2025-VIL-844-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Banking and Other Financial Services, Business Auxiliary Services, Design Services - Appellant exported goods manufactured by him and received consideration in foreign currency from buyers. The Department observed that the appellant had paid certain expenses in foreign currency, on which tax had not been paid under the Reverse Charge Mechanism (RCM) - Whether bank charges paid to foreign banks are subject to service tax under Reverse Charge – HELD - The bank charges paid by the appellant to foreign banks were not subject to service tax under reverse charge. The foreign buyers or clients of the appellant availed the services of the foreign banks to facilitate payments to the appellant in foreign currency. There was no arrangement between the foreign banks and the appellant, and the appellant had merely borne the bank charges based on an understanding with their foreign buyers/clients. The service provider and service recipient relationship existed between the foreign bank and the buyer, and not between the foreign bank and the appellant. Consequently, no service had been provided by the foreign bank within the taxable territory to the appellant, and hence, no service tax was leviable on the bank charges - the impugned order and allowed the appeal of the appellant - Whether commission paid to agents is liable to service tax under Reverse Charge – HELD - The commission paid by the appellant to foreign agents was not liable to service tax under reverse charge. The foreign agents had been appointed by the foreign buyers to identify potential suppliers, and the commission was paid by the appellant as per the terms and conditions of the sale with the foreign buyers. There was no evidence to show that the appellant had any direct transaction or contract with the foreign agents, and the commission was merely a discount extended by the appellant to the foreign buyers. Accordingly, the Tribunal held that the demand of service tax on the commission paid by the appellant cannot be sustained - Whether design charges paid to professionals are subject to service tax under reverse charge – HELD - The design charges paid by the appellant to foreign professionals were not subject to service tax under reverse charge. The terms of the agreement with the foreign buyers were that the appellant would bear the artwork charges, and the appellant had paid these charges as per the terms and conditions of the sale with the foreign buyers. The Tribunal held that there was no evidence to show that the appellant was the recipient of the services of the design charges, and the charges were paid by the appellant as per the mutual agreement with the foreign buyers - Whether the extended period of limitation has been rightly invoked – HELD - The invocation of the extended period of limitation cannot be sustained. The Tribunal observed that even if the appellant was legally required to pay the amount of service tax under the reverse charge mechanism, the appellant would be entitled to avail CENVAT credit of the amount of service tax so paid and utilize it against payment of duties in respect of its clearances of final products. This would clearly render the situation to be revenue neutral, and hence, the extended period cannot be upheld.
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