No Service Tax on Reverse Charge If Services were availed Indirectly: CESTAT [Read Order]

In Raymond Limited vs. Commissioner of Service Tax, the Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that the service tax under reverse charge under Section 66A of Finance Act, 1994 is not applicable when the assessee has not availed services from a foreign country directly.

The appellant had incurred expenditure in foreign currency as amounts were deducted from export proceeds by the banks towards their charges. The proceeds of exports were collected by a foreign bank and the same was, in turn, remitted to the Indian Bank. The Revenue served a show cause notice to the appellant alleging that the charges were taxable in respect of services in India under Section 66A of the Finance Act,1994 as the service was provided from foreign country and payment were made by the appellant. The penalty under section 76 to 78 of the Finance Act, 1994 was also imposed. On appeal to the Appellate Commissioner, the adjudication order was upheld. Aggrieved, the appellant approached the CESTAT.

The bench comprising of Judicial Member Ramesh Nair & Technical Member Raju found that the issue was already decided in the case of Dileep Industries Pvt. Ltd. 2017 and extracted relevant portions of the decision in that case. The bench, in that case found that the appellant while exporting their goods lodged their bills for collection to the Indian Bankers who in turn send the same to the foreign banks and 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. On such case, the bench found that the appellant is not entitled to pay the service tax.

“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 under Section 66A read with Rule 2 (1)(2)(iv) of the Service Tax Rules, 1994.” read the order.

“In view of above order passed by the Tribunal and following the ratio of same we hold that the demand and penalties imposed against the Appellant in the present case is not sustainable. We therefore set aside the impugned order and allow the appeal with consequential reliefs, if any.” held the bench.