GST update /2026-27/0020

M/s Annur Cotton Mills [A unit of Sharadha Terry Products Ltd.] vs Commissioner of GST & Central Excise

GST UPDATE

Hon’ble Authority: Customs, Excise & Service Tax Appellate Tribunal, Chennai Bench
Case Title: M/s Annur Cotton Mills [A unit of Sharadha Terry Products Ltd.] vs Commissioner of GST & Central Excise
Appeal No.: Service Tax Appeal No. 41266 of 2017
Date of Decision: 25.03.2026
Outcome: Appeal Allowed – Demand of Service Tax under Reverse Charge Mechanism (RCM) on foreign bank charges set aside

Brief Facts of the Case

The appellant, M/s Annur Cotton Mills, engaged in textile processing activities, was involved in export transactions with foreign buyers. During the course of such exports, payments were received through banking channels involving Indian banks as well as intermediary / foreign banks situated outside India. The foreign banks deducted certain bank charges while remitting export proceeds to the appellant. The Department alleged that such services rendered by foreign banks amounted to “Banking and Financial Services” (BFS) received by the appellant from service providers located outside India. Accordingly, the Department sought to levy Service Tax under the Reverse Charge Mechanism (RCM) on the appellant in respect of such foreign bank charges. A Show Cause Notice dated 06.03.2014 was issued proposing recovery of Service Tax along with applicable interest and penalties. The adjudicating authority confirmed the demand and the same was upheld by the Commissioner (Appeals). Aggrieved thereby, the appellant preferred appeal before the CESTAT, Chennai Bench.

Question before Hon’ble Tribunal:

• Whether bank charges deducted by foreign intermediary banks in export transactions are liable to Service Tax under Reverse Charge Mechanism?
• Whether the appellant can be treated as recipient of “Banking and Financial Services” provided by foreign banks?

Brief Arguments by Appellant:

The appellant submitted that the identical issue for an earlier period had already been decided by the Chennai Bench of the Tribunal in the appellant’s own case vide Final Order No. 40537/2025 dated 27.05.2025 wherein the demand had been set aside.
It was argued that deduction of charges by foreign banks during remittance of export proceeds does not result in taxable import of banking services liable to Service Tax under RCM.
The appellant contended that once the Tribunal had already decided the identical issue in favour of the assessee, the same view ought to be followed in the present matter as well.

Brief Arguments by Respondent

The Revenue contended that foreign banks had rendered banking and financial services to the appellant in relation to export remittances and therefore the appellant, being the recipient of such services in India, was liable to discharge Service Tax under Reverse Charge Mechanism.

Findings and Judgment

The Tribunal observed that the very same issue had already been examined by the Chennai Bench in the appellant’s own case for an earlier period, wherein the demand had been set aside. The Bench held that following the earlier binding decision and maintaining judicial consistency, there existed no justifiable reason to sustain the impugned demand.
Accordingly, the impugned order was set aside and the appeal was allowed with consequential reliefs as per law.

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GST update /2026-27/0020

GST UPDATE

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