TMI Blog2009 (9) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... vice tax being an indirect tax, is a liability borne ultimately by the customers of the bank. In the instant case, the departments of Union Government were the client of the RBI. Therefore, tax on the activity, exempt when undertaken by the RBI, need not be levied when the same activity is undertaken by another bank as its agent. Thus passed the order for the waiver of pre-deposit and stay recovery of the dues. - ST/STAY/281 OF 2008 - IN ST/429 OF 2008 - 1287 OF 2009 - Dated:- 24-9-2009 - M.V. RAVINDRAN, JUDICIAL MEMBER AND P. KARTHIKEYAN, TECHNICAL MEMBER S. Ananthan for the Appellant. N.R. Bhaskar for the Respondent. ORDER P. Karthikeyan, Technical Member - Canara Bank, Bangalore (henceforth the appellant, or the bank) has sought waiver of pre-deposit of the following dues adjudged against them vide the impugned order : (1) Demand of Service Tax of Rs. 5,97,47,205 along with applicable interest. (2) Penalty of Rs. 5,97,47,205 imposed on the bank under section 78 of the Finance Act, 1994 (the Act). (3) Penalty at the rate of Rs. 200 per day up to 18-4-2006 and thereafter at the rate of Rs. 200 per day during which the default continues or 2 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the category of "Banking and other Financial services" of section 65(12)(a)(viii) of the Act. He found that: "(a) M/s. Canara Bank is a banking company conducting its operations in India, (b) operating Government accounts in respect of a few Government departments/ministries and receiving as well as making payment towards such accounts, (c) providing taxable service namely, 'operation of bank accounts', which has been specified as a taxable service, under the category of 'Banking and Other Financial Services', as defined under section 65(12)(a)(viii) read with section 65(105)(zm) of the Act, to RBI as per their directive and, (d) received commercial consideration from the RBI for providing such services, and received a sum of Rs. 53,35,19,512 towards service charges during the period 10-9-2004 to 30-9-2007." The Commissioner observed that as per Notification No. 22/06-ST, dated 31-5-2006, taxable services provided or to be provided to any person by the RBI was exempted from service tax liability during the period 10-9-2004 to 30-9-2007. The bank had received agency commission of Rs. 53,35,19,512 for operation of Union Government Accounts. The bank was liable to pay service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt from service tax. As the bank functioned as an agency of RBI, in terms of this exemption, the operations of the bank on behalf of RBI were exempt from service tax. In support of the argument that the exemption available to a principal extended to its agent, the learned counsel relied on the judgment of the Apex Court in the case of State of Madras v. Cement Allocation Coordinating Organization Manu/SC/0636/1997. The learned counsel also relied on Stay Order No. 404/2009, dated 1-4-2009 in the case of Karnataka Land Army Corpn. Ltd. v. CST in support of the argument that statutory functions of the State were not exigible to service tax. 4. Opposing the application for waiver of pre-deposit, the learned standing counsel for the respondent revenue relied on the following judgments of the Apex Court and the High Court : (1) Union of India v. Adani Exports Ltd. [Civil Appeal No. 5152 of 2007, dated 12-11-2007]. (2) INI Express Worldwide (P.) Ltd. v. UOI [2007] 6 STT 252 (Bom.). (3) Siliguri Municipality v. Amalendu Das AIR 1984 SC 653. These judicial authorities had held that grant of stay in tax matters should be an exception and not a rule. When Tribunal decided to gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate [or commercial concern], namely :— (i) financial leasing services including equipment leasing and hire-purchase; Explanation.—For the purposes of this item, 'financial leasing' means a lease transaction where— (i) contract for lease is entered into between two parties for leasing of a specific asset; (ii) such contract is for use and occupation of the asset by the lessee; (iii) the lease payment is calculated so as to cover the full cost of the asset together with the interest charges; and (iv) the lessee is entitled to own, or has the option to own, the asset at the end of the lease period after making the lease payment; (ii) ** ** ** (iii) merchant banking services; (iv) securities and foreign exchange (forex) broking, and purchase or sale of foreign currency, including money changing;] (v) asset management including portfolio management, all forms of fund management, pension fund management, [custodial, depository and trust services; (vi) advisory and other auxiliary financial services including investment and portfolio res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable services provided or to be provided by any person, to the Reserve Bank of India when the service tax for such services is liable to be paid by the Reserve Bank of India under sub-section (2) of section 68 of the said Finance Act read with rule 2 of the Service Tax Rules, 1994; (iii) taxable services received in India from outside India by the Reserve Bank of India under section 66A of the Finance Act, 1994." 