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2013 (8) TMI 527 - AT - Service TaxCENVAT credit - Rule 6(3) - trading activity - leasing services - assesse took credit of service tax paid on input services which were common to both taxable services and non-taxable activities - whether the non-taxable part of the interest on loans received by the applicant will get added in either or both of the factors, namely, "E"&"F" as described in Rule 6 3 (b) (iii) - Held that:- Our prima facie interpretation is that hire purchase, loan against leasing and hypothecation are taxable services and the value of these taxable services is only to the extent of amount charged over and above the principal and interest. Of course determining such value can be difficult because there can be a dispute as to what is the interest amount. Calling an amount as "interest" may not by itself be sufficient to legally recognize the amount as interest. The exemption prima facie only says that the service tax calculated on ninety per cent of an amount, forming or representing as interest is exempt. This implies that the value of the service is calculated as 10% of interest charged for levying tax. But the notification does not imply that rest of the interest is value of service. If the value of the service is more than 10% of the interest that amount can be quantified and such factor will enter "F" as part of taxable service. Only such an approach can be consistent with provision in Rule 6 (2) (iv) of Service Tax (Determination of Value) Rules, 2006 and the notification. The activity was the trading activity and Cenvat credit cannot be taken on input services used for such activity – relying upon Association of Leasing & Financial Service Companies Vs. UOI [2010 (10) TMI 4 - SUPREME COURT OF INDIA] - Parliament is competent to charge service tax on leasing services and interest received can be a good measure of the value of service – the order had taken note of the fact that the Union of India was trying to charge tax only on 10% of the interest which was found to be quite a reasonable measure for charging tax. We propose to arrive at the ratio E/F by including 10% of the interest on services like Hire purchase, Leasing and loan in both the factors "E" and "F" and excluding the balance from both the factors. Waiver of pre- deposit - whether the items of income was to be excluded from both the factors “E” and “F” as argued by assessed at this stage or was to be included in both the factors as argued by Revenue – Held that:- Credit can be taking only if it is either a taxable service or an exempted service - trading was not either the most reasonable conclusion was that credit could not have been taken at all – the issue as to whether any credit has been taken on any of the input service attributable to the impugned incomes needs to be examined – pre-deposit ordered partly.
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