2024 (1) TMI 6 - AT - Service Tax

Levy of service tax - Services retendered on behalf of state government - Banking and Financial Services - receiving service charges @1% of the total salary disbursed in respect of two primary schools - Extended period of limitation - HELD THAT - There is no specific exemption provided under 'Banking and Financial Services' for the services rendered by the banks to state governments. Hence, the contention of the Appellant is not acceptable and the service charges collected are liable to pay service tax under the category of 'Banking and financial Services' as defined under section 65(12) of the Finance Act, 1994. Extended period of limitation - suppression of facts - HELD THAT - The entire demand has been confirmed in the impugned order based the information available in the balance sheet. The department has not brought in any evidence to substantiate the allegation of suppression. Accordingly, the demand confirmed in the impugned order by invoking the extended period is not sustainable. The Appellant is liable to pay service tax, if any, on the normal period of limitation, along with interest. Demand of service tax - receipts of the Appellant from Agricultural Insurance Company of India Ltd. for collection of crop insurance premium from cultivators and/or agriculturists under National Agricultural Insurance Scheme - HELD THAT - It is observed that such services are exempted under Notification 3/2000-ST dated 06.07.2000 - the decision cited in the case of SHRI RAJKOT DISTRICT CO OPERATIVE BANK LTD VERSUS COMMISSIONER OF CENTRAL EXCISE ST, RAJKOT 2023 (6) TMI 1347 - CESTAT AHMEDABAD , is squarely applicable in this case, where it was held that the appellant are entitled for the exemption notification 3/2000-ST and not liable to pay any service tax on the commission received in relation to general insurance under government s various schemes - the demand confirmed in the impugned order on this count is not sustainable. Demand of service tax - service charges deducted by the out station banks for the collection of out station cheques - HELD THAT - The Appellant has not received any money on account of collection of out station cheques. The service charges were deducted by the out station banks on which no service tax payable by the Appellant. Accordingly, we hold that the demand made in the impugned order on this count is not sustainable. Demand confirmed on the amount of Rs.43,500/- deducted by State Bank Of India, Midnapore Branch from the accounts of appellant as banking cash transaction tax - HELD THAT - It is observed that the amount wrongly deducted was credited to their account later. Hence, no service tax payable on this amount. Accordingly, the demand of service tax on this amount is not sustainable. Appeal disposed off.

Summary

Issues involved:
The appeal against the Order-in-Appeal dated 30.03.2013 filed by the Appellant, challenging the demand of Rs.22,26,137/- confirmed in the Order-in-Original along with interest and penalties imposed under Sections 76 and 78 of the Finance Act, 1994.

Issue 1: Demand under 'Banking and Financial Services' category
The impugned order demanded service tax on the differential amount of Rs.1,85,06,413/- received by the Appellant as service charges for disbursing salary in two primary schools. The Appellant argued that the service was rendered on behalf of the state government and was only to defray bank expenses, hence not falling under 'Banking and Financial Services' as defined under Section 65(12) of the Finance Act, 1994. However, the Tribunal held that no specific exemption was provided for services rendered by banks to state governments. Therefore, the service charges collected were deemed liable for service tax under the mentioned category.

Issue 2: Time-barred demand
The Appellant contended that the demand was time-barred as there was no suppression involved, making the demand invoking the extended period not sustainable. The Tribunal found merit in this submission, noting that the demand was based solely on information from the balance sheet without evidence of suppression. Consequently, the demand confirmed by invoking the extended period was deemed unsustainable, and the Appellant was held liable to pay service tax within the normal period of limitation, along with interest.

Issue 3: Exemption for services related to Agricultural Insurance
The demand on receipts from Agricultural Insurance Company of India Ltd. for collecting crop insurance premium was challenged by the Appellant, citing exemption under Notification 3/2000-ST dated 06.07.2000. The Tribunal, following a relevant decision, concluded that the services provided by the Appellant for insurance under government schemes were eligible for exemption under the notification. Therefore, the demand on this count was deemed unsustainable, and the appeal was allowed.

Issue 4: Service charges by outstation banks
Regarding the demand for service tax on charges deducted by outstation banks for collecting outstation cheques, the Tribunal observed that the Appellant did not receive any money from this activity. As a result, the demand on this count was considered unsustainable.

Issue 5: Banking cash transaction tax
The demand on the amount of Rs.43,500/- deducted by State Bank Of India, Midnapore Branch as banking cash transaction tax was found to be wrongly deducted and later credited back to the Appellant's account. Therefore, no service tax was deemed payable on this amount, making the demand on this count unsustainable.

In conclusion, the Tribunal held the Appellant liable for service tax on service charges under the 'Banking and Financial Services' category within the normal period of limitation. The demand on receipts from Agricultural Insurance Company was set aside, along with the demands related to service charges by outstation banks and banking cash transaction tax. Penalties imposed were also set aside, and the case was remanded back for quantification of the demand under the 'Banking and Financial Services' category.