Case Law Details
State Bank of India Vs Commissioner of Service Tax (CESTAT Mumbai)
Conclusion: In present facts of the case, the appeal was allowed and it was held that the PPF accounts are opened, maintained, by the Government and the funds of the PPF accounts are credited to the Public Account of India, which are ultimately used/invested in the manner prescribed under notification issued by the Department of Economic Affairs in the Ministry of Finance. Thus, there is no discretion for the appellant in handling the funds under the PPF accounts. Therefore, is no question of management of funds lying in the PPF accounts, by the appellants.
Facts: The facts of the case are that the appellant is providing taxable services under the category ‘Banking and Other Financial Services’ enumerated under Section 65 (105)(zm) of the Finance Act, 1994. The appellant, 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/-. 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 original authority wherein, it was observed that the appellant is engaged in the service of management of PPF fund. The service of ‘management of PPF funds’ rightly fits into the service of ‘all forms of fund management’ appearing in the definition of banking and other financial services itself. On this basis the original authority concluded that the service of management of PPF funds rendered by the appellants to the RBI by default falls under the category of banking and other financial services and is a taxable service.
On an appeal preferred by the appellants before the Commissioner (Appeals), it was observed that 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.
The Hon’ble Tribunal observed that the issue for consideration is whether the appellant are liable for payment of service tax in respect of services rendered by them in terms of section 65 (105)(zm) of the Finance Act, 1994. It was observed that the PPF accounts are opened, maintained, operated by the appellant as per the scheme notified by the Government and the funds of the PPF accounts are credited to the Public Account of India, which are ultimately used/invested in the manner prescribed under notification issued by the Department of Economic Affairs in the Ministry of Finance. Thus it appears that there is no discretion for the appellant in handling the funds under the PPF accounts and the PPF funds are entirely managed by the Government of India. In such a scenario, there is no question of management of funds lying in the PPF accounts, by the appellants.
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