Section 65(12) : Exemption to RBI cannot be extended to services provided under agency

Exemption available to 'services provided by RBI' cannot be extended to services provided under agency from RBI

No limitation on powers of legislature to levy a tax on rendition of 'sovereign' service : CESTAT

[2015] 57 taxmann.com 406 (New Delhi - CESTAT)

CESTAT, NEW DELHI BENCH

Commissioner of Central Excise & Service Tax, Chandigarh

v.

State Bank of Patiala

Section 65(12), read with section 66D(b), of the Finance Act, 1994 and articles 285 and 289 of the Constitution of India - Taxable services - Banking and other Financial Services - Stay Order - Assessee-bank was appointed as agent by RBI and collected tax remittances on behalf of RBI - Assessee received commission from RBI, which was sought to be charged to service tax under Banking/Financial Services - Assessee argued that : (a) it was a sovereign activity and not taxable and (b) in any case, since service was provided on behalf of RBI, it was exempt, as all service provided by RBI were exempt under notification no. 22/2006 - HELD : There is no limitation on powers of legislature to levy a tax on rendition of 'sovereign' service - Service provided by RBI or assessee under authorisation of RBI, does not also fall under articles 285 and 289 of Constitution - Further, exemption available to 'services provided by RBI' cannot be extended to services provided under agency from RBI - Hence, service tax was prima facie leviable and therefore, refund ordered by Commissioner (Appeals) was stayed [Paras 11 to 14] [In favour of revenue]

Circulars and Notifications : Notification No. 22/2006-S.T., dated 31-5-2006