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2020 (2) TMI 1493 - AT - Service TaxClassification of services - Banking and Financial Services or not - collection of fund amount from Coal Companies and the Coal Mine Workers and invest them in various Banks and Securities so as to ensure a good return and pay provident fund pension etc. to the Coal Mine Workers - extended period of limitation - interest - penalty - HELD THAT - There are little force in the arguments of the appellant that they are not a Body Corporate but a Government Department performing some functions because the very Act which created them and entrusted them with the power states that they are a Body Corporate. Section 3B of the CMPFMP Act, 1948 specifically mentions that the appellant is a Body Corporate. Whether the appellant is covered by the definition of Banking and Finance Services? - HELD THAT - As can be seen from the definition asset management including portfolio management all forms of fund management pension fund management custodial depository and trust services are squarely covered by the definition of banking and financial services . The appellant s organization functions under Board of trustees and under Section 3A of the Act it is a Body Corporate. Their responsibilities as evident from the submissions of the appellants themselves are nothing but funds management for which they received service charges of @3% from the Coal Companies. Therefore the appellant is squarely covered by the definition of Banking and Financial services and therefore is liable to pay service tax under this Heading. Whether the appellants are performing services to the country? - HELD THAT - Evidently they are not performing any sovereign functions of the State. They are managing the some funds and performing some functions for the workers of Coal Companies and are getting paid for such services. These services rendered by the appellants are not like the services of RTO of issuing driving license after charging a fees for the purpose or the State Drugs control who issues license for manufacture of pharmaceuticals after charging the requisite fees both of which are sovereign functions of the State. The appellant s functions are akin to the activities of other commercial organizations owned by the Government such as Public Sector Undertakings Public Sector Banks etc.. In all such organizations while the nature of their activity is commercial being owned by the Government their business is so conducted to take in to account some social objectives and goals. This by itself will not make their activities sovereign functions or get them exempted from the tax. Once the Parliament has passed an Act imposing tax in a particular way that cannot be wished away by the appellant claiming noble objectives of their organization. Once a law is passed it must be implemented as it is drafted without any intendment - the appellant is liable to pay service tax. Extended period of limitation - HELD THAT - In this case the appellant has not applied for service tax registration or paid service tax. There is nothing on record to show that the appellant had written to the Department intimating their activities and seeking to know if they are liable to pay service tax. On the other hand when their activities were detected during Audit and the Department had written several letters and reminders only then they obtained service tax registration. Even after obtaining the service tax registration they have not paid the service tax nor filed any returns. This conduct of the appellant does not show their bonafides - It is the organization which has demonstrably evaded the tax to profit. It cannot now profit from its own wrong and escape tax liability - the invocation of extended period of limitation is fully justified in this case. Interest under Section 75 - HELD THAT - As the interest under Section 75 is directly linked to the payment of duty the interest must accordingly be paid by the appellant. Penalties - HELD THAT - There are nothing inconsistent or wrong in the impugned order imposing statutory penalties under Sections 78, 77 76 of the Finance Act 1994 since the appellant has made every possible effort to knowingly evade tax. Appeal dismissed - decided against appellant.
Issues Involved:
1. Classification of services provided by the appellant under "Banking and Other Financial Services." 2. Status of the appellant as a Body Corporate. 3. Applicability of service tax to statutory organizations performing welfare functions. 4. Invocation of the extended period of limitation. 5. Imposition of penalties under the Finance Act, 1994. Issue-wise Detailed Analysis: 1. Classification of Services Provided by the Appellant: The primary issue was whether the services provided by the appellant fall under "Banking and Other Financial Services" as per Section 65(12) of the Finance Act, 1994. The appellant managed various funds, including provident funds, pension schemes, and insurance schemes, and received a 3% commission for these services. The tribunal found that asset management, including fund management and pension fund management, is explicitly covered under "Banking and Financial Services" as per the definition provided in the Finance Act, 1994. Therefore, the tribunal concluded that the appellant's activities are taxable under this category. 2. Status of the Appellant as a Body Corporate: The appellant argued that it was not a Body Corporate but a statutory organization performing functions under the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (CMPFMP Act). However, the tribunal noted that Section 3B of the CMPFMP Act explicitly states that the appellant is a Body Corporate. The tribunal rejected the appellant's claim and confirmed that they are indeed a Body Corporate. 3. Applicability of Service Tax to Statutory Organizations Performing Welfare Functions: The appellant contended that as a statutory organization performing welfare functions mandated by the Directive Principles of State Policy, they should not be subject to service tax. The tribunal distinguished between sovereign functions and commercial activities performed by government-owned entities. It held that the appellant's activities were akin to those of other commercial organizations owned by the government, such as public sector undertakings and banks, which are subject to service tax. The tribunal emphasized that fiscal statutes must be strictly construed, and the appellant's activities fall within the taxable category as per the Finance Act, 1994. 4. Invocation of the Extended Period of Limitation: The appellant argued that the notice for service tax demand was time-barred, and the extended period of limitation should not be invoked. The tribunal found that the appellant did not voluntarily register for service tax or pay the tax despite repeated reminders from the department. The appellant's conduct indicated an intention to evade tax, justifying the invocation of the extended period of limitation. The tribunal held that the extended period was rightly invoked in this case. 5. Imposition of Penalties: The appellant contested the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The tribunal noted that the appellant made every possible effort to evade tax, including failing to register for service tax, not paying the tax, and not filing returns. The tribunal found that the imposition of statutory penalties was justified given the appellant's conduct. Conclusion: The tribunal upheld the impugned order, confirming the demand for service tax along with interest and penalties. The appeal was rejected, and the appellant was held liable to pay service tax under the category of "Banking and Financial Services." The tribunal emphasized the strict interpretation of fiscal statutes and found no merit in the appellant's arguments regarding their status and functions.
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