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2020 (10) TMI 479 - AT - Service TaxLevy of service tax - Banking and other financial services - ‘third party payments’ for exports effected by M/s AKR Textiles to buyer outside India - negative list regime - POPOS rules - applicability of 29/2004-ST dated 22nd September 2004 - HELD THAT:- 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 - the issue is no longer res integra and that demand pertaining to ‘other financial services’ has been erroneously confirmed in the orders impugned. 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’ 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. Thus, 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 - the liability for allegedly having received services provided by M/s Amsco Finance Ltd also does not sustain. Appeal allowed - decided in favor of appellant.
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