Mega Enterprises vs Commissioner Of Central Excise & ...

(Arising out of Order-in-Original No. 11/ST/2009 dated 30/07/2009 and Order-in-Appeal No. AKP/119/NSK/2010 dated 31.03.2010 & OIA No. AKP/118/NSK/2010 dated 31.03.2010 passed by the Commissioner (Appeals) Customs & Central Excise, Nashik)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. P.S.Pruthi, Member (Technical)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

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Mega Enterprises : Appellant VS

Commissioner of Central Excise & Customs, Nashik And

Respondent Commissioner of Central Excise & Customs, Nashik VS

Appellant Mega Enterprises : Respondent

Appearance

Shri Vinay Kansara, Advocate for Appellant

Shri K.S. Mishra, Additional Commissioner (A.R) for respondent

CORAM:

Mr. M.V. Ravindran, Member (Judicial) Mr. P.S.Pruthi, Member (Technical)

Date of hearing : 12/05/2015 Date of decision : 12/05/2015

ORDER NO.

Per : M.V. Ravindran

These three appeals filed against Orders-in-Original No. 11/ST/2009 dated 30/07/2009 and Orders-in-Appeal No. AKP/119/NSK/2010 dated 31.03.2010 & OIA No. AKP/118/NSK/2010 dated 31.03.2010. The assessee is in appeal No. ST/230/2009 against the Order-in-Original No. 11/ST/2009 dated 30/07/2009. While Revenue is in appeal against Order-in-Appeal No. AKP/119/NSK/2010 dated 31.03.2010 & OIA No. AKP/118/NSK/2010 dated 31.03.2010. Since all the three appeals raised very same issue they are disposed by a common order.

2. Heard both sides and perused the records.

3. The assessee is aggrieved by the Order-in-Original on the ground that the adjudicating authority has confirmed demand of Approximately Rs.53.74 lakhs under the category of Banking and other Financial Services for the period June 2007 to March 2008 and upholding the allegation and the show cause notice that appellant was undertaking cash management. Revenue is aggrieved by the Orders-in-Appeal on the ground that the first appellate authority has set aside the Orders-in-Original which has held against the assessee.

4. Ld. Counsel would take us through the impugned orders and submit that the appellant is successful bidder for collecting octroi on behalf of the Municipal Corporation of Dhule, Malegaon and Deolali, they are entrusted of collection of octroi and transit fees and are required to pay to the Municipal Corporation/Cantonment Board an amount as per contract entered after successful Tender. It is his submission that any amount which is collected over and above the contract amount is kept back by the appellant and in respect of transit fee, appellant is authorized to receive the 3% of the amount collected as transit fee as a consideration. He would submit that the lower authorities are held that the services would fall under the category of banking and financial services, which is incorrect as appellant is not a financial institution nor is he nothing banking financial corporation. He would then draw our attention to the definition of banking and other financial services and submit that they are not covered under the said category. It is also his submission that this bench in the case of Parag Parikh Financial Advisory Services Ltd. Vs. Commissioner of Service Tax, Mumbai 2015-TIOL-287-CESTAT-MUM has held what is a financial institution. He would also submit that the appellant cannot fall under the category of financial institution are a banking company or a non-banking company accordingly, they would not be covered under banking and financial services. He would also submits that the cash management as defined in Law Dictionary is efficient management of cash in a business in order to put the cash to work more quickly and to keep the cash in applications that produce income and collect all the cash put to them. He would submit that the reliance placed by the adjudicating authority on the CBEC Circular No. 83/1/2006-ST, dated 4.7.2006 is totally incorrect as also on TRU Letter No. 334/1/2007-TRU, dated 28.2.2007.

5. Ld. AR on the other hand would submit that the services rendered by the appellant is nothing but the cash management as per the Circular dt. 28.2.2007 which specifically talks about services of collection of receivables. He would submit that appellant is collecting the receivables from the vehicles entering the city and supposed to pay octroi to the municipal bodies. He would submits that the appellant collects the amount of octroi on behalf of the Municipal Bodies and retained the some amount as commission for rendering such services and hence it was covered under the category of banking and financial service. He would also submit that the Municipal Bodies cannot be called as State Government, as the definition of Central Government and State Government and local authority as given in General Causes Act, would not be applicable in this case. He would submit that the definition of banking and financial services has undergone a change from 1.6.2007 wherein the activity of cash management has been included in the banking and other financial services.

6. We have considered the submissions made at length by both sides and perused the records.

7. The issue involved in this case is regarding the classification of services as has been held by the lower authorities whether it would fall under the category of banking and financial services or otherwise.

8. Undisputed facts are that the appellant herein is a successful bidder for appointing as an agent collecting for octroi for the local municipal bodies. It is also undisputed that the appellant collects the octroi and deposits the same with the local bodies to the amount tendered by him.

9. Revenue authorities are of the view that such activity undertaken by the appellant would fall under the category of cash management as enshrined in the definition of banking and financial service. In order to appreciate the correct legal position, it is necessary to reproduce the said definition.

