2016 (11) TMI 524 - AT - Service Tax

Cash management service - taxability - Business Auxiliary Service - Section 65(19) of the Finance Act, 1994 - Held that - The Banking and Other Financial Services (BOFS) was included in the statute w.e.f 16.7.2001 under Section 65(12), however, the definition as it was initially introduced specifically excluded cash management services. The definition of scope of BOFS was further amended w.e.f 1.6.2007 when cash management service was specifically included under Clause (v). It is also on record that from 1.6.2007, the appellant has been discharging service tax liabilities under BOFS. Revenue authorities have taken a view that for the period prior to 1.6.2007 such services would be covered by BAS. Reliance placed on the decision of the case of CST vs. M/s. Federal Bank Limited 2016 (3) TMI 354 - SUPREME COURT where it was held that Clause (12) of Section 65 covers all charging services rendered by the Banks. - when cash management services stood excluded from the purview of service tax at the hands of the Bank until 31.05.2007, the authorities cannot levy service tax on an activity which is essentially cash management service, by taking aid of other general charging heads, such as business auxiliary service. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether cash management services provided by a bank are liable for service tax under Business Auxiliary Service (BAS) prior to 1.6.2007.

Analysis:
The appeal was filed by Revenue against the order passed by the Commissioner of Central Excise (Appeals), Mangalore, demanding service tax from a bank for collecting telephone bills for BSNL, categorized as cash management service. The dispute covered the period from July 2003 to September 2004, with penalties and interest imposed. The Commissioner (A) allowed the bank's appeal, leading to Revenue's appeal before the Appellate Tribunal CESTAT Bangalore.

The Revenue contended that the bank's activities of cash management fell under BAS, including services related to promotion, marketing, customer care, billing, collection of dues, and other support services. The bank argued that cash management services were not included in the definition of Banking and Other Financial Services (BOFS) until 1.6.2007, citing a Supreme Court judgment in favor of the bank.

The Tribunal noted that cash management services were excluded from the scope of BOFS until 1.6.2007 and were specifically included under Clause (v) from that date. The Tribunal referred to the Supreme Court's decision in the case of CST vs. M/s. Federal Bank Limited, which clarified the exclusion of cash management services until 31-5-2007. The Tribunal concurred with the Supreme Court's interpretation and held that the authorities cannot levy service tax on cash management services under BAS for the period before 1.6.2007.

The Tribunal also referenced Section 65A of the Act regarding the classification of taxable services, emphasizing the importance of specific descriptions in classification. Relying on the statutory provisions and the Supreme Court's decision, the Tribunal upheld the Commissioner (A)'s order in favor of the bank, dismissing the Revenue's appeal.

In conclusion, the Tribunal ruled that cash management services provided by the bank were not liable for service tax under BAS before 1.6.2007, aligning with the Supreme Court's interpretation and statutory provisions. The Revenue's appeal was dismissed, affirming the decision in favor of the bank.