No Service Tax Payable On Banking Services Rendered By PNB To RBI: CESTAT
The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is payable on banking services rendered by Punjab National Bank (PNB) to the Reserve Bank of India (RBI).The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the appellant bank is working as an agent of RBI in the discharge of...
The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is payable on banking services rendered by Punjab National Bank (PNB) to the Reserve Bank of India (RBI).
The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the appellant bank is working as an agent of RBI in the discharge of sovereign functions; therefore, whatever exemption is applicable to RBI, that should also be applicable to the appellants who are working as agents in the discharge of statutory/sovereign functions.
The appellant bank is a nationalized bank having its registered office in Chandigarh and was registered with the service tax department for providing taxable services in the category of banking and financial services, transportation of goods by road, and renting of immovable property dated 16.04.2009 as defined under Section 65(105)(zzk), 65(105)(zzp), and 65(105)(zzzz) of the Finance Act, 1994.
The Reserve Bank of India, through a network of its public accounts departments and branches of other agency banks, carries out government . transactions for the central and state governments. The appellant is an authorized branch of Punjab National Bank that carries out central and state government transactions for the states of Punjab, Haryana, and Himachal Pradesh.
The RBI credited the appellant's account with the commission earned; out of the total commission received, the appellant retained 25% and transferred the remaining 75% to the respective branches.
The appellant bank received a total commission of Rs. 13,80,13,654, out of which only 25% of the commission amounting to Rs. 3,53,85,775 is retained by the appellant for carrying out state government business transactions for RBI. Out of 25% of the amount retained, Rs. 1,36,48,430 are received by the appellant from RBI in lieu of providing services of collection of taxes and duties (treasury business).
The department issued a show cause notice proposing the demand of Rs. 1,53,75,352 under “Business Auxiliary Service” for the period 01.10.2006 to 30.09.2011. The appellant filed its detailed reply to the show cause notice, and after following due process, the commissioner confirmed the demand along with interest and an equal penalty.
The assessee contended that the order is not sustainable in law as the same has been passed without properly appreciating the facts and the binding judicial precedents on the identical issue. She further submits that the service provided for discharge of sovereign or statutory functions of the state is outside the purview of service tax, which makes the entire demand unsustainable.
The tribunal, while allowing the appeal of the bank, held that the main services rendered by the appellant to the RBI are exempt from service tax vide notification No. 22/2006-ST dated 14.04.2006. The benefit of exemption available to RBI would be available to the agent, i.e., PNB. The services are in the nature of statutory/sovereign functions and hence not liable to Service Tax.".
Counsel For Appellant: Shruti Khandelwal
Counsel For Respondent: Anurag Kumar
Case Title: M/s Punjab National Bank Versus Commissioner of Service Tax, Chandigarh
Case No.: Service Tax Appeal No. 55596 of 2014