State Bank of Hyderabad Versus CCT, Hyderabad – GST
Service Tax
2018 (11) TMI 173 – CESTAT HYDERABAD – 2018 (19) G. S. T. L. 645 (Tri. – Hyd.)
CESTAT HYDERABAD – AT
Dated:- 27-9-2018
Appeal No. ST/601/2009 – A/31243/2018
Service Tax
Mr. M.V. Ravindran, Member (Judicial) And Mr. P. Venkata Subba Rao, Member (Technical)
Shri S. Ananthan, CA (Rep.) for the Appellant.
Shri V.R. Pavan Kumar, Superintendent/AR for the Respondent.
ORDER
Per: P.V. Subba Rao.
1. The appellant is a Public Sector Bank with Head Quarters in Hyderabad and is engaged in the provision of banking services. They have opted for centralized registration and are registered with the Central Excise and Customs, Hyderabad-III Commissionerate for payment of service tax in respect of merchant banking services. The Director General of Central Excise Intelligence conducted investigation and found that the appellant has been rendering services and receiving amounts in respect of the following:
(i) C
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s and therefore, no service tax liability accrues to the Head Office and the show cause notice was issued without jurisdiction.
3. After following due process of law, the learned Commissioner confirmed the demands as per the show cause notice and also confirmed recovery of interest. He further imposed penalties under Sec. 76, 77 & 78 of the Finance Act, 1994. Aggrieved by the impugned order this appeal has been filed by the appellant on the following grounds:
(a) The show cause notice covering entire period is beyond the scope of Sec. 73 as the department was fully aware of the facts and activities of the appellant for over one year prior to the issue of show cause notice.
(b) There is nothing on record to show that bank suppressed the information with an intention to evade tax.
(c) The show cause notice was issued without jurisdiction to the head office of the appellant bank.
(d) Learned Commissioner erred in confirming the demand on the appellant bank without jurisdiction.
(e)
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se notice. Collection of taxes and sale of Government of India Bonds are sovereign functions and are not taxable. He further argued that the credit card services became taxable only w.e.f. 01.05.2006 and hence they are not liable to tax during the relevant period. Collection of taxes being a sovereign function and not a service, is not liable to service tax.
5. Learned departmental representative reiterated the arguments made in the Order-in-Original. He would argue that the services rendered by the appellant are squarely covered by the definition of 'business auxiliary services' being in the nature of promoting and marketing services provided to their clients.
6. We have considered the arguments on both sides and perused the records. The short points to be decided are as follows:
1) Whether service tax is chargeable during the relevant period on
a. Collection of taxes for the Central Government and the Government of State and the commission received for such collection from those
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ion the appellant cannot now argue that their head office has no role in providing the services and hence cannot be issued a show cause notice. It is not the case of the appellant that their branch offices are separately registered with the department for the alleged services rendered. Therefore, we do not find any force in the arguments of the appellant that the show cause notice was issued without jurisdiction. Coming to the merits of the case, we find that as far as mutual funds and Government of India Bonds are concerned, identical issue came before this Bench in the case of CCCE & ST, Hyderabad Vs Andhra Bank [2018 (7) TMI 1439 (CESTAT-Hyd)] in which it was held as follows:
“8. We find that in respect of the demand of commission on sale of mutual funds, the period involved is July 2003 to 09.07.2004. Identical issue came up before the Tribunal in the case of P.N. Vijay Financial Services (P) Ltd. Wherein the Bench held that sale and purchase of mutual funds is covered under notif
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of the Apex Court in the case of Federal Bank Limited would squarely cover the issues in favour of the respondent and is also the judgment of the Tribunal in the case of Western Union Financial Services. We do not find any reason to deviate from such a view already taken.
11. As regards the commission received on sale of Government of India bonds, the period involved is from July 2003 to June 2003, identical issue came up before the Tribunal in the case of HDFC Bank Ltd wherein the Tribunal held that sale of RBI bonds and receipt of brokerage being the transaction of government securities, there is no service tax liability. The said view is followed by the Revenue in the case of CITI Bank [2017 (12) TMI 18 – CESTAT-Chennai]. We do not find any reason to deviate from such a view already taken.”
8. In view of the above, we find no reason to take a different view in this case and we hold that the service of sale of Government of India bonds is not a service and there is no tax liabili
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marketing of sale of goods produced or provided by or belonging to a client. Clause (ii) deals with promoting or marketing of service provided by a client. Clause (iii) deals with any customer care services provided on behalf of the client. In this case the appellant is receiving commission from either Central Government or from the State Government and hence it is not unreasonable to call them their clients. However, the services are neither sale or marketing of goods nor promoting or marketing of services or any customer care services. In fact, collection of tax is neither a sale of good nor rendering of service. It is a compulsory payment which is collected by law from everyone by the State and the tax payer is not the customer or the client of the Government. It is in this compulsory collection of money in the form of tax, the appellant is assisting the Government of India and the State Government and is getting paid for the same. Therefore, we are of the considered view that by n
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vered. The Hon'ble Larger Bench of CESTAT in the case of Standard Chartered Bank Ltd and others [2015 (8) TMI 686 (CESTAT-Delhi (LB))] held that the comprehensive definition of the credit card services w.e.f. 01.05.2006 do not automatically apply to the credit card services when they were rendered as a part of “the banking and other financial services”. We, therefore, find that the credit card services rendered by the appellant by selling and promoting the credit card issued by their parent company viz., SBI and the commission received by them for this service fall under the definition of credit card services w.e.f. 01.05.2006. Prior to the introduction of this definition the credit card services would have been chargeable to service tax to the extent applicable and as “banking and other financial services”. Therefore, the demand made on sale of credit cards under the head of 'business auxiliary services' does not sustain.
9. In view of the above, we find that the demands raised in th
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