TaxTMI 
TaxTMI 
2017 (4) TMI 902
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....llant is involved in collection of contribution from the employers covered by the provision of the Act, collection of inspection charges and administrative charges, penal damages, penal interest from defaulters. They disburse accumulated provident fund to the Members alongwith interest, pay various kinds of pension benefits to members and to family members and incur expenses in administering the scheme as provided under the above- mentioned Act. 2. The Revenue entertained a view that the appellants are engaged in providing taxable service under the category of "Banking and Other Financial Services (BOFS)" in terms of Section 65 (105) (zm) readwith Section 65 (12) of the Finance Act, 1994. Considerations received under 7 headings were sought to be subjected to service tax. These are (1) administrative charges received from employers (2) inspection charges received from employers (3) penal damages (4) interest on delayed payments (5) interest on investments (6) receipts from pension fund and (7) miscellaneous receipts. The proceedings initiated against the appellant by way of issue of two show cause notices dated 18/05/2009 and 23/10/2009, were completed by adjudication by the Ori....
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....ed in the manner stipulated by the Central Government as per the rules and notifications issued from time to time ; (3) 'banking and other financial services' are liable to tax only when the provider is falling in any one of the category mentioned therein. The Revenue asserted that the appellants are "a body corporate" and, hence, can be considered as provider of service under BOFS. The appellant, per-se, is not a body corporate. In terms of Section 5C of the Act it is the Board of Trustees who are considered to be body corporate not the appellant as an institution. The funds belong to the appellant and not trustees who are entrusted to manage it. The financial statements and annual accounts are signed by the Central Provident Fund Commissioner and Financial Advisor who are employees of the appellant. It will show that the appellant as an organization is distinct from the Board of Trustees who are managing the funds and supervising the functions of the appellant. Even if the appellant is considered as a body corporate, during the period 01/04/2004 to 09/09/2004 the term "body corporate" was not included in the tax entry for BOFS. (4) During the disputed period fro....
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.... that he appellant is falling under the category of 'body corporate' and are involved in asset management, fund management, all forms of fund management including pension fund management, custodial, depository and trust services. These services are specifically included under tax entry BOFS. The learned AR submitted that under BOFS, specific exemptions are available in respect of services provided to Central or State Governments, interest or discount, interest on financial leasing and a few other services. From the provisons of relevant tax entry for BOFS, it is evident that the appellant is providing service in relation to management of various funds as a trustee or a body corporate, and as such liable to service tax. Even though the appellant is an organization that provides services for the welfare of the people of the country, this by itself does not mean they are not providing taxable service. They are not sovereign/public authority and are not discharging such function. The fee or amount collected for managing funds cannot be considered as a fee for statutory activity. In terms of Section 3 (23) of General Clauses Act, 1897 Government includes both Central Government and any ....
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....[or commercial concern], namely :- (i) financial leasing services including equipment leasing and hire-purchase ; Explanation - For the purposes of this item, "financial leasing" means a lease transaction where - (a) contract for lease is entered into between two parties for leasing of a specific asset ; (b) such contract is for use and occupation of the asset by the lessee ; (c) the lease payment is calculated so as to cover the full cost of the asset together with the interest charges ; and (d) the lessee is entitled to own, or has the option to own, the asset at the end of the lease period after making the lease payment ; (ii) * * * * (iii) merchant banking services ; (iv) securities and foreign exchange (forex) broking, and purchase or sale of foreign currency, including money changing ; (v) asset management including portfolio management, all forms of fund management, pension fund management, [custodial, depository and trust services]; (vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions an....
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....2 and later on the same was introduced in 1952. This Court had occasion to expressly hold that the said Act is a beneficial social welfare legislation to ensure benefits to the employees. In the case of Regional Provident Fund Commissioner v. S.D. College, Hoshiarpur and others reported in (1997) 1 SCC 241, this Court while interpreting Section 14B of the Act held that the Act envisages the imposition of damages for delayed payment (paragraph 10 at page 244 of the report). This Court also held that the Act is a beneficial social legislation to ensure health and other benefits of the employees and the employer under the Act is under a statutory obligation to make the deposit. In paragraph 11, it has also been held that in the event of any default committed in this behalf Section 14B steps in and calls upon the employer to pay damages. 23. If we look at the modern legislative trend we will discern that there is a large volume of legislation enacted with the purpose of introducing social reform by improving the conditions of certain class of persons who might not have been fairly treated in the past. These statutes are normally called remedial statutes or social welfare legis....
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....h makes Section 14B applicable to an exempted establishment also came by way of an amendment, namely, by Act 33 of 1988. Here also if we look at the relevant portion of the Statement of Objects and Reasons of Act 33 of 1988 we will find that they are based on certain recommendations of the High level committee to review the working of the Act. Various recommendations were incorporated in the Objects and Reasons and one of the objects of such amendment is as follows:- "(viii) the existing legal and penal provisions, as applicable to un-exempted establishments, are being made applicable to exempted establishments, so as to check the defaults on their part;" ............. 58. We hold that in a case of default by the employer by an exempted establishment, in making its contribution to the Provident Fund Section 14B of the Act will be applicable". 8. It is clear from the above, that the appellant is a statutory authority created for a specified welfare function. Section 1 (3) of EPMF & MP Act stipulates that it applies to establishments of specified categories, mainly employing 20 or more persons. The schemes framed under the Act are to be laid in the Parli....
