sabre Travels Network India P Ltd v. Commissioner of CGST & Central Excise, Mumbai Central [final order no. A/85779-85783/2020dated 11th September 2020] which may be usefully referred to.
8. It appears to us that, while ‘consideration’ is passed from appellants to the overseas entity, it is the overseas customer who is, contractually, bound to repatriate value of exports to the appellant and, instead of doing so, authorises M/s Amsco Finance Ltd as delegate to effect that responsibility. It is not the contractual responsibility of the appellants to collect the dues and, therefore, by no stretch can it be held that the mediation of M/s Amsco Finance Ltd is a substitution for the task that would, otherwise, fall to the appellants. If at all, the Hong Kong entity is an ‘intermediary’ within the meaning assigned in Place of Provision of Service Rules, 2012 to render the service, it has been performed in Hong Kong and, thus, not in the taxable territory. The demand for the period after 1st July 2012 also fails. Consequently, the liability for allegedly having received services provided by M/s Amsco Finance Ltd also does not sustain.
9. With the findings supra pertaining to the appeal of M/s AKR Textiles applicable equally to the several other appeals, the demands impugned therein also do not sustain.
10. Accordingly, all the orders impugned before are set aside and ST/40433/2015 & 21 Others appeals allowed.We find that the above decision in AKR Textiles has been followed in two other cases Viz. Eastman Exports Global Clothing Private Ltd. and Carona Knit Wear decided by this Tribunal.”
We find that the above decision in AKR Textiles has been followed in two other cases Viz., Eastman Exports global Clothing Private Ltd. (Supra) and Carona Knit (Supra) Wear decided by this Tribunal.
10. Further, we find that the service of remittance by a foreign bank to Indian bank of the exporter is not liable to service tax at the hands of the exporter. In this regard, we may also refer to the decision of Chennai Bench of the Tribunal in the case of M/s. SKM EGG Products Export (supra) wherein the Tribunal after relying upon the decision of M/s. Dileep Industries Pvt Ltd vs. CCE, Jaipur [2017 (10) TMI 1231 CESTAT NEW DELHI], has observed in para 5.2 as under: –
“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. 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.”
11. After appreciating the facts and following the above decisions, we are of the considered opinion that the demand raised cannot sustain and requires to be set aside. Ordered accordingly. Since the demand itself does not sustain, the invocation of extended period and imposition of penalties does not arise.
12. In the result, the impugned Order-in-Original No. 08/2015 dated 20.07.2015 is set aside. The appeal is allowed with consequential relief, if any, as per the law.
(Order pronounced in open court on 17.12.2024)
