PPF Funds Management Service Prior To 10.9.2004 Not Liable To Pay Service Tax: CESTAT

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is payable on the operation of PPF accounts after September 10, 2004.

The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) has observed that the value of services received by a service provider prior to 10.9.2004 in respect of "operation of bank accounts" is not subject to payment of service tax.

The appellant/assessee, SBI, received an intimation from the Reserve Bank of India stating that an amount of WAs was being paid as commission charges relating to the financial year 2003-2004.

The department concluded that the appellant is engaged in the service of management of PPF funds, and the words ‘all forms of fund management’ appearing in sub-clause (v) of the definition given under Section 65(12) of the Finance Act, 1994, are all about management of funds and allied activities. Even the claim of the appellant that the service, namely operation of bank accounts, cannot be remotely related to the service of ‘management of PPF accounts rendered by the appellants to the RBI. The service of ‘management of PPF funds’ rightly fits into the service of ‘all forms of fund management’ appearing in the definition of banking and other financial services itself.

The department held that the service of management of PPF funds rendered by the appellants to the RBI by default falls under the category of banking and other financial services and is a taxable service.

The assessee contended that the activity performed by it was not the management of PPF funds but the maintenance of PPF accounts, which can be considered taxable only as of September 10, 2004.

The department contended that the appellant was liable to pay service tax on the remuneration received by them from RBI in relation to PPF funds management during the relevant period as part of taxable services under the heading Banking and Other Financial Services.

The CESTAT held that the appellant is eligible to claim a refund of service tax paid under protest in terms of the proviso to Section 11B, subject to the condition that such a refund claim is required to be filed in terms of Section 11B of the Central Excise Act, 1944, which has been made applicable to service tax as per Section 83 of the Finance Act, 1994.

Case Title: M/s State Bank of India, Mumbai Versus Commissioner of Service Tax

Case No.: Service Tax Appeal No. 85844 of 2016

Date: 19.06.2023

Counsel For Appellant: Krishna Kumar & Sanjay Khemani

Counsel For Respondent: Vinod Kumar

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