2018 (6) TMI 584 - AT - Service Tax

Banking and Other Finance Services - appellants are a registered Trust as a Federation of Women in Micro Credit providing loans to Women s Self Help Groups (SHG) engaged in micro finance - demand of service tax liability under Section 65 (12) ibid is only on the allegation that the appellants are a financial institution - scope of SCN - Held that - As it has already been found that the appellants would not fall within the ambit of banking company or financial institution for the purposes of Section 65 (12) ibid, that allegation in the SCN and its confirmation in the impugned order cannot then be sustained - the SCN has clearly proposed the demand of service tax only on the ground that appellants are a financial institution and not on a charge that their services are taxable since they have been done by any other person‛. This being so, this argument of the Ld. A.R is therefore outside the scope of the SCN and hence cannot be raised at this stage. Taking into account that appellants are only a Charitable Trust and have already paid up remaining demand pertaining to Rent-a-cab service amounting to ₹ 1,46,260/-, we also set aside any penalty in respect of that demand - the impugned order confirming the tax liability along with interest and penalty against the appellant on Banking and Other Financial Services will require to be set aside - appeal allowed in part.

Summary

Issues:
1. Whether the activities of the appellant fall within the ambit of 'Banking and Other Finance Services' as per Section 65(12) of the Finance Act, 1994?
2. Whether the proceedings are barred by limitation due to the appellant's belief that no service tax was payable?
3. Whether the appellant, being a charitable trust, can be considered a commercial concern and fall under the category of a financial institution?
4. Whether the demand for service tax on Rent-a-cab service on a reverse charge basis is contestable?
5. Whether the impugned order confirming tax liability on 'Banking and Other Financial Services' is sustainable?

Analysis:
1. The appellant, a registered Trust providing loans to Women's Self Help Groups, was issued a show cause notice proposing a service tax demand under 'Banking and Other Finance Services' for the period October 2004 to March 2009. The Commissioner confirmed the tax demand and imposed penalties. The appellant argued that they do not fall under the definition of a financial institution as per Section 65(12) of the Act since they are a charitable trust engaged in micro lending, not involved in deposit collection. The Tribunal held that the appellant does not qualify as a banking company or financial institution, thereby setting aside the tax liability, interest, and penalties.

2. The appellant contended that the proceedings are barred by limitation due to their belief that no service tax was payable, being a charitable trust exempt from taxes. The Tribunal considered this argument but focused on the appellant's classification as a financial institution under the Act, ultimately ruling in favor of the appellant based on the definition and activities.

3. The appellant relied on legal precedents to support their stance that as a charitable trust, they cannot be considered a commercial concern or a financial institution. The Tribunal analyzed the definition of a financial institution and noted that the appellant did not meet the criteria outlined in the RBI Act, thereby concluding that the appellant does not fall under the 'Banking and Other Financial Services' category.

4. The appellant accepted a demand for service tax on Rent-a-cab services on a reverse charge basis for a specific period, attributing non-payment to ignorance of the law. The Tribunal acknowledged this acceptance and set aside any penalty related to this specific demand, considering the appellant's charitable trust status and timely payment.

5. The Tribunal scrutinized the impugned order confirming tax liability on 'Banking and Other Financial Services' and found that the appellant, being a charitable trust not meeting the criteria of a financial institution, should not be held liable under this category. Consequently, the Tribunal set aside the tax liability, interest, and penalties, partially allowing the appeal based on the appellant's charitable trust status and compliance with the Rent-a-cab service demand.