The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax is payable on bill discounting under banking and other financial services (BFS)only when service is rendered by the banking company.
M/s. Surin Automotive Private Limited, the appellant is a registered service provider for Goods Transport Operator Service. The balance sheet of the appellant appears to have revealed the receipt of Rs.9,91,954/- and Rs.4,42,174/- for the periods 2007-08 and 2008-09 respectively.
The Department appeared to have found that the appellant was making payments to their suppliers only after sixty days and if the supplier wanted earlier payment, 5% of the value of the bill was deducted by the appellant, which was shown in the appellant’s balance sheet as income under “Bill discount”.
The Revenue doubted that the appellant did render service within the meaning of Section 65(12)(a)(ix) read with Section 65(105)(zm) of the Finance Act, 1994 and a Show Cause Notice dated 19.06.2009 was issued proposing to demand Service Tax under ‘banking and other financial services’.
The appellant appeared to have filed a reply dated 04.08.2009 whereby they appear to have denied rendering any service under ‘banking and other financial services’. The Deputy Commissioner of Central Excise confirmed the demand.
The appellant submitted that Service Tax is payable on ‘bill discounting’ under banking and other financial services (‘BFS’ for short) only when the service is rendered by a banking company or financial institution including a non-banking financial company. They would thus contend that they are only a body corporate and not liable to pay Service Tax as they cannot be classified under the category of banking companies or financial institutions.
It was found that the appellant has not denied the fact of giving bill discounting facility to some of its customers, but had denied liability only on the ground that they are not a banking company or a financial institution. The definition makes it clear that such a bill discounting facility could be offered not only by a banking company or a financial institution but also by a body corporate.
In light of the decision in the case of M/s. Hind Filters Ltd, the two-member bench Mr P Dinesha, Member (Judicial) and Mr M Ajit Kumar, Member (Technical) upheld the order and dismissed the appeal.
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