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2019 (8) TMI 1031 - AT - Service TaxValuation - nature of pre-pay penalty towards foreclosure of home loan - inclusion of commitment charges in assessable value - whether these are in nature of interest/ damages or not - case of appellant is that the commitment charges are in nature of interest charges or the damage charges made by them from their customer/ client for making available the said credit facility available to them - HELD THAT:- In view of established practices in banking and financial industry we do not find any merits in the submissions of the appellant that the prepayment levy charged by them for foreclosure of loan is interest charge or in nature of liquidated damages. The basic nature of interest as is understood in the banking and financial industry is that its time value of the money held by the other person. In the case of foreclosure the customer is not holding any money of the appellant, but is returning back the same much before the appointed date. Hence the return of money cannot be subject to interest charge as claimed by the appellant, nor can it be the damages as claimed by them. We are not in position to agree with submissions of the appellant that these charges are in nature damages recovered from the customers. Since it was an option extended at the time of entering into the contract/ loan agreement, the same cannot also be termed as liquidated damages for non performance of the conditions specified in the contract. The contract specifies a charge levied for exercising the option the said charge cannot be penalty or liquidated damage to compensate the loss. Time limitation - HELD THAT:- Appellants have not shown any bonafide reason to show that they entertained such a belief. Further if they claim the issue was clarified by CBEC only in 2011, then what made them pay the service tax in the year 2006. The arguments advanced by the appellants do not establish the existence of such a bonafide belief - the demand of Service Tax made by invoking the extended period of limitation is upheld. Demand of interest - HELD THAT:- Also the demand made in respect of the interest at appropriate rate under Section 75 is upheld. Penalty - HELD THAT:- When the invocation of extended period of limitation in terms of proviso to section 73(1) is upheld, penalty under Section 78 should follow - Also for various contraventions of the provisions of Chapter V of Finance Act, 1994, the penalties imposed under Section 76 and 77 too are justified - the case is fit where provisions of Section 80 should be invoked to set aside the penalties that are imposed under Section 76, 77 & 78 of Finance Act, 1994. Appeal allowed in part.
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