2018 (8) TMI 900 - AT - Service Tax

Banking and other Financial Services - appellant, is a banking company and a body corporate, conducting their operations in India - It was alleged that the services provided by the appellant to the RBI amounted to providing a taxable service under the Banking and other Financial Services which was taxable from 10.09.2004 - Held that - There is no ambiguity with reference to the Notification; therefore, the submission of the departmental representative for strict interpretation is not warranted. There is no doubt that the exemption is given vide N/N. 22/2006-ST dated 31.5.2006 is applicable to RBI. In terms of Section 65(7) of the Finance Act, 1994, Assessee means a person liable to pay the service tax and includes his agent . Under Section 45 of the RBI Act, it provides that RBI can nominate other banks as its agent at all places or at any place in India for such purpose as the Bank may specify. Therefore, reading the Notification and Section 65(7) of Finance Act, 1994 and the powers vested with RBI to appoint their agents, there is no hesitation in concluding that the exemption available to RBI in discharge of its functions should be available to the appellant working as the Agents of RBI in terms of the Agreement. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether services provided by the appellant to the Reserve Bank of India are taxable under Banking and other Financial Services.
2. Whether the services provided by the appellant are exempt from Service Tax under Notification No. 6/2006-ST.
3. Interpretation of an exemption Notification regarding the liability to pay Service Tax.

Analysis:

Issue 1:
The Department alleged that the appellant, a banking company, acted as an agent for the Reserve Bank of India, receiving agency commission for transactions on behalf of the Government of India. The Department issued show-cause notices claiming the services provided were taxable under Banking and other Financial Services. The Department relied on Circular No. 356/53/2007 TRU to assert that services are taxable irrespective of the consumer's status. The appellant contended that the services did not fall under "operation of bank accounts" and were exempted by Notification No. 6/2006-ST. The appellant cited a previous case and argued that the issue was settled by a Larger Bench. The Tribunal examined the agreements and held that the appellant, as an agent of RBI, was entitled to the same exemptions as RBI, concluding that the services were exempt.

Issue 2:
The appellant argued that the services provided were exempt under Notification No. 6/2006-ST. The Department contended that the exemption should be strictly interpreted, placing the burden on the assessee to prove applicability within the exemption clause. The Tribunal referred to previous judgments and held that the appellant, as an agent of RBI, was eligible for the exemption available to RBI. The Tribunal emphasized that the exemption available to RBI in its functions should extend to the appellant working as RBI's agent, as per the Agreement and Section 45 of the RBI Act.

Issue 3:
The Department emphasized strict interpretation of the exemption Notification regarding liability to pay Service Tax. The Tribunal referred to Section 65(7) of the Finance Act, 1994, defining "Assessee" to include the agent liable to pay service tax. The Tribunal concluded that the appellant, as an agent of RBI, should benefit from the exemption granted to RBI, as per the Notification and relevant legal provisions. The Tribunal allowed the appeals, ruling in favor of the appellant.

In conclusion, the Tribunal held that the services provided by the appellant to the Reserve Bank of India were exempt from Service Tax under Notification No. 6/2006-ST, as the appellant, acting as an agent of RBI, was entitled to the same exemptions as RBI. The judgment emphasized the legal provisions, agreements, and previous rulings to support the decision, ensuring a comprehensive analysis of the issues involved.