Case Law Details
CESTAT held that appellants are not liable to pay service tax on their statutory activities performed in terms of EPMF & MP Act, 1952. The appellants are not providing any taxable service to the employers covered by the said Act. The relationship and transaction between the employers and the appellant is in discharge of statutory and compulsory obligations, coercively enforceable by the law. The considerations sought to be taxed are statutorily fixed, mandated fees and charges. No option exists with the appellant or contributor to vary such ‘Fees’ or ‘charges’. As such, we find no taxable element in such transaction. This conclusion is supported by Board’s clarification dated 18/12/2006
Per. B. Ravichandran :-
These two appeals are against impugned orders, both dated 01/07/2010, passed by Commissioner of Service Tax, New Delhi. The appellant is an institution created by an Act of Parliament – The Employee’s Provident Fund and Miscellaneous Provision Act, 1952 (EPMF & MP Act). The main function of the appellant is to administer three schemes of the Government of India, Ministry of Labour, in terms of EPMF & MP Act, namely (a) Employee’s Provident Fund Scheme (Section 5) (b) Employee’s Pension Scheme (Section 6A) and (c) Employee’s Deposit Link Insurance Scheme (Section 6 C). The appellant 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 Original Authority, vide the impugned orders dated 01/07/2010. The first show cause notice covered period from 01/04/2004 to 31/03/2008 and the second notice covered the period 01/04/2008 to 31/03/2009. The Original Authority confirmed service tax demand of Rs. 461,60,87,786/- in respect of first show cause notice dated 18/05/2009. He imposed equal amount of penalty under Section 78 and further penalty of Rs. 5,000/- under Section 77 of the Finance Act, 1994. In respect of second show cause notice dated 23/10/2009 he confirmed a service tax demand of Rs. 226,02,13,066/- and imposed a penalty of equivalent amount under Section 78 and further penalty of Rs. 5,000/- under Section 77 of the Act. The Original Authority, in essence, held that the appellant provided taxable service as a corporate body/trust by managing funds and the activities carried out are not in the nature of statutory functions but are in the nature of services of social welfare as per the directive principles of state governance. He held that in such cases, service tax would be leviable as long as the activity undertaken falls within the scope of a taxable service as defined under Finance Act, 1994. It was further held that the appellant is neither a sovereign nor a public authority and is only a body corporate established under law and managed by a Trust.
3. The learned Consultant appearing on behalf of the appellant submitted on the following lines :-
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