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TMI Blog2025 (2) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in manufacture and export of knitted garments, had been paying a service fee to (i) M/s. Amsco Finance Ltd., Hongkong, (AFL) an intermediary, for receipt of payments relating to exports made to M/s. C&A Buying, Germany and (ii) to the foreign banks remitting the export sale proceeds to the Appellant's bank account. 2.2 Verification of the export invoices raised to M/s. C&A indicated that M/s. Fashion Knits had been allowing a deduction of 3% from the price agreed in the Purchase Orders and such deductions were named as 'other deductions' in their invoices and related Shipping Bills. While some of the Purchase Orders and invoices were silent about these deductions, related Shipping Bills have invariably shown it as 'other deductions'. Copy of Bank documents like Foreign Bills Transaction through Bank in India, inter alia, indicate the drawee / applicant / importer name (as Amsco Finance Ltd.), Bill amount, Amount realized, other bank charges etc. These particulars clearly specify the amount deducted from Invoice Value at the importer end and also by the foreign bank towards their charges while transferring the proceeds to India. 2.3 Further inquiry on the flow of paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice would be the place of the Appellant and the service was deemed as provided in the taxable territory and in terms of Rule 2(1)(d)(g) of Service Tax Rules, 1994, the Appellant were liable for payment of Service Tax, in terms of clause 65(105)(zm) and Rule 3 of the Place of Provision of Services (Provided from India and Received in India) Rules, 2012, on the banking and other financial services received by them, under reverse charge mechanism in terms of Section 66A(1)(b) and Section 68 of Finance Act, 1994 (ACT). 2.5 A Show Cause Notice dated 24.10.2013 was issued to the Appellant seeking to assess the service received by them from AFL and other foreign banks, to Tax under Section 65(105)(zm) the ACT ibid and proposing to demand Service Tax of Rs.8,06,971/- towards payment to AFL and Rs.79,91,346 /- to various banks abroad, during the period 2008-09 to 2012-13, under Section 73 of the ACT ibid along with applicable interest, besides proposal to impose penalties under Sections 76,77(1), 77(2) and 78) of the Act ibid. 2.6 After due process of law, the Adjudicating Authority vide impugned Order-in-Original confirmed the demand as proposed and imposed equal penalties under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and in this regard It was pointed out that the valuation provisions under the Central Excise Act, 1944 and the Customs Act, 1962 have been strictly adhered to in as much as only the transaction value i.e, the sale consideration net of discounts is recorded in the books of accounts. Hence it was contended that the other deductions given by the Appellants to overseas customers cannot be construed as "consideration" payable to AFL for rendering any service to the Appellant. (vi) It was contended that the engagement of the banker was at the instance of the buyer and it is in their agreement terms, AFL agreed to transfer the sale proceeds through the designated banks. It was averred that the appellants have not remitted any amount payable in foreign currency to the banks abroad or AFL and have received sale proceeds after deduction of 3% by the buyer through their authorised bank. Moreover, the deductions of 3% from invoice value would only point to deductions allowed only to the buyer. It was pointed out that, if the service receiver and Service provider are in the foreign territory, the payment of Service Tax does not arise as per Board Circular No.16/14/2012-ST dated 10.07.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable? 8. We find that the identical issues as involved in the present case, were also involved in the case of M/s. AKR Textile and Others (supra) wherein Chennai Tribunal has allowed 22 appeals of the exporters by setting aside the impugned orders. It is pertinent to reproduce the relevant findings of the Tribunal in the cited case, which is reproduced herein below: - "5. 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. On perusal of the said order at '6. The case of the department is that when the foreign bank deducts the charges towards transfer of foreign exchange to the Indian bank, since the same Is deducted from the sale proceeds, it is a service rendered by the foreign bank to the appellants and that there is a service provider and service recipient relationship between the foreign bank and the appellant. It is to be noted that the foreign bank deducts such charges and transfers the foreign exchange t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: - "5. We have considered the submissions from both sides and perused the records. We find 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 from them under Section 66A read with Rule 2(l)(2)(iv) of the Service Tax Rules, 1994. Moreover, we also find that in Appellant's own case for the previous period similar order had been passed by the original adjudicating authority and on appeal being filed against the same, the Commissioner (Appeals), vide order-in-appeal dated 12-11- 2008 has set aside that order and as per the appellant's counsel, no appeal has been filed against that order, in view of this, the impugned order is not sustainable. The same is set aside and the appeal is allowed." 7. We have to say that the decision relied upon by the Id. AR in the case of Lupin Ltd. (supra), was rendered on 12.2,2013 which is much before the clarification issued by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. For the period from 1st July 2012: - Service tax demand related to M/s Amsco Finance Ltd; - It has been argued by M/s, AKR Textile that after the advent of negative regime, they are not liable to pay service tax under reverse charge. For which, they have reiterated what was already stated and quoted in Issue 1 discussion. The argument put forth were already considered and were rejected as not tenable. From the records available and as per the legal position and in view of the clarification given in the CBEC Education Guide, para 5.3.3, M/s. AKR Textile are receiving the Banking and Financial service rendered by M/s Amsco Finance Ltd., and they are person who is making the payment of service fee for the service received. M/s C& A is neither receiving the service of M/s Amsco Finance Ltd nor paying the payment. It is M/s. AKR Textile (who are having a permanent establishment in the taxable territory) who are making the payment actually, hence, they are liable to pay service tax under Section 68 (2) of the Finance Act, 1994 for the receipt of service from the non-taxable territory to the taxable territory i.e. in India.Further it Is held that it is not the mere transfer of money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nued to be no less vital than before for discerning the service transaction even as "recipient", with the obliteration of carefully crafted boundaries inherent to the definition of "taxable services" by the generalized explication as the substituting of selfperformance, had ceased to be." by the Tribunal in Sabre Travels Network India P Ltd v. Commissioner of CGST & Central Excise, Mumbai Central [final order no. A/85779-85783/2020 dated 11th September 2020] which may be usefully referred to. 8. It appears to us that, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi (supra), by relying on the ratio laid down by the Tribunal in the case of M/s. Dileep Industries Pvt. Ltd. Vs. CCE, Jaipur (supra), where the Tribunal held as under:- "4. After hearing both the parties and on perusal of record, it appears that the first issue is pertaining to the collection charges of the Indian bankers who in turn send the same to the appellant for collection to the foreign bankers. The department has demanded Rs. 2,37,087/- from the appellant. From the record, it appears that while exporting their goods, they lodged their bills for collection to the Indian Bankers who in turn send the same to the foreign banks. The foreign banks while remitting the money to the Indian Bank, deduct their charges for collection of bills which in turn are charged by the Indian Banks from the appellants. When it is so, then the appellant are not entitled to pay the service tax." 10. After appreciating the facts and in compliance to the judicial discipline, we are of the considered opinion that the demands raised cannot sustain and requires to be set aside. Ordered accordingly. Since the demands itself could not be sustained, invocation of extended period and imposition of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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