The Customs Excise & Service Tax Appellate Tribunal (CESTAT) has held that the collection of contribution to build a corpus fund to secure the depositors’ interest is not a mere transaction in money so is the appellant liable to pay Service Tax.
The appellant, Kerala Cooperative Deposit Guarantee Fund Board is constituted, under Kerala Cooperative Deposit Guarantee Scheme, 2012 for the administration of Cooperative deposit fund, by Government of Kerala, who notified the scheme vide S.R.O. No. 28/2012 with G.O.(P) No.03/2012/Co-op dated 11-1-2012, vide powers vested in them under Section 57(B) of the Kerala Co-operative Societies Act,1969.
The minister in charge of Cooperation would be the chairman of the Board and all other members are nominated by the Government of Kerala. The contribution to the fund is the sum of money payable to the fund by the credit societies at the rate specified; the purpose of the scheme is to provide a guarantee for the deposits made in the credit societies and for creating confidence among the depositors and for attracting more details.
All Cooperative societies have to follow this; the fund is to be utilized for the settlement of the claims in respect of the deposits which are guaranteed; all the money of the fund are to be deposited in the State of District Cooperative Banks or in the treasury; there is no provision that the interest accrued to be added to the corpus fund; if a credit society is unable to make payment to the depositor, the depositor shall be free to approach the Board for assistance.
The Department has issued two SCNs dated 31.01.2017 & 12.09.2017 for the periods 2012 to 2016, alleging that their activity must not be charged to Service Tax being “Services” under Section 65B of Finance Act, 1994 from 01.07.2012 onwards; the SCNs came to be confirmed by a common Order 64&65 dated 17.10.2017.
The Tribunal includes Judicial Member, S.S Garg and Technical Member, P. Anjani Kumar pronounced the order based on an appeal filed by Kerala Co-Operative Deposit Guarantee Fund Board.
The coram observed that the appellants are a body constituted by the Government. There are a number of decisions by the Tribunal and Higher Courts that mens rea cannot be attributed to the Public Sector Units. The appellant is a body constituted by the Government. further finds that it is not expedient and necessitated to impose penalties.
While confirming the duty demand along with interest, the tribunal held that the penalties imposed under Section 77 & 78 are liable to be set aside, by invoking the provisions of Section 80 of the Finance Act, 1994.
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