2023 (6) TMI 996 - AT - Service Tax

Refund of service tax paid - taxability of Banking and Other Financial Services - remuneration received from RBI in relation to PPF management in terms of clause (v) of Section 65(12) of the Finance Act, 1994 - Applicability of exemption on services of operation of bank account when provided to a customer, under N/N. 25/2004- ST dated 10.09.2004. Whether the appellant are liable for payment of service tax in respect of services rendered by them in terms of section 65 (105)(zm) of the Finance Act, 1994? HELD THAT - In exercise of the powers conferred by section 3 of PPF Act, 1968, the Public Provide Fund Scheme had been notified on 1.7.1968. The PPF scheme provides for any individual desirous of subscribing to the PPF account, for opening an account by applying to an accounts office i.e., an office or branch of SBI or other authorized offices. Further, the said PPF scheme provides for the manner of making subscriptions, limit and no. of subscriptions, withdrawals from the fund, interest, transfer of accounts, loans, repayment of loans and interest, nomination and repayment after death of subscriber etc. - in the relevant years Union Budget documents, in Receipts Budget 2004-2005 under Table-I, sources and application of National Small Savings Fund as on 31st March, the liabilities outstanding as on 1st April and accretion to liabilities during the year under Public Provident Fund has been accounted as Sources of Funds under the head Capital Receipts - Department of Economic Affairs (DEA) in the Ministry of Finance had notified the pattern of investment to be followed by Non-Government Provident Funds, Superannuation Funds and Gratuity Funds prescribing the investment pattern in specific Government securities, Debt instruments, Equities and related investments which are specifically mentioned by name therein. Further, DEA also specified therein and also prescribed the percentage of the amount to be invested in various government securities vide notification F. No.5(88)/2006 PR dated 14.8.2008 as amended by notification F. No.11/14/2013-PR dated 2.3.2015. On the basis of the above, it is concluded that the PPF accounts are opened, maintained, operated by the appellant as per the scheme notified by the Government and the funds of the PPF accounts are credited to the Public Account of India, which are ultimately used/invested in the manner prescribed under notification issued by the Department of Economic Affairs in the Ministry of Finance. Thus it appears that there is no discretion for the appellant in handling the funds under the PPF accounts and the PPF funds are entirely managed by the Government of India. In such a scenario, there is no question of management of funds lying in the PPF accounts, by the appellants. It is a common practice to define certain terms in the Act itself in order to provide as an aid for construction or for interpretation of an issue. The definitions could broadly be classified into three categories viz., means , includes and means and includes . The Legislature has power to define a word even artificially. So the definition of word in the definition section may either be restrictive of its ordinary meaning or it may be extensive of the same. When a word is defined to mean such and such, the definition is prima facie restrictive and exhaustive; whereas, where the word defined is declared to include such and such, the definition is prima facie extensive - When a word is not defined in the Act itself, it is permissible to refer to dictionaries to find out the general sense in which the word is understood in common parlance. However, in selecting one out of the various meanings of a word, regard must always be had to the context as it is a fundamental rule that the meanings of words and expressions used in an Act must take their colour from the context in which they appear; when the context makes the meaning of a word quite clear, it becomes unnecessary to search for and select a particular meaning out of the diverse meanings a word is capable of, according to lexicographers as held in various judgements Mangoo Singh Vs. Election Tribunal, Bombay 1957 (9) TMI 85 - SUPREME COURT by the Hon ble Apex Court. Thus, the approach adopted in the impugned order for coming to the conclusion that the services provided by the appellant falls under the scope of funds management based on the dictionary meanings is not supported by law. Further, the Government had enacted the Securities and Exchange Board of India Act, 1992 to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto. All forms of fund management and how this is regulated is elaborated in the said legal provisions and the regulations made there under - in the given case of appellants, there was no fund management involved and the entire amount was credited to the Public Account of the Government, to be used as per the instructions, norms, scheme of PPF notified by the government. Hence we conclude that there was no fund management services rendered by the appellants in this case. During the relevant period of time i.e. in 2004-2005, if RBI was not treated as a customer as held by the learned Commissioner in para 11 of impugned order, then the whole issue of taxability of services falls flat, as this is not covered under the scope of taxable services. Hence, the impugned order is liable to be set aside on this ground alone. Refund of service tax paid by the appellants specifically mentioning in the GAR-6 Tax payment Challans that the payment of service tax is made under protest - HELD THAT - The issue is no more res integra in view the decision taken in a number of cases both by this Tribunal and by the Hon ble High Court of Bombay in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS FDC. LTD 2008 (9) TMI 320 - BOMBAY HIGH COURT where it was held that the Tribunal was right in concluding that the ground of non-forwarding of a letter as contended by the Department would not be of any significance. It does not mean that the claim for refund is ex facie not maintainable so as to extend the benefit of the provisio to sub-section (1) of section 11B of the Central Excise Act, 1944 - the appellant is eligible to claim refund of service tax paid under protest in terms of the proviso to Section 11B, subject to the condition that such a refund claims are required to be filed in terms of section 11B of Central Excise Act, 1944, which have been made applicable to service tax as per Section 83 of the Finance Act, 1994. Appeal allowed by way remand of the refund application for fresh adjudication to the original authority for the limited issue of satisfying the unjust enrichment angle.