6. In the Cement Allocation Coordinating Organization's case (supra), the Apex Court dealt with the includibility of packing charges of cement dealt with by a selling agent of Dalmia Cement (Bharat) Ltd., for the purpose of Madras General Sales Tax Act, 1959. In the judgment impugned before the Apex Court, the Hon'ble High Court of Madras had held that the respondent therein, an agent of Dalmia Cement (Bharat Ltd.), was entitled to deduction of packing charges from the taxable turnover under the Madras General Sales Tax Act if the principal would be entitled to such exclusion. The paras of the above judgment relevant to decide the issue at hand are reproduced below : "1. This appeal by certificate arises from the decision of the High Court of Madras in Writ Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng authority from examining the question, after giving afresh notice, whether the principal himself would be disentitled to exclusion of the value of the packing materials in determining the chargeable turnover. 3. It is against this order that the State of Madras has come up in appeal to this Court. 4. The charging section under the Madras General Sales Tax Act, 1959 is section 3. It brings to all taxable turnover of a dealer as defined in the Act. The expression 'dealer' is defined in section 2(g). Because of section 2(g)(iii) a Commission agent is also considered as a 'dealer' for the purpose of the Madras General Sales Tax Act, 1959. Hence the taxable turnover of a Commission agent is liable to be brought to tax. The only other provision that we need refer is rule 6 of the Rules framed under the Act. That rule reads: The tax or taxes under section 3, 4 or 5 shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer: (a) and (b)** ** ** (c) all amounts falling under the following two heads, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tudied the case law cited by the learned standing counsel for the revenue. In the Adani Exports Ltd.'s case (supra), the Apex Court had observed that even if Tribunals decided to grant full or partial stay, it had to impose such conditions as may be necessary to safeguard the interest of revenue. In the same judgment, the Apex Court had directed that the appeal of the party might be heard without insisting on any pre-deposit. The respondents before the Hon'ble Court were directed to undertake before the adjudicating authority to liquidate demands, if any, sustained by the Tribunal within eight weeks from the date of receipt of Tribunal's order. In the instant case, we find that the appellant bank, a Government of India undertaking is solvent enough to discharge the liability, if any, confirmed against them. We do not find any risk to revenue if the demands are ultimately sustained and do not deem it necessary to put them to terms like submitting an undertaking etc. to safeguard the interest of revenue. 6.2 In the case of INI Express Worldwide (P.) Ltd. (supra) the Hon'ble High Court of Mumbai disposed the application for stay of recovery of service tax imposed on courier agency. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered this judgment and do not find it relevant to the case at hand. The judgment held that by an interlocutory order issued by High Court in exercise of its writ jurisdiction should not stay the recovery of a tax imposed by a public authority, as a rule. The case law relates to stay of impost and pursuant recovery of a tax. 8. The revenue has not raised any other ground against the application for waiver of pre-deposit and stay of recovery of the adjudged dues. Service tax being an indirect tax, the impugned tax is a liability borne ultimately by the customers of the bank. In this case , departments of Union Government are the clients of the RBI. Therefore the exemption from tax on the activity exempt when undertaken by the RBI need not be levied when the same activity is undertaken by another bank as its agent. We find that the applicant bank has made out a strong prima facie case against the demand of tax, interest and penalties imposed on them on the strength of judgment in the Cement Allocation Coordinating Organization's case (supra). In the circumstances, we order waiver of pre-deposit and stay recovery of the dues, pending decision in the appeal. - - TaxTMI - TMITa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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