Statutory agent exemption for government business transactions excludes service tax on bank commission and related demands.

A bank acting as a statutory agent of the Reserve Bank of India for government business transactions was treated as covered by the same exemption available to the principal, because the agent's acts were attributable to the principal and the relevant notification extended to services provided to or by the Reserve Bank of India. The article notes that receiving taxes and making pension payments on behalf of the Government were regarded as statutory and sovereign functions, so the commission for those covered activities was treated as outside service tax, with the related demand, interest and penalties described as set aside.

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Issues: Whether commission received by the bank for carrying out government business transactions as an agent of the Reserve Bank of India was liable to service tax, and whether the exemption under Notification No. 22/2006-S.T. applied.

Analysis: The activity was examined in the light of Section 45 of the Reserve Bank of India Act, 1934, under which nationalised banks perform government business as agents of the Reserve Bank of India. The decision relied on the settled view that the acts of an agent are attributable to the principal and that Section 65(7) of the Finance Act, 1994 recognises an agent within the scope of a person liable to pay service tax. It was further noted that the exemption notification granted relief to taxable services provided to or by the Reserve Bank of India, and that the same benefit extended to its statutory agent performing the covered functions. The activities of receiving taxes and making pension payments on behalf of the Government were treated as statutory and sovereign in nature.

Conclusion: The commission received for such government business transactions was held not liable to service tax, and the demand, interest, and penalties were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded, and the assessee obtained full relief against the confirmed tax demand and related penalties.

Ratio Decidendi: Where a bank acts as a statutory agent of the Reserve Bank of India for government business, the exemption available to the principal extends to the agent for the covered activities, and such services are not exigible to service tax.

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