{"id":325030,"date":"2024-06-24T18:00:34","date_gmt":"2024-06-24T12:30:34","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=325030"},"modified":"2025-08-23T09:40:04","modified_gmt":"2025-08-23T04:10:04","slug":"cestat-sets-aside-order-demanding-service-tax-on-interest-earned-on-overdraft-and-cash-credit-facilities","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/06\/24\/cestat-sets-aside-order-demanding-service-tax-on-interest-earned-on-overdraft-and-cash-credit-facilities\/","title":{"rendered":"\u2018Withholding exemption and demanding service tax was grossly illegal\u2019; CESTAT sets aside order demanding service tax on interest earned on Overdraft and Cash Credit facilities"},"content":{"rendered":"
\n

Custom, Excise and Service Tax Appellate Tribunal, Kolkata:<\/span> An appeal was filed by the appellant challenging the order passed by the Commissioner (Appeals), whereby the Commissioner upheld the order passed by the Adjudicating Authority confirming Service Tax amount of Rs. 4,54,838.00 along with interest under section 75<\/a> of the Finance Act, 1994<\/a> (‘the Act’) besides imposing penalty under Section 78<\/a> of the Act<\/a>. The Bench of R. Muralidhar, Member (Judicial) and Rajeev Tandon, Member (Technical)<\/span>, stated that the Notification dated 22-09-2004 (‘the Notification’) clearly exempted service tax on interest income on such overdraft\/cash credit facilities and the same was required to be shown separately in invoice, bill or the challan for the purpose. However, Rule 4A(1) of the Service Tax Rules, 1994<\/a> (‘1994 Rules’), mandated mentioning of certain basic details like name, address, registration number of both service provider and service recipient, value of taxable service etc.<\/p>\n

The Tribunal observed that the appellant had affirmed that such details were incorporated in the monthly statements issued for the purpose. With the expansion of the scope of acceptable documents for the purpose of the Notification, the Tribunal stated that it could not see any reason why such bank statements could not be considered to serve the purpose. Thus, withholding of eligibility of exemption and consequent demand of service tax from the appellant was grossly illegal and cannot be sustained. Thus, the Tribunal set aside the impugned order and allowed the present appeal.<\/p>\n

Background<\/p>\n

In the present case, consequent to the visit of the internal audit party of the Dibrugarh Commissionerate, a demand of service tax on interest earned on Overdraft and Cash Credit for the period 2008-09 to 2011-12 was issued to the appellant. It was contended that the Invoice, Bills and Challans, were not in accordance with the stipulations of Rule 4A of the 1994 Rules<\/a> and therefore the assessee was liable to pay service tax.<\/p>\n

The Adjudicating Authority and Commissioner (Appeals) stated that the appellants had failed to produce such invoice, bill or challan, and therefore, the service tax was confirmed. The Commissioner (Appeals) while relying on the amendment to Rule 4A(1) of 1994 Rules<\/a> vide the Notification, which provides taxable service to be provided or credit to be distributed on invoice, bill or challan, had observed that the required stipulation in the provision was not fulfilled.<\/p>\n

Appellant contended that they have been a provider of Banking Service and regularly furnishing monthly banking statements to their constituents who enjoy overdraft\/cash credit facilities. These monthly statements apart from showing the transactions also clearly and separately indicated charges\/interest etc. along with relevant dates on which such charges\/interest were levied or accrued. Therefore, such banking statements provided to the constituent would clearly meet and satisfy the requirements of Rule 4A of 1994 Rules<\/a>.<\/p>\n

Appellant contended that the Rule 4A(i) was indicative, and was applicable towards taxable service to be provided or credit to be distributed on invoice, bill or challan and therefore, in essence not applicable for exempt services. If the applicability of Rule 4A was mandatory for exempt services, it would have been reflected in the Notification itself. The Notification exempting income from levy of Service Tax could not obviously impose the burden of maintaining documents applicable for taxable services.<\/p>\n

