Bill Discounting Facility Could Be Offered Not Only By Banking Company But Also By A Body Corporate: CESTAT

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has observed that bill discounting facilities could be offered not only by a banking company or a financial institution but also by a body corporate.

The bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that service tax is payable on ‘bill discounting’ under banking and other financial services (BFS).

The appellant/assessee is a registered service provider for the Goods Transport Operator Service. The balance sheet of the appellant appears to have revealed the receipt of Rs. 9,91,954 and Rs. 4,42,174 for the periods 2007-08 and 2008-09, respectively.

The department found that the appellant was making payments to their suppliers only after sixty days. If the supplier wanted earlier payment, 5% of the value of the bill was deducted by the appellant, which was shown in the appellant’s balance sheet as income under "Bill discount".

The department entertained a doubt that the appellant did render service within the meaning of Section 65(12)(a)(ix) read with Section 65(105)(zm) of the Finance Act, 1994. Thus, a Show Cause Notice was issued, proposing to demand Service Tax under ‘banking and other financial services’.

The appellant filed a reply in which it appeared to have denied rendering any service under ‘banking and other financial services’.

However, in adjudication, the Deputy Commissioner of Central Excise, Tambaram-adjudicating authority, proceeded to confirm the demand as proposed in the Show Cause Notice.

The assessee contended that service Tax is payable on ‘bill discounting’ under BFS only when the service is rendered by a banking company or financial institution, including a non-banking financial company. It is only a corporate body and is not liable to pay Service Tax as it cannot be classified under the category of a banking company or financial institution.

The CESTAT held that ‘bill discounting facilities availed of by a body corporate or Limited Company for prompt payment are taxable.

Case Title: M/s. Surin Automotive Private Limited Versus Commissioner of Central Excise and Service Tax

Case No.: Service Tax Appeal No. 40074 of 2014

Date: 04.08.2023

Counsel For Appellant: M.N. Bharathi

Counsel For Respondent: Anandalakshmi Ganeshram

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