1. These are two appeals filed by the Revenue challenging the order of Commissioner (Appeals) made on 7th April, 2005. In the impugned order, the learned Commissioner had set aside the order of the adjudicating authority holding that the work carried out by the appellant for various clients and service rendered by them would not fall under the category of business auxiliary service.
2. Aggrieved by the said order of the Commissioner (Appeals), the Revenue has filed these two appeals. The main contentions of the learned authorized representative for the Department are based on the findings of the adjudicating authority in his order.
3. The respondent company is admittedly providing the services as the registrar to an issue (RTA) and share transfer agent (STA). They are also engaged in the preparation of voter list for Chief Electoral officer, Bhopal. The various activities which are to be undertaken by the respondent company as contained in Regulation 14(2) of the SEBI as indicated in para 6 of the Assistant Commissioner's order dated 15.12.2004 read as follows: In the instant case, Party No. 1 is bound by Regulation 14(2) of the SEBI (Registrar to an issue and Share transfer Agents) Regulation 1993, the same specifies the General Obligations and responsibilities of a RTA which are as follows: Every registrar to an issue shall also maintain the following records with respect to: a) all the application received from the investors in respect of an issue c) Basis of allotment of securities to the investors as finalized in consultation with the stock exchange; g) Refund order if dispatched to investors in respect of application money received from them in response to an issue h) Such other records as may be prescribed by the board for carrying on the activities as registrar to an issue.
Further, as per Regulation 14(3) of the SEBI (Registrat to an issue and share transfer Agents) Regulation 1993, Eery share transfer agent shall maintain the following records for a body corporate or any person or group of persons for whom he is carrying on the activities as share transfer agents namely b) The names of transferor and transferee and the dates of transfer of securities c) Such other records as may be specified by the board for carrying out the activities as Share Transfer Agent.
The definition available under Section 65(19) of the act is reproduced below: i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or iv) any incidental or auxiliary support service such as billing, collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and public relation services and includes services as common agent, but does not include any information technology service.
Explanation: For the removal of doubts, it is hereby declared that for the purposes of this clause 'information technology service means any service in relation to designing, developing or maintaining of computer software, or computerized data processing or system networking, or any other service primarily in relation to operation of computer systems; 4. It was vehemently argued by the learned DR that the service rendered by the respondent fall under the category of customer care service provided on behalf of the client and it relates to promotion or marketing of service incidental or auxiliary support service provided on behalf of the client.
5. The learned Counsel for the respondent highlights the fact that the service in question has virtually come into effect only from the current year w.e.f. 1.5.2006 vide 65(89-c) and 65(95-a) respectively as reproduced below: (89c) 'registrar to an issue' means any person carrying on the activities in relation to an issue including collecting application forms fro investors, keeping a record of applications and money received from investors or paid to the seller of securities, assisting in determining the basis of allotment of securities, finalizing the list of persons entitled to allotment of securities and processing and dispatching allotment letters, refund orders or certificates and other related documents (95-a) Share transfer agent 'means any person who maintains the record of holders of securities and deals with all matters connected with the transfer or redemption of securities or activities incidental thereto.
6. It was ;emphasized that the new service has been brought under tax net only from the current year and that in this context, the learned Counsel pointed out the contents of foot note No. 52(a) inserted when Clause (zzzi) under Sub-section (105) of Section 65 came ;into existence. The foot note reads: "Inserted by the Finance Act, 2006 with effect from a date yet to be notified." Drawing inference from this fact, it was pleaded by the learned Counsel that the said service by registrar to an issue in relation to sale or purchase of securities was never in existence at the material time when the Commissioner (Appeals) had passed an order in favour of them. As regards the services rendered by them to election authorities by way of preparation of electoral list, it was also argued that the adjudicating authority had not made any finding thereon and that the service rendered to the electoral authority cannot be categorized as business since the election authorities were under constitution obligation to conduct elections in the country and they were obviously not engaged in any 'business' which could be commercial in nature. To support this argument, the learned Counsel relied upon the observations of the Hon'ble SC in Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-tax, Mysore 1010 ITR SC 234 an extract of which would read as follows: Ordinarily profit motive is a normal incident of business activity and if the activity of a trust consists of carrying on of a business and there are no restrictions on its making profit, the court would be well justified in assuming in the absence of some indication to the contrary that the object of the trust involves the carrying on of an activity for profit.
7. To drive home his point that the new levy cannot be treated as an extension of an old levy, the learned Counsel relied upon the ratio of the larger Bench of this Tribunal in Larsen and Toubro Ltd. v. CCE, Chennai 2006 (3) 321 Tribunal in which it was held that the services of the commission agent are included in the definition of 'business auxiliary service' w.e.f. 1.7.2003. He also pleads that the respondents were never engaged in promotion or marketing of the service of the client namely electoral authorities and no customer service was ever provided on behalf of their client as spelled out under the definition of 'business auxiliary service.' It was further submitted that the electoral authorities were engaged in serving under the constitution for conducting free and fair elections which cannot be regarded as commercial business.
