The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that a Trust cannot be termed as a ‘Non-Banking Financial Institution’ for the purpose of levying tax under the head ‘Banking and Other Financial Services’ under the Finance Act, 1994.
The appellants, Mahasemam Trust are primarily engaged in micro-financing (small scale lending) to poor women members of self-help groups, and were charging interest on such loans apart from collecting various other charges like processing charge, application charges Group Maintenance Charges, etc., from the borrowers.
The department demanded service tax by holding that the assessee is a non-banking financial institution is engaged in lending activity and the activity would fall under ‘Banking and Other Financial Services’.
The assessee contended that during the major part of the demand, the taxable service would attract levy of service tax only if it is rendered by a banking company or a financial institution or a non-banking financial company. The assessee, being a Trust, does not fall under any of these categories, they argued.
It was noted that for a limited period from 01.05.2006 to 30.05.2007, the said taxable service as given in Section 65(105)(zm) was amended to include the words “any other person”.
The first appellate authority held that the assessee can be treated as “any other person” ad confirmed the demand.
The bench noted that in the Show Cause Notice, it was said that the assessee is a non-banking financial institution and therefore is liable to pay Service Tax for the Banking and Financial Services.
“This being so, in our view, the Commissioner has traversed beyond the scope of Show Cause Notice to confirm the demand for the period 01.05.2006 to 30.04.2007. From the provisions of law reproduced above, it can be seen that the Commissioner has rightly dropped the demand for the period from 01.10.2004 to 30.04.2006 and for 01.05.2007 to 30.11.2009 when the words “any other person” was not part of the definition under Section 65(105)(zm),” the bench said.
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