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TMI Blog2009 (9) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 77 of the Act. 2. Facts of the case are that the authorities had received intelligence that the applicant rendered taxable services classifiable as 'operation of bank accounts' during the period 10-9-2004 to September 2007 as an agent of the Reserve Bank of India (RBI) without following statutory formalities including payment of applicable service tax. Under the arrangement the bank undertook the Government transactions namely collection of direct tax/indirect tax, payment of pension, human resource department transactions under various departments, Government deposits like RBI bonds, PPF, Senior Citizen Savings Scheme etc. They charged commission for Government transactions at the following rates : (1) All receipts at the rate of Rs. 45 per challan with effect from 1-7-2005. (2) Payment of pension at the rate of Rs. 60 per month. (3) All other payments at the rate of Re. 0. 90 paise per Rs. 100. As per a circular dated 30-6-2007 of the RBI, the bank received commission at the rate of Rs. 11.80 per Rs. 100 on Government transactions (receipts and payments). The agency commission on other transactions effective from 1-7-2005 is as follows: (i) Receipts, Rs. 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prescribed ST-3 returns. After due process, the Commissioner found that the entire tax had escaped assessment due to suppression by the bank. He rejected the arguments of the appellants that they undertook the impugned activity as an agent of the RBI. It was under statutory obligation to conduct the Government business which was not exigible to service tax. This statutory function could not be termed as service. The impugned activities were normally undertaken by the treasury of the Government. The statutory function performed by the Government could not be treated as taxable service. The Commissioner held that the appellant's argument was fallacious as there was no exemption from payment of service tax on services provided to the Government. The bank was compensated in the form of agency commission for undertaking the transactions on behalf of the RBI and it was treated as income for tax purposes. There was no specific exemption for the said activity from liability to service tax. The Notification No. 22/06 ST, dated 31-5-2006 excluded from the ambit of service tax, various activities which did not include the impugned services rendered by the appellant. The CBEC had clarified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank undertook during the material period taxable service of 'operation of bank accounts' falling under clause (12) of section 65 of the Act. Bank has submitted that the impugned order does not give details of such accounts opened with the bank. There is no dispute as to the value of taxable services or the tax computed on the value received. The dispute is whether the bank is liable to discharge service tax on transactions it carried out as an agent of the RBI. As per the Notification No. 07/06-ST, dated 1-3-2006, the bank was bound to function as the agent of the RBI at any place in India for purposes specified by the RBI in the said notification. It is common case that the impugned activities were undertaken by the bank as an agent of the RBI. The bank was one of the several banks appointed by RBI under section 45 of the RBI Act as its agent. The Commissioner has found that whereas such activities undertaken by RBI are exempt under Notification No. 22/06-ST, dated 31-5-2006, there is no such notification issued exempting similar services rendered by the appellant bank. Section 65(12) of the Act, Notification No. 7/2006-ST, dated 1-3-2006 and Notification No. 22/06-ST, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 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, overdraft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts; (b) foreign exchange broking and purchase or sale of foreign currency, including money changing provided by a foreign exchange broker or an authorised dealer in foreign exchange or an authorised money changer, other than those covered under sub-clause (a); Explanation.—For the purposes of this clause, it is hereby declared that 'purchase or sale of foreign currency, including money changing' includes purchase or sale of foreign currency, whether or not the consideration for such purchase or sale, as the case may be, is specified separately; Notification No. 7/2006-ST, dated March 1, 2006 "G.S.R.(E)-In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (herein referred to as the 'Finance Act'), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts taxable ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial Tax Officer, Lalgudi wrote to the assessee to show cause why its turnover relating to the price of the packing materials used in packing the Cement sold should not be included in its taxable turnover. The assessee instead of showing cause against that proposal moved the High Court of Madras under Article 226 of the Constitution to direct the assessing authority not to include that turnover in its taxable turnover. The High Court entertained that Writ Petition. It would have been proper if the High Court had directed the assessee to put forward its case before the authorities under the Madras General Sales Tax Act, 1959. Now that the High Court had entertained the Writ Petition and gone into the merits of the case, it serves no useful purpose to refuse to go into the merits of case. 2. In its Writ Petition the assessee had definitely averred that it was functioning as the agent of Dalmia Cement (Bharat) Ltd. and its rights are the same as that of its principal. It was further alleged in the Writ Petition that when cement was sold in packages, the packing charges were separately shown in the bills issued to the buyers. On these grounds the assessee claimed that it is entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that we have to consider is whether an agent of a principal who is also a dealer under the Act is entitled to the same rights as his principal has under the Act. Under the general law the agent merely represents his principal. Therefore, while functioning within the scope of the agency he can exercise all the rights which his principal could have exercised. In fact, in the case of an ordinary agency, the agent merely acts for his principal. This provision must hold good even under the Madras General Sales Tax Act unless otherwise provided therein. The fact that for the purpose of that Act an agent is considered as a dealer does not alter the legal position in other respects. Excepting to the extent otherwise provided in the Madras General Sales Tax Act the agent must be held to represent his principal while dealing with the goods of his principal; he merely steps into the shoes of his principal. He is entitled to the same exemptions as his principal would have got had he dealt with the concerned goods himself. Agents are considered as dealers under the tax so as to effectively enforce the provisions of the Act. But that provision does not convert an agent into a principal for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the presumption that the enactment is constitutionally valid. As far as granting stay or injunction in the matter of imposition and/or collection of taxes is concerned, the Supreme Court has clearly indicated in the case of Siliguri Municipality v. Amalendu Das AIR 1984 SC 653 the precaution to be exercised by the courts. It is well-settled that, normally, the High Court should not, as a rule, in proceedings under article 226 of the Constitution of India, grant any stay on recovery of tax save under very exceptional circumstances. The grant of stay in tax matters should be an exception and not the rule." (p. 253) 7. We find that in the instant case, the appellants have not raised any challenge to the legality or constitutionality of the levy under the Act. On the other hand they have made out a prima facie case against the demand relying on judgment of the Apex Court. In the Siliguri Municipality's case (supra) relied on by the Mumbai High Court in the judgment of INI Express Worldwide (P.) Ltd.'s case (supra), the Apex Court had observed that a public authority such as a municipality could not function if its source of revenue was blocked by an interim order. Municipality had t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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