No Suppression When PSU Bank Records Transactions in Statutory Books, Extended Limitation Not Invocable: CESTAT Allows Indian Bank Appeals [Read Order]

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal(CESTAT) ruled that extended limitation cannot be invoked against Indian Bank in the absence of suppression of facts with intent to evade service tax.

Indian Bank, the appellant, is a PSU and scheduled bank. The appeals arose from a common Order-in-Original dated 22.12.2017 passed by the Commissioner of GST and Central Excise, Chennai. The department had issued several show cause notices alleging short-payment and non-payment of service tax, short reversal of CENVATcredit, and wrong availment of CENVAT credit for different periods.

The disputed issues included service tax on foreign exchange income earned through interbank transactions, turnover commission, arrangement fee, non-inclusion of TDS on import of service, reversal under Rule 6(3A) of the CENVAT Credit Rules, credit on handling services, and proportionate credit on BSNL invoices.

The demands included Rs. 27,82,05,445 under the show cause notice dated 19.04.2010, Rs. 9,09,14,970 under the show cause notice dated 21.10.2010, and Rs. 16,13,85,905 under the show cause notice dated 13.10.2011. Several connected appeals had already been settled under SVLDRS, leaving the present appeals and department appeals before the tribunal.

The appellant’s counsel argued that Indian Bank was under continuous supervision of the Government and RBI. The bank submitted that all transactions were recorded in its statutory books and had been examined during audit. They argued that the dispute involved interpretation of law and that a different view taken by the department could not amount to suppression.

On turnover commission, the bank’s counsel argued that the amount was received from RBI for government business as RBI’s agent. It relied on Notification No. 22/2006-ST dated 31.03.2006 and the Supreme Court ruling in CST Bangalore v. Canara Bank. The bank also argued that arrangement charges were in the nature of interest and were excluded from taxable value.

The revenue counsel supported the findings of the Commissioner and argued that the demands and credit disallowances were correctly confirmed.

The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) agreed with the bank on limitation. The tribunal observed that Indian Bank was a PSU/scheduled bank, its transactions were recorded in statutory books and the issues involved interpretation.

The tribunal held that there was no material to allege suppression with intent to evade tax. Since the entire demand was raised by invoking the larger period, the tribunal did not examine the other issues on merits. The impugned order was set aside. Indian Bank’s appeals were allowed with consequential relief, while the department’s appeals were dismissed.