TMI Blog2008 (7) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... Archana Wadhwa, Member (Judicial) and Mr. B.S.V. Murthy, Member (Technical) Shri D.S. Negi, SDR for the appellant. Shri W. Christian, Advocate for the respondent. [Order Per: Mr. B.S.V. Murthy, Member (Technical)] - The respondents are engaged in the manufacture of excisable goods falling under Chapter 39 of the Schedule of CETA, 1985. They had given an extrusion machine on lease to M/s Jain Irrigation, Jalgaon under the agreement w.e.f. 20.12.2002 and received Rs.8,33,333/- per month as user charges. Revenue proposed to treat this as banking and financial service and two show cause notices were issued which culminated into confirmation of demand for service tax amounting to Rs.25,96,626/- with interest and equal amount of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made out prima facie case against the demand of service tax and the leasing of ATM fell within the definition of banking and other financial services. The learned advocate on behalf of the respondent, on the other hand, relies upon the decision of this tribunal in the case of M/s Thermax Ltd. vs. CCE Pune 2007 (8) STR 487 (Tri-Mumbai), wherein it was held as under: "appellant manufactured industrial boilers and in some cases, supplied the goods on lease basis on account of financial constraints of such customers". Appellant only collected interest on unpaid amount of credit, and charged no amount on account of lease management fee, processing fee or documentation charges. Activity confined to own products, and appellant not professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes equipment leasing and hire-purchase by a body corporate." 4. Since the Finance Act, 1994 does not define what is financial leasing, the Commissioner (Appeals) has relied upon the Accounting Standard published by ICAI. According to the accounting standards, the leasing is classified as a financial leasing if the ownership of the assets on lease is transferred to lessee by the end of the lease term and this option is created at the inception of the lease itself. In the instant case, the agreement is only for the period of 35 months during which a monthly user charge is required to be paid and agreement does not provide for transfer of the assets at the end of the term. Further from the agreement it is also seen that all risks and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. The customer repayment schedule contains the details of the EMIs with the break-up for the principal and the interest. In respect of leasing and hire purchase, the amount recovered as principal is not the consideration for services rendered but is credit to the capital account of the lessor/hire purchase service provider. The interest/finance charges is the revenue or income and is credited to the revenue account. Such interest or finance charges together with the lease management fee/processing fee/documentation charges is the consideration for the service rendered and therefore, they constitute the value of taxable service and service tax is payable on this value. Accordingly, it is clarified that service tax in the case of financ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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