Analysis, Law, and Decision<\/p>\n

The Tribunal noted that the audit party had observed that to claim the requisite exemption under the Notification, the appellant had not fulfilled the conditions as laid down in the 1994 Rules<\/a>. Further, Rule 4A (1)(i) of 1994 Rules<\/a> required disclosure of service tax payable on the value of service provided, thus, it could not be said to include exempt services. Moreover, a proviso inserted to the Rule by an amendment could not have the effect on enlarging the scope of the provision, at best it was only clarificatory.<\/p>\n

The Tribunal stated that the Notification clearly exempted service tax on interest income on such overdraft\/cash credit facilities and the same was required to be shown separately in invoice, bill or the challan for the purpose. However, Rule 4A(1) of the 1994 Rules<\/a>, mandated certain basic details like name, address, registration number of both service provider and service recipient, value of taxable service etc. The Tribunal observed that the appellant had affirmed that such details were incorporated in the monthly statements issued for the purpose. With the expansion of the scope of acceptable documents for the purpose of the Notification, the Tribunal stated that it could not see any reason why such bank statements could not be considered as to serve the purpose. Thus, withholding of eligibility of exemption and consequent demand of service tax from the appellant was grossly illegal and cannot be sustained.<\/p>\n

The Tribunal opined that moreover, it was settled proposition of law that the technical barrier, could be an impediment to grant appropriate relief. Therefore, the amendment rendered vide the Notification would not call for a strict construction. The Tribunal stated that it was not in agreement with the finding of the Adjudicating Authority upholding the demand for Service Tax on the amount of interest equivalent on overdraft\/cash credit extended by the appellant. Thus, the Tribunal set aside the impugned order and allowed the present appeal.<\/p>\n

[Assam Cooperative Apex Bank Ltd. v. Commr. (CGST), 2024 SCC OnLine CESTAT 3624<\/a>, Order dated 12-06-2024<\/span>]<\/p>\n\n

