TMI Blog2012 (6) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... agent of RBI, other issues are not considered at this stage. Limitation - Since question involves interpretation of law and facts in this case, therefore, we consider invocation of extended period is not called for. Penalty also set aside - Decided in favor of assessee. - ST/429/02 - - - Dated:- 29-5-2012 - Mr. M.V. Ravindran, Mr. B.S.V. Murthy, JJ. For Appellant : Shri S. Anandan (C.A.) Lalitha Rameshwaran(C.A.) For Respondent : Shri R. Nagar, A.R. Per : Mr. B.S.V. Murthy; M/s. Canara Bank (Canara Bank) is engaged in the business of banking and financial service in India. Investigation was taken up on the basis of intelligence that Canara Bank provided services of payment and receiving money on behalf of government in respect of various transactions. The investigation, show cause notice and adjudication have resulted in the impugned order in which it has been held that the services provided by Canara Bank in relation to payment of pension, transactions of various departments, public deposit, RBI Bonds, EPF, special deposit scheme, senior citizens saving scheme, compulsory deposit scheme are to be treated as taxable service. Further, Canara Bank als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services; 10a[(iv) Securities and foreign exchange (forex) broking, and purchase or sale of foreign currency, including money changing;] (v) asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services 11[***]; (vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy; (vii) provision and transfer of information and data processing; and 12[(viii) banker to an issue services; and (ix) other financial services, namely, 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;] 5. There is no dispute that the department proposes to charge service tax on the appellant on the ground that the transactions involved in the present case are covered by operation of bank accounts in item no. (ix). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Canara, Bank has to make payment as and when required by Government of India. This is totally unlike a operation of an account where no bank would make payment unless there is a positive balance in the account of the person. When there is a condition of transfer of money received on behalf of the Government by the appellant that the same should be credited within specified time limit, a similar condition when the money is paid and has to be received from Government is non-existent. Therefore he submits that in the absence of an account, the question of levy of service tax does not arise at all. 7. The ld. A.R s. submission regarding the same paragraph is that, the paragraph provides that all sums due to or due 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 RBI. He also submits that this would mean that the Nationalised Bank is not required to make payment of all the money received on a day physically or otherwise to the RBI within the time limit. It would be sufficient if the amount is debited in the account of Nationalised Bank maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made and who makes them and whether the claim made by the ld. Chartered Accountant that payments are made on daily basis by the bank to the RBI and receivables are received separately by way of transfer have not been verified by any one. The original adjudicating authority has simply stated in his order that they have admitted making the payments towards Government account and also receiving money on account of Government. The service of receiving money and crediting money on behalf of Government of India is an operation of banking account. For such services bank is paid service charges at the rates prescribed by RBI. The functions carried out by the agency bank is in relation to operation of banking account. The ld. Chartered Accountant also submitted that the services provided in relation to operation of bank accounts is not covered by the definition in view of the term used namely in the introductory paragraph of the definition. Therefore the service provided has to be operation of bank accounts to attract levy and not service in relation to banking account. In the absence of proper verification of above claims and the result of investigation not being clear, we are unable to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Manu/SC/0636/1997). The ld. A.R. on the other hand submitted that the exemption is provided only to RBI and not to any other bank. He submits that it is settled law as per the decisions of the Hon ble Supreme Court that exemption notification has to be implemented strictly and when terms/the words used are clear, no other interpretation would not be possible. He relied upon the decision of the Hon ble Supreme Court in the case of Uttam Industries 2011(265) ELT 14 (S.C). Further he relies upon the CBEC letter No.Dy.No.174/Com(ST)/07 dated 26.07.2007 wherein it was clarified that the request for exemption from service tax on services provided by SBI to/on behalf of RBI have been found to be not feasible. He submits that after this clarification all other banks that are rendering similar services to/on behalf of the RBI have been paying service tax and therefore the appellant is not eligible for exemption. We find that the clarification issued by the Board is in reply to a letter requesting for exemption. The question as to whether the service is taxable or not and whether the exemption provided to RBI is admissible to its agents or not have not been examined. Normally, if such issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment shall entrust the Bank, on such condition as may be agreed upon, with the management of the public debt and with the issue of any new loans. (3) In the event of any failure to reach agreement on the conditions referred to in this section the Central Government shall decide what the conditions shall be. (4) Any agreement made under this section shall be laid, as soon as may be after it is made, before Parliament. 21A. Bank of transact Government business of States on agreement. (1) The Bank may by agreement with the Government of any State undertake- (a) all its money, remittance, exchange and banking transactions in India, including in particular, the deposit, free of interest, of all its cash balances with the Bank; and (b) the management of the public debt of, and the issue of any new loans by, that State. (2) Any agreement made under this section shall be laid, as soon as may be after it is made, before Parliament. 45. Appointment of Agents. (1) Unless otherwise directed by the Central Government with reference to any place, the Bank may, having regard to public interest, convenience of banking, banking development and such other factors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo heads, when specified and charged for by the dealer separately, without including them in the price of the goods sol: (i) freight; and (ii) charges for packing, that is to say, cost of packing materials and cost of labour and other such like services. 5. The first question 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse this function would have been performed by Government Treasury and where the government does not have its own treasury, RBI/authorised banks are performing the functions. Similarly, PAN cards have to be issued by Income Tax Department and this function is entrusted to UTI Technology Services and, therefore, the Tribunal held that it has to be treated as statutory/sovereign function and is not liable to service tax. In the case of Janata Sahakari Bank Ltd. Vs. CCE Pune-II 2011-TIOL-1270-CESTAT Mum, the commission received for disbursement of salary to Government Servants was held not liable on the ground that it is in relation to statutory functions of Government. Even though we find prime facie that the submissions are correct, we feel that more detailed consideration is required especially in view of the fact there are several functions performed on behalf of Government and all the functions may or may not come under statutory/sovereign function. One example is maintenance of PPF accounts. Question arises whether maintenance of PPF can be considered as statutory function. PPF is run by the Government as a welfare measure and is not required to be performed by Government. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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