[(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) financial leasing services including equipment leasing and hire-purchase;

[Explanation.For the purposes of this item, financial leasing means a lease transaction where

(i) contract for lease isentered into between two parties for leasing of a specific asset;

(ii) such contract is for use and occupation of the asset by the lessee;

(iii) the lease payment is calculated so as to cover the full cost of the asset together with the interest charges; and

(iv) the lessee is entitled to own, or has the option to own, the asset at the end of the lease period after making the lease payment;] [(ii) * * * *

(iii) merchant banking services;

[(iv) Securities and foreign exchange (forex) broking, and purchase or sale of foreign currency, including money changing;]

(v) asset management including portfolio management, all forms of fund management, pension fund management, [custodial, depository and trust services,]

(vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy;

(vii) provision and transfer of information and data processing;

[(viii) banker to an issue services; and

(ix) other financial services, namely, lending, issue of pay order, demand draft, cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults, operation of bank accounts;]

10. We also find that the financial institution has been defined as under:

"(c) financial institution'' means any non-banking institution which carries on as its business or part of its business any of the following activities, namely:

(i) the financing, whether by way of making loans or advances or otherwise, of any activity other than its own:

(ii) the acquisition of shares, stock, bonds, debentures or securities issued by a Government or local authority or other marketable securities of a like nature:

(iii) letting or delivering of any goods to a hirer under a hire-purchase agreement as defined in clause (c) of section 2 of the Hire-Purchase Act, 1972:

(iv) the carrying on of any class of insurance business;

(v) managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto;

(vi) collecting, for any purpose or under any scheme or arrangement by whatever name called, monies in lumpsum or otherwise, by way of subscriptions or by sale of units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing monies in any other way, to persons from whom monies are collected or to any other person,"

Reading the definition of banking and financial services and the meaning of financial institution, we have to hold that the services rendered by the appellant would not fall under the category of service provided by a banking or a financial institution or any other body corporate or commercial concern. This our view is forfeited by the judgment of this Tribunal in the case of Parag Parikh Financial Advisory Services Ltd. (supra) (wherein one of us was a Member) and it was held as under:-

To fall within the tax net, the appellant has to be a banking company or a financial institution including a non-banking company. Obviously, the appellant is not a banking company or a non-banking financial company. As per the definition of "financial institution" only when the appellant carries on business of acquisition of shares, bonds, debentures or securities issued by a Government or Local Authority or other marketable securities of a like nature, the appellant can be categorized as a financial institution. Merely because the appellant is registered as a stock broker with the SEBI, which is a statutory requirement the appellant cannot be considered as a financial institution. If that be so, all stock brokers dealing in shares/securities would be financial institutions which is a totally wrong interpretation of the statutory definition of a financial institution. There is also no evidence available on record to show that the appellant has been registered under the RBI Act as a "Financial institution".

In this factual and legal scenario, the conclusion of the lower authorities that the appellant is a financial institution as defined in the RBI Act cannot be sustained. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any, in accordance with law.

It can be seen from the above reproduced ratio that in order to get covered under the banking and financial services, an assessee has to be either a banking company or financial institution or a non-banking company or any other commercial concern rendering the various services as enshrined in the definition of banking and other financial services. Now we address the services covered under the definition. We find that the services rendered by the appellant, if any, will not fall under any category as indicated in the definition of banking and other financial service; it is the case of the Revenue that the activity of the appellant would fall under the category of cash management. We do not agree with the findings recorded by the lower authority i.e. adjudicating authority inasmuch as the word Cash Management is not only collection and deposit of cash. The cash management includes various activities as has been contended correctly by the Ld. Counsel, inasmuch, cash management involves, something more like contracting a debt collection service to retrieve what is owned by a customer, and also investing such cash which would lead to avoiding insolvency and bankruptcy and also reduced the days of the debt, increasing collection rates, selecting appropriate short-term investment vehicles, and also strategically by increasing days cash on hand in order to improve a companys overall financial profitability. In the case in hand, we find that it is undisputed as to the appellant is only collecting an amount as octroi the vehicles, in which goods transported and octroi liability arises. In our view this will not encompose ingredients of cash management. In the absence of any cash management activity undertaken by the appellant, we find that the services rendered by the appellant will not fall under the category of banking and financial services.

11. Yet another angle to this case is that CBEC vide Circular No. 83/1/2006-ST. dated 4.7.2006 while clarifying as to the services provided by Department of Posts in respect of money orders, operation of bank accounts issue of postal orders etc. clarified as under :-

 Banking and other financial services are defined under section 65(12). Such services provided to a customer by a banking company or a financial institution including a non-banking financial company or any other body corporate or any other person to a customer are liable to service tax under section 65(105)(zm). The expression any other person appearing in section 65(105)(zm) is to be read ejusdem generis with the preceding words. The expression other financial services appearing under section 65(12)(a)(ix) is a residuary entry and includes those services which are normally rendered by banks or financial institutions.

Hence, banking and other financial services provided by a banking company or a financial institution or a non-banking financial company or any other service provider similar to a bank or a financial institution are liable to service tax under section 65(105)(zm) of the Finance Act, 1994. Department of Posts is not similar to a bank or a financial institution and hence does not fall within the category of any other similar service provider.

(emphasis ours) It can be seen from the above reproduced clarification that CBEC was of the view that any services to fall under the category of banking and financial services, the expression any other person needs to be read ejusdem generic with the preceding words and the services are to be provided by any person should be similar to a bank or financial institution. In the case in hand, as is recorded by us, it is undisputed that appellant is not financial institution.

13. Since we have disposed the appeal on merits we are not recording any findings on the various other submissions made before us.

14. In view of foregoing and in the facts and circumstances of this case, we hold that the appellant assessees appeal needs to be allowed and the impugned order in that appeal is liable to be set aside we do so; the impugned orders in Revenues appeal needs to be upheld.

15. Assessees appeal allowed Revenue appeals rejected.

(Pronounced in court)

(P.S.Pruthi) Member (Technical)

(M.V. Ravindran) Member (Judicial)

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