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2014 (12) TMI 666 - AT - Service TaxBanking and Financial Institution Service - Business of lending securities and earning interest - Held that:- Transaction held by the CCIL for collateral borrowing and lending obligation is nothing but giving loans and advance against securities. Therefore, prima facie the amount of charges retained by the lender constitute as interest on loan. In these circumstances, the applicants are not required to pay service tax. Another issue for demand of service tax is that the applicant, HDFC Bank Ltd., discounts the account receivable (invoice) of their client and at the time of maturity, they get full value of the amount of the invoice. Revenue is of the view that as they have discounted the invoice, the same does not form part of the interest, the same is commission earned by them for discounting the invoice. The revenue has termed this transaction as factoring i.e a financial transaction in which a business in need of funding sells its accounts receivable as discount. On that they are required to pay service tax. As per the Notification 29/2004-ST dated 22.09.2004, discount of bill is exempted from levy of service tax. The only contention of the revenue is that while discounting the applicant has earned commission. We have seen the said notification. As per the Notification, it deals only the interest for lending the money for certain period of time. In the facts of the case, the discount is nothing but interest for lending the money. Therefore, the applicants have made out a case for complete waiver of pre-deposit on this issue. Penal interest is payable on delay of the advance given by the applicant to their clients. Therefore, same also form part of the interest of loan. Accordingly, service tax is not payable. In these circumstances, the applicant has made out a case for complete waiver of pre-deposit on this issue also - Stay granted.
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