Case Law Details
Employees Provident Fund Organization Vs Office of Commissioner of Service Tax (CESTAT Delhi)
CESTAT Delhi held that Employees Provident Fund Organization (EPFO) is not liable to pay service tax on their statutory activities performed in terms of ‘The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952’ (EPM & MP Act, 1952).
Facts- The appellant is a statutory body under the Ministry of Labour and Employment, Government of India. It has been established by an Act of Parliament called “The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952”.
The case of the appellant is that it enforces the provisions of the Act and Schemes on the establishments covered under the said Act. It collects the contribution made by employees and employers and invests the same in the best possible manner as per the pattern prescribed by the Central Government under section 20 of Indian Trust Act, 1882. The appellant tries to earn the maximum possible earnings on such investments and credits back the earnings in the accounts of employees.
In the course of carrying out the above stated activities, the appellant receives administration charges, inspection charges, 7Q Interest, and penal damages from the employees.
The department alleged that the appellant provided services to the employers in relation to asset management of Employees Provident Fund, Employees Deposit Linked Insurance Scheme and Employees Pension Scheme. The Department also alleged that in lieu of providing the said services, the appellant received income under the aforesaid heads from the employers, which would be taxable under the category of ‘banking and other financial services’ for the period upto 30.06.2012 and leviable to service tax in terms of the provisions of section 65B(44) of the Finance Act, 1994 read with section 66B of the Finance Act for the period from 01.07.2012 to 31.03.2014. Accordingly, four show cause notices were issued to the appellant demanding service tax under section 73(1) of the Finance Act with interest and penalties.
Conclusion- We find that the appellants are not liable to pay service tax on their statutory activities performed in terms of EPM & 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 (supra). The impugned orders are without merit and are not legally sustainable. Accordingly, we set aside the same and allow the appeals filed by the appellant.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s Employees Provident Fund Organisation1 has filed this appeal for setting aside the order dated 26.11.2015 passed by the Commissioner of Service Tax, Delhi-3 Commissionerate2 confirming the demand proposed in the four show cause notices dated 30.09.2010, 15.10.2012, 23.05.2014 and 17.04.2015 with interest and penalties.
2. The period involved in the show cause notice dated 09.2010 is from 2009-2010; the show cause notice dated 15.10.2012 is from 2011-2012; the show cause notice dated 23.04.2014 is from 2012-2013, and the show cause notice dated 17.04.2015 is from 2013-2014. The taxable category mentioned in the show cause notice for the period 01.04.2009 to 30.06.2012 is „banking and other financial services‟ defined under section 65(105)(22k) of the Finance Act, 19943. For the period commencing 01.07.2012 up to 31.03.2014 service tax has been proposed under section 65B(44) read with section 66B of the Finance Act.
3. The appellant is a statutory body under the Ministry of Labour and Employment, Government of India. It has been established by an Act of Parliament called “The Employees‟ Provident Fund and Miscellaneous Provisions Act, 1952”4. The appellant functions under the overall superintendence of the policies framed by the Central Board of Trustees, a tripartite body headed by Union Minister of Labour as Chairman. The Body administers the provisions of the Act and the following three Schemes have been framed.
i. The Employees‟ Provident Fund Scheme, 1952;
ii. Employees‟ Pension Scheme, 1995; and
iii. Employees‟ Deposit Linked Insurance Scheme, 1976
4. The case of the appellant is that it enforces the provisions of the Act and Schemes on the establishments covered under the said Act. It collects the contribution made by employees and employers and invests the same in the best possible manner as per the pattern prescribed by the Central Government under section 20 of Indian Trust Act, 1882. The appellant tries to earn the maximum possible earnings on such investments and credits back the earnings in the accounts of employees.
5. In the course of carrying out the above stated activities, the appellant receives administration charges, inspection charges, 7Q Interest, and penal damages from the employees.
6. The department alleged that the appellant provided services to the employers in relation to asset management of Employees Provident Fund, Employees Deposit Linked Insurance Scheme and Employees Pension Scheme. The Department also alleged that in lieu of providing the said services, the appellant received income under the aforesaid heads from the employers, which would be taxable under the category of „banking and other financial services‟ for the period upto 30.06.2012 and leviable to service tax in terms of the provisions of section 65B(44) of the Finance Act, 19945 read with section 66B of the Finance Act for the period from 01.07.2012 to 31.03.2014. Accordingly, four show cause notices were issued to the appellant demanding service tax under section 73(1) of the Finance Act with interest and penalties.
7. The appellant filed a detailed reply to the show cause The Commissioner by order dated 26.11.2015 confirmed the demand with interest and penalties.
8. Shri A.K. Batra, learned consultant appearing for the appellant submitted that for the period 01.04.2009 up to 06.2012 the issue raised in this appeal has been decided by a Division Bench of the Tribunal in the appellant‟s own case in M/s Employee Provident Fund Organisation Vs. CST, Delhi6 and the Civil Appeal filed by the Department to assail the order of the Tribunal was dismissed both on the ground of delay and on merits by the Supreme Court by order dated 05.10.2018 in Commissioner Vs. Employee Provident Fund Organisation7.
9. Learned consultant also pointed out that for period 07.2012 to 3 1.03.2014, the issue has also been decided by the Commissioner, Siliguri by order dated 03.09.2019 while adjudicating the show cause notice dated 28.03.2018 and as also by the Commissioner, Delhi by order dated 02.03.2023 while adjudicating two show cause notices dated 21.04.2016 and 21.03.2018. The learned consultant also pointed out that order dated 03.09.2019 passed by the Commissioner, Siliguri has attained finality as no appeal has been filed by the department to assail this order.
