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PJ/CASE LAW/2014-15/2460

Whether service tax liability arise on the commission retained by the UK Branch of Standard Chartered Bank for collection of export proceeds?

Case:-RAYMOND LTD Vs COMMISSIONER OF SERVICE TAX - II, MUMBAI
 
Citation:-2014-TIOL-2177-CESTAT-MUM
 
Brief facts:-The appeal and stay petition are directed against Order-in-Appeal No. 574/PD/14 dated 20.04.2014 passed by Commissioner, Central Excise & Service Tax (Appeals-IV), Mumbai. Under the impugned order, the learned appellate authority had upheld confirmation of service tax demand of Rs. 14,69,439/- alongwith interest thereon and also imposition of equal amount of penalties by the adjudicating authority vide order-in-original No. 50/ST-II/Addl.SKS/DN VI/12-13 dated 20.03.2013. Aggrieved of the same the appellant is before Tribunal.
 
Appellant’s contention:-The learned counsel for the appellant submits that they had a manufacturing unit of textile products and exported goods to the foreign buyer. The bills for collection of the export proceeds were handed over to Standard Chartered Bank at Fort, Mumbai. The Standard Chartered Bank undertook collection of the export proceeds through their office in UK who retained a part of the amount towards collection charges. The department is asking the appellant to pay service tax on the amount retained by the UK branch of the Standard Chartered Bank on reverse charge basis under Section 66A of the Finance Act, 1994.
 
The learned counsel for the appellant submits that they have no transaction or no contract with Standard Chartered Bank at UK. They had handed over the bills to Standard Chartered Bank at Mumbai and the said bank has discharged the liability on the commission charged by them. Since both the service provider and the service recipient are situated in India, the question of demanding service tax from the appellant in respect of the commission retained by the Standard Chartered Bank in UK does not arise at all. He further submits that for the subsequent period the department has accepted this contention and dropped the service tax demand. Accordingly, he prays for grant of stay.
 
Respondent’s contention:-The learned Superintendent (AR) for the Revenue reiterates the finding to pay service on the commission retained by the UK Branch of Standard Chartered Bank.
 
Reasoning of judgment:-The Hon’ble court notice that the contract for collection is between the appellant and the Bombay branch of the Standard Chartered Bank. Thus both the service provider and service recipient are situated in India and therefore there is no import of service involved. How the Standard Chartered Bank in Mumbai makes arrangement for collection is not the business of the appellant, nor are they concerned with that. They, therefore, find that the appellant has made out a prima facie case for wavier of pre-deposit. They therefore grant unconditional waiver of pre-deposit of the dues adjudged vide the impugned order and stay of recovery thereof during the pendency of the appeal.
 
Decision:- Stay granted.
 
Comment:- The analogy of the case is that service tax liability should not arise on the commission retained by UK branch of the Standard Chartered Bank because there is no relation of service provider or service receiver between appellant and UK branch office. The appellant have no transaction or no contract with SCB at UK. Appellant hand over bills to SCB at Mumbai and the said bank has discharged the liability on the commission charged by them. Hence, service tax on commission retained by SCB in UK does not arise.
 
Prepared by:- Monika Tak

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