ST - Services provided in relation to operation of accounts of EPFO & ESIC are not taxable under Financial Services - however, since appellant has paid ST demand and are not claiming any refund, no penalty is imposable: CESTAT
By TIOL News Service
AHMEDABAD, MAR 11, 2013: THE appellant State Bank of India is providing taxable services falling under the category of 'Banking and Other Financial Services' and registered with the department. On the basis of the intelligence gathered by the officers of DGCEI it was revealed that SBI also provided taxable services in relation to operation of accounts of the Employees Provident Fund Organization (EPFO) and Employees State Insurance Corporation (ESIC) classifiable under Banking and other financial services and on which no Service Tax was being paid.
Therefore, appellant was served with show cause notice on 19.10.2009 proposing to recover Rs. 9,80,215/- being service tax not paid for the period from 10.9.2004 to 31.3.2007 and interest and penalties.
The adjudicating authority passed an order confirming the demand of service tax of Rs. 8,81,090/- and interest thereon and also imposed penalty of equal amount under Section 78 of the Finance Act, 1994. However, he chose not to impose any penalty under Section 76 and 77 of the Finance Act, 1994.
The appeal filed by SBI against the order was rejected by the Commissioner(A). Incidentally, the Revenue had also filed an appeal against non-imposition of penalty u/s 76 & 77 and they too lost.
Resultantly, SBI and the CCE, Surat-I are together before the CESTAT.
The appellant submitted that they have already discharged the Service Tax as confirmed by the adjudicating authority although they were not required to pay the same in view of the decision in Canara Bank vs. Commissioner of Service Tax, Bangalore, - (2012-TIOL-790-CESTAT-AHM). However, they would not be claiming any refund of the same, submitted the appellant, but prayed that the penalty imposed be set aside.
The Revenue representative had a standard submission - that he is not aware whether the Tribunal decision cited by SBI has been accepted but wants that the appellant be penalized under the sections not troubled by the lower authorities.
The Bench observed -
"7. On careful consideration of the submissions made by both sides, I find that the issue involved in this case is regarding service tax to be discharged on the amounts of commission received by the appellant from the Govt. of India. It is seen from the record that the appellant is claiming that they have discharged the entire service tax liability and in respect of which they have produced a certificate issued by the Chief Manager, Main Branch, Surat, which indicate discharge of service tax liability from September 2004 to July 2005. It is the claim of the Chartered Accountant that these amounts include the service tax liability which has been arrived at by the lower authorities as short payment.
8. Since the assessee, State Bank of India has discharged the service tax liability before the issuance of show cause notice and there being a claim that the records are lost in flood in the year 2005, I have to hold that the certificate produced by the learned advocate to be correct as on date. Since the appellant, State Bank of India has already discharged the service tax liability and in my opinion, such service tax liability need not have been paid by them as per the decision given by this Bench in the case of Canara Bank (wherein I was one of the Member). I find that there is no reason for visiting the appellant with penalty that has been imposed by the lower authorities. In the case of appellant, the appeal is for setting aside the penalty imposed under Section 78 of the Finance Act, 1994.
8. Since I have already held that the appellant has discharged the service tax liability, as per the certificate produced by the Chartered Accountant, the service tax liability having been discharged, and held that the appellant is not required to be visited with the penalty under Section 78, under the same analogy, I find that the appellant is not to be visited with any penalty under Section 76 of the Finance Act, 1994 as has been pleaded by the Revenue in their appeal."
In fine, the assessee's appeal for setting aside the penalty imposed by the lower authorities was allowed and Revenue's appeal for imposing penalty under Section 76 of the Finance Act, 1994 was rejected.
(See 2013-TIOL-416-CESTAT-AHM)