Summary

Issues Involved:
1. Taxability of services provided by the appellant under the category of 'fund management'.
2. Eligibility for refund of service tax paid under protest.
3. Applicability of limitation period for filing refund claims.

Summary:

Issue 1: Taxability of Services Provided by the Appellant Under the Category of 'Fund Management'

The appellant, M/s State Bank of India, Mumbai, contended that their activities related to the maintenance of Public Provident Fund (PPF) accounts do not constitute 'fund management' services. They argued that they merely maintain PPF accounts as per the scheme notified by the government, and the funds are managed by the Government of India, not by them. The original authority and the Commissioner (Appeals) had concluded that the services provided by the appellant fell under 'all forms of fund management' as per Section 65(12) of the Finance Act, 1994, making them taxable.

The Tribunal found that the PPF accounts are operated and maintained by the appellant as per the government scheme, and the funds are credited to the Public Account of India, managed by the Government of India. There is no discretion for the appellant in handling these funds, and thus, they are not providing 'fund management' services. The Tribunal concluded that the services provided by the appellant do not fall under the scope of 'fund management' and are not taxable under this category.

Issue 2: Eligibility for Refund of Service Tax Paid Under Protest

The appellant had paid service tax under protest and filed a refund claim, which was rejected by the original authority on the grounds of time limitation and lack of evidence of protest. The Tribunal referred to previous decisions, including the Bombay High Court's ruling in Commissioner of Central Excise Vs. F.D.C. Limited, which stated that marking forms and invoices as 'duty paid under protest' is sufficient and a separate letter is not necessary. The Tribunal held that the appellant is eligible for a refund of service tax paid under protest, subject to fulfilling the conditions under Section 11B of the Central Excise Act, 1944, which applies to service tax as per Section 83 of the Finance Act, 1994.

Issue 3: Applicability of Limitation Period for Filing Refund Claims

The Tribunal noted that the limitation period of one year for filing a refund claim does not apply when the tax is paid under protest, as per the proviso to Section 11B of the Central Excise Act, 1944. The appellant's refund claim, therefore, cannot be denied on the grounds of time limitation.

Conclusion:

The Tribunal set aside the impugned order of the Commissioner (Appeals), Service Tax-II, Mumbai, holding that the services provided by the appellant are not taxable under the category of 'fund management'. The appeals filed by the appellant were allowed with consequential relief, and the case was remanded to the original authority for fresh adjudication on the limited issue of unjust enrichment, to be decided within three months. The Tribunal directed that the appellant should be given an opportunity for a personal hearing to present their case.