In a significant ruling, the Principal bench of the CESTAT situated at Delhi held that Service Tax cannot be levied on the Employees Provident Fund Organization since it is a statutory body created for specific welfare functions.
While allowing the appeal filed by the Organization, the bench clarified that the fee and other charges levied by the appellant are statutory requirements and said that no Service Tax element can be attributed towards the activities of the appellants.
The appellant, Employee Provident Fund Organization, is statutory body created by the Central Government under the Employee’s Provident Fund and Miscellaneous Provision Act, 1952. The Revenue imposed service tax on the appellant by holding that administrative charges, inspection charges, penal damages, interest on delayed payments, interest on investments, receipts from pension fund and other miscellaneous receipts received from the members are subject to service tax.
The department was of the opinion that the services provided by the appellant-assessee are taxable under the head “Banking and Other Financial Services (BOFS)”.
It was also held that since the appellant provided taxable service as a corporate body/trust by managing funds and the activities carried out are not in the nature of statutory functions but are in the nature of services of social welfare as per the directive principles of state governance, are squarely covered by the Finance Act, 1994.
The appellant contended that the receipts in dispute are not subject to Service Tax since it is not related to any service rendered by the appellant.
After hearing the both sides, the bench concluded that the service tax cannot be levied on the appellant. Perusing the relevant provisions of the Act, the bench said that the appellant is a statutory authority created for a specified welfare function and the charges paid by the employers to the appellant are mandated statutory payments and are not towards any consideration for receiving taxable service.
It was noted that the fee and other charges collected by the appellant from the employers in the present dispute are fixed by the law with no discretion or option vested with appellant or the employers. As such these cannot be considered as amounts received for providing any taxable service of BOFS.
“For levy of service tax on any transaction, there should be a service provider and a service recipient, apart from identifying a transaction under a specific taxable category. In the present case, the appellant is identified as a service provider. However, the Original Authority did not specifically identify the service recipient. The employers are the only persons who pay the consideration, now sought to be taxed, at the hand of appellants.”
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