Service tax under RCM not leviable for bank charges paid by Indian Bank to Foreign Bank

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

Please become a Premium member. If you are already a Premium member, login here to access the full content.