Relief to Samsung Electronics: CESTAT quashes Service Tax Demand under ‘Expenditure in Foreign Currency’ on ground of absence of Service Receiver [Read Order]

The Allahabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) granted relief to Samsung Electronics by quashing the service tax demand under the head of expenditure of foreign currency on the grounds of the absence of service receiver. 

Samsung Electronics India Pvt. Ltd, the appellant assessee was engaged in the manufacture of goods falling under Chapter 85 of the First Schedule to the Central Excise Tariff Act, 1985, and also providing/ receiving taxable services, such as management consultant, consulting engineer, market research agency, maintenance and repair, business auxiliary service, renting of immovable property, and Information Technology and Software services. 

The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the service tax demand and for the imposition of penalties along with the interest against the assessee. 

Atul Gupta and Prakhar Shukla, the counsels for the assessee contended that the service if any has been received it was by the Indian Bank and not by the assessee. Hence, the amount charged by foreign banks to Indian banks prima facie cannot be considered as service received by the assessee. 

Manish Raj, the counsel for the department contended that the foreign bank had no office in India, hence the assessee, being the receiver of services from the foreign bank, was liable to pay service tax on the services under section 66A of the Finance Act, 1994. 

The Bench observed that in the case of Kalpataru Power Transmission Ltd, the court held that the assessee does not have any kind of interaction with foreign banks, and the service if any has been received it was by the Indian Bank and not by the assessee and no service tax can be charged from them under Section 66A of the Finance Act. 

The two-member bench comprising P K Choudhary (Judicial) and Sanjiv Srivastava (Technical) quashed the service tax demand imposed against the assessee while allowing the appeal filed by the assessee. 

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