TaxTMI 
TaxTMI 
2023 (6) TMI 996
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....ellant, on 30.03.2005 had received an intimation from the Reserve Bank of India, Public Accounts Department, New Delhi stating that an amount of Rs.7,13,15,955/- is being paid as commission charges relating to the financial year 2003-2004. Since the payment was received by the appellant on 30.03.2005, and as the Mumbai Branch did not receive clarity from their head office on taxability of such commission received from RBI for maintenance of Public Provident Fund (PPF) accounts, the appellants had deposited service tax rate of 10.2% for an amount of Rs.72,74,227/- along with other service tax dues payable to the government on the taxable services under the head of account 0044-143 Service Tax on banking and other financial services vide GAR-7 Challan dated 31.3.2005 for a total amount of Rs.12,76,16,122/- specifically mentioning that the payment of service tax is being made under protest subject to notification of Government of India. Subsequently realizing their mistake and that the appellant is not engaged in fund management service in respect of PPF accounts maintained by them, they had filed refund application for Rs.72,74,227/- enclosing various supporting documents before the ....
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.... the Commissioner (Appeals), Service Tax-II, Mumbai, the first appellate authority after hearing them on 23.11.2015, had come to the conclusion that appellant is liable to pay service tax on the remuneration received from RBI in relation to PPF management in terms of clause (v) of Section 65(12) of the Finance Act, 1994. According to him the appellant had provided the service of managing the Public Provident Funds to the RBI on behalf of the Government of India against remuneration. By referring to various definitions of fund management as per Financial Dictionary, Investopedia, Cambridge business English dictionary, Wikipedia he concluded that the service or maintaining PPF Accounts fall under the category of fund management. He also gave the reason that PPF account though maintained in favour of the customer/investor for earning better interest rates and definite returns with security, but the appellant had received a remuneration against the same from RBI. Hence according to him the service provided by the appellant to a customer is not the subject matter of this case, but the service provided by the appellant to RBI is the subject matter under consideration. He had in his order....
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....urities. The investment pattern is as per norms decided from time to time by the Central Government. The liabilities outstanding as on 1st April of an year and the accretion to liabilities during the year are shown in the Sources and Application of NSSF as on 31st March in the Receipts Budget for each year as a part of Budget documents. The appellants have no say in the matter of PPF accounts, as these are transferred to government account and the investments made in government securities as per the extant policy. Thus the Learned Counsel for appellant contended that maintaining the PPF accounts cannot by any stretch of imagination be termed as a fund management. Thus the Learned Counsel for the appellant pleaded that refund of service tax denied by the department in this case, treating the services under the taxable category of 'all forms of fund management services' is not legally sustainable. 3.2. The Learned Counsel for the appellant also submits that during Budget 2004, the services of operation of bank accounts was brought under the expanded scope 'banking and other financial services' vide clarification issued by the TRU, Ministry of Finance in Explanatory Notes to budget....
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.... any other body corporate [or commercial concern], in relation to banking and other financial services;] 1 Substituted (w.e.f. 10.09.2004) by s. 90 of the Finance (No. 2) Act, 2004 (23 of 2004). 2 Substituted (w.e.f. 16.05.2008) for the words "to a customer" by s. 90 of the Finance Act, 2008 (18 of 2008). 3 Substituted (w.e.f. 16.06.2005) by s. 88 of the Finance Act, 2005 (18 of 2005). 7.3. In addition to the above, the definitions provided under section 65 of the Finance Act, 1994 which are relevant to the above taxable services is extracted below: Section 65. Definitions. - In this Chapter, unless the context otherwise requires, -- (11) "banking company" has the meaning assigned to it in clauses (a) of section 45 A of the Reserve Bank of India Act, 1934 (2 of 1934); 1[(12) "banking and other financial services" means (a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or 2[commercial concern], namely:- (i) financial leasing services including equipment leasing and hire-purchase; 3['Explanation.-Fo....
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.... 2007 (22 of 2007). 4 Omitted (w.e.f. 01.05.2006) by s. 68 of the Finance Act, 2006 (21 of 2006). 5 Substituted (w.e.f. 16.05.2008) by s. 90 of the Finance Act, 2008 (18 of 2008). 6 Substituted (w.e.f. 01.06.2007) by s. 135 of the Finance Act, 2007 (22 of 2007). 7 Substituted (w.e.f. 01.05.2006) by s. 68 of the Finance Act, 2006 (21 of 2006). 8 Substituted (w.e.f. 16.05.2008) by s. 90 of the Finance Act, 2008 (18 of 2008). 9 Inserted (w.e.f. 16.05.2008) by s. 90 of the Finance Act, 2008 (18 of 2008). (74) "non-banking financial company" has the meaning assigned to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); (93) "securities" has the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (121) words and expressions used but not defined in this Chapter and defined in the Central Excise Act, 1944 (1 of 1944) or the rules made there under, shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise. 65A. Classification of taxable services - (1) F....
