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2018 (7) TMI 513 - AT - Service TaxReverse Charge Mechanism - Banking and Financial Services - the appellants are maintaining Nostro and Vostro Accounts with foreign banks to help their customers dealing in export and import business and for paying/collecting bank charges for such services - penalty imposed in relation to Nostro accounts - also appellants are utilising the services of SWIFT, Belgium, for securely and reliably exchanging financial information relating to banking transactions. Penalty imposed on Nostro Accounts - Held that:- The appellant has discharged the service tax along with interest on being pointed out by the department - The issue whether assesse is liable to pay service tax under reverse charge mechanism was contentious for a long time - the penalty imposed in regard to Nostro transactions is unwarranted and requires to be set aside. Demand of service tax on SWIFT transactions - Held that:- he service rendered under SWIFT would very well get covered under sub-clause (vii) of the definition of Banking and other Financial services as provided under 65 (12). Though in the SCN, sub-clause (vii) and (ix) has been mentioned, we find that the allegation as well as activity of transfer of information and data processing which is rendered has been clearly mentioned in the SCN. Therefore, the mere mentioning of the sub-clause wrongly in our view would not make the SCN vitiated or invalid - argument of appellant fails - taking note of the fact that the demand has been made under reverse charge mechanism, we consider that the period prior to 18.04.2006 requires to be set aside - also, the penalty for the period after 18.04.2006 is unwarranted and requires to be set aside - thus, the demand for the period after 18.04.2006 is upheld whereas the penalty on this issue is set aside. Demand of service tax on Vostro transactions - case of appellant is that the service qualifies as export of service - Held that:- From the manner of operation and working of Vostro we are able to see that the appellant retains the charges for providing the service. The account is maintained in Indian Rupees, but the inward remittances are in foreign convertible currency received from the Bank located outside India; the appellant retains the charges in Indian currency out of the inward remittance received from Bank located outside India - the condition that receipt in foreign currency in effect satisfied - thus, being export of services, the demand made on Vostro transactions cannot sustain and requires to be set aside. Appeal allowed in part.
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