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2016 (11) TMI 22 - CESTAT BANGALORE

2016 (11) TMI 22 - CESTAT BANGALORE - TMI - Levy of tax - activities of cash management - Business Auxiliary Service - Section 65(19) of the Finance Act, 1994 - demand of interest u/s 75 and imposition of penalties - The Banking and Other Financial Services (BOFS) was included in the statute w.e.f 16.7.2001 under Section 65(12), however, the definition as it was initially introduced specifically excluded cash management services. The definition of scope of BOFS was further amended w.e.f 1.6.2007 .....

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es can be charged to service tax under BAS stands decided by the Hon’ble Apex Court in the case of CST vs. M/s. Federal Bank Limited [2016 (3) TMI 354 - SUPREME COURT] where it was held that Clause (12) of Section 65 covers all charging services rendered by the Banks. - when cash management services stood excluded from the purview of service tax at the hands of the Bank until 31.05.2007, the authorities cannot levy service tax on an activity which is essentially cash management service, by takin .....

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06 passed by the Commissioner of Central Excise and Customs, Cochin. The appellant-Bank is engaged in providing the service of cash management to their big clients. The dispute covers the period 1.7.2003 to 30.9.2005 during which a demand of ₹ 65,67,524/- stands made in the impugned order as service tax payable under the category of Business Auxiliary Service (BAS) under Section 65(19) of the Finance Act, 1994. The interest payable under Section 75 as well as penalties have been imposed. T .....

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(12)(v) only w.e.f 1.6.2007 when its scope was expanded. Accordingly, their contention is that for the period prior to 1.6.2007 no service tax can be levied on this activity by bringing it under the category of BAS under Section 65(19). (ii) They have further submitted that the case has been decided squarely in their favour by the Hon ble Supreme Court in the case of CST vs. M/s. Federal Bank Limited: 2016 (42) S.T.R. 418 (SC). 2. Heard Smt. Lalitha Rameswaran, learned CA for the appellant as w .....

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as specifically included under Clause (v). It is also on record that from 1.6.2007, the appellant has been discharging service tax liabilities under BOFS. Revenue authorities have taken a view that for the period prior to 1.6.2007 such services would be covered by BAS. Prior to the amendment in Section 65(12) w.e.f. 1.6.2007, the definition stood as follows: (12) banking and other financial services means- (a) The following services provided by a banking company or a financial institution includ .....

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iliary 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 (viii) Other financial services, namely, lending, issue of pay order, demand draft, cheque, letter of credit and bill of exchange, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults, operation of bank account .....

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nt services appearing in the clarification letter of the CBEC dated 1-6-2007. 9. It is not in dispute that under Clause (12) of Section 65, there was a specific mention in sub-clause (v) to the effect that the banking and other financial services means asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services, but does not include cash management. Subsequently, the legal position has been altered and the above .....

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n turn do not specifically relate to banking and other financial services. Rather such banking and other financial services are specifically covered by clause (12) of Section 65. 11. In that view of the matter, the High Court held that Clause (12) of Section 65 covers all charging services rendered by the Banks. The High Court is further of the view that when cash management services stood excluded from the purview of service tax at the hands of the Bank until 31-5-2007, the authorities cannot l .....

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