2019 (8) TMI 1523 - AT - Service Tax

Eligibility of exemption - N/N.22/2006-ST dated 31.05.2006 - Banking or Financial service - agency services - collection of taxes and remittance to RBI - services rendered by UCO Bank to RBI - HELD THAT - The issue decided in the case of CCE S.T. CHANDIGARH VERSUS STATE BANK OF PATIALA 2016 (10) TMI 800 - CESTAT NEW DELHI where it was held that Decision in the case of M/s. Canara Bank Versus CST, Bangalore 2012 (6) TMI 274 - CESTAT, AHMEDABAD relied upon where it was held that appellant is held to be eligible for exemption as an agent of RBI. Further it is being observed that against the larger Bench decision the department has preferred appeal before the Hon ble Supreme Court being Civil Appeal No.9981 of 2017. The order of the larger Bench of the Tribunal has not been stayed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmation of demand for Service Tax, appeal against dropping of demand and non-imposition of penalty.

Analysis:
The case involved an appeal against an Order-in-Original where both the assessee and the department contested the decision. The assessee, a bank, was engaged in carrying out Government transactions on behalf of the Reserve Bank of India (RBI) and received remuneration known as "Agency Commission." The dispute arose when a show cause notice alleged that these services provided by the bank to the RBI were taxable under 'Banking and Other Financial Services.' The appellant contended that the services were exempt from Service Tax as they were acting as an agent of the RBI, which was explicitly exempted under Notification No.22/2006. The Tribunal referred to a previous decision and held that if the RBI was exempted from Service Tax liability, its agent (the bank) should also benefit from the exemption. The Tribunal dismissed the appeal filed by the department and allowed the appeal filed by the appellant.

The Tribunal's decision was based on the interpretation of Notification No.22/2006, which granted exemption from Service Tax to services provided to or by the RBI. The Tribunal reasoned that as the bank was acting as an agent of the RBI, it should be extended the same benefit of exemption. The Tribunal also emphasized that the bank, as the agent of the RBI, was transacting Government business, which is considered a sovereign function performed on behalf of the Government and hence not liable to Service Tax. The Tribunal rejected the department's arguments based on case law and upheld the appellant's claim for exemption under the notification.

The department had preferred an appeal before the Supreme Court against the Tribunal's decision, but the order of the Tribunal had not been stayed. Despite the department's appeal, the Tribunal allowed the appellant's appeal against the demand for Service Tax and rejected the appeal filed by the Revenue. The Tribunal concluded that the law as laid down in a previous case was the correct exposition of the law, and the present appeal had no merit, leading to the dismissal of the Revenue's appeal.