Advocates who appeared in this case:<\/p>\n

For the Appellant:<\/span> Suprakas Chaudhury, FCA;<\/p>\n

For the Respondent<\/span>– S. Mukhopadhyay, Authorized Representative.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Tribunal noted that Rule 4A (1)(i) of Service Tax Rules, 1994 requires disclosure of service tax payable on the value of service provided, thus, it cannot include exempted services. Moreover, a proviso inserted to the Rule by an amendment cannot enlarge the scope of the provision, at best it is only clarificatory.<\/p>\n","protected":false},"author":67520,"featured_media":319582,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[70188,6651,70186,70187,3208,34000,70189],"class_list":["post-325030","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-cash-credit-facilities","tag-cestat","tag-interest-earned","tag-overdraft","tag-service_tax","tag-service-tax-rules","tag-withholding-exemption"],"yoast_head":"\nCESTAT sets aside order demanding service tax on interest earned on Overdraft and Cash Credit facilities | SCC Times<\/title>\n<meta name=\"description\" content=\"CESTAT stated that it was not in agreement with upholding the demand for Service Tax on the amount of interest on overdraft\/cash credit extended by the appellant and accordingly set aside the impugned order.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2024\/06\/24\/cestat-sets-aside-order-demanding-service-tax-on-interest-earned-on-overdraft-and-cash-credit-facilities\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"\u2018Withholding exemption and demanding service tax was grossly illegal\u2019; 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In the trade parlance, hotels providing additional facilities such as restaurants, banquet hall, conference hall, bar and health club are recognized as \u2018Full-Service Hotel\u2019 - which is the opposite of a \u2018Limited-Service Hotel\u2019 or a \u2018Budget-Friendly Hotel\u2019, with\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Service Tax against actor Rajinikanth","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/03\/Service-Tax-against-actor-Rajinikanth.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/03\/Service-Tax-against-actor-Rajinikanth.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/03\/Service-Tax-against-actor-Rajinikanth.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/03\/Service-Tax-against-actor-Rajinikanth.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":354006,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/07\/21\/cestat-no-service-tax-on-upfront-fee-penalty-on-dmrc-set-aside\/","url_meta":{"origin":325030,"position":1},"title":"\u2018No service tax to be paid on upfront fee\/premium for agreement to lease\u2019; CESTAT sets aside penalty on DMRC","author":"Sanket","date":"July 21, 2025","format":false,"excerpt":"\u201cAt the time of executing the Concession Agreements with developers, DMRC had collected \"upfront fee\" as a price for obtaining the respective Concession Agreements.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"service tax on upfront fee","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/07\/service-tax-on-upfront-fee.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/07\/service-tax-on-upfront-fee.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/07\/service-tax-on-upfront-fee.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/07\/service-tax-on-upfront-fee.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":358919,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/09\/04\/sky-lark-education-exempt-from-service-tax-cestat\/","url_meta":{"origin":325030,"position":2},"title":"SKY Lark Education Welfare Society an educational institution; will be exempted from service tax: CESTAT","author":"Bharti","date":"September 4, 2025","format":false,"excerpt":"\u201cSKY Lark Education Welfare Society is imparting education to students of Swami Vivekanand Subharti University, enrolled under the distant learning programme, as per its curriculum and it is duly recognized under the laws of the Uttar Pradesh Government\/UGC.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"SKY Lark Education exempt from service tax","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/09\/SKY-Lark-Education-exempt-from-service-tax.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/09\/SKY-Lark-Education-exempt-from-service-tax.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/09\/SKY-Lark-Education-exempt-from-service-tax.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/09\/SKY-Lark-Education-exempt-from-service-tax.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":311487,"url":"https:\/\/www.scconline.com\/blog\/post\/2024\/01\/16\/demand-of-service-tax-u-s-73-a-of-finance-ac-incorrect-when-broadcasters-service-tax-is-not-retained-cestat-legal-news\/","url_meta":{"origin":325030,"position":3},"title":"Demand of service tax u\/s 73-A of Finance Act, 1994 incorrect when broadcaster\u2019s service tax is collected and not retained: CESTAT reiterates","author":"Simranjeet","date":"January 16, 2024","format":false,"excerpt":"\u201cWith coming into force of interest provisions, the revenue neutrality concept has undergone a change, so as to consider duty neutrality different from revenue (Duty+interest) neutrality. Latter at time may not exist, even if former is present.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"CESTAT","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/01\/CESTAT-2.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/01\/CESTAT-2.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/01\/CESTAT-2.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/01\/CESTAT-2.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":324296,"url":"https:\/\/www.scconline.com\/blog\/post\/2024\/06\/13\/cestat-upholds-order-directing-to-pay-service-tax-for-construction-of-racetrack\/","url_meta":{"origin":325030,"position":4},"title":"\u2018Racetrack not meant for public access as a right, thus not exempted from tax\u2019; CESTAT upholds order directing to pay service tax for construction of racetrack","author":"Arushi","date":"June 13, 2024","format":false,"excerpt":"The Tribunal stated that for a place to fall within the ambit of a public place, the element of right of access of public was a necessary concomitant.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"CESTAT","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/04\/CESTAT.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/04\/CESTAT.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/04\/CESTAT.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/04\/CESTAT.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":211312,"url":"https:\/\/www.scconline.com\/blog\/post\/2019\/03\/04\/cestat-valid-case-for-exercising-discretion-under-s-80-of-finance-act-1994-made-out-on-payments-made-showing-bonafides\/","url_meta":{"origin":325030,"position":5},"title":"CESTAT | Valid case for exercising discretion under S. 80 of Finance Act, 1994 made out on payments made showing bonafides","author":"Bhumika Indulia","date":"March 4, 2019","format":false,"excerpt":"Customs, Excise & Service Tax Appellate Tribunal: This appeal was preferred before\u00a0P. Dinesha, J., against the interest liability and penalty under Section 78 of the Finance Act, 1994. Appellant was a registered service provider, providing \u2018Manpower Recruitment\/Supply Agency Services\u2019. It was found while verification of Third Party Data that appellant\u2019s\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/325030","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67520"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=325030"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/325030\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/319582"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=325030"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=325030"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=325030"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}