10. The learned consultant for the appellant, therefore, submitted that as the issues raised in this appeal have already been decided in favour of the appellant, the order dated 11.2015 that has been assailed this appeal deserves to be set aside.
11. Shri Rajeev Kapoor, the learned authorized representative appearing for the department has, however, supported the impugned order.
12. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered.
13. In the case of the appellant for the period 01.04.2004 to 31.03.2009, the order dated 01.07.2010 passed by the Commissioner was assailed by the appellant before the Tribunal and the Tribunal, by order dated 13.04.2017, set aside the order passed by the Commissioner and allowed the appeal. The relevant portions of the order passed by the Tribunal are reproduced below:-
“10. xxxxxxxx The Board vide Circular dated 23/08/2007 clarified that activities assigned to and performed by sovereign/public authorities under the provisions of any law are statutory duties. The fee or amount collected as per the provision of relevant statute for performing such functions is in the nature of compulsory levy and are deposited into Government account. It was clarified that such activities are purely in public interest and are undertaken as mandatory and statutory functions. These are not to be treated as services provided for a consideration. Therefore, suck activities assigned to and performed by a sovereign/public authority under the provisions of any law, do not constitute taxable service. Any amount/fee collected in such cases are not to be treated as consideration for the purpose of levy of service tax.
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 appellant is a public authority performing statutory functions as mandated by an Act of Parliament.
16. xxxxxxxxx The fee and other charges collected by the appellant from the employers in the present dispute are fixed by the law with no discretion or option vested with appellant or the employers. As such these cannot be considered as amounts received for providing any taxable service of BOFS.
17. xxxxxxxxx One crucial aspect, missed by the Original Authority, is fund which is managed by the appellant is to the benefit of employees whose welfare is entrusted to the appellant, by law. The employers do not get any benefit out of such fund management. The administrative charges and other charges paid by the employers, therefore cannot be attributed to any service received by them from the As already noted, the employers have no choice and are compulsorily mandated by law to contribute to the fund and also pay the administrative charges/inspection charges etc. in terms of the EPMF & MP Act. The employees who ultimately benefit, have not paid any consideration to the appellant. They only contributed their part of fund, through the employer, to the appellant. They contribution to the fund is not the subject matter of disputed tax liability. The other charges liked 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.
20. Having examined the impugned orders, the submissions made by both the parties before us, closely, we find that the appellants are not liable to pay service tax on their statutory activities performed in terms of EPM & 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 (supra). The impugned orders are without merit and are not legally sustainable. Accordingly, we set aside the same and allow the appeals filed by the appellant.”
14. In view of the aforesaid decision of the Tribunal, with which we have no reason to disagree, the demand confirmed for the period from 01.04.2009 to 30.06.2012 deserves to be set aside.
15. For the period from 01.07.2012 to 31.03.2014, the Commissioner, Siliguri by a detailed order dated 03.09.2019, in the case of the appellant for the period 01.07.2012 to 3 1.03.2014, discharged the show cause notice that was issued for demanding service tax on the amount collected by the appellant towards administrative charges and inspection charges and the relevant portions of the order are reproduced below:-
“ 8.6. From the foregoing para, it is obvious that in view of the Hon‟ble CESTAT, EPFO are not liable to pay service tax on their statutory activities performed in terms of EPMF & MP Act, The appellants are not providing any taxable service to the employers covered by the said Act. The consideration sought to be taxed are statutorily fixed, mandated fees and charges. No option exists with the appellant or contributor to vary such “Fees‟ or „charge‟. The demand period covered in the case finalized by the Hon‟ble CESTAT is for period 01.04.2004 to 31.03.2009 i.e. prior to the Negative list regime. The instant Show Cause Notice covers the period from 01.07.2012 to 31.03.2016 when the Negative list regime was under force. The allegation in the show cause notice is that the services rendered by EPFO are not covered under the negative list under section 66D of the Finance Act, 1994 during the period from 01.07.2012 to 31.03.2016. It was included in the Negative list vide Notification number 09/2016-ST dated 01.03.2016. However, I am of the opinion that difference in period of demand has no effect on the merit of the case discussed by the Hon‟ble CESTAT. The ration of the decision of the Honb‟ble Tribunal is squarely applicable to the case. The Hon‟ble Tribunal has cited the decision of the Hon‟ble Supreme Court in case of Regional Provident Fund Commissioner Vs. The Hoogly Mills Company Ltd. and Ors. Reported in (2012) 2 SCC 489 for concluding that the Noticee is a statutory authority created for a specified welfare function.
16. Learned consultant appearing for the appellant has submitted that this order passed by the Commissioner, Siliguri has attained finality as no appeal has been filed by the department.
17. The Commissioner, Delhi in the order dated 02.03.2023, while adjudicating the two show cause notices issued for the period 2014-2015 and 2015-2016, has also discharged the show cause notice after relying upon the decision of the Tribunal and the Board Circular dated 23.08.2007.
18. In view of the aforesaid, the order dated 26.11.2015 passed by the Commissioner deserves to be set aside and is set aside. The appeal is accordingly, allowed.
(Order dictated and pronounced in the Open Court)
NOTES ;-
1. the appellant
2. the Commissioner
3. the Finance Act
4. the Act
5 the Finance Act
6. 2017 (4) TMI 902-CESTAT New Delhi
7. 2018 (12) TMI 1580- Supreme Court
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