2024 (6) TMI 850 - AT - Service Tax

Levy of service tax - Banking and other Financial Services - amounts received from the customer for renting the service of safe deposit locker/ vault under the head locker caution deposit - HELD THAT - It needs to be examined whether in due course the locker caution deposit is refunded in full when the service comes to an end at the time of surrender of the locker by the customer barring the odd case when an eventuality arises to break the locker open. Or whether any part of the deposit is retained and should form a part of the rent paid on the locker which is taxable. The matter is remanded for a decision on this factual issue. The lower authority shall follow the principles of natural justice and afford a reasonable and time bound opportunity to the appellant to place the evidence on record before passing a speaking order - matter remanded back to the Original Authority for verification. Appeal disposed off by way of remand.

Summary

Issues involved:
The issues involved in this case are whether the "locker caution deposit" collected by a bank from customers is liable for service tax under Banking and other Financial Services u/s 65(12) of the Finance Act 1994, and whether the deposit is refundable and not subject to service tax.

Details of the Judgment:

Issue 1: Liability for Service Tax on Locker Caution Deposit
The appellant, a bank, collected locker caution deposits from customers but did not discharge Service Tax on the same. The Tribunal noted that the deposit could be considered as additional consideration attracting service tax, as per rule 6(2)(i) of the Service Tax (Determination of Value) Rules 2006. The Tribunal found that the deposit was not exempt from taxable value and was therefore liable for service tax under Banking and other Financial Services u/s 65(12) of the Finance Act 1994. The matter was remanded to the Original Authority for verification of whether the deposit is refunded in full when the service ends, except in cases where the locker needs to be broken open.

Issue 2: Refundable Nature of Locker Caution Deposit
The appellant argued that the locker caution deposit was a capital receipt repayable to customers when the locker account is closed, and thus not subject to service tax. They contended that the deposit was not towards any service activity provided by the bank. The Tribunal observed that the appellant did not provide clear evidence at the Original Authority stage to show that the deposit was actually refunded in full. Citing precedents where service tax was not levied on security deposits, the Tribunal emphasized the need for verification of the refundable nature of the deposit.

Conclusion:
The Tribunal remanded the matter back to the Original Authority for verification, emphasizing the principles of natural justice and providing a time-bound opportunity for the appellant to present evidence. The decision highlighted the need to examine whether the "locker caution deposit" is refunded in full when the service ends, except in cases of breaking open the locker. The appeal was disposed of accordingly, with the matter to be resolved within ninety days of the order.