Bank exempt from Service Tax as agent of RBI for Govt transactions under Notification 22/2006.

The Tribunal upheld the appellant bank's claim for exemption from Service Tax under Notification No.22/2006, as it was acting as an agent of the RBI in carrying out Government transactions. The Tribunal reasoned that since the RBI was exempt from Service Tax liability, its agent (the bank) should also benefit from the exemption. Despite the department's appeal to the Supreme Court, the Tribunal's decision in favor of the appellant was not stayed. The Tribunal dismissed the Revenue's appeal, affirming the exemption for the bank and rejecting the demand for Service Tax.

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Issues:
Appeal against confirmation of demand for Service Tax, appeal against dropping of demand and non-imposition of penalty.

Analysis:
The case involved an appeal against an Order-in-Original where both the assessee and the department contested the decision. The assessee, a bank, was engaged in carrying out Government transactions on behalf of the Reserve Bank of India (RBI) and received remuneration known as "Agency Commission." The dispute arose when a show cause notice alleged that these services provided by the bank to the RBI were taxable under 'Banking and Other Financial Services.' The appellant contended that the services were exempt from Service Tax as they were acting as an agent of the RBI, which was explicitly exempted under Notification No.22/2006. The Tribunal referred to a previous decision and held that if the RBI was exempted from Service Tax liability, its agent (the bank) should also benefit from the exemption. The Tribunal dismissed the appeal filed by the department and allowed the appeal filed by the appellant.

The Tribunal's decision was based on the interpretation of Notification No.22/2006, which granted exemption from Service Tax to services provided to or by the RBI. The Tribunal reasoned that as the bank was acting as an agent of the RBI, it should be extended the same benefit of exemption. The Tribunal also emphasized that the bank, as the agent of the RBI, was transacting Government business, which is considered a sovereign function performed on behalf of the Government and hence not liable to Service Tax. The Tribunal rejected the department's arguments based on case law and upheld the appellant's claim for exemption under the notification.

The department had preferred an appeal before the Supreme Court against the Tribunal's decision, but the order of the Tribunal had not been stayed. Despite the department's appeal, the Tribunal allowed the appellant's appeal against the demand for Service Tax and rejected the appeal filed by the Revenue. The Tribunal concluded that the law as laid down in a previous case was the correct exposition of the law, and the present appeal had no merit, leading to the dismissal of the Revenue's appeal.

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