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2009 (9) TMI 312 - CESTAT, BANGALOREBanking and other Financial services- Notification No. 22/06-sT, dated 31.5.2006- The Appellant bank was an agent of the Reserve bank of India. Under an agreement, it undertook the government transactions, namely, collection of direct tax, payment of pension, human resource department transactions under various departments, the Government deposits like RBI Bonds, PPF, Senior Citizens Saving Schemes etc. and it charged commission on the government transactions. The activity fell under the category of ‘Banking and other Financial Services’ of section 65(12)(a)(viii). 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 1.9.2004 to 30.9.2007. There was no specific exemption from the said activity from liability to service tax. In the light of the judgment of the Apex Court, in State of madras v. Cement Allocation Coordinating organization manu/SC/0636/1997, held that service 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.
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