1. The present application seeks waiver of predeposit and stay of recovery in respect of an amount of Service Tax of Rs. 80,60,079/- and Education Cess of Rs. 56,268/- demanded by the adjudicating authority in the impugned order for the year 2004 as also in respect of penalties imposed under various provisions of the Finance Act, 1994. After examining the records and hearing both sides, we note that the appellants are manufacturers of aerated waters and are discharging duty liability on MRP basis. During the above period, they had collected what was called "transferring of right to use" charges on glass bottles and crates which were used as containers which were returnable and reusable. These charges were already included in the assessable value of the goods for the purpose of payment of Central Excise duty. The impugned order, upholding the department's case as made out in the show-cause notice, held that as the appellants were a body corporate coming within the meaning of this expression used in Section 65(12) of the Finance Act, 1994 and were rendering 'equipment leasing services' to their distributors, they were liable to pay Service Tax on the amount collected towards the above charges from the distributors. The appellants' case is that, as they were not into the business of rendering 'financial services' and were engaged in the sole activity of manufacturing and marketing aerated waters, they would not come within the definition of "Banking and other financial services". It is also contended that, in any case, the crates and bottles are not 'equipments' and hence no 'equipment leasing service' was rendered during the period of dispute. This case of the appellants has been amplified today by learned Counsel by relying on a plethora of circulars issued by the Board, which are the following: (i) No. B 11/1/2000 TRU dated 09.07.2001, wherein it was clarified that "body corporate" means "a company which should be either a banking company or a financial institution or a non-banking financial company to come within the Service Tax net.
(ii) No. B 11/1/2002-TRU dated 01.08.2002, wherein it was held that all body corporates providing specified "Banking and other financial services" would come under the tax net.
Banking and other financial services are defined under Section 65(12). Such services provided to a customer by a banking company or 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) of the Finance Act, 1994 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) read with Section 65(12) 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.
It is argued by learned Counsel, on the above basis, that the appellants were not to be treated as coming within the ambit of the expression 'other body corporate' used in Section 65(12) ibid inasmuch as their activity during the period of dispute was not one which could be designated as 'other financial services'. In support of his submission that the crates and bottles were never used as 'equipments' by the appellants, learned Counsel has relied on the Calcutta High Court's decision in the case of Singh Alloys and Steel Ltd. 1993 (66) E.L.T. 594(Cal.), wherein it was held that an equipment should be one or more assemblies capable of performing a complete function. It is submitted that, to qualify to be an equipment, an item should be shown to have a specified mechanical, electrical or electronic function. In the present case, the crates and bottles can by no stretch of imagination be considered to have had such function. Finally, learned Counsel submits that, as Sales Tax was paid on the above charges as evidenced by the relevant invoices, it was not open to the Central Excise authorities to demand Service Tax thereon. In this connection, reliance is placed on the Supreme Court's Constitution Bench judgment in Bharat Sanchar Nigam Ltd. v. Union of India 2. Learned SDR reiterates the findings contained in the impugned order.
It is her case that the Board's circular dated 04.07.2006 cannot be pressed into service to oppose the levy of Service Tax on the service in question inasmuch as this circular would not govern the service which was rendered in the year 2004.
3. After considering the submissions, we are impressed with the case advanced by learned Counsel. The Board's circular dated 04.07.2006 itself must clinch the issue as rightly pointed out by learned Counsel.
This circular, clarifies the meaning of the expression 'any other person' contained in the text of the definition of the expression "Banking and other financial services" as amended. It is clarified that this expression 'any other person' should be read ejusdem generis, with the preceding words. Before its amendment dated 10.09.2004, the expression ''Banking and other financial services" was defined thus: The following services provided by a Banking or a financial institution including non-banking financial company or any other body corporate namely....
By the above amendment, 'commercial concern' was also added to the above list. By a recent amendment, 'any other person' was also added to the list. It was this expression which was sought to be construed by the Board in the circular dated 04.07.2006. Accordingly, the expression 'any other person should be read ejusdem generis with the preceding words. The preceding words also include "body corporate". A corollary would be that the expression 'body corporate' should be read 'ejusdem generis' with the pre-existing expressions. If that be so, the Board's circular would stand up against the demand of Service tax raised in the impugned order inasmuch as, admittedly, the appellants did not come within the purview of 'non-banking financial company'. The argument put forward with reference to "equipment" is also appealing. It is also an admitted fact that Sales Tax was paid on the rental charges collected by the appellants from their distributors. It would appear from the Supreme Court's ruling in BSNL's case (supra) that anything on which Sales Tax is paid is goods and, therefore, Service Tax cannot be levied thereon, though Central Excise duty may be leviable, if the goods are found to be excisable and dutiable.
4. For the reasons we have noted above, the appellants are not required to make any predeposit under Section 35F of the Central Excise Act.
There will be waiver of predeposit and stay of recovery in respect of the amounts of tax and penalties.