Case Law Details
Assam Cooperative Apex Bank Ltd Vs Commr. of CGST (CESTAT Kolkata)
In a significant decision, the case of Assam Cooperative Apex Bank Ltd vs Commissioner of CGST (CESTAT Kolkata) revolves around the applicability of service tax on interest income derived from overdraft and cash credit facilities.
The dispute arose when the Internal Audit Party of the Dibrugarh Commissionerate demanded service tax from the appellant for the period 2008-09 to 2011-12. The contention was based on non-compliance with Rule 4A of the Service Tax Rules, which specifies invoicing requirements for taxable services. The lower authorities upheld the demand citing non-adherence to invoicing rules and disallowed exemption under Notification No. 29/2004-ST.
The appellant, a banking institution, argued that their monthly statements to customers, detailing transactions including interest charges, fulfilled the invoicing requirements as per the amended Rule 4A. They contended that the exemption notification did not impose invoicing obligations meant for taxable services.
Upon review, Kolkata CESTAT found that the appellant’s banking statements, which included all requisite details except the service tax component, were sufficient for compliance with Rule 4A. They emphasized that Notification No. 30/2004-ST expanded acceptable documents for compliance purposes, supporting the appellant’s stance.
The tribunal concluded that the demand for service tax on interest income was unjustified, overturning the lower authority’s decision. It highlighted that strict construction of rules should not override substantial compliance, especially when beneficial exemptions are involved.
The ruling in Assam Cooperative Apex Bank Ltd vs Commissioner of CGST by Kolkata CESTAT sets a precedent affirming that interest income from overdraft and cash credit facilities is exempt from service tax, provided it is clearly documented as per amended invoicing rules.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant has filed the present Appeal assailing the order of the Learned Commissioner (Appeals), whereby the Learned Commissioner (Appeals) has upheld the order passed by the lower authority confirming Service Tax amount (under Sec. 68 of Finance Act, 1994) of Rs.4,54,838.00/- along with interest under section 75 of the act ibid besides imposing penalty under Section 78 of the act ibid, amongst others.
2. The brief facts of the case are that consequent to the visit of the Internal Audit Party of the Dibrugarh Commissionerate, a demand of Service Tax on interest earned on Overdraft and Cash Credit for the period 2008-09 to 2011-12 was issued to the appellant contending that the Invoice, Bills and Challans as mentioned were not in accordance with the stipulations of Rule 4A of the Service Tax Rules, 1994 and therefore the assesse was liable to pay Service Tax thereon. The Learned Adjudicating Authority as well as the Commissioner (Appeals) have essentially gone by the fact of non-adherence of prescriptions of the Rule ibid, thereby disentitling the appellant of the benefit of Notification No. 29/2004-ST. Thus the said Show Cause Notice for non-payment of Service Tax on taxable service rendered (equivalent to the amount of interest), under the category of “Banking and other Financial Services” was issued for purpose of tax recovery. The orders of the two lower authorities inter alia state that the appellants failed to produce such invoice, bill or challan and therefore, they have confirmed the aforesaid amount of Service Tax. The Commissioner (Appeals) while relying on the amendment to Rule 4A(1) of the Service Tax Rules vide Notification No. 30/2004-ST dated 22/09/2004 has observed that the required stipulation was not fulfilled and therefore, his orders accordingly.
3. For sake of ready reference and better appreciation, it would be essential to go through Rule 4A of the Service Tax Rules as it is stood post amendment vide Notification No. 30/2004-ST which added proviso thereto. The said Rule is incorporated as hereunder:-
“4A. Taxable service to be provided or credit to be distributed on invoice, bill or challan-
(1) Every person providing taxable service [not later than [thirty] days from the date of [completion] of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier, shall issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him in respect such taxable service, whichever is earlier, shall issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him in respect such taxable service provided or [agreed] to be provided and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely;-
(i) the name, address and the registration number of such person
(ii) the name and address of the person receiving taxable service;
(iii) Description and value of taxable service provided or agreed to be provided; and
(iv) The service tax payable thereon
[Provided that in case the provider of taxable service is a banking company or a financial institution including a non-banking financial company providing service [to any person], an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered, and whether or not containing address of the person receiving taxable service but containing other information in such documents as required under this sub-rule:]
Provided………………
2. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx”
4. It is the contention of the appellant that they have been a provider of Banking Service and regularly furnishing monthly banking statements to their constituents who enjoy overdraft/cash credit facilities. These monthly statements apart from showing the transactions undertaken by the constituent during a month also clearly and separately indicate charges/interest etc. along with relevant dates on which such charges/interest were levied or accrued. They therefore submit that such banking statements provided to the constituent would clearly meet and satisfy the requirements of Rule 4A ibid as amended with the insertion of proviso referred supra.
5. Heard both sides and perused the case records.
6. It is noted from the Order-in-Original alleging that the Audit Party had observed that the Appellant had not fulfilled the conditions as laid down in the Rule, to be eligible to claim the requisite exemption under Notification No. 29/2004-ST dated 22.09.2004. It is the foremost contention of the appellant that Rule 4A(i) ibid as indicative, is applicable towards taxable service to be provided or credit to be distributed on invoice, bill or challan and therefore, in essence not applicable for exempt services. They have contended that the only condition imposed vide Notification No. 29/2004-ST is that the said interest amount is shown separately in invoice, bill as the case may be or a challan issued for this purpose. They further submit that were the applicability of Rule 4A to be made mandatory for exempt services, it would have been reflected in the Notification itself. They fortify their argument with the plea that the Notification exempting income from levy of Service Tax could not obviously impose the burden of maintaining documents applicable for taxable services. It is noted that Clause 1(iv) of Rule 4A requires disclosure of Service Tax payable on the value of service provided, thus, it cannot be said to include exempt services. Moreover a proviso inserted to the Rule by way of an amendment cannot have the effect on enlarging the scope of the provision, at best it is only clarificatory.
7. Notification No. 29/2004-ST, clearly exempts service tax on interest income on such overdraft/cash credit facilities and the same is required to be shown separately in invoice, bill or the challan for the Rule 4A(1) however mandating certain basic details like, name, address, registration number etc. of both the service provider and the service recipient, value of taxable service etc. The appellant has affirmed that such details are incorporated in the monthly statements issued for the purpose. With the expansion of the scope of acceptable documents for the purpose vide notification No. 30/2004-ST dated 22.09.2004, we see no reason why such bank statements cannot be considered as to serve the purpose. Thus the withholding of eligibility of exemption and consequent demand of service tax from the appellant is grossly illegal and cannot be sustained.
8. Under the circumstances, we are not in agreement with the findings of the lower authority upholding the demand for Service Tax on the amount of interest equivalent on overdraft/cash credit extended by the appellant.
9. Moreover, it is settled proposition of law that technical barrier, if any, cannot be an impediment to grant appropriate relief. In the context of amendment rendered vide Notification No. 30/2004-ST dated 22.09.2004, the present scenario certainly would not call for a strict construction.
10. In view of our discussions aforesaid, the order passed by the lower authority is set aside and the Appeal filed is therefore allowed.
(Dictated and pronounced in the open court.)
Author Bio
