2026-VIL-826-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Taxability of service charges deducted by foreign banks from export proceeds - The appellant is a manufacturer and exporter of knitted garments. The foreign banks deducted their specified charges from the export sales proceeds due to the appellant before transferring the balance amount to the appellant's Indian bank account - Department alleged that such amounts deducted were the consideration paid by the appellant for the taxable service of "Banking and other Financial Services" provided by the foreign banks and hence the appellant was liable to pay service tax under reverse charge mechanism - Whether the amounts deducted by foreign banks towards bank charges on export proceeds while transferring the same to the appellant's Indian bank account are exigible to service tax at the hands of the appellant under RCM - HELD - The demand is unsustainable as the department has merely made an assumption without any evidence to show the existence of a service provider and service recipient relationship between the appellant and the foreign banks. It is settled that demand cannot be based on assumptions and presumptions. Further, there is no privity of contract between the appellant and the foreign remitting bank, and the foreign bank acted on the instructions of the foreign buyer to fulfil the buyer's obligation to remit payment. The Tribunal relied on its own prior rulings and held that the liability, if any, would rest with the Indian bank as the entity receiving the "remittance service" from the foreign bank, and not with the appellant exporter - The impugned order is set aside and the appeal is allowed
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GSTAT Appeal filed wrongly...
By CA Vivek Jalan

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