Appellants exempt from service tax on bill discounting charges under Finance Act, 1994.

The Tribunal held that the appellants were not liable to pay service tax on the charges/amount collected for bill discounting facility. The Tribunal found that the services provided by the appellants fell under the exemption for money lending services as per Notification No.29/2004-ST. Citing a precedent involving UCO Bank, Kolkata, the Tribunal determined that the value equivalent to interest or discount in connection with bill discounting facility was exempted from service tax under Section 66 of the Finance Act, 1994. Consequently, the demand for service tax and penalties were set aside, and the appeal was allowed.

---

---

Issues:
Whether the appellants are liable to pay service tax on the charges/amount collected for bill discounting facility.

Analysis:
The case involved the appellants engaged in the business of discounting bank instruments, accepting cheques and demand drafts from clients, paying cash after deducting a percentage as collection charges. The department considered this activity falling under Banking and Financial Services. A show-cause notice was issued for service tax demand, interest, and penalties. The original authority and Commissioner (Appeals) confirmed the demand. The appellants argued their services were money lending, eligible for exemption under Notification No.29/2004-ST. The Revenue argued the amount collected for bill discounting was not interest, falling under Banking and Financial Services.

The Tribunal analyzed a similar case involving UCO Bank, Kolkata, where it was held that the value equivalent to interest or discount in connection with services like overdraft facility, cash credit facility, or bill discounting facility would be exempted from service tax. The Tribunal noted that the value of interest or discount in providing these services would be exempted under Section 66 of the Finance Act, 1994. The Tribunal also highlighted the negative list of services under Section 66D, which includes extending deposits, loans, or advances where the consideration is represented by interest or discount. Based on this analysis, the Tribunal set aside the demand for service tax on the value of interest received in rendering bill discounting facility and penalties imposed, allowing the appeal with consequential reliefs.

In conclusion, the Tribunal held that the demand for service tax on the charges/amount collected for bill discounting facility could not be sustained based on the interpretation of relevant provisions and exemptions under the Finance Act, 1994. The impugned order confirming the demand and penalties was set aside, and the appeal was allowed with consequential reliefs.

---