Sourcing customers for a bank is a taxable service to the bank, not an exempt service to borrowers.

An intermediary that sources prospective borrowers for a financing bank renders a distinct service to the bank itself, not a service on behalf of the bank to borrowers. Because the arrangement involved remuneration by the bank and no tripartite agreement, appointment letter, or obligation to borrowers, the claimed benefit under Notification No. 14/2004-S.T. was unavailable. The activity was therefore treated as a taxable service to the bank, and refund relief based on the exemption was not sustainable.

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Issues: Whether the respondent was entitled to refund or exemption under Notification No. 14/2004-S.T. dated 10-09-2004 on the footing that it was acting as a sourcing agent for the financing bank, and whether the service rendered was a taxable service provided to the bank.

Analysis: The service provider traced prospective borrowers for the financing bank and was remunerated by the bank. The arrangement was held to comprise two distinct services: first, marketing or sourcing customers for the bank, and second, the bank's own financial service to borrowers. The respondent was found to be a service provider to the bank itself, not a provider on behalf of the bank to its customers. In the absence of a tripartite agreement, appointment letter, or any obligation to the borrowers, the notification benefit was held to be unavailable.

Conclusion: The respondent was not covered by the exemption notification and remained liable to service tax; the first appellate order granting refund was incorrect.

Final Conclusion: The Revenue's challenge succeeded and the refund relief granted to the respondent was set aside.

Ratio Decidendi: Where an intermediary renders a distinct service to a financing bank for sourcing customers, without any obligation to provide service to borrowers on behalf of the bank, the activity is a taxable service to the bank and not one covered by the claimed exemption notification.

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