2015 (6) TMI 625 - AT - Service Tax

Nature of activity - collection of octroi on behalf of the Municipal Corporation - cash management activity or not - Banking and other Financial Services - Held that - Reading the definition of banking and financial services and the meaning of financial institution, we have to hold that the services rendered by the appellant would not fall under the category of service provided by a banking or a financial institution or any other body corporate or commercial concern. - cash management involves something more like contracting a debt collection service to retrieve what is owned by a customer, and also investing such cash which would lead to avoiding insolvency and bankruptcy and also reduced the days of the debt, increasing collection rates, selecting appropriate short-term investment vehicles, and also strategically by increasing days cash on hand in order to improve a company s overall financial profitability. In the case in hand, we find that it is undisputed as to the appellant is only collecting an amount as octroi the vehicles, in which goods transported and octroi liability arises. In our view this will not encompass ingredients of cash management. In the absence of any cash management activity undertaken by the appellant, we find that the services rendered by the appellant will not fall under the category of banking and financial services. Yet another angle to this case is that CBEC vide Circular No. 83/1/2006-ST dated 4.7.2006 while clarifying as to the services provided by Department of Posts in respect of money orders, operation of bank accounts issue of postal orders etc. - CBEC was of the view that any services to fall under the category of banking and financial services, the expression any other person needs to be read ejusdem generic with the preceding words and the services are to be provided by any person should be similar to a bank or financial institution. In the case in hand, as is recorded by us, it is undisputed that appellant is not financial institution. - Decided in favour of Assessee.

Summary

Issues involved:
Classification of services under the category of banking and financial services.

Detailed analysis:
The judgment involves three appeals filed against different orders but concerning the same issue, all disposed by a common order. The appellant contested the demand confirmed under "Banking and other Financial Services" for a specific period, arguing against being classified as a financial institution. The Revenue challenged the Orders-in-Appeal that favored the appellant. The core issue revolved around whether the services provided fell under banking and financial services or not.

The appellant, a bidder for collecting octroi on behalf of municipal bodies, argued against being categorized as a financial institution, emphasizing that the services provided did not align with banking and financial services definitions. The appellant highlighted the definition of cash management and contended that the services rendered did not fall within the banking and financial services category. The appellant also challenged the reliance on certain circulars by the adjudicating authority.

On the contrary, the Revenue asserted that the appellant's activities constituted cash management, citing a circular from 2007 that specifically mentioned the collection of receivables. The Revenue argued that the appellant's role in collecting and retaining amounts for services rendered fell under banking and financial services.

The tribunal analyzed the definitions of banking and financial services and financial institutions, emphasizing that to be covered under such services, the entity must be a banking company, financial institution, or similar commercial concern. The tribunal referred to a previous judgment to support its conclusion that the appellant did not meet the criteria to be classified as a financial institution. The tribunal further elaborated on the concept of cash management, stating that the appellant's activities did not align with the comprehensive scope of cash management as defined.

Additionally, the tribunal referenced a CBEC circular from 2006, clarifying that services falling under banking and financial services must be provided by entities similar to banks or financial institutions. Since the appellant did not meet this criterion, the tribunal concluded that the appellant's services did not fall under banking and financial services. Consequently, the tribunal allowed the appellant's appeal and rejected the Revenue's appeals, setting aside the impugned order in favor of the appellant.