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....tain remuneration as laid down under an agreement. In view of the above, the appellants claimed that they only maintain PPF accounts and in no way concerned with management of PPF funds, and thus they are not performing any taxable services in relation to PPF accounts. Hence the appellants claim that these are not covered under the scope of taxable services until 10.09.2004, subsequent to which 'operation of bank accounts' was brought under the tax net. 8.3. On the other hand, the learned AR for the Department claimed by quoting the impugned order that the appellant is providing the taxable services under the category of 'all forms of fund management' as they are managing the PPF funds, on the reasoning that the funds in PPF accounts are also used for banking/financing purposes including advancing loans and further investments into other options by the appellant. 8.4. In view of the contentious stand taken by the appellant and the AR for the Department, we find that it is necessary to examine the details of the services provided by way of PPF accounts. In the impugned order it is stated that the activities undertaken by the appellant in relation to maintenance of PPF accounts....
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....l may, on his own behalf or on behalf of a minor, of whom he is the guardian, subscribe to the Fund in such manner and subject to such maximum and minimum limits as may be specified in the Scheme. 5. Interest.- All subscription made under section 4 shall bear interest at such rate as may be notified by the Central Government in the Official Gazette, from time to time, and the interest shall be calculated in such manner as may be specified in the Scheme. 6. Withdrawals.- (1) A subscriber shall be entitled to make withdrawals from the amount standing to his credit in the Fund (including any interest accrued thereon) to such extent and subject to such terms and conditions as may be specified in the Scheme: Provided that such withdrawals shall be allowed only after the expiry of a period of five years from the end of the year in which he makes the initial subscription to the Fund (2) Notwithstanding anything contained in sub-section (1), a subscriber shall be entitled to withdraw the entire balance standing to his credit in the Fund after the expiry of a period of fifteen years from the end of the year in which he makes the initial subscript....
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....nment. Thus, the monies in the Fund will remain with Government and will be accounted for in the Government account." 8.7. We also find that in the relevant years' Union Budget documents, in Receipts Budget 2004-2005 under Table-I, sources and application of National Small Savings Fund as on 31st March, the liabilities outstanding as on 1st April and accretion to liabilities during the year under Public Provident Fund has been accounted as Sources of Funds under the head "Capital Receipts" with the following explanation. "National Small Savings Fund. (i) All deposits under small savings schemes are credited to the " National Small Savings Fund" (NSSF) established in the Public Account of India with effect from 1.4.1999. All withdrawals by depositors are made out of the accumulations in this Fund. The balance in the Fund is invested in special Government Securities as per norms decided from time to time by the Central Government. Pursuant to the recommendations of the Expert Committee on Administered Interest Rates and other related issues, chaired by Dr. Y.V.Reddy, then Deputy Governor of the Reserve Bank of India, since 1st April, 2002, the entire net collections (depo....
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..... The definitions could broadly be classified into three categories viz., 'means' , 'includes' and 'means and includes'. The Legislature has power to define a word even artificially. So the definition of word in the definition section may either be restrictive of its ordinary meaning or it may be extensive of the same. When a word is defined to 'mean' such and such, the definition is prima facie restrictive and exhaustive; whereas, where the word defined is declared to 'include' such and such, the definition is prima facie extensive. We find that the definition provided under section 65(12) for 'banking and other financial service' proceeds with the word 'means' and that for a specific sub-group of such service have used the expression 'including' to specify the services covered under its scope and used the expression 'does not include' to exclude certain services from the scope of taxation. When a word is not defined in the Act itself, it is permissible to refer to dictionaries to find out the general sense in which the word is understood in common parlance. However, in selecting one out of the various meanings of a word, regard must always be had to the context as it is a fundame....
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....would be made specifying restrictions, if any. (ii) Particulars regarding amount, period of management, repayment or withdrawal. (iii) Taxation aspects such as Tax Deducted at Source etc., if any. (iv) Condition that the portfolio manager shall not lend the securities of the client unless authorized by him in writing. In view of the above, we find that in the given case of appellants, there was no fund management involved and the entire amount was credited to the Public Account of the Government, to be used as per the instructions, norms, scheme of PPF notified by the government. Hence we conclude that there was no 'fund management' services rendered by the appellants in this case. 12. It is also important to note that in the impugned order, the learned Commissioner (Appeals) had taken a contrary stand, firstly at para 9 for coming to a conclusion that the service provided by the appellant to RBI being the subject matter under consideration and that the service provided to the customers who open PPF account is not the subject matter of this case, for bringing the services provided by the appellant under the scope of taxable services. However, subsequently at para 11, he had excl....
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....sue of pay order, demand draft, cheque, letter of credit, bill of exchange, providing a bank guarantee, overdraft facility, bill discounting, safe deposit locker or safe vaults, operation of bank accounts. From the above, we find that it is clearly laid down that as per the legal provisions enacted in the Finance Bill, 2004 which became the Finance Act, 2004 on 10.9.2004, all services provided by the appellants with respect to "operation of bank accounts" became taxable under the service tax net w.e.f. 10.9.2004. Further, an exemption from payment of service tax, interalia, on the value of taxable services provided to a customer by a banking company in respect of operation of bank accounts was issued vide notification No.25/2004-ST dated 10.9.2004. This made the legal position abundantly clear that the value of services received by a service provider prior to 10.9.2004, in respect of "operation of bank accounts" is not subject to payment of service tax. Thus, we conclude that operation of PPF accounts was brought into service tax net w.e.f. 10.09.2004. 14. We also find that the issue of refund of service tax paid by the appellants specifically mentioning in the GAR-6 Tax paym....
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....on 11B. Claim for refund of duty and interest, if any, paid on such duty . (1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person : Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this subsection as amended by the said Act and the same shall be dealt with in accor....