2011 (3) TMI 1055 - AT - Service Tax

Business Auxiliary Service - Service tax liability - Impugned period between 7/2003 to 1/2005 - respondent was collecting electricity bills and telephone bills on behalf of the electricity board and telecom companies - Held that - As in an identical issue in the case of Federal Bank Ltd. 2009 (5) TMI 78 - CESTAT BANGALORE has upheld the view of this Bench inasmuch as upholding that the services of collection of telephone bills by the bank for BSNL Airtel etc. would not fall under the category of Business Auxiliary Service attracting liability of service tax under Section 65(19) of the Finance Act 1994. It is held by the Hon ble High Court 2009 (7) TMI 579 - HIGH COURT OF KERALA that the services which are rendered by the current respondent would initially fall under Cash management services under Section 65(12) which came into effect from 01/06/2007 - no merit in the appeal filed by the Revenue.

Summary

Issues involved: Service tax liability on the respondent for the period 7/2003 to 1/2005 regarding the collection of electricity and telephone bills, classification under "Business Auxiliary Service," applicability of customer care service, interpretation of the definition of Business Auxiliary Service under Section 65(19) of the Finance Act, 1994.

Analysis:

The appeal before the Appellate Tribunal CESTAT, Bangalore, involved the service tax liability of the respondent for the period 7/2003 to 1/2005, related to the collection of electricity and telephone bills. The Revenue authorities contended that the services provided by the respondent fell under the category of "Business Auxiliary Service." A show-cause notice was issued, demanding service tax, interest, and penalties. The adjudicating authority upheld the demand, penalties, and interest. However, the assessee appealed before the ld. Commissioner(Appeals), who ruled in favor of the assessee, stating that the services provided were not covered under business auxiliary service as they were part of normal banking activity and not customer care service.

The ld. DR argued that the services rendered by the respondent should be classified as customer care service on behalf of the clients, falling under the definition of Business Auxiliary Service under Section 65(19) of the Finance Act, 1994. On the other hand, the ld. Counsel referred to a previous case involving Federal Bank Ltd., where it was held that the collection of telephone bills by the bank for entities like BSNL and Airtel did not attract service tax under Business Auxiliary Service.

After considering the submissions, the Appellate Tribunal found that the Hon'ble High Court had previously ruled in the case of Federal Bank Ltd. that similar services provided by the respondent did not fall under Business Auxiliary Service. The High Court held that such services were initially categorized as 'Cash management services' under Section 65(12). Therefore, based on the binding judicial pronouncement by the High Court, the appeal filed by the Revenue was rejected, and it was concluded that the services provided by the respondent did not attract service tax liability under Business Auxiliary Service as per the Finance Act, 1994.