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TMI Blog2023 (6) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from their head office on taxability of such commission received from RBI for maintenance of Public Provident Fund (PPF) accounts, the appellants had deposited service tax rate of 10.2% for an amount of Rs.72,74,227/- along with other service tax dues payable to the government on the taxable services under the head of account 0044-143 Service Tax on banking and other financial services vide GAR-7 Challan dated 31.3.2005 for a total amount of Rs.12,76,16,122/- specifically mentioning that the payment of service tax is being made under protest subject to notification of Government of India. Subsequently realizing their mistake and that the appellant is not engaged in fund management service in respect of PPF accounts maintained by them, they had filed refund application for Rs.72,74,227/- enclosing various supporting documents before the original authority i.e., Assistant Commissioner of Service Tax, Division-V, Navi Mumbai. The original authority having considered the written submission dated 12.01.2001 of the appellants and after giving personal hearing to them on 10.02.2011, had concluded that the appellant is engaged in the service of management of PPF fund and the words all fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had provided the service of managing the Public Provident Funds to the RBI on behalf of the Government of India against remuneration. By referring to various definitions of fund management as per Financial Dictionary, Investopedia, Cambridge business English dictionary, Wikipedia he concluded that the service or maintaining PPF Accounts fall under the category of fund management. He also gave the reason that PPF account though maintained in favour of the customer/investor for earning better interest rates and definite returns with security, but the appellant had received a remuneration against the same from RBI. Hence according to him the service provided by the appellant to a customer is not the subject matter of this case, but the service provided by the appellant to RBI is the subject matter under consideration. He had in his order at paragraph 9 had observed that the money deposited in PPF accounts are also used for banking/financing purposes including advancing loans and further investments into other options by the appellant. Thus he concluded that the services provided by the appellant to RBI as taxable under the category of all forms of fund management as covered under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have no say in the matter of PPF accounts, as these are transferred to government account and the investments made in government securities as per the extant policy. Thus the Learned Counsel for appellant contended that maintaining the PPF accounts cannot by any stretch of imagination be termed as a fund management. Thus the Learned Counsel for the appellant pleaded that refund of service tax denied by the department in this case, treating the services under the taxable category of all forms of fund management services is not legally sustainable. 3.2. The Learned Counsel for the appellant also submits that during Budget 2004, the services of operation of bank accounts was brought under the expanded scope banking and other financial services vide clarification issued by the TRU, Ministry of Finance in Explanatory Notes to budget changes providing the scope of imposition of levy. Further, it is claimed by them that where the tax has been paid under protest, then the period of limitation of one year for filing refund application from the relevant date shall not apply. Hence the Counsel stated the limitation of time does not apply in this case and that the appellant is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 2005 (18 of 2005). 7.3. In addition to the above, the definitions provided under section 65 of the Finance Act, 1994 which are relevant to the above taxable services is extracted below: Section 65. Definitions. In this Chapter, unless the context otherwise requires, -- (11) banking company has the meaning assigned to it in clauses (a) of section 45 A of the Reserve Bank of India Act, 1934 (2 of 1934); 1[(12) banking and other financial services means (a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or 2[commercial concern], namely: (i) financial leasing services including equipment leasing and hire-purchase; 3[ 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 of 2008). 9 Inserted (w.e.f. 16.05.2008) by s. 90 of the Finance Act, 2008 (18 of 2008). (74) non-banking financial company has the meaning assigned to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); (93) securities has the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (121) words and expressions used but not defined in this Chapter and defined in the Central Excise Act, 1944 (1 of 1944) or the rules made there under, shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise. 65A. Classification of taxable services (1) For the purposes of this chapter, classification of taxable services shall be determined according to the terms of the sub-clauses (105) of section 65; (2) When for any reason , a taxable service is prima facie, classifiable under two or more sub-clauses of clause (105) of section 65, classification shall be effected as follows :- (a) the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general descriptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned AR for the Department claimed by quoting the impugned order that the appellant is providing the taxable services under the category of all forms of fund management as they are managing the PPF funds, on the reasoning that the funds in PPF accounts are also used for banking/financing purposes including advancing loans and further investments into other options by the appellant. 