In a major setback to the State Bank of India, the Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that the Employees’ Provident Fund (EPF)and the Employees’ State Insurance(ESI) are not taxes.
The appeal has been filed by State Bank of India against demand of service tax and imposition of penalties under Section 77 and 78 of the Finance Act, 1994. The counsel appearing for the appellant pointed out that appellant was providing various banking and financial services on which they were paying taxes and was however not paying any tax on the Commission amount received on account of operation of EPF/ESI account.
The appellants are seeking waiver of penalty on the ground that the service provided by them was entitled to exemption under Notification No. 13/2004 dated 10.09.2004. It was argued that the saidnotification exempts taxable service provided by a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, to the government of India or the Government of a State.
The services provided by the appellant are in relation to the disbursement of EPF and ESI. Notification No. 13/2004-ST dated 10.09.2004 provides following exemption: “exempts taxable service provided by a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, to the government of India or the Government of a State from the whole of the service tax leviable thereon.”
The Coram comprising Ramesh Nair, Judicial Member and Raju, Technical Member observed that “We also find that the language of the Notification is very clear and there is no scope of confusion between the EPF / ESI scheme with taxes collected by Government. Therefore, non-inclusion of the Commission and claim of exemption under Notification 13/2004 is clearly an attempt to evade the taxes.”
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