We have examined the case records and heard both the sides. The Tripartite agreement between Central Depository Services (India) Limited, Syncom Formulations (India) Ltd (Issuar) and Ankit Consultancy Private Ltd. (RTA) was perused, to ascertain the nature of activities engaged in by the respondents. Para 8 of the said agreement (Dematerialization) indicates the nature of activities undertaken by the respondent as RTA which is reproduced below: 8.1. CDS will electronically intimate, on a daily basis, all dematerialisation requests received from its participants to the RTA. 8.2. Upon receipt of the Dematerialisation Request Form (DRF) along with the securities of which dematerialisation is sought, the RTA shall firstly verify the validity and authenticity of the certificates or other documents of title to the securities and accuracy or the contents of the DRF and secondly, shall confirm from his/its records that such dematerialisation has been required by the person whoso name appears as the holder of those securities in the register of securities maintained by the RTA in respect of those securities.
8.3. The RTA undertakes that the data pertaining to the securities to be dematerialised received from participants through CDS shall be validated against the database of securities maintained by the Issuer and/or RTA and then only valid securities with clear (sic) shall be permitted to be dematerialised.
8.4. After verification as aforesaid, the RTA shall intimate CDS authonsing a credit in dematerialised form in respect of the concerned securities in favour of the beneficial owner. On receipt of such intimation. CDS shall cause the necessary credit entry to be made in the account of the beneficial owner concerned. No credit of any securities to the account of any beneficial owner shall be made unless CDS has received an intimation from the RTA as set out hereinabove.
8.5. The RTA undertakes that no dematerialisation request shall be accepted by it or intimated to CDS in respect of any securities so long as the same are subject to any restraint injunction, prohibition or attachment under any direction order or decree of any court, tribunal, Central of State Government, SEBI or any statutory or revenue authority empowered in that behalf or which are by law or under the terms and conditions of issuance thereof, prohibited from being transferred.
8.6. The RTA shall electronically intimate CDS regarding the confirmation or rejection, whether in part or in whole of every dematerialisation request within a period of 15 days from the date of receipt of the DRF by the RTA. 8.7. The RTA shall in all cases retain the DRF with it for such period as may be specified by law in that behalf subject to a minimum period of five reasons: 8.8.1. the certificates or other documents of title to the securities are found to be stolen, forged, fabricated or counter (sic) 8.8.2. the Issuer or the RTA has been served with or intimated of any decree, order or direction of any court, tribunal, SEBI, Central or State Government or other statutory or revenue authority prohibiting or restraining transfer of those securities including any order of attachment, distress or exection in respect thereof; 8.8.3. in case duplicate certificates or other documents of title with the same distinctive numbers have already been issued in lieu of the original certificates/documents of title submitted for demateralisation.
8.8.4. the securities in respect of which dematerialisation is sought are subject to any restriction or prohibition on transfer thereof under any law in force for the time being or under the terms and conditions of the issuance thereof; 8.8.5. any other reason as may be specified by CDS in his/its Operating instructions.
8.9. The RTA skill return to the concerned participant the certificates and/or other documents of title to such of the securities submitted for dematerialisation as are rejected by the RTA provided however that in the event of dematerialisation in part or in whole being rejected for any of the reasons set out in Clause 8.3 above, the certificates relating to those securities shall be retained by the RTA and shall be dealt with by the RTA in accordance with law.
8.10. In all cases where the RTA rejects any request for dematerialisation of any securities in whole or in part, the RTA shall communicate is writing to the concerned participant the precise reason for such rejection.
8.11. The RTA shall, forthwith send intimation to the concerned stock exchange where the dematerialised security is listed giving particulars of the securities which have been dematerialised in such format as may be specified by the concerned stock exchange.
8.12. Every intimation to CDS permitting dematerialisation of any securities, shall be deemed to be backed by a joint and several representation and assurance by the Issuer and the RTA to CDS that such securities exist, are validly issued and stand in the records of the Issuer and/or the RTA in the name of the beneficial owner who has sought dematerialisation in respect of those securities.
8.13. The Issuer and the RTA accept full responsibility for cancellation, mutilation or destruction of certificates and/or other documents of title to securities received and accepted by them for dematerialisation and for the safe custody thereof pending cancellation, mutilation or destruction.
8.14. The Issuer and/or the RTA agrees and undertakes that the record of certificates of securities which have been dematerialised will be maintained by the Issuer and /or the RTA in such manner as may be specified in the Bye Laws and Operating Instructions and shall upon termination of this Agreement or upon the RTA ceasing to act as such in respect of the said security, entrust all such records to the care and custody of the Issuer.
9. From the above, lit appears that the services rendered by the respondent on behalf of CDA is well structured and codified and it cannot be categorized as 'customer care service', as Iheld lin order in original. In view of the fact that the Hon'ble Supreme Court in Bhaktawar Singh Balkishan v. Union of India and Ors. reported in ( has held that maintaining the armed forces is part of the sovereign activity of the State and that it is specious to contend that it is a 'business activity' with an eye on profits, the activities of electoral machinery of the country also cannot be termed as a business activity.
11. In view of the above and considering the facts and circumstances of the matter, we do not find sufficient grounds to interfere with the order of the Commissioner (Appeals). We therefore, dismiss the appeals filed by the Revenue.