Service Tax Not Payable on Interest Income from Overdraft/Cash Credit Facilities: CESTAT

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled in favor of The Assam Cooperative Apex Bank Ltd., overturning a service tax demand on interest earned from overdrafts and cash credits. The dispute arose when the bank was assessed for service tax due to alleged non-compliance with invoicing rules under Rule 4A of the Service Tax Rules, 1994. \r

The tribunal emphasized that monthly banking statements provided by the bank adequately documented the charges and interest accrued, thus meeting the requirements for exemption under Notification No. 29/2004-ST. It further noted that amendments in Notification No. 30/2004-ST expanded the acceptable forms of documentation, including bank statements, for claiming exemption. \r

The tribunal concluded that technicalities should not obstruct rightful relief, highlighting the illegality of withholding tax exemption based on procedural grounds. This decision reinforces the importance of proper documentation compliance in tax disputes.