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....deration (not a statutory fee), then in such cases, service tax would be leviable, as the activity undertaken falls within the scope of a taxable services, as defined. 11. Now, we can examine the activities of the appellant to determine whether they are coming under the scope of mandatory, statutory functions discharged by a public authority in terms of law. The term 'public authority' has to be examined and understood. 'Public' includes a section of the public (Shri Venkataraman Devaru vs. State of Mysore - 1958 S.C.R. 895). The word 'public' is ordinarily used with reference to a joint body of citizens. The term 'authority' is defined as "a public administrative agency or corporation having quasi governmental powers and authorized to administer a revenue producing public enterprise", (Webseter's Third New International Dictionary); authority is a body having jurisdiction in certain matters of "public nature". Therefore, the "ability" conferred upon a person by the law to alter, by his own will directed to that end, the rights, duties, liabilities or other legal relations either of himself or of other persons must be present ab-extra to make a person "authority". (Som Prakash R....
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....ithin the meaning of the expression "authority", as mentioned in Article 12 of the Constitution, upon consideration of all relevant factors. ....................... 24. When we discuss "pervasive control", the term "control" is taken to mean check, restraint or influence. Control is intended to regulate, and to hold in check, or to restrain from action. The word "regulate", would mean to control or to adjust by rule, or to subject to governing principles. The appellant is concerned with 'Public' - namely the employers who are governed by the EPMF & MP Act. The employers are governed by the said Act for delivery of welfare benefits to the employees (members of the Fund). The appellant is an "authority" having vested with statutory powers to enforce the due contribution of fund, administration charges, penal charges etc. The appellant has power to impose penal consequence on employers for violation of any provisions of EPMF & MP Act, and also for coercive recovery of dues. 13. Having examined the scope of 'public authority' and applying the general principles to the functions and responsibilities of the appellant we have no hesitation to hold that the appellan....
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....the date of such entry in service, subscribe to a policy in the official branch of the State Life Insurance at such rate as may be determined by the Government from time-to-time and shall continue to subscribe till he ceases to be in Government service. The period of one year has now been reduced to one month by G.O(P). 229/12/Fin, dated 19-4-2012. Rule 22B also provides that such employee shall enroll as a member of General Insurance Scheme. Though, at the relevant point of time, taxable service included insurance service as well, the Central Board of Customs and Excise issued Circular No. 89/7/2006-Service Tax, dated 18-12-2006 and the relevant part of this circular reads thus : "A number of sovereign/public authorities (i.e., an agency constituted/set up by government) Perform certain functions/duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; ....
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....d group insurance in pursuance of the statutory mandate as contained in Rules 22A and 22B of Part-I KSR. In other words, the insurance provided is a mandatory statutory function discharged by a State Government Department. Such an activity is not a taxable service for the purpose of Service Tax in the light of the Circular issued by the Central Board of Customs and Excise referred to above. This, therefore, means that the view taken by the learned single judge does not merit interference". 16. The Hon'ble Supreme Court in Calcutta Municipal Corporation vs. Shrey Mercantile (P) Ltd. reported in (2005) 4 SCC 245 examined the meaning and scope of terms "Fee" and "tax". It was held that :- "14. According to Words and Phrases, Permanent Edn., Vol. 41, p. 230, a charge or fee, if levied for the purpose of raising revenue under the taxing power is a "tax". Similarly, imposition of fees for the primary purpose of "regulation and control" may be classified as fees as it is in the exercise of "police power", but if revenue is the primary purpose and regulation is merely incidental, then the imposition is a "tax". A tax is an enforced contribution expected pursuant to a legislativ....
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....r of disputed tax liability. The other charges like administrative charges, inspection charges paid by the employers, are being subjected to service tax. We find that in the absence of a service provider and service recipient relation between the appellant and the employers, no service tax liability can arise in the transaction. 18. The appellants also contested the findings of the Original Authority on the service tax liability of penal charges, interest and delayed payments, interest on investment, receipts from pension fund and other miscellaneous receipts. It is clear that penal damages received in terms of Section 14 of EPMF & MP Act, 1952 cannot be considered as a consideration for a taxable service. Similarly, interest on delayed payment, interest received on investment, from pension funds cannot be subjected to service tax as there is no service related activity at all in such income. We are in agreement with the appellant on these issues. 19. Our attention is also drawn to Notification No. 09/2016-ST dated 01/03/2016 which inserted Sl. No. 49 in the Notification No. 25/2012-ST dated 20/06/2012. The said entry covers "services provided by Employees' Provident Fund Org....