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2013 (11) TMI 299 - AT - Service TaxInterest Charges - Banking and other financial services – Hire purchase contract - Whether or not interest-charges on EMI collected as ‘Documentation and Service Charges’ at the time of entering into hire purchase agreements, is chargeable under Banking and other financial services – Held that:- The provisions of Explanation 1 (viii) to Sec. 67 of the Finance Act 1944, read with CBEC Circular No. 80/10/2004-ST dt. 17/09/2004, ‘interest on loans’ is not required to be included in the gross value of the services provided during the period – thus demand of service tax with respect to ‘interest on loans’ is not required to be included in the gross taxable value for calculating the service tax. Rate of service tax on EMI payment – Held that:- Following Art Leasing Ltd. Vs. Commissioner of C.EX., Cochin [2007 (6) TMI 217 - CESTAT, BANGALORE] - The Banking and Financial Services came under the service tax net w.e.f. 16.07.2001 - at that time, CBEC issued clarification to the effect that in respect of Hire Purchase Contracts entered prior to 16.07.2001 and installments of which were received after 16.07.2001, there is no Service tax liability - When the Hire Purchase contract is entered, the taxable event occurs - the demand of differential amount applying the higher rate, which came into effect from 14.05.2003, will not be applicable in respect of the contracts entered prior to that date - The rate of service tax, prevailing on the date on which contract is entered into will be applicable and not the higher rates made effective the subsequent Finance Act periods during which EMIs are continued to be paid – decided in favour of assessee.
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