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CCE & S.T. Chandigarh Versus State Bank of Patiala

Eligibility of exemption - N/N.22/2006-ST dated 31.05.2006 - Banking or Financial service - collection of taxes and remittance to RBI - services rendered by scheduled bank to RBI - whether qua N/N. 22/2006-ST dated 31.05.2006, the commission received from the Reserve Bank of India by a scheduled bank for rendition of Banking or Financial service is entitled to exemption from service tax on the ground that the banking company providing such taxable service is an agent of the Reserve Bank of India .....

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der Reverse Charge Mechanism. In our view as the respondent assessee is an agent of RBI, exemption granted by notification No. 22/2006-ST, needs to be extended to respondent - if RBI is exempted from the service tax liability in respect of various services, its agent for doing such services also needs to be extended the same benefit. - Assessee means a person liable to pay service tax and includes his agent. RBI a person liable to pay tax as an assessee but for exemption, will include their .....

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) And Mr. V. Padmanabhan, Member (Technical) Ms. Suchitra Sharma, Commr (AR) Shri Govind Dixit, D.R. Shri Amresh Jain, D.R. for appellant Shri SourabhGarg, C.A Ms. PriyankaBanga, C.S. Shri Malvinder Bhatia, Advocate for respondent ORDER Per M. V. Ravindran This Larger Bench was constituted on administrative order of the Hon ble President. The Referral Bench vide miscellaneous order No. 798/2014 dated 26.08.2014 has referred the issue for consideration which as under:- Whether qua notification No .....

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while opening the arguments for Revenue submits that the factual matrix which according to him is that State Bank of Patiala is a banking company registered under Companies Act, 1956 and regulated by the Reserve Bank of India (herein after referred to as RBI) as per the provisions of Banking Regulations Act, 1949; The RBI in exercise of its authority conferred by Section 45 of Reserve Bank of India Act, 1934 appointed the respondent-assessee as an agent to receive remittances of taxes on RBI s b .....

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clear and it exempts only the taxable services provided by RBI. It is his further submission that the law is settled and too well established that exemption notification are to be strictly interpreted for which proposition he relies upon the decision of the Apex Court in the case of Commissioner of Cus. (Prv.) Amritsar v. Malwa Industries Ltd. 2009 (235) ELT 214 (S.C.) and Uttam Industries v. Commissioner of Central Excise, Haryana 2011 (265) ELT 14. (S.C.). It is his submission that the Referra .....

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for exempting the services provided to and by RBI. It is his further submission that reliance placed by the Bench in the case of Canara Bank (supra) on the judgement of the Apex Court in the case of State of Madras vs. Cement Allocation Coordinating Organisation (1971) 2SCSS/587 is not applicable as the specific provisions of Finance Act will prevail over the general observations made by the Apex Court in that case. 4.1 It is his further submission that the respondent herein i.e. State Bank of P .....

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k of Patiala would draw our attention to the decision of the Tribunal in the case of Canara Bank (supra). It is her submission that the Tribunal subsequently in the case of Union Bank of India 2013-TIOL-343-CESTAT-MUM has followed the decision given by the Tribunal in the case of Canara Bank and held that the service tax liability does not arise on the bank which is receiving commission for collecting and remitting the taxes to consolidated fund of India on behalf of the RBI. She would extensive .....

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5 of the RBI Act, the RBI is authorized for appointing agent or any Bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or as defined in the State Bank of India (Subsidiary Banks) Act, 1959, for receiving on behalf of RBI any payment required to be made into the Bank or any bill, or any other security required to be delivered into the Bank. She has also submitted that the very same provisions were considered by the Tribunal in the case of Canara Bank .....

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ct, 1956, and regulated by the RBI under provisions of the Banking Regulation Act, 1949. 6. We have considered the submissions made at length by both sides and perused the records. 7. The issue that falls for consideration of this Larger Bench is whether the respondent herein is eligible for the benefit of exemption notification No. 22/2006-ST dated 31.05.2006. The respondent herein is a public sector/nationalized bank established under Banking Companies (Acquisition and Transfer of Undertakings .....

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being taken that the RBI is constituted under RBI Act, 1934, and is banker of the nation. As per Section 20 of the RBI Act, the RBI is mandated to accept the monies for the account of Government of India and to make payment and other activities like foreign exchange remittances and other banking operations including the management of debt of the Govt.of India. 7.2 The provisions of Section 21 of the RBI Act has categorically stated that right to transact Govt. transaction in India is only given .....

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where the Bank has no branches or agencies, and the (Central Government) may hold at such places such balances as (it) may require. 7.3 It may be noticed from the reproduced Section, only RBI can transact the Government business in India which is to receive and also remit all the money on behalf of the Government of India. Section 21A of the RBI Act also empowers the RBI to transact Government business of States on agreement. Holistically, reading of Section 20, 21 and 21A of the RBI Act, would .....

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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 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 (5 of 1970), or a corresponding new bank co .....

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jother 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.] (Emphasis supplied) 7.4 On careful reading of above reproduced Section 45, it can be noticed that, RBI, under the direction of Central Government of India having regard to public interest, convenience of banking and other factors, can appoint a national bank or the State .....

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ur view as the respondent assessee is an agent of RBI, exemption granted by notification No. 22/2006-ST, needs to be extended to respondent. In our view the claim of the respondent from exemption of the service tax on the commission received for undertaking the activity of receiving various taxes on behalf of the Govt. of India, seems to be justified inasmuch as that the provisions of Section 45 of RBI Act categorically mandated for appointing national bank or a State Bank by the RBI for specifi .....

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uced definition, the Finance Act itself acknowledges the fact that the person who is liable to pay service tax includes its agent which would mean in the case in hand that in the absence of Notification 22/2006-ST, RBI would be liable to pay service tax as also banks which are appointed by RBI as agent under Section 45 of RBI Act. Applying the same analogy, in our view if RBI is exempted from the service tax liability in respect of various services, its agent for doing such services also needs t .....

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