By TIOL News Service

MUMBAI, APRIL 18, 2018: THE appellant, a manufacturer of textile products, exported goods to the foreign buyer. The bills for collection of the export proceeds were handed over to Standard Chartered Bank at Fort, Mumbai. The 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 asked 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.

Inasmuch as the department alleged that the Appellant had ‘incurred expenditure' in ‘foreign currency' as amounts were deducted from export proceeds by the banks towards their charges and which are liable to service tax.

SCN was issued and the demand was confirmed along with penalties.

As the Appellate Commissioner upheld the order, the assessee filed an application for stay before the CESTAT.

The CESTAT had held –

We reported this case as - 2014-TIOL-2177-CESTAT-MUM.

In a similar case of Dileep Industries Pvt. Ltd. decided by the Tribunal, the facts mentioned were –

++ While exporting their goods, appellants 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.

++ 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.

The CESTAT, Principal Bench, Delhi had in the referred case, therefore, held - 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. [reported as -  2017-TIOL-3755-CESTAT-DEL]

Concluding that the issue is no more disputed and stands resolved by the aforementioned order, the demand and penalties imposed against the Appellant in the present case were held as unsustainable.

The impugned order was set aside and the appeal was allowed with consequential relief.

(See 2018-TIOL-1250-CESTAT-MUM)