2026-VIL-1513-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax – Demand under Reverse Charge Mechanism on charges deducted by foreign and intermediary banks - Service Provider-Recipient Relationship – Appellant-Exporter of goods receiving export proceeds remitted through foreign banking channels and banks deducting charges while transmitting such remittance - The appellant, being an exporter of goods, can be regarded as recipient of services rendered by foreign banks/intermediary banks involved in transmission of export proceeds remitted by foreign buyer and, consequently, service tax is payable by the appellant under RCM on the charges deducted by such foreign banks / intermediaries - HELD - Levy under Reverse Charge contemplated under Finance Act, 1994 must first establish the taxable relationship between service provider and service recipient - Merely because foreign banks deducted charges from export proceeds, cannot automatically be concluded that service provider-service recipient relationship exists between foreign intermediary banks and exporter - For establishing Reverse Charge liability, there must be evidence showing that foreign banks were engaged by exporter for rendering services to it - Absence of any evidence that Appellant had entered into contractual arrangement with foreign banks or was under obligation to pay consideration to such banks for any service rendered to it - Intervention of corresponding or intermediary banks in transmission of funds is essentially part of inter-bank arrangement for transfer of money - Appellant cannot be fastened with Service Tax merely because amount ultimately credited to its account is net of certain bank charges - Service provider must be engaged and there must be contractual nexus for levy of tax to be justified - Tribunal's earlier decision in Appellant's own case for preceding period setting aside demand has not been shown to be reversed or stayed by any higher judicial forum - Demand of Service Tax under Banking and Other Financial Services on charges deducted by foreign and intermediary banks is not sustainable and is set aside - Service Tax - Scientific or Technical Consultancy Services - Classification of Regulatory Documentation Services - Pharmaceutical manufacturer and exporter engaging foreign entities for compilation and preparation of documentation necessary for filing regulatory applications and obtaining approvals before overseas regulatory authorities - Whether services for preparation and compilation of regulatory dossiers and assistance in obtaining regulatory approvals for pharmaceutical products constitute taxable Scientific or Technical Consultancy Services - HELD - Essential character of service must be determined from nature of activity actually undertaken and not merely from professional qualifications of persons rendering service - Possession of scientific or technical expertise by consultant does not ipso facto make every activity undertaken by such consultant a Scientific or Technical Consultancy Service - For taxable service in question there must be advice, consultancy or scientific and technical assistance rendered by scientist, technocrat or science or technology institution or organisation in a discipline of science or technology - Preparation and compilation of documentation for regulatory filings from information already available with service recipient or in published literature cannot, without anything further, be equated with Scientific or Technical Consultancy - In present case Appellant's own earlier decision squarely applies to present period where Tribunal examined very same foreign service providers and substantially identical activities and held that services relating to obtaining permissions and registrations and meeting regulatory requirements for marketing pharmaceutical products abroad cannot be classified as Scientific or Technical Consultancy Services - Service Tax in respect of payments had been discharged under category of Management or Business Consultant Service and amount so paid was appropriated in impugned order while simultaneously confirming demand by reclassifying activity under Scientific or Technical Consultancy Service - Once classification adopted by Revenue itself is found not sustainable, consequential demand cannot survive - Services rendered by foreign entities for preparation and compilation of regulatory dossiers and assistance in obtaining approvals cannot be classified under Scientific or Technical Consultancy Service - Demands under this head are set aside.
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