National Securities Depository Ltd. Vs Commissioner of Service Tax (CESTAT Mumbai)
Intelligence gathered by the officers of Directorate General Of Central Excise Mumbai Zonal Unit to effect that Appellants were not discharging service tax on operational income received on account of transaction fees, custodial fees etc, by wrongly claiming exemption from service tax as per Board Circular No.B.II/1/200/TRU dated 09.07.2001. These amounts received by the Appellants from Depository Participants appeared to be liable to taxation under the category of “Banking and Financial Services”.
CESTST Mumbai held as follows:-
> the services provided by the appellant to depository participants are aptly of “provision and transfer of information and data processing”, classifiable under (vii) of Banking and Financial Services as defined under Section 65(12) of Finance Act, 1994;
> Extended period of limitation as per proviso to Section 73(1) of Finance Act, 1994, for demanding the service tax is invocable.
> benefit of cum tax value as per sub-section (2) of Section 67 of Finance Act, 1994 is admissible to the appellants and so is also the benefit of the tax already paid as per the ST-3 returns filed by them, hence matter needs to be remanded back to adjudicating authority for re-quantification of demand.
> Demand of interest under Section 75 of Finance Act, 1994 is justified.
> Penalties imposed under Section 75A, 77 & 78 of Finance Act, 1994 is justified but needs to be redetermined in light of re-quantification of demand in de-novo proceedings.
FULL TEXT OF THE CESTAT JUDGEMENT
This appeal is directed against order in original No 26/STCV/SKD/16-17 dated 30.06.2016 of Commissioner Service Tax – V, Mumbai. By the impugned order, the Commissioner has held as follows:
“5.01 I hold that the services provided by M/s National Securities Depository Ltd to their Depository Participants during the period from 01.04.2004 to 31.03.2009 are classifiable under the category of “Banking and Other Financial Services” as defined under Section 65 (12) (vii) and Section 65 (1 05)(zm) of the Finance Act, 1994;
5.02 I, confirm the demand of Service Tax totally amounting to Rs 52,36,20,950/- (Rupees Fifty Two Crores Thirty Six Lakhs Twenty Thousand Nine Hundred and Fifty only) for the period 01.04.2004 to 31.03.2009 in terms of Section 73(2) of the Finance Act, 1994, read with Section 66 and Section 68 ibid and Rule 6 of Service Tax Rules, 1994;
5.03 I order for recovery of interest under Section 75 of the Act , at the appropriate rates on the amount of confirmed demand ordered for recovery at Para 5.02 above;
5.04 I impose a penalty of Rs. 500/- (Rupees Five Hundred only) under Section 75A of the Finance Act, 1994.
5.05 I impose a penalty of Rs 52,36,20,950/- (Rupees Fifty Two Crores Thirty Six Lakhs Twenty Thousand Nine Hundred and Fifty only) under Section 78 of the Act. If the Noticee pays the Service tax confirmed, as mentioned in para 5.02 above, along with the interest on delayed payment within 30 (thirty) days from the date of communication of this Order, the amount of penalty liable to be paid by the Noticee under Section 78 of the Act shall be twenty five percent of the service tax payable/ confirmed in para 5.02 above. However, the benefit of reduced penalty under Section 78 of the Act, shall be available only i the said Service Tax confirmed, Interest and the Penalty of twenty five percent of the service tax payable/ confirmed, so imposed under the aforesaid Order, is paid within the period of 30 (thirty) days from the date of communication of this Order.
5.06 I impose penalty of Rs 5000/- (Rupees Five Thousand only) on the Noticee for each failure to file proper periodical returns as prescribed under Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994 on the due dates and for failure to furnish the list of all accounts maintained by them in relation to Service Tax as required under Rule 5(2) of the Service Tax, 1994, respectively under Section 77 of the Act.
5.07 I, refrain from imposing penalty under Section 76 of the Act, as I have imposed penalty under Section 78 of the Act at 5.05 above.”
2.1 Intelligence gathered by the officers of Directorate General Of Central Excise Mumbai Zonal Unit to effect that Appellants were not discharging service tax on operational income received on account of transaction fees, custodial fees etc, by wrongly claiming exemption from service tax as per Board Circular No.B.II/1/200/TRU dated 09.07.2001. These amounts received by the Appellants from Depository Participants appeared to be liable to taxation under the category of “Banking and Financial Services”.
2.2 Acting on intelligence investigation were initiated and relevant details in respect of Operational Income received under various heads namely Annual Fees, Custodial Fees, Transaction Fees, Software License Fees etc. Along with Balance Sheet, Copy of MOU and projects agreements, service tax returns , registration etc., were called for. Statements of various functionaries of Appellants as detailed below were also recorded:-
