2016 (12) TMI 290 - AT - Service Tax

Appeal on Service Tax Exemption for Bill Discounting Activity

The appeal challenged the demand of service tax on bill discounting activity, with the appellant arguing they are not engaged in banking or financial ... Levy of service tax - activity of bill discounting undertaken by the appellant for which they have received consideration in the form of discount - denial of benefit of the N/N. 29/2004-ST dated 22.9.2004 - Held that: - The case of the appellant is that service tax becomes payable on this activity only when the service is rendered by banking company or financial institution including NBFC or any other body corporate or commercial concern. Their submission is that though they are a body corporate, still they will not be liable for service tax inasmuch as they cannot be classified under the category of banking company or other financial institutions. We are not in agreement with this view. The definition of banking and other financial services makes it applicable to any of the following:(a) Banking company (b) Financial institution including NBFC. (c) Any other body corporate (d) Or commercial concern - Since the various categories are separated by 'Or'it is clear that the service tax will be applicable to all. It is not disputed that the appellant is a body corporate, since they are a limited company. Hence we are of the view that levy of service tax will be applicable to the appellant. Benefit of N/N. 29/2004-ST dated 22.9.2004 - Held that: - the invoices clearly indicate the amount of the bill of exchange, discounting charges and the net amount paid to the seller. In some cases, it has been shown as interest. The benefit of the exemption will be available whether the consideration is described as interest or discount. This has been specifically held by the Tribunal in the case of UCO Bank [2014 (9) TMI 820 - CESTAT KOLKATA]. The documents submitted would require verification before allowing the benefit of exemption No. 29/2004-ST dated 22.9.2004. For this purpose, we remand the matter to the original adjudicating authority, who shall allow the benefit of the scrutiny of the documents. The appellant is directed to produce all relevant documents to establish their claim for the benefit of the notification. Appeal allowed by way of remand. Issues:1. Demand of service tax on bill discounting activity.2. Applicability of Notification No. 29/2004-ST.3. Claim of exemption under the notification.4. Bar on demand by limitation.5. Classification of appellant under banking or financial services.Issue 1: Demand of Service Tax on Bill Discounting Activity:The appeal contested the demand of service tax on bill discounting activity, where the appellant received consideration in the form of discount. Both authorities confirmed the demand of service tax, along with interest and penalties under the Finance Act, 1994. The appellant argued that they are not engaged in banking or financial services, relying on case laws to support their stance.Issue 2: Applicability of Notification No. 29/2004-ST:The appellant claimed benefit under Notification No. 29/2004-ST, which exempts the value of taxable services related to overdraft, cash credit, or bill discounting equivalent to the interest amount. Lower authorities denied the claim as interest amount was not separately shown in the invoice. However, the appellant provided documents indicating the bill of exchange, discounting charges, and net amount paid to the seller, some labeled as interest. The Tribunal held that the exemption applies whether described as interest or discount.Issue 3: Claim of Exemption under the Notification:The benefit of the exemption was denied due to lack of separate mention of interest in the invoice. The appellant submitted documents showing details, which the lower authorities overlooked. The Tribunal directed a remand for verification of the documents to allow the benefit of the notification. The appellant was instructed to produce all relevant documents for scrutiny.Issue 4: Bar on Demand by Limitation:The appellant argued that the demand was time-barred as there was no suppression of facts, with the Show Cause Notice covering the period from 1.4.2005 to 31.3.2007, issued on 2.2.2009. This issue was not extensively discussed in the judgment.Issue 5: Classification of Appellant under Banking or Financial Services:Although primarily engaged in manufacturing excisable goods, the appellant was involved in bill discounting. The definition of banking and financial services includes lending, bill discounting, and other financial activities. The appellant contended they should not be liable for service tax as they are a body corporate but not a banking company or financial institution. The Tribunal disagreed, stating that the service tax applies to all categories listed in the definition, including any body corporate.This summary provides a detailed analysis of the judgment, addressing all the issues involved comprehensively.