2010 (5) TMI 261 - AT - Service Tax

Tribunal rules in favor of appellant on service tax liabilities, excluding CMS and MCS activities.

SYNDICATE BANK Versus COMMISSIONER OF C. EX. MANGALORE

SYNDICATE BANK Versus COMMISSIONER OF C. EX. MANGALORE - 2010 (19) S.T.R. 578 (Tri. - Bang.) , [2011] 33 STT 165 (Bang. - CESTAT) Issues Involved:1. Service tax liability under Business Auxiliary Service (BAS) for Cash Management Service (CMS).2. Service tax liability under Management Consultancy Service (MCS).3. Service tax liability under Banking & Other Financial Services (BOFS) for miscellaneous income.Issue-wise Detailed Analysis:I. Service Tax Liability under Business Auxiliary Service (BAS) for Cash Management Service (CMS):The adjudicating authority found that the appellant provided cash management services to corporate customers, which involved managing client funds. The authority categorized this service under 'Business Auxiliary Services' (BAS) as defined by Notification No. 7/2003-ST, dated 20-6-2003. However, the Tribunal referenced the Federal Bank Ltd. v. CCE, Calicut case, where it was determined that such activities do not fall under BAS. The Tribunal concluded that the appellant's CMS activities were akin to cash management, which is excluded from BAS, and thus, the service tax liability under BAS for CMS was unsustainable. Consequently, the demand and penalties related to CMS under BAS were set aside.II. Service Tax Liability under Management Consultancy Service (MCS):The adjudicating authority asserted that the appellant's agreement with foreign exchange companies in Oman and Qatar for providing managerial personnel constituted Management Consultancy Services (MCS). However, the Tribunal found that the services were rendered outside India's territorial waters and were thus not liable for service tax as per Circular No. 36/4/2001, dated 8-10-2001. Additionally, the Tribunal determined that the nature of the services provided did not qualify as MCS but rather involved managing the exchange companies' day-to-day operations. Therefore, the demand and penalties for MCS were set aside.III. Service Tax Liability under Banking & Other Financial Services (BOFS) for Miscellaneous Income:The adjudicating authority based the service tax demand on the miscellaneous income reported in the appellant's balance sheet, assuming it arose from taxable services. The appellant provided a reconciliation statement suggesting otherwise, which was not previously submitted to the lower authorities. The Tribunal remanded this issue back to the adjudicating authority for reconsideration, instructing them to verify the records and determine whether the miscellaneous income was indeed from taxable services under BOFS. The Tribunal emphasized following principles of natural justice during the reassessment.Conclusion:The appeal was disposed of with the following directions:1. The service tax demand and penalties under BAS for CMS were set aside.2. The service tax demand and penalties under MCS were set aside.3. The service tax demand under BOFS for miscellaneous income was remanded for reconsideration by the adjudicating authority.The Tribunal's decision was pronounced at the conclusion of the hearing.