8.4. In view of the contentious stand taken by the appellant and the AR for the Department, we find that it is necessary to examine the details of the services provided by way of PPF accounts. In the impugned order it is stated that the activities undertaken by the appellant in relation to maintenance of PPF accounts are as follows: (i) opening of the PPF accounts (ii) allowing deposits/withdrawals from such PPF accounts in accordance with the PPF scheme (iii) crediting interest at the yearend in various PPF accounts (iv) maintaining the KYC records including nominations (v) closure of accounts on maturity (vi) maintaining records of the above mentioned activities in relation to PPF. 8.5. We also find that PPF accounts have been operated and maintained on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount standing to his credit in the Fund (including any interest accrued thereon) to such extent and subject to such terms and conditions as may be specified in the Scheme: Provided that such withdrawals shall be allowed only after the expiry of a period of five years from the end of the year in which he makes the initial subscription to the Fund (2) Notwithstanding anything contained in sub-section (1), a subscriber shall be entitled to withdraw the entire balance standing to his credit in the Fund after the expiry of a period of fifteen years from the end of the year in which he makes the initial subscription to the Fund. (3) Subject to the provisions of sub-sections (1) and (2), an individual who has made subscriptions to the Fund on behalf of a minor, of whom he is the guardian, shall be entitled to withdraw any amount from the Fund only for the use of the minor. . 8.6. We also find 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs schemes are credited to the National Small Savings Fund (NSSF) established in the Public Account of India with effect from 1.4.1999. All withdrawals by depositors are made out of the accumulations in this Fund. The balance in the Fund is invested in special Government Securities as per norms decided from time to time by the Central Government. Pursuant to the recommendations of the Expert Committee on Administered Interest Rates and other related issues, chaired by Dr. Y.V.Reddy, then Deputy Governor of the Reserve Bank of India, since 1st April, 2002, the entire net collections (deposits minus withdrawals by subscribers) under small saving schemes in each State and Union Territory (with Legislature) are advanced to the concerned State/Union Territory (with Legislature) Government as investment in its special securities. The debt servicing of Government securities is an income of Fund while cost of the interest paid to the subscribers and cost of management of small savings schemes are expenditure of Fund. Further, we also find that Department of Economic Affairs (DEA) in the Ministry of Finance had notified the pattern of investment to be followed by Non-Government Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r banking and other financial service proceeds with the word means and that for a specific sub-group of such service have used the expression including to specify the services covered under its scope and used the expression does not include to exclude certain services from the scope of taxation. 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 AIR 1957 SC 871. by the Hon ble Apex Court. Therefore we find that the approach adopted in the impugned order for coming to the conclusion that the services provided by the appellant fal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclude that there was no fund management services rendered by the appellants in this case. 12. It is also important to note that in the impugned order, the learned Commissioner (Appeals) had taken a contrary stand, firstly at para 9 for coming to a conclusion that the service provided by the appellant to RBI being the subject matter under consideration and that the service provided to the customers who open PPF account is not the subject matter of this case, for bringing the services provided by the appellant under the scope of taxable services. However, subsequently at para 11, he had excluded the services provided to RBI, as they (RBI) cannot be treated as a customer of the appellant for denial of the benefit of exemption notification No.25/2004-ST for the taxable services operation of bank account for the period prior to 10.09.2004. During the relevant point of time, the taxable services under banking and other financial services, meant to include only the services provided to a customer, and not the services provided to any person, as can be seen here under. 65 (105). taxable service means any service provided,_ (zm) to a customer, by a banking company or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided to a customer by a banking company in respect of operation of bank accounts was issued vide notification No.25/2004-ST dated 10.9.2004. This made the legal position abundantly clear that the value of services received by a service provider prior to 10.9.2004, in respect of operation of bank accounts is not subject to payment of service tax. Thus, we conclude that operation of PPF accounts was brought into service tax net w.e.f. 10.09.2004. 14. We also find that the issue of 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, 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 Vs. F.D.C. Limited 2009 (238) ELT 708 (Bom.). The relevant portion of the order is extracted below: 3. In the peculiar facts of this case, the Tribunal noticed that the respondent- Assessee has during the course of proceedings urged that while making payment of duty, during the period in dispute, the relevant invoices and ER-1 returns filed would show that they wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person : Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this subsection as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act : Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest. (2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund : Provided that the amount of duty of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 11B of Central Excise Act, 1944, which have been made applicable to service tax as per Section 83 of the Finance Act, 1994. 15. In view of the detailed findings rendered in the above paragraphs, we find that the impugned order of the Commissioner(Appeal) holding that the services provided by the appellants are taxable under the category of funds management , is not legally sustainable. Accordingly, on the basis of above discussions and findings recorded in the preceding paragraphs, we are of the considered view that the impugned order of Commissioner (Appeals), Service Tax-II, Mumbai is liable to be set aside as being not sustainable in law and therefore the appeals filed by the appellants deserve to be allowed with consequential relief. 16. In view of the above, we set aside the impugned order passed by the Commissioner (Appeals), Service Tax-II, Mumbai, and allow the appeals filed by the appellants by way remand of the refund application for fresh adjudication to the original authority for the limited issue of satisfying the unjust enrichment angle.. As the issue is pending for long, we direct that the original authority should decide the case of refund within next t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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