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TMI Blog2017 (8) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... their accounts with it. That is not the penalty realized by the bank from its customers. Penalty as is commonly understood in law is a realization against infraction of law. The appellant bank being a service provider sought to recover cost of services provided to its customers for presenting their cheque for realization or for honouring their cheques presented by drawees. Such cost recovered does not assume the character of penalty since that was sought to be recovered in consonance with the terms agreed between the parties. Similarly, the charges collected by it, in respect of accounts falling below the minimum balance required to be maintained in respect of accounts is a recovery of cost of maintaining such accounts. That cannot also be characterized as penalty. The cost recovered by the appellant bank from the account holders whose quarterly average balance fall, below the agreed amount is nothing but a consideration received by it to provide the service of banking to the customers. Naming of such cost recovery as violation charges does not alter the object of taxation of the receipt made by it in relation to the provision of service of operation of accounts opened by its cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax is payable on (i) Cheque return charges; (ii) Minimum balance violation charges and (iii) Charges for non-maintenance of QAB by the service provider providing banking and financial services. The notice claims that there is no service element involved in the said transactions and as such no service tax is leviable on the same. Cheque return charges are charged to customers when the cheques issued by the customers fail to get honoured. The bank provides cheque operating service for their customers subject to certain conditions one of which is to maintain enough balance in their account for the cheques tendered in their name. The cheque operation definitely involves operation of bank accounts and is extended to customers subject to certain conditions and when the said conditions are violated the customer is being penalized by the bank by collecting some charges. The said charges can very well be construed as service charges as the said charges are in-built in the cheque operation service and it is the customer who incurs the charges. The noticee's claim that no service element is involved in the cheque returning process is also no acceptable. The quantum of service involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gross value of taxable service provided by the appellant bank to its Customers. Appellant it is a banking company as defined by section 65(11) of the Act, 1994 and had provided banking and other financial services during the impugned period. The term banking and financial services is defined under section 65(12)(ix) of the Act which reads as under: Section 65(12)(ix): other financial services namely lending; issue of pay order; demand draft, cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, over draft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts . 3.2 Appellant submitted that according to section 65(105)(zm) of the Act, provision of banking service of the nature described in section 65(12)(ix) of the Act provided only, is taxable, but nothing else. The impugned receipts were penalties. Learned adjudicating authority without appreciating the nature of the receipt held that such receipts formed part of gross value of the taxable service and taxed the same. 3.3 According to the appellant, any brea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to service tax nor any penalty is imposable. 4. Government through Circular F.No.332/29/2009-TRU dated 26.4.2010 has clarified that penal rent for retaining the container beyond pre-determined period being detention charge is not liable to service tax. It was further clarified by Circular No.96/7/2007-ST dated 23.8.2007 that surcharge collected on the delayed payment of telephone bills is not a consideration taxable under the Finance Act, 1994. Therefore, the above three receipts of the appellant-bank do not form part of the gross value of receipt not being received in the course of provision of taxable service. The word namely used at the beginning of section 65(12)(a) and again in 65(12)(a)(ix) clearly mean that only the nature of receipts specified In the taxing entry shall be liable to tax and nothing beyond that 5. Revenue on the other hand submits that the adjudicating authority has properly passed the order considering that the above three receipts were made by the bank in the course of provision of banking services. These receipts were integral part of the banking receipts in the course of provision of banking service to its Customers by the bank. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zm) of the Act, envisages taxation of any services provided by a bank and all such services provided in relation to provision of banking services are sought to be taxed by that entry. Accordingly, the scope of services provided in relation to operation of the bank account falls within its ambit. All the three charges stated above were received by the appellant in relation to provision of banking service and most particularly operation of bank accounts opened with it by its customers. The receipts made by appellant from its customers for acting for them on their instructions or terms agreed between them are valuable consideration received by the appellant while providing service of maintaining their accounts with it. That is not the penalty realized by the bank from its customers. Penalty as is commonly understood in law is a realization against infraction of law. But a consideration received by one party from the other in terms of fulfillment of their premises as per agreed terms between them is not penalty. Nomenclature has no relevance to interpret a taxing entry. The object of the taxing entry is determinative of the levy. The appellant bank while providing the banking ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties. Similarly, the charges collected by it, in respect of accounts falling below the minimum balance required to be maintained in respect of accounts is a recovery of cost of maintaining such accounts. That cannot also be characterized as penalty. The cost recovered by the appellant bank from the account holders whose quarterly average balance fall, below the agreed amount is nothing but a consideration received by it to provide the service of banking to the customers. Naming of such cost recovery as violation charges does not alter the object of taxation of the receipt made by it in relation to the provision of service of operation of accounts opened by its customers with it. 12. The appellant emphasized that the term namely being used at two place of section 65(12) of the Act, that does not broaden the scope of taxation to tax the aforesaid three receipts made by it. But it fails to appreciate that a definition only assigns meaning to a term or expression in legislation without being determinative of scope of a taxing entry. The taxing entry enacted in section 65(105)(zm) of the Act is determinative of the levy. No doubt, the term namely has been used at two places ..... X X X X Extracts X X X X X X X X Extracts X X X X
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