Strict construction of service tax exemption for Reserve Bank-related services led to interim stay of refund relief.

Exemption notifications are to be strictly construed, and Notification No. 22/2006-ST was read as covering only taxable services provided by or to the Reserve Bank of India in the specified situations. An assessee acting as an authorised agent of the Reserve Bank of India was found, prima facie, to have no clear legal basis to claim the same exemption by general agency principles, and no constitutional bar to levy of service tax was shown at this interim stage. On that basis, the operation of the appellate refund order was stayed pending disposal of the appeal, granting the Revenue interim relief.

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Issues: Whether stay of the impugned appellate order granting refund of service tax was warranted in view of Notification No. 22/2006-ST and the assessee's plea of exemption as an agent of the Reserve Bank of India.

Analysis: The order records only a prima facie appraisal at the interim stage. It notes that exemption notifications must be strictly construed and that the notification specifically exempts taxable services provided by or to the Reserve Bank of India in the enumerated situations. The plea that the assessee, as an agent authorised by the Reserve Bank of India under the Reserve Bank of India Act, 1934, should also be treated as immune from tax was found to have no clear legal basis at this stage. The order also observes, prima facie, that no constitutional limitation was shown against levy of service tax on such services and that the scope of the exemption could not be expanded by general principles of agency.

Conclusion: Stay of the operation of the impugned appellate order was granted pending disposal of the appeal, and the Revenue obtained interim relief.

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