2011 (6) TMI 290 - AT - Service Tax

Refund of service tax paid - Sourcing of customers - Notification No.14/2005 dated 10.9.2004. - Appellant was remunerated by ICICI, HFC in pursuance of the terms of understanding between the bank and the Respondent for the service provided to the Bank principal - Revenue was of opinion on the facts as stated above, at the outset, that the nature of the service provided was misconstrued by the Appellate Authority to hold that refund is admissible to the Respondent which is not permissible by law - there was de-link of the entire transaction splitting into two different aspects, each aspect needs examination under touchstone of law. The transaction of the Respondent brought it to the fold of law - Revenue Appeal allowed.

Issues:
1. Admissibility of refund to the Respondent for service provided to a bank.
2. Interpretation of Notification No. 14/2005 dated 10.9.2004 regarding service tax liability.
3. Classification of the nature of service provided by the Respondent to the bank and its clients.

Analysis:
1. The Appellate Tribunal addressed the issue of the admissibility of a refund to the Respondent for providing services to a bank. The Tribunal noted that the Respondent was engaged by a bank to source customers for housing finance. The Revenue contended that the service provided by the Respondent was misconstrued by the first Appellate Authority, leading to the erroneous allowance of the refund. The Tribunal examined the nature of the service provided and concluded that the Respondent was a service provider to the bank, not on behalf of the bank to its clients. As there was no evidence of the Respondent providing services to third parties on behalf of the bank, the Tribunal held that the first Appellate order was incorrect, and the Revenue's appeal was allowed.

2. The Tribunal delved into the interpretation of Notification No. 14/2005 dated 10.9.2004 concerning service tax liability. The first Appellate Authority had relied on this notification to support the refund claim of the Respondent. However, upon scrutiny, the Tribunal found that the Respondent did not fall under the categories specified in the notification. The Tribunal emphasized that the Respondent was solely a service provider to the funding banks and did not have any obligation towards the bank's clients. Therefore, the Tribunal concluded that the first Appellate order misinterpreted the notification, leading to the allowance of the refund erroneously.

3. Regarding the classification of the nature of service provided by the Respondent to the bank and its clients, the Tribunal highlighted the distinct services offered in the transaction. The Respondent's role was identified as promoting the market for the financing bank, while the bank provided financial services to its clients. The Tribunal emphasized that the Respondent did not act on behalf of the bank towards its clients and was solely a service provider to the bank. As there was no tripartite agreement or evidence of the Respondent's obligation towards the bank's clients, the Tribunal concluded that the first Appellate order's misconception of the law led to the erroneous allowance of the refund. Consequently, the Revenue's appeal was approved.

In conclusion, the Appellate Tribunal, in its detailed analysis, clarified the nature of the services provided by the Respondent, the interpretation of the relevant notification, and the admissibility of the refund. The decision emphasized the distinction between the services rendered by the Respondent to the bank and its clients, ultimately leading to the allowance of the Revenue's appeal based on the misinterpretation of the law by the first Appellate Authority.

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