2013 (2) TMI 537 - AT - Service Tax

Service tax on commission received from the Govt. of Indiafor collecting and making payments towards Employees Provident Fund and Employees State Insurance - appellant M/s. State Bank of India is providing taxable services falling under the category of Banking and Other Financial Services and registered with the department - Held that - Since the assessee, State Bank of India has discharged the service tax liability before the issuance of show cause notice and there being a claim that the records are lost in flood in the year 2005, the certificate produced issued by the Chief Manager, Main Branch, Surat, which indicate discharge of service tax liability from September 2004 to July 2005 is to be correct as on date. Since the appellant, State Bank of India has already discharged the service tax liability such service tax liability need not have been paid by them as per the decision given by this Bench in the case of Canara Bank (2012 (6) TMI 274 - CESTAT, AHMEDABAD) - no reason for visiting the appellant with penalty that has been imposed by the lower authorities. Accordingly, the assessee s appeal for setting aside the penalties imposed by the lower authorities is allowed and Revenue s appeal for imposing penalty under Section 76is rejected.

Summary

Issues:
1. Confirmation of demand of service tax liability, interest, and penalty under Section 78.
2. Non-imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:

Issue 1:
The appellant, State Bank of India (SBI), appealed against the confirmation of demand for service tax liability, interest, and penalty under Section 78. The case involved SBI providing taxable services falling under Banking and Other Financial Services without paying the applicable service tax. The intelligence gathered revealed the evasion of service tax for the period from 10.9.2004 to 31.3.2007. The adjudicating authority confirmed a demand of Rs. 8,81,090/- as service tax and imposed an equal penalty under Section 78. Both SBI and the department appealed before the first appellate authority, which upheld the decision. The advocate for SBI argued that the commission received for statutory functions related to EPFO and ESIC should not be taxable. The Additional Commissioner submitted that the issue revolved around the non-penalization under Section 76 and mentioned a similar judgment in another case.

Issue 2:
The main issue in this case was whether SBI had discharged the service tax liability on the commission received from the Government of India. SBI claimed to have discharged the liability and presented a certificate to support this claim. The presiding judge considered the certificate valid, especially since the records were reportedly lost in a flood in 2005. Referring to a previous judgment involving Canara Bank, the judge concluded that SBI was not required to pay the service tax liability. As a result, the penalty under Section 78 was set aside, and the appeal to impose penalty under Section 76 was rejected. The judge emphasized that since the service tax liability was discharged, there was no basis for imposing any penalties on SBI.

In conclusion, the appellate tribunal allowed SBI's appeal to set aside the penalties imposed by the lower authorities and rejected the Revenue's appeal to impose a penalty under Section 76 of the Finance Act, 1994. The judgment highlighted the importance of discharging service tax liabilities and the impact on penalty imposition under different sections of the Act.