2018 (7) TMI 1439 - AT - Service Tax

Business Auxiliary Services or not - amounts received as commission from various agencies for the sale of mutual funds - collection of telephone bills for BSNL - receipt and remittance of money from abroad as an agent of Western Union - sale of Government of India bonds - period July 2003 to June 2006 - demand of service tax under the head Business Auxiliary Services. Commission on sale of mutual funds - period involved is July 2003 to 09.07.2004 - Held that - Identical issue came up before the Tribunal in the case of P.N. Vijay Financial services (P) Ltd. 2008 (9) TMI 72 - CESTAT, NEW DELHI wherein the Bench held that sale and purchase of mutual funds is covered under notification No. 13/2003-ST and hence any commission received for such activity, no tax is payable - demand set aside. Commission received on collection of telephone bills - period involved is July 2003 to 09.09.2004 - Held that - Hon ble Supreme Court in the case of Federal Bank Limited 2016 (3) TMI 354 - SUPREME COURT has categorically held that services provided by banks for collection of telephone bills, insurance premium on behalf of the client companies have to be considered as cash management service and cannot be considered under the category of business auxiliary services - demand set aside. Amount of commission received on money transfer - period from July 2003 to 09.09.2004 - Held that - The ratio of Apex Court in the case of Federal Bank Limited 2016 (3) TMI 354 - SUPREME COURT would squarely cover the issues in favor of the respondent, where it was held that 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 - demand set aside. Commission received on sale of Government of India bonds - period involved is from July 2003 to June 2006 - Held that - Identical issue came up before the Tribunal in the case of HDFC Bank Ltd 2014 (1) TMI 1611 - CESTAT MUMBAI wherein the Tribunal held that sale of RBI bonds and receipt of brokerage being the transaction of government securities, there is no service tax liability - demand set aside. Appeal dismissed - decided against Revenue.

Summary

Issues:
Demand of service tax liability on the respondent bank for services rendered, including commission on sale of mutual fund units, collection of telephone bills, receipt and remittance of money from abroad, and sale of Government of India bonds.

Analysis:
1. The Revenue filed an appeal against the Order-in-Appeal confirming service tax demands on the respondent bank for various services. The first appellate authority set aside the demands raised by the adjudicating authority.

2. The services in question included commission received on the sale of mutual fund units, collection of telephone bills for BSNL, receipt and remittance of money from abroad, and sale of Government of India bonds on behalf of IDBI.

3. The Revenue argued that the commission received by the bank for promoting mutual funds and collecting telephone bills is taxable under business auxiliary services. The bank's activities were compared to those of E-Seva, Post Office, or Customer Care, suggesting the services were not banking activities.

4. The respondent's Chartered Accountant cited various Tribunal decisions to support their case, claiming that the issues were covered by precedents. They argued that the extended period for invoking tax liability could not be applied, referring to a specific decision.

5. Upon review, the Tribunal found that the demand for service tax covered the period from July 2003 to June 2006, involving commissions from various services provided by the bank.

6. For the commission on the sale of mutual funds, the Tribunal relied on previous decisions and notifications to conclude that no tax was payable for such activities during the specified period.

7. Regarding the commission received for collecting telephone bills, the Tribunal referred to a Supreme Court decision categorizing such services as cash management services, not falling under business auxiliary services.

8. The Tribunal also found that the commission received for money transfer services was not taxable based on Supreme Court and Tribunal judgments.

9. Finally, for the commission on the sale of Government of India bonds, the Tribunal followed previous decisions stating that there was no service tax liability for such transactions involving government securities.

10. Considering the facts and legal precedents, the Tribunal upheld the impugned order, finding it correct and legally sound, without any infirmity. The appeal by the Revenue was rejected, and the impugned order was upheld.