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2021 (3) TMI 676 - AT - Service TaxClassification of services - Banking and other Financial Services or not - construction of residential houses from loan sanctioned by HUDCO and other financial institutes and allotting these houses on hire purchase sale and outside sale basis to the consumers against collection of the amounts - interest income - extended period of limitation - penalty - suppression of facts or not? - HELD THAT:- Para h to clause (7) of section (2) of the Companies Act, 1956 clarifies that the body corporate, which fall in the exclusion clause of the above definition are not relevant for the purpose of Section 65 (12), which defines Banking and other Financial Services. Clause (c) of the above definition excludes such body corporate from the scope of Section 65 (12) of the Finance Act which cannot be defined as company and which are the creature of Government. The appellant is, apparently, constituted under Rajasthan Housing Board Act, 1970. No doubt, Section 4 (2) of the said Act describes ‘RHB’ as a body corporate but this body corporate is definitely not constituted under the Companies Act but by Rajasthan Government to have perpetual succession and a common seal with power to acquire hold and dispose of property both moveable and immovable and to enter into contracts and may by its corporate name sue and be sued and do all things and acts necessary for the purpose of Rajasthan Housing Board Act (RHB). ‘RHB’, otherwise also, cannot be called as Banking Company. The definition of Banking company as per Section 65 (11) of Finance Act, 1994. Section 5 (c) of Banking Regulation Act, 1949 clarifies that any company, which is engaged in manufacture of goods or carries own any trade and which accepts deposits of money from the public merely for the purpose of financing its business, as such manufacturer or trader shall not be deem to transit the business of banking. Once that is true even for a banking company, the appellant, who is not even the body corporate as defined under Section 16 (12) cannot be burdened with the tax liability for rendering ‘Banking and other Financial Services’, when it accepts deposits of money from the public merely for the purpose of financing the sale of houses being constructed by it. Since the basic function of the appellant is to construct the houses and then to sell it either by way of allotment or by way of hire purchase against receiving certain amounts whether in form of ASC charges or hire purchase charges, but the activity is specifically the activity of construction of complexes and as such said amount cannot be made liable to tax for rendering service as that of ‘Banking and Financial Services’ - the appellant is neither such a body corporate as is required for Section 65 (12) of Finance Act, 1994 nor the funds as that of ASC charges and hire purchase charges are the income of the appellant, who is held to be engaged in rendering construction services as contrary to Banking and Financial Services. Interest income - HELD THAT:- Service Tax (Determination of Value) Rules, 2006, though applicable for the period w.e.f. 18.04.2006 to 01.07.2012., it is observed that as per Rule 6 (2) thereof the value of taxable service has not to include interest on loans and on delayed payments of any consideration for provision of services or sale of property whether movable or immovable. The hire purchase deposits for the property which cannot be defined as goods are also out of the scope of taxable value as far as the interest thereupon is concern - whatever interest amount received by the appellant is confined to the activity with respect to the own products of the appellant i.e. the construction raised by them for being sold, that too, in welfare of economically weaker