ST - Notfn 22/2006 - Since exemption Notification clearly limits grant of immunity only to taxable services provided by or to RBI, benefit prima facie not available to State Bank of Patiala - Matter referred to Larger Bench: CESTAT
By TIOL News Service
NEW DELHI, SEPT 24, 2014: THE assessee is a banking company. The RBI in exercise of its authority conferred by Section 45 of the RBI, 1934 appointed the assessee as an agent, inter alia to receive remittances of taxes on RBl's behalf to the credit of the consolidated fund. For executing this function, RBI paid a commission to the assessee.
The commission was treated by Revenue as the consideration received for rendition of the taxable "Banking or Financial Service".
So, the assessee remitted ST. Later, on the ground that they were entitled for exemption in terms of Notification No. 22/2006-ST dated 31.5.2006, the assessee applied for refund of the service tax remitted.
The lower authority rejected the claims on ground time bar as well as holding the assessee ineligible for the benefit of Notification No. 22/2006-ST .
As the Commissioner(A) allowed the appeal filed by the assessee by relying upon the decisions in M/s Canara Bank 2012-TIOL-790-CESTAT-AHM & Union Bank of India 2013-TIOL-343-CESTAT-MUM , Revenue is before the CESTAT.
The AR seeks a stay of operation of the impugned order on the ground that pursuant to the order of Commr.(A) the department would haveto refund the service tax remitted by the assessee.
The respondent assessee submitted that the order of the Appellate Commissioner is impeccable as the same is passed in view of the Division Bench judgement of this Tribunal in M/s Canara Bank and, therefore, there is no justification for interdicting the refund, by a stay order.
The Division Bench headed by the President observed that the submissions made by the assessee based on the decision in M/s Canara Bank Ltd . does not prima facie commend acceptance for the reason -
14. The power to grant exemption from the liability to tax is conferred on the Central Government under Section 93 of the Act in plenitudinous terms. Such exemption may be granted either in a specific case or in respect of a generality of cases, with or without conditions. In the exercise of such broadly conferred power, the Central Government issued Notification No.22/2006-ST , clearly enumerating the transactions, the taxable services and the provider or recipient of services, in expressly specified circumstances, which alone are notified to be eligible to the immunity to tax. It is a settled principle and one that is too well established, that exemption Notifications are to be strictly and rigorously construed. We also prima facie discern no ambiguity in the taxable services and circumstances of such rendition/receipt which are spelt out in Notification No. 22/2006-ST . In view of the unambiguous enumeration of the exemptions spelt out in the Notification, the grammatical meaning of clauses (i), (ii) and (ii) must be held to the correspond with its legal meaning as well. Since we, prima facie , notice no ambiguity in the scope of the exemptions specified in the Notification, there is no warrant for reading implications into the text. On its plain terms clauses(i) and (ii) of the Notification clearly exempt only such taxable services as are provided by RBI to any person and taxable services provided or to be provided by any person to the RBI, in circumstances where the inherence of service tax for rendition of such services would fall on the RBI under the reverse charge protocol enacted in Section 68(2) of the Finance Act 1994 read with Rule 2 of the Service Tax Rules, 1994. Though the ld. Consultant would contend that as taxable services provided by the RBI to any person are exempt from the levy of service tax, the assessee as an agent of RBI must be held to be immune to such levy as well, we are prima facie of the view that the generic principles of agency cannot be canvassed to expand the scope of exemption to the assessee, since the exemption Notification clearly limits the grant of immunity only to taxable services provided by or to the RBI and in enumerated circumstances.”
And so, stay was granted from operation of the order passed by Commissioner(A).
See order 2014-TIOL-1834-CESTAT-DEL
On the same day, the appeals filed by the Revenue were heard by the same Division Bench.
Adverting to the Division Bench decision in Canara Bank (supra) and the notification 22/2006-ST, the Bench further observed -
"4. Prima facie , it appears to us that since it is settled law that an exemption Notification must be strictly and narrowly construed, treating a bank authorised by the RBI (to transact Government business) as the agent of the RBI and thus entitled to exemptions clearly confined to the RBI (under Notification No.22/2006-ST ), is an interpretation that warrants deeper analysis and possible reconsideration. We are conscious that we are a Division Bench and therefore a coordinate bench qua the judgement in M/s Canara Bank . We are however satisfied that the issue calls for deeper analysis and application of the appropriate interpretive principles."
Noting that it would be appropriate that the issue be considered by a Larger Bench, the following question was, therefore, framed -
“Whether qua notification No. 22/2006-ST dated 31.5.2006, the commission received from the Reserve Bank of India by a scheduled bank (entrusted with functions of transaction of Govt. business) 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 and thus entitled to exemptions specified in clause (i) of Notification No. 22/2006-ST, dated 31.5.2006.”
In passing : The Only Thing That Is Constant Is Change - Heraclitus, Greek Philosopher
(See 2014-TIOL-1835-CESTAT-DEL)
