2018 (8) TMI 699 - AT - Service Tax

Banking and other Financial Services - Benefit of N/N. 6/2006- ST dated 01.03.2006 - appellant, agent of RBI - It was contended by the Department that CBEC vide its Circular No. 356/53/2007 TRU has clarified that service is leviable on the taxable services provided irrespective of status of the consumer of service - Held that - The appellants are working as an agent of RBI in the discharge of sovereign functions, therefore, whatever exemption is applicable to RBI, that should also be applicable to the appellants who are working as an agent in the discharge of statutory/sovereign functions. Issue is squarely covered by the decision in the case of M/S. CANARA BANK VERSUS CST, BANGALORE 2012 (6) TMI 274 - CESTAT, AHMEDABAD , where it was held that Exemption to the principal would be available to the agent also. Appeal allowed - decided in favor of appellant.

Summary

Issues: Allegation of providing taxable service under Banking and other Financial Services, applicability of exemption, scope of Service Tax, agency relationship with RBI, interpretation of statutory functions exemption.

In this judgment by the Appellate Tribunal CESTAT BANGALORE, the issue revolved around the allegation that the appellants, a banking company, were acting as agents for the Reserve Bank of India (RBI) and receiving agency commission, which was considered a taxable service under Banking and other Financial Services. The Department contended that the services provided to the RBI were taxable from a certain date and issued a Show Cause Notice (SCN) to the appellants. The Department relied on a circular clarifying the levy of taxes on taxable services provided, regardless of the consumer's status. The Commissioner confirmed the demand in the Order-in-Original. The appellants argued that the SCN exceeded the scope of the Finance Act, 1994, as the Department was aware of their activities, and the extended period for invoking tax evasion allegations was not justified. They contended that the services provided were exempt under a specific notification and cited a precedent where similar issues were settled in favor of the bank.

The Appellate Tribunal analyzed the case in light of a previous judgment involving Canara Bank, where it was held that an agent working on behalf of RBI in the discharge of sovereign functions would be eligible for the same exemptions as the principal. The Tribunal noted that if RBI were to undertake the same activities, no Service Tax would be applicable, as RBI itself was exempt. Therefore, the Tribunal concluded that the appellants, working as agents of RBI in the discharge of sovereign functions, should also benefit from the same exemptions applicable to RBI. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.