Tribunal rules on service tax liabilities for Non-Banking Financial Company

The tribunal ruled in favor of the appellants, a Non-Banking Financial Company, in a case involving service tax liabilities. The tribunal held that interest charged above 18% per annum on gold loans is not subject to service tax. Token and postage charges were deemed reimbursable expenses not taxable. However, the service provided as a sub-representative for money transfers was taxable as it did not qualify as an export of service. The tribunal also found that the Notification exempting certain money transfer services did not apply. The matter of service tax on travel agency commissions was remanded for verification, and all penalties were set aside.

---

---

Issues Involved:
1. Service tax liability on interest charged above 18% per annum.
2. Service tax on token charges and postage charges.
3. Taxability of money transfer service as a representative/sub-representative.
4. Applicability of Notification No.19/2015-ST dated 14.10.2015 for service tax exemption.
5. Service tax on commission earned on air/rail/bus travel agent services.
6. Invocation of extended period of limitation and imposition of penalties.

Detailed Analysis:

1. Service Tax Liability on Interest Charged Above 18% Per Annum:
The appellants, a Non-Banking Financial Company (NBFC), collected interest on gold loans, including amounts labeled as "incidental charges" and "risk interest." The department alleged these additional charges were taxable. The appellants argued that these were interest components and not service fees. The tribunal found that interest, regardless of nomenclature, is not subject to service tax as per Section 65B(30) and Rule 6(2)(iv) of the Service Tax (Determination of Value) Rules, 2006. The tribunal upheld the view that the entire interest, including amounts above 18%, is not taxable.

2. Service Tax on Token Charges and Postage Charges:
The appellants collected token and postage charges as reimbursement for expenses incurred. The tribunal held that these charges are reimbursable expenses and are not subject to service tax, referencing the Supreme Court's decision in the case of Intercontinental Consultants and Technocrats Pvt Limited.

3. Taxability of Money Transfer Service as a Representative/Sub-Representative:
The appellants acted as sub-representatives for M/s. Wall Street Finance Ltd., facilitating money transfers for M/s. Western Union. The tribunal concluded that the service rendered to M/s. Wall Street Finance Ltd. is not an export of service since the immediate beneficiary is an Indian entity. Therefore, the service is taxable.

4. Applicability of Notification No.19/2015-ST Dated 14.10.2015 for Service Tax Exemption:
The tribunal found that Notification No.19/2015-ST, which exempts service tax for certain money transfer services, is not applicable to the appellants as their service does not qualify as an export of service.

5. Service Tax on Commission Earned on Air/Rail/Bus Travel Agent Services:
The appellants claimed they had discharged service tax liabilities on commissions earned from travel agency services. The tribunal remanded the matter for verification by the adjudicating authority to confirm whether the appellants had indeed paid the service tax.

6. Invocation of Extended Period of Limitation and Imposition of Penalties:
The tribunal set aside all penalties imposed, noting that the issues were under dispute and there was no intent to evade tax. The tribunal also found that the extended period for issuing the show-cause notice was not applicable.

Conclusion:
(i) The demands related to incidental charges/risk interest/interest on gold loans were set aside.
(ii) The demands for token charges and postage charges were also set aside.
(iii) The demand for service tax on money transfer services was upheld.
(iv) The issue of service tax on travel agency commissions was remanded for verification.
(v) All penalties were set aside.
(vi) The departmental appeal was dismissed.

(Order pronounced in the Open Court on 01.02.2022)

---