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2016 (10) TMI 800 - AT - Service TaxEligibility of exemption - N/N.22/2006-ST dated 31.05.2006 - Banking or Financial service - collection of taxes and remittance to RBI - services rendered by scheduled bank to RBI - whether qua N/N. 22/2006-ST dated 31.05.2006, the commission received from the Reserve Bank of India by a scheduled bank for rendition of Banking or Financial service is entitled to exemption from service tax on the ground that the banking company providing such taxable service is an agent of the Reserve Bank of India and thus entitled to exemptions specified in clause (i) of N/N. 22/2006-ST dated 31.3.2006? - Held that - Drawing power from Section 45, RBI appoints various national banks/public sector banks for collection of various taxes and making payment of pension etc. This would mean that various national banks are agents of the RBI. The Central Govt. of India by N/N. 22/2006-ST has given exemption from the payment of service tax of any taxable services provided to or by RBI either in India or under Reverse Charge Mechanism. In our view as the respondent assessee is an agent of RBI, exemption granted by notification No. 22/2006-ST, needs to be extended to respondent - if RBI is exempted from the service tax liability in respect of various services, its agent for doing such services also needs to be extended the same benefit. Assessee means a person liable to pay service tax and includes his agent. RBI a person liable to pay tax as an assessee but for exemption, will include their agents viz. Banks appointed under Section 45 of RBI Act, to execute functions of RBI. Decision in the case of M/s. Canara Bank Versus CST, Bangalore 2012 (6) TMI 274 - CESTAT, AHMEDABAD relied upon where it was held that appellant is held to be eligible for exemption as an agent of RBI. Appeal dismissed - decided in favor of respondent.
Issues Involved:
1. Whether the commission received from the Reserve Bank of India (RBI) by a scheduled bank for rendering Banking or Financial services is entitled to exemption from service tax under Notification No. 22/2006-ST dated 31.05.2006. Detailed Analysis: 1. Background and Factual Matrix: The State Bank of Patiala, a banking company regulated by the RBI, was appointed by the RBI under Section 45 of the RBI Act, 1934, to receive remittances of taxes on behalf of the RBI and credit the same into the consolidated fund. For this service, the RBI paid a commission to the bank, which the Revenue authorities sought to tax. 2. Respondent's Claim: The respondent (State Bank of Patiala) claimed that the commission received is not liable to tax based on Notification No. 22/2006-ST dated 31.05.2006 and applied for a refund of the service tax remitted. 3. Revenue's Argument: The Revenue argued that the exemption under Notification No. 22/2006-ST applies only to taxable services provided by the RBI. They contended that the State Bank of Patiala, being a separate entity and not the RBI, does not qualify for the exemption. The Revenue relied on the strict interpretation principle of exemption notifications and cited various case laws to support their argument. 4. Respondent's Counter-Argument: The respondent referred to the Tribunal's decision in the case of Canara Bank, which held that service tax liability does not arise on the bank receiving a commission for collecting and remitting taxes on behalf of the RBI. They further argued that as per Section 45 of the RBI Act, the bank acts as an agent of the RBI, and thus, the exemption should extend to them as well. 5. Tribunal's Analysis and Findings: The Tribunal examined the provisions of the RBI Act, particularly Sections 20, 21, 21A, and 45, which mandate the RBI to transact Government business and authorize it to appoint agents (banks) for this purpose. The Tribunal noted that the State Bank of Patiala, acting as an agent of the RBI, is involved in sovereign functions of the Government, such as collecting taxes and remitting them to the RBI. 6. Interpretation of Notification No. 22/2006-ST: The Tribunal held that the exemption granted by Notification No. 22/2006-ST should extend to the agents of the RBI, as the Finance Act, 1994, defines an "assessee" to include agents. Therefore, if the RBI is exempt from service tax, its agents performing the same functions should also be exempt. 7. Judicial Precedents: The Tribunal upheld the decision in Canara Bank, which correctly interpreted Notification No. 22/2006-ST and did not require reconsideration. The Tribunal distinguished the cited case laws (Malwa Industries Ltd and Uttam Industries) as not applicable to the present case due to different factual circumstances. Conclusion: The Tribunal concluded that the commission received by the State Bank of Patiala from the RBI for collecting and remitting taxes is exempt from service tax under Notification No. 22/2006-ST. The appeal by the Revenue was dismissed, and the reference was answered in favor of the respondent. Order Pronouncement: (Order pronounced in Court on 17.10.2016)
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