TMI Blog2014 (12) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... raised, hence, has absolutely no legs to stand and is rejected. The further contention is with respect to exemption provided to activities including transaction in money. Going by Explanation 2 of Section 66B(44), such exemption does not apply to conversion of currency from one form to another. Hence, no exemption can be claimed by the petitioner with respect to the service it receives, in so far as the respondent-Bank converts its foreign remittances to Indian currency. - This Court cannot confuse the remittance with the conversion, since both are distinct events and it is the latter that is the taxable event. Valuation - legal validity of taking entire transaction value into consideration - Held that:- The petitioner is correct, in so far as accepting that the petitioner is liable to the tax on the charges [“commission” and “exchange”] levied by the respondent-Bank; which levy is made on the gross amount charged by the service provider by sub-clause (i) of Section 67(1) and that consideration is in terms of money. But such levy and collection, does not prevent the taxation authorities from looking into whether there is any other ostensible consideration for the service prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for the Respondent. JUDGMENT The petitioner is a private limited company, engaged in the business of manufacture and export of coir, jute and other allied products. The petitioner is aggrieved by the service tax levied and deducted; allegedly with respect to the remittances made by foreign buyers, in foreign currency, to the 1st respondent-Bank. The petitioner is not liable to pay service tax on the amounts of foreign currency remitted to India, is the essential contention advanced in the writ petition, supplemented by the further contention that if at all it is to be levied, the same can be only on the gross charges levied by the Bank for the service rendered. The petitioner seeks for a declaration that the petitioner is not liable to pay service tax for the remittances of foreign currency made from overseas, towards the value of the goods exported by the petitioner and seeks interdiction of the respondent-Bank from making such deductions. The petitioner would also pray for refund of the amounts already deducted. 2. The respondent-Bank as also the respondents 3 to 6, being the officials of the Union of India, have filed counter affidavit in the matter. The exact comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Charge of Service tax on and after Finance Act, 2012. Section 66B. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed . (emphasis supplied) Valuation of taxable services for charging service tax. Section 67 (1) - Subject to the provisions of this Chapter, where service tax is charged on any taxable service with reference to its value, then such value shall, - (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (emphasis supplied) Service Tax (Determination of Value) Rules, 2006 : Rule 2B. Subject to the provisions of Section 67, the value of taxable service provided for the services so far as it pertains to purchase or sale of foreign currency, including money changing, shall be determined by the service provider in the following manner :- For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at that time, multiplied by the total units of currency. Example I : US $ 1000 are sold by a customer at the rate of ₹ 45 per US $. RBI reference rate for US$ is ₹ 45.50 for that day. The taxable value shall be ₹ 500. Example II : INR 70000 is changed into Great Britain Pound (BGP) and the exchange rate offered is ₹ 70, thereby giving GBP 1000. RBI reference rate for that day for GBP is ₹ 69. The taxable value shall be ₹ 1000 : Provided that in case where the RBI reference rate for a currency is not available the value shall be 1% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange broking and purchase or sale of foreign currency, including money changing, whether such service be rendered by a private company or one exclusively dealing in money changing operations or a Bank; nationalised or otherwise, who is authorised to carry on such activity. The emphasis is on the service provided and the taxing event is also the service rendered. The provision does not distinguish establishments; nor confine the levy to those establishments exclusively conducting money changing operations. The contention raised, hence, has absolutely no legs to stand and is rejected. 6. The further contention is with respect to exemption provided to activities including transaction in money. Going by Explanation 2 of Section 66B(44), such exemption does not apply to conversion of currency from one form to another. Hence, no exemption can be claimed by the petitioner with respect to the service it receives, in so far as the respondent-Bank converts its foreign remittances to Indian currency. Exhibit P1 Circular also does not apply to the service of conversion of money; which is the subject matter of this dispute. What is specifically dealt with, in the said Circular, is the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be understood as any provision of service for a consideration in money, being taxed on the value of the gross amount charged by the service provider. By sub-clause (ii), where the provision of service is for a consideration not wholly or partly in money, then the amount in money equivalent to such consideration has to be determined. Such determination would include the amount charged by the service provider in terms of money and that otherwise enuring to the service provider; the latter determined in terms of money; as provided in the rules. Further, by sub-clause (iii), when the provision of service is for a consideration which is not ascertainable, then also the benefit derived by the service provider; has to be determined in terms of money; as per the rules. 11. Hence, sub-clauses (i), (ii) and (iii) are not in derogation of or exclusion to each other; but are mutually complementary, depending upon the manner in which consideration for provision of service is accepted by the service provider, from the recipient. In terms of money or in any other form and when it is not ascertainable; to be determined in terms of money. The different sub-clauses also speak of such ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 paise per US Dollar. The petitioner also has a contention that this amount also would be in terms of money and so long as it is not specifically charged by the Bank, that would go beyond the prescription of gross amounts in the statute. However, it is to be specifically noticed that the Bank, at that point of time, does not receive such consideration in terms of money. The Bank could purchase foreign currency as permissible under the various enactments and as regulated by the RBI and sell it immediately or later when the prices may go up or fall. That, however, is a matter to be left to a prudent Banker to decide. 15. When the selling rate is 50 paise higher, per US Dollar, the Bank having purchased it at a lower amount and such consideration having not crystallised in terms of money; is not ascertainable as the gross amount charged. It is this unascertainable component which the statute permits, to be ascertained in terms of money, by sub-section (4) of Section 67; to be prescribed by the Rules and which has been done by Rule 2B of the Rules of 2006. It is to be specifically noticed that the Rules do not levy a tax on any higher amount received by the Bank when selling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for each of the transactions in an year and not on the total amount of Indian currency converted from foreign currency in an year. The rule itself provides for different rates on the gross amount of currency exchanged , on a maximum of the converted currency; further emphasising such levy to be on each transaction. The contention raised by the petitioner that such option is to be exercised and made applicable for all the transactions made in a whole year is belied by the proviso itself, which would be redundant, if the contention of the petitioner is accepted. If such clubbing were provided, there was absolutely no requirement for the proviso to sub-rule (7B), which stipulates that on exercising an option, for a financial year, such option shall not be withdrawn during the remaining part of that financial year. 19. This Court does not find any illegality in the levy of service tax made and collected by the respondent-Bank on the services provided, of the conversion of foreign currency, to the petitioner. When the foreign currency is entitled to an exchange rate, in the market, as notified by the RBI, and a money changer including a Bank involved in such activity purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X
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