2012 (5) TMI 32 - AT - Service Tax

Whether the payment made by the applicant bank to Society for Worldwide Inter-bank Financial Telecommunication (SWIFT) for transfer of funds to members Banks is liable to service tax - Held that - As per provisions of Section 65(12) the definition of banking and other financial services which provide the services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern, namely provision and transfer of information and data processing the activity undertaken by the applicant is covered under the banking and other financial services - no waiver of pre-deposit of the service tax - against assessee.

Summary

Issues involved:
Service tax liability for payment made to Society for Worldwide Inter-bank Financial Telecommunication (SWIFT) for transfer of funds to member Banks under the category of 'Banking and other Financial Services'.

Analysis:

1. Service Tax Liability for SWIFT Payment:
The issue in question was whether the payment made by the appellant to SWIFT for transferring funds to member Banks is liable to service tax under the category of 'Banking and other Financial Services'. The appellant argued that their service falls under telecommunication service or Club and Association service, hence exempt from service tax. However, upon examination of the definition of 'banking and other financial services' as per Section 65(12) of the Finance Act, 1994, the Tribunal found that the activity undertaken by the appellant indeed falls under this category. Consequently, the Tribunal ruled that the appellant failed to establish grounds for waiving the pre-deposit of the service tax amount. The appellant was directed to make the pre-deposit within eight weeks, and compliance was to be reported by a specified date. Upon compliance, the interest and penalties under the Finance Act were to be waived and stayed during the pendency of the appeals.

2. Judgment and Direction:
The Tribunal, consisting of Ashok Jindal and P R Chandrasekharan, JJ., deliberated on the matter. After hearing arguments from the appellant's consultant and the respondent's representative, the Tribunal analyzed the provisions of the Finance Act, 1994, specifically focusing on the definition of 'banking and other financial services'. The Tribunal concluded that the services provided by the appellant, including the provision and transfer of information and data processing, fell within the ambit of 'banking and other financial services'. As a result, the Tribunal upheld the service tax demand against the appellant and directed them to make the required pre-deposit within the stipulated timeline. Compliance with the directive would lead to the waiver and stay of interest and penalties under the Finance Act during the appeal process.

In summary, the judgment by the Appellate Tribunal CESTAT, Mumbai, confirmed the service tax liability against the appellant for the payment made to SWIFT for fund transfers to member Banks under the category of 'Banking and other Financial Services'. The Tribunal determined that the appellant's activities aligned with the definition provided in the Finance Act, 1994, and thus, the appellant was required to make a pre-deposit of the service tax amount. Compliance with this directive would result in the waiver and stay of interest and penalties under the Finance Act during the pendency of the appeals.