2017 (2) TMI 1347 - AT - Service Tax

Demand of service tax - appellant are getting the commission from the RBI for the tax collection, RBI bonds, payment of pension, PPF etc. - Held that - the bank has been appointed by the RBI as its agent under Section 45 of the RBI Act. RBI itself has been entrusted by the Central Government to transact Government business. Hence the bank has been appointed as agent of RBI, it is transacting Government business which is in the nature of a sovereign function performed on behalf of the Government and hence not liable to service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Applicability of service tax on activities of a subsidiary of State Bank of India acting as an agent of RBI for transacting Government business.

Condonation of Delay:
The appeal was filed against Order-in-Original No.3/2012-Hyd-III-Adjn. There was an application for condonation of delay in filing the appeal. The appellant claimed that the appeal was filed within the time limit, and there was no delay. The learned consultant and the learned AR both agreed that there was no delay. The Tribunal allowed the condonation of delay application based on the statements provided.

Applicability of Service Tax:
The appellant, a subsidiary of State Bank of India, was authorized by the RBI to transact Government business in India, including receiving and remitting money on behalf of the Government of India. The Department demanded service tax on these activities. The appellant claimed to be the agent of the RBI under Section 21A of the RBI Act and had powers to transact Government business of the States on agreement. The Tribunal found that the issue was covered in favor of the appellant by the ratio of a Larger Bench of Tribunal in a previous case. The Larger Bench clarified that when a bank is appointed as an agent of the RBI, transacting Government business, which is a sovereign function performed on behalf of the Government, it is not liable to service tax. Based on this legal position, the Tribunal found no merit in the impugned order and set it aside, allowing the appeal filed by the appellant.

In conclusion, the Tribunal allowed the appeal, stating that the appellant, acting as an agent of the RBI for transacting Government business, was not liable to pay service tax on the activities mentioned.