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ST - Contract for collection of proceeds from foreign buyer is between appellant and its Indian branch - Thus, both are situated in India and, therefore, there is no import of service involved - Stay granted: CESTAT

By TIOL News Service

MUMBAI, NOV 05, 2014: A service tax demand of Rs.14,69,439/- alongwith interest and penalties confirmed by the adjudicating authority was upheld by the Commissioner(A) and, therefore, the appellant is before the CESTAT.

The facts are that the appellant has a manufacturing unit of textile products and exported goods to the foreign buyer. The bills for collection of the export proceeds were handed over to Standard Chartered Bank at Fort, Mumbai. Standard Chartered Bank undertook collection of the export proceeds through their office in UK who retained a part of the amount towards collection charges.

The department is asking the appellant to pay service tax on the amount retained by the UK branch of the Standard Chartered Bank on reverse charge basis under Section 66A of the Finance Act, 1994.

Before the CESTAT, in appeal against the confirmation of service tax demand, the appellant submitted that they have no transaction or no contract with Standard Chartered Bank at UK; that they had handed over the bills to Standard Chartered Bank at Mumbai and the said bank has discharged the liability on the commission charged by them; since both the service provider and the service recipient are situated in India, the question of demanding service tax from the appellant in respect of the commission retained by the Standard Chartered Bank in UK does not arise at all.

It is also submitted that for the subsequent period the department has accepted this contention and dropped the service tax demand.

The AR does not want to let go of this confirmed demand and reiterates what the lower authorities had held.

The Bench observed -

"7. We notice that the contract for collection is between the appellant and the Bombay branch of the Standard Chartered Bank. Thus both the service provider and service recipient are situated in India and therefore there is no import of service involved. How the Standard Chartered Bank in Mumbai makes arrangement for collection is not the business of the appellant, nor are they concerned with that. We, therefore, find that the appellant has made out a prima facie case for wavier of pre-deposit…."

In fine, the CESTAT granted unconditional waiver of pre-deposit of the adjudged dues & stayed the recovery.

(See 2014-TIOL-2177-CESTAT-MUM)


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