State Bank of India wins service tax appeal, eligible for refund under protest rule

The Tribunal held that services provided by the appellant, M/s State Bank of India, are not taxable under 'fund management'. The appellant is eligible for a refund of service tax paid under protest, as marking forms and invoices as 'duty paid under protest' is sufficient. The limitation period for filing refund claims does not apply when tax is paid under protest. The Tribunal set aside the Commissioner's order, allowing the appeals with consequential relief and remanding the case for fresh adjudication on unjust enrichment within three months. The appellant is granted a personal hearing opportunity.

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Issues Involved:
1. Taxability of services provided by the appellant under the category of 'fund management'.
2. Eligibility for refund of service tax paid under protest.
3. Applicability of limitation period for filing refund claims.

Summary:

Issue 1: Taxability of Services Provided by the Appellant Under the Category of 'Fund Management'

The appellant, M/s State Bank of India, Mumbai, contended that their activities related to the maintenance of Public Provident Fund (PPF) accounts do not constitute 'fund management' services. They argued that they merely maintain PPF accounts as per the scheme notified by the government, and the funds are managed by the Government of India, not by them. The original authority and the Commissioner (Appeals) had concluded that the services provided by the appellant fell under 'all forms of fund management' as per Section 65(12) of the Finance Act, 1994, making them taxable.

The Tribunal found that the PPF accounts are operated and maintained by the appellant as per the government scheme, and the funds are credited to the Public Account of India, managed by the Government of India. There is no discretion for the appellant in handling these funds, and thus, they are not providing 'fund management' services. The Tribunal concluded that the services provided by the appellant do not fall under the scope of 'fund management' and are not taxable under this category.

Issue 2: Eligibility for Refund of Service Tax Paid Under Protest

The appellant had paid service tax under protest and filed a refund claim, which was rejected by the original authority on the grounds of time limitation and lack of evidence of protest. The Tribunal referred to previous decisions, including the Bombay High Court's ruling in Commissioner of Central Excise Vs. F.D.C. Limited, which stated that marking forms and invoices as 'duty paid under protest' is sufficient and a separate letter is not necessary. The Tribunal held that the appellant is eligible for a refund of service tax paid under protest, subject to fulfilling the conditions under Section 11B of the Central Excise Act, 1944, which applies to service tax as per Section 83 of the Finance Act, 1994.

Issue 3: Applicability of Limitation Period for Filing Refund Claims

The Tribunal noted that the limitation period of one year for filing a refund claim does not apply when the tax is paid under protest, as per the proviso to Section 11B of the Central Excise Act, 1944. The appellant's refund claim, therefore, cannot be denied on the grounds of time limitation.

Conclusion:

The Tribunal set aside the impugned order of the Commissioner (Appeals), Service Tax-II, Mumbai, holding that the services provided by the appellant are not taxable under the category of 'fund management'. The appeals filed by the appellant were allowed with consequential relief, and the case was remanded to the original authority for fresh adjudication on the limited issue of unjust enrichment, to be decided within three months. The Tribunal directed that the appellant should be given an opportunity for a personal hearing to present their case.

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