2025-VIL-1806-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Remittances in foreign currency, Export-import transactions, Collection of remittances made by the overseas buyers towards proceeds of exports, Demand under RCM – Appellant was providing various banking and financial services, including services related to collection of remittances made by overseas buyers towards proceeds of exports. Department alleged that when foreign banks deduct certain charges from the remittance amount and remit the net amount to the Indian banks, the Indian banks are liable to pay service tax on such foreign bank charges under reverse charge mechanism - Whether the Indian banks are the recipient of service provided by the foreign banks in the export/import transactions for settling the foreign remittances, and thus liable to pay service tax under Reverse Charge basis – HELD - By relying on the decisions in the cases of State Bank of Bikaner & Jaipur and Central Bank of India, it is held that the Indian banks are not the recipient of any service rendered by the foreign banks in the export/import transactions for settling the foreign remittances. The Indian banks merely act as an agent of the Indian exporters/importers and facilitate the settlement of payments. There is no flow of consideration from the Indian banks to the foreign banks, and hence, the Indian banks cannot be made liable to pay service tax under RCM on the foreign bank charges. The transactions are in compliance with the legal requirements and the Indian banks do not have any role in the payment of foreign bank charges, which are borne by the Indian exporters/importers - The impugned orders are set aside and the appeals are allowed
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