2018 (11) TMI 173 - AT - Service Tax

Levy of service tax - Collection of taxes for the Central Government and the Government of State and the commission received for such collection from those Governments - Held that - The services are neither sale or marketing of goods nor promoting or marketing of services or any customer care services. In fact, collection of tax is neither a sale of good nor rendering of service. It is a compulsory payment which is collected by law from everyone by the State and the tax payer is not the customer or the client of the Government. It is in this compulsory collection of money in the form of tax, the appellant is assisting the Government of India and the State Government and is getting paid for the same - by no stretch of imagination can collection of taxes be called a business auxiliary service within the definition as per Sec. 65 (9) - demand set aside. Levy of service tax - Sale of Government of India Bonds and commission received from RBI for such sale - Held that - The service of sale of Government of India bonds is not a service and there is no tax liability - As far as the sale of mutual funds is concerned, same has been covered by exemption notification 13/2003-ST as the commission received on sale of goods was exempted - demand not sustainable. Levy of service tax - Sale of credit cards of SBI (Issuing Bank) and the commission received from SBI for such sale; d. Sale of mutual funds of SBI and the commission received for such sale from SBI - Held that - The credit card services rendered by the appellant by selling and promoting the credit card issued by their parent company viz., SBI and the commission received by them for this service fall under the definition of credit card services w.e.f. 01.05.2006. Prior to the introduction of this definition the credit card services would have been chargeable to service tax to the extent applicable and as banking and other financial services - the demand made on sale of credit cards under the head of business auxiliary services does not sustain. Whether the appellant has been issued show cause notice without jurisdiction as the head office of the appellant banking company had not rendered the services but their branches did? - Held that - The assessee opted for centralized registration for some other services and has been discharging service tax accordingly. As far as the alleged four taxable services are considered, they have not paid any service tax. Having opted for centralized registration the appellant cannot now argue that their head office has no role in providing the services and hence cannot be issued a show cause notice. It is not the case of the appellant that their branch offices are separately registered with the department for the alleged services rendered - there is no force in the arguments of the appellant that the show cause notice was issued without jurisdiction. Extended period of limitation - Whether interest is recoverable and penalty is imposable under Sec. 76, 77 & 78 of the Finance Act, 1994? - Held that - The demands raised in the impugned order are not sustainable on merits and therefore, the same needs to be set aside - the interest and penalties also need to be set aside - as demand do not sustain on merits, it is not necessary to go into the question of limitation. Appeal allowed.

Summary

Issues:
1. Jurisdiction of show cause notice
2. Taxability of various services
3. Applicability of extended period of limitation
4. Recoverability of interest and imposability of penalties

Jurisdiction of Show Cause Notice:
The appellant, a Public Sector Bank, contested a show cause notice issued by the Commissioner demanding service tax for various activities. The appellant argued that the notice was issued without jurisdiction as it was sent to the Head Office, which did not provide services, while services were rendered at branch offices. The Tribunal held that since the appellant had centralized registration and had not paid service tax for the mentioned services, the Head Office could not claim lack of jurisdiction. As the branch offices were not separately registered, the show cause notice was deemed valid.

Taxability of Various Services:
Regarding the taxability of services, the Tribunal analyzed each service separately. It was held that the sale of mutual funds and Government of India Bonds were exempt from tax under Notification No. 13/2003. Collection of taxes was considered a sovereign function and not a service, thus not subject to service tax. The sale of credit cards was found taxable only from 01.05.2006 onwards, and the demand for service tax on credit card sales before this date was deemed unsustainable.

Applicability of Extended Period of Limitation:
Since the demands raised were found to be not sustainable on merits, the Tribunal did not delve into the question of limitation, as it was unnecessary due to the lack of merit in the demands.

Recoverability of Interest and Imposability of Penalties:
As the demands were set aside on merits, the interest and penalties imposed by the Commissioner were also set aside. The appeal was allowed, and the impugned order was overturned by the Tribunal.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT Hyderabad highlights the key issues, arguments, and conclusions reached by the Tribunal in a thorough and comprehensive manner.