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2023 (11) TMI 168 - AT - Service TaxNon-payment of service tax - bank charges paid to the foreign banks - Expenditure in Foreign Currency - HELD THAT - It has been clarified as per Trade Notice No 20/2013-14 dated 10.02.2014 of Commissioner Service Tax I Mumbai that the Indian Exporters are not the recipient of services from the Foreign Bank/ intermediary bank. As Indian Exporter s as per the above clarification are not receiving any ser5vices from the foreign bank/ intermediary bank, the entire foundation on which this demand has been made and upheld is demolished and the impugned orders need to be set aside only on this ground. In case of M/S. THEME EXPORTS PVT. LTD. VERSUS C.S.T., DELHI 2018 (5) TMI 825 - CESTAT NEW DELHI following the earlier decision in case of M/S DILEEP INDUSTRIES PVT. LTD. VERSUS CCE, JAIPUR 2017 (10) TMI 1231 - CESTAT NEW DELHI where it was held 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 under Section 66A read with Rule 2(1)(2)(iv) of the Service Tax Rules, 1994. Thus, the issue involved in this case is no longer res-integra. The issue involved in the case is squarely covered by the above referred decisions and other decisions cited by the counsel for the appellant - there are no merits in the impugned orders - appeal allowed.
Issues Involved:
1. Liability to pay service tax on bank charges paid to foreign banks under the Reverse Charge Mechanism. 2. Applicability of penalties and interest for non-payment of service tax. Summary: Issue 1: Liability to Pay Service Tax on Bank Charges Paid to Foreign Banks The appellant, engaged in manufacturing and exporting goods, paid bank charges to foreign banks but did not pay service tax on these charges. The original authorities confirmed the demand for service tax under Section 73(1) of the Finance Act, 1994, arguing that the appellant received "Banking & Other Financial Services" from foreign banks, making them liable under the Reverse Charge Mechanism as per Section 66A of the Finance Act, 1994. The appellant contended that this issue had been settled in various cases, including Greenply Industries Ltd, Clywin Knit Fashions, and Dishman Pharmaceuticals & Chemicals Ltd, where it was held that no service tax is payable on such payments. They also referenced Trade Notice No. 20/2013-14-ST-I, which clarified that Indian exporters are not the recipients of services from foreign banks, thus not liable for service tax. The Tribunal considered previous judgments and the Trade Notice, concluding that the Indian exporters are not the recipients of services from foreign banks. Consequently, the appellant cannot be treated as a service recipient, and no service tax can be charged under Section 66A of the Finance Act, 1994. Issue 2: Applicability of Penalties and Interest The original orders imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994, for non-payment of service tax. The Assistant Commissioner, in a subsequent order, set aside the penalty under Section 76 but upheld other penalties and interest. Given the Tribunal's finding that the appellant is not liable for service tax on the bank charges paid to foreign banks, the foundation for imposing penalties and interest is invalidated. Consequently, the impugned orders were set aside. Conclusion: The Tribunal allowed the appeals, setting aside the impugned orders, and ruled that the appellant is not liable to pay service tax on the bank charges paid to foreign banks under the Reverse Charge Mechanism. The penalties and interest imposed were also invalidated.
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