Service Tax - Collection of Taxes - State Bank of Patiala is an Agent of RBI, not liable to pay tax -CESTAT Larger Bench
AS per Notification No. 22/2006-ST, taxable services provided or to be provided to any person, by the Reserve Bank of India were exempted. State Bank of Patiala is a banking company and regulated by the Reserve Bank of India as per the provisions of Banking Regulations Act, 1949; The RBI in exercise of its authority conferred by Section 45 of Reserve Bank of India Act, 1934 appointed the State Bank of Patiala as an agent to receive remittances of taxes on RBI's behalf to credit the same into consolidated fund; for which a commission was paid by RBI; This is sought to be taxed by Revenue authorities.
In the Canara Bank case - , in identical situation, it was held that:
Since the agent is eligible for the exemption which is available to the principal in terms of the relationship with the principal of the agent and not because of exemption granted specifically to the agent or principal, the appellant is eligible for exemption. If RBI were to undertake the activity there would have been no question of levy of service tax. It was also brought to notice that RBI is not paying service tax. Same functions being carried out by RBI are exempted. Therefore, the benefit of exemption available to RBI would be available to the agent i.e. Canara Bank.
However, another Bench of the Tribunal in State Bank of Patiala - doubted the Canara Bank decision and referred the issue to a Larger Bench.
The Larger Bench recently held that the law as laid down by the Tribunal in the case of Canara Bank is correct exposition of law.
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