2014 (11) TMI 832 - AT - Service Tax

Waiver of predeposit of tax - levy of service tax on bill discounting charges in the course of purchase and sales - Banking and Other Financial Services - Held that - Prima facie, we are unable to accept the contention of the Commissioner (Appeals). As per Section 65 (12) (a) (ix), Banking & Other Financial Service would include the bill discounting services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern. Apparently, the bill discounting are related to processing charges collected by the said institutions from the recipient of service. But, in the present case, the bill discounting is during the course of sale of goods between the buyer and seller and prima facie, no service tax is leviable. - Prima facie case in favour of assessee - Stay granted.

Summary

Issues:
Waiver of predeposit of tax for the period 2007-08 and 2008-09 under the category of "Banking and Other Financial Services."

Analysis:

1. The applicant sought waiver of predeposit of tax amounting to Rs. 1,77,259 along with interest and penalty for the period 2007-08 and 2008-09 under the category of "Banking and Other Financial Services." The Commissioner (Appeals) had categorized the bill discounting as a banking service subject to service tax. However, the Tribunal found that the bill discounting in this case occurred during the sale of goods between the buyer and seller, not as a separate financial service provided by a banking company or financial institution. The Tribunal referred to Section 65(12)(a)(ix) which defines "Banking & Other Financial Service" to include bill discounting services by specific entities. Since the bill discounting in the present case did not align with the definition under the said section, the Tribunal held that no service tax was leviable.

2. The Tribunal concluded that the applicant had established a strong prima facie case for the waiver of the entire tax amount, interest, and penalty. Consequently, the Tribunal waived the predeposit of the entire tax amount along with interest and penalty, and also stayed the recovery of the same during the pendency of the appeal. The Tribunal allowed the stay application based on the findings that the bill discounting in this case did not constitute a taxable banking or financial service as per the relevant legal provisions.

In summary, the Tribunal ruled in favor of the applicant, waiving the predeposit of tax, interest, and penalty for the period 2007-08 and 2008-09 under the category of "Banking and Other Financial Services." The decision was based on the interpretation of the legal provisions governing banking and financial services, specifically regarding bill discounting, and the conclusion that the bill discounting in this case did not attract service tax as it was part of the sale of goods transaction between the buyer and seller, not a separate financial service provided by specified entities.