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TMI Blog2015 (9) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... he bond-subscriber. Without rendering of custodian services, it would not be correct to hold that the appellant is liable to service tax for the consideration received from the Reserve Bank of India as handling commission, turnover commission and service charge in the category of "banking or other financial service". - The claim of the assessee to be taxed as provider of "business auxiliary service is upheld. There being no differential tax to be collected, the departmental appeal on valuation and penalty is dismissed - Decided against Revenue. - Appeal No. ST/349/2011, Appeal No.ST/350/2011 - Final Order Nos. A/2793-2794/2015-WZB/STB, - Dated:- 6-8-2015 - M V Ravindran, Member (J) And C J Mathew, Member (T), JJ. For the Appellant : Shri S S Gupta, CA For the Respondent : Ms P V Sekhar, Deputy Commissioner (AR) ORDER Per C J Mathew M.s ICICI Bank Ltd has filed an appeal contesting Order-in-Original No. 04/ST-II/KKS/2011 dated 28 th February 2011 in which Commissioner of Service Tax, Mumbai- II has confirmed service tax of ₹ 91,80,371/- for rendering of banking and other financial services valued at ₹ 15,83,07,200/- for the period 16 th July 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial service . 3. The original authority held that M/s ICICI Bank has sold bonds, which have been ascertained to be government securities, directly to subscribers and has earned brokerage thereon from the Reserve Bank of India which is liable to tax. It was also held that by issuing Certificate of Holding, by opening of new and maintenance of old Bond Ledger Accounts and by paying interest as well as redemption value, the receiving office has rendered custodial service liable to tax. In arriving at the conclusion that the claim of M/s. ICICI Bank to be taxable as provider of business auxiliary service is not tenable, the original authority has attempted to distinguish between the two taxable services with reference to Section 65A of Finance Act, 1994, by holding that, in the context of the definition specifying banking company , that status of the organisation is the key to specificity that will determine classification under Section 65(12). 4. In the departmental appeal before us, it is contended that valuation of the taxable service on cum-tax basis relying on the decision of the Tribunal in re Rampur Engineering Co Ltd. vs CCE Jaipur I [2006(30) STR 650 (Tri-D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers of relief bonds cannot claim to be anything other than custodian. 7. We observe that the assessee has discharged service tax of ₹ 40,76,137/- for the period after 1 st July 2003 on the entire remuneration earned from RBI with the introduction of tax on business auxiliary service . In connection with the demand on brokerage earned prior to 1 st July 2003, this Tribunal has held in the cases cited by the learned Chartered Accountant that brokerage earned on sale of government securities is not taxable. The confirmation of tax of ₹ 31,92,050/- on brokerage earned for the period from 16 th July 2001 to 30 th June 2003 in the impugned order is, therefore, not sustainable. Hence, the sole issue for determination is whether the gamut of activities performed by M/s ICICI Bank after sale of bonds is tantamount to custodial services and, therefore, renders them liable to tax of ₹ 44,62,861/- on the handling commission, turnover commission and service charge for rendering of banking and financial services from 16 th July 2001 to 31 st March 2004 of which there is no dispute on ₹ 25,50,678/- already paid by assessee as taxable under business auxiliary servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded in the definition. Sans client- custodian relationship and sans entrusting of securities for safekeeping, the incidental services are not relevant. Once a client has entrusted the safekeeping of securities to a custodian, the custodian may maintain accounts relating to the security and collect the benefits accruing to the client as incidental activities. Without such entrustment the relationship is not one of custodianship. 10. Examining the scheme of receiving office in relation to government bonds, it appears that Reserve Bank of India utilizes the reach of specified banking companies to garner subscribers. The numbers would have been restricted if the Reserve Bank of India were to route the sale through its own offices across the country. These identified banks maintain details of subscriber, pay out interest as and when due and record the disposal of the bonds. In return, they are compensated with certain commission by the Reserve Bank of India as laid down in the agreement with the Reserve Bank of India. The relationship with Reserve Bank of India exists because of the potential for reaching out to vast number of subscribers. The Reserve Bank of India is not a client ..... X X X X Extracts X X X X X X X X Extracts X X X X
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