Custom, Excise & Service Tax Tribunal
M/S Hind Filters Ltd vs Cce, Indore on 29 November, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing: 6.10.2016
Date of Pronouncement: 29.11.2016
Appeal No. ST/1501/2010
(Arising out of Order-in-Appeal No. IND-I/180/2010 dated 28.7.2010 passed by the Commissioner (Appeals), Customs & Central Excise, Indore)
M/s Hind Filters Ltd. Appellant
Vs.
CCE, Indore Respondent
Appearance Shri Rachit Jain, Advocate - for the appellant Shri Govind Dixit, D.R. - for the respondent CORAM: Honble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. V. Padmanabhan, Member (Technical) Final Order No. 55443/2016 Per V. Padmanabhan :
The present appeal is directed against the order of the Commissioner (Appeals), Indore dated 28.7.2010. The controversy is with reference to demand of service tax on the activity of bill discounting undertaken by the appellant for which they have received consideration in the form of discount. Revenue has taken the view that service tax is liable to be paid on such discount amounts received by the appellant. They have also denied the benefit of the Notification No. 29/2004-ST dated 22.9.2004. Both the authorities below have confirmed the demand of service tax to the extent of Rs.11,01,930/- along with interest chargeable under Section 75 as far as imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.
2. Appeal against the impugned order is mainly on the following grounds:
(i) The appellant is engaged in the manufacture of excisable goods falling under Chapter 56 of the Central Excise Tariff Act. They are not engaged in the business of banking or financial services. Their submission is that levy of service tax under banking and other financial services defined under Section 65(12). They have also placed reliance on several case laws including Inox Air Products Ltd. Vs. CCE, Nagpur 2015 (38) STR 191 (Tri.-Mum.), Banswara Syntex Vs. CCE, Jaipur 2009-TIOL-2214-CESTAT-DEL and UCO Bank Vs. CST, Kolkata 2014 (36) STR 1169 (Tri.-Kol.).
(ii) They have also claimed that the entire demand is barred by limitation as there was no suppression of facts by the appellant. The Show Cause Notice covers the period 1.4.2005 to 31.3.2007 and has been issued on 2.2.2009.
3. We have heard Shri Rachit Jain, ld. Advocate for the appellant as well as Shri Govind Dixit, ld. DR appearing for the Revenue.
4. Even though the appellant is primarily engaged in the manufacture of excisable goods falling under Chapter 56, it is not in dispute that they have engaged themselves in the activity of discounting of bills of exchange. The definition of banking and other financial services is given in Section 65(12). For ready reference, it is extracted below:
65(12) Banking and other financial services means-
(a) The following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern namely
(i)....................
(viii) other financial services, namely, lending issue of pay order, demand draft, cheque, letter of credit and bill of exchange; providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts:
5. In the activity of bill discounting, the appellant has performed the role of lender by paying the discounted amount to the seller of the goods and subsequently recovering the full amount of the bill of exchange from the borrower. The consideration received by the appellant for this transaction is the difference between the amount of the bill of exchange received by them from the borrower and the amount paid to the seller of the goods. The appellant claims that this difference is in the form of interest received by them for advancing the amount to the seller, it can also be described as discount.
6. The case of the appellant is that service tax becomes payable on this activity only when the service is rendered by banking company or financial institution including NBFC or any other body corporate or commercial concern. Their submission is that though they are a body corporate, still they will not be liable for service tax inasmuch as they cannot be classified under the category of banking company or other financial institutions. We are not in agreement with this view. The definition of banking and other financial services makes it applicable to any of the following:
(a) Banking company
(b) Financial institution including NBFC.
(c) Any other body corporate
(d) Or commercial concern.
Since the various categories are separated by Or it is clear that the service tax will be applicable to all. It is not disputed that the appellant is a body corporate, since they are a limited company. Hence we are of the view that levy of service tax will be applicable to the appellant.
7. We now turn to the benefit of Notification No. 29/2004-ST dated 22.9.2004. The notification has exempted so much of the value of taxable services in relation to an overdraft facility, cash credit facility or discounting of bills, bills of exchange or cheques equivalent to the amount of interest on such overdraft, cash credit or, as case may be, discount. The claim of the appellant for the benefit under notification stands denied by the lower authorities for the reason that the interest amount is not shown separately in the invoice or bill issued for this purpose. The appellant has claimed that they have submitted the relevant documents before the lower authorities who have ignored the same. We have perused copies of the documents submitted by the appellant in the appeal papers. We find that the invoices clearly indicate the amount of the bill of exchange, discounting charges and the net amount paid to the seller. In some cases, it has been shown as interest. The benefit of the exemption will be available whether the consideration is described as interest or discount. This has been specifically held by the Tribunal in the case of UCO Bank (supra). The documents submitted would require verification before allowing the benefit of exemption No. 29/2004-ST dated 22.9.2004. For this purpose, we remand the matter to the original adjudicating authority, who shall allow the benefit of the scrutiny of the documents. The appellant is directed to produce all relevant documents to establish their claim for the benefit of the notification. The appeal is allowed by way of remand.
(Pronounced in Court on 29.11.2016) (Archana Wadhwa) Member (Judicial) (V. Padmanabhan) Member (Technical) RM 6