The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service tax liability lies on the Indian Bank if any bank charges are paid by the Indian Bank to Foreign Banks in connection with any import or export of goods.
Dishman Pharmaceuticals & Chemicals Ltd, the appellant assessees was engaged in the export of goods while remitting the export proceeds to the Indian bank of the assessee and the assessee’s Indian Bank had paid service tax on such bank charges, the Indian bank remitted the said export proceeds to the assessee’s account.
R. Subramanya, the counsel for the assessee contended that in the entire admitted transaction the assessee had no dealing with the foreign banks and as regards the deduction made by the foreign bank while remitting the export proceeds to the Indian Bank, the dealing was between the Indian Bank and the Foreign Bank.
Further submitted that the foreign bank was a service provider and the Indian bank was a service recipient who is legally liable to discharge the service tax, therefore, the demand cannot be raised from the assessee.
Prakash Kumar Singh, the counsel for the department relied on the decisions made by the lower authorities and contended that the demand of service tax raised by the department on the assessee was as per the law and liable to be sustained.
The Bench observed that in this transaction the service provider was the foreign bank and the service recipient was an Indian Bank located in India as the recipient of service from the foreign bank was liable to pay service tax under the reverse charge mechanism, in terms of Rules 2 (d) (1) (iv) of Service Tax Rules, 1984.
The two-member bench comprising Ramesh Nair (Judicial) and C.L Mahar (Technical) quashed the demand for service tax and held that the assessee was not held to be liable for payment of service tax.
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