9911796707
TMI Blog2012 (6) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... not have its own treasury and maintains currency chests on behalf of Reserve Bank of India (RBI). It has been held that these activities are also to be treated as taxable services. By the impugned order demand of service tax of Rs.5,97,47,205/- with interest has been confirmed and penalty has been imposed under Sections 76, 77 and 78 of Finance Act, 1994. 2. The ld. Chartered Accountant on behalf of the appellant stated that he would like to place three submissions in support of his case and argued extensively and on behalf of Revenue Ld. A.R. also made elaborate submissions. The discussion and analysis by us are under three main arguments advanced by the appellants. 3. The three main arguments advanced are - (i) The services provided are not covered by the definition of service tax at all; (ii) RBI is exempt from service tax liability both as a receiver of service and as a provider of service; and (iii) the services are statutory/sovereign functions of Government performed on behalf of Government and hence mot liable to service tax. I. The services are not covered by the definition. 4. Before we proceed it is appropriate to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of bank accounts in item no. (ix). It is the submission of the ld. Chartered Accountant that the transactions made in the present case for which service tax is proposed to be levied can not be called operation of the bank account at all. For this purpose, he drew our attention to the copy of Agreement entered into by Canara Bank with RBI. He drew our attention specifically to para (3) of the agreement which reads as under: The Reserve Bank of India shall not maintain a balance with the Nationalised Bank for the management of the accounts of the Central or State Governments and all sums due or due to from the Central or State Governments in the management of the aforesaid account shall be adjusted by the Nationalised Bank by book transfer with the balances which it holds with the Reserve Bank at such place or places at which there is an office or branch of the Banking Department of the Reserve Bank and in such manner as may be agreed upon between the Reserve Bank and the Nationalised Bank from time to time . 6. He submits that this clearly shows that the appellant does not operate bank account at all as far as Government transactions are concerned. Operation of bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e account of Nationalised Bank maintained with RBI. Similarly for the payment made, the amount can be received by making adjustment in the account of a Nationalised Bank maintained with RBI. 8. We have considered the submissions. We find that if we read paragraph-3 of the Agreement it gives an impression that Canara Bank has no need for making physical payment/receive payment from Government of India on every day or at regular interval. What emerges from paragraph-3 appears to be that RBI being a regulator of banks in the country, the Canara Bank is required to maintain an account with RBI for various purposes and instead of RBI having account or Government of India having account, this seems to be a working arrangement whereby Nationalised Banks have been permitted to make the debit/credit entries in the accounts maintained by them with RBI. This is contrary to the normal banking practice of banking as understood for others. In the normal case as submitted, customers open the account and customers can withdraw money and ask the bank to receive money. The procedure adopted by RBI is peculiar and appropriate when we see the nature of transactions and the relationship between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigation not being clear, we are unable to come to the conclusion as to whether the performance of the agent s functions by Canara Bank amounts to operation of bank account or not. It is quite clear that service provided in relation to Bank account is not covered under operation of bank account. If the submissions made by the ld. Chartered Accountant are factually correct (he has not produced any documentary support for this purpose), the service does not amount to operation of bank account. However the submissions are contrary to what emerges from the provisions of Agreement in para-3. In the normal course, we should have either remanded the matter or required documentary evidence to come to a conclusion. However, in view of the fact that we have found merit in the claim of the appellant for exemption from service tax which we are going to discuss subsequently in the subsequent paragraphs we consider that it is not necessary to reach a conclusion as to whether the process amounts operation of banking account even though from the Agreement it does appear to be so. II. Canara Bank is eligible for exemption available to RBI as the agent of RBI. 9. The second submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to its agents or not have not been examined. Normally, if such issues are examined and a circular is issued, reasoning behind the circular and issues raised are discussed in the letter so issued. In the absence of such details, the letter dated 26.07.2007 would not be of help to Revenue. This is unlike consideration of issues by a quasi judicial forum where the issues are examined in the light of facts and circumstances of the case and applicability of statutory provisions to the same and judicial pronouncements. Therefore we are bound to take note of the circular and in the event we find the circular to be applicable to the facts and circumstances, follow the same. Therefore, the circular does not and can not mean that the decision has to be in line with it. Similarly, the fact that other banks are paying service tax can not also be a ground for rejecting the claim of the appellant to exemption since the issue is whether the appellant is liable or not and not whether others are liable. The ld. Chartered Accountant stated if Canara Bank was paying and all others were not paying, will the revenue force others to pay or allow Canara Bank not to pay. The department does not take a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any place, the Bank may, having regard to public interest, convenience of banking, banking development and such other factors which in its opinion are relevant in this regard, appoint the National Bank, or the State Bank or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970, or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act 1980, or any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, as its agent at all places, or at any place in India for such purposes as the Bank may specify. (2) When any bank is appointed by the Bank as its agent under sub-section (1) to receive on behalf of the Bank any payment required to be made into the Bank, or any bill, hundies or other securities required to be delivered into the Bank, under any law or rule, regulations or other instructions having the force of law, the same may be paid or delivered into the bank so appointed as the agent of the Bank. 12. From the above it can be seen that RBI have the right to transact Government business and allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 purposes under the Act. 13. The above observations of the Hon ble Supreme Court make it clear that exemption to the principal would be available to the agent also. For this purpose, since the agent is eligible for the exemption which is available to the principal in terms of the relationship with the principal of the agent and not because of exemption granted specifically to the agent or principal, we have to hold that the appellant is eligible for exemption. If RBI were to undertake the activity there would have been no question of levy of service tax. It was also brought to our notice that RBI is not paying service tax. Same functions being carried out by RBI are exempted. Therefore, we hold that the benefit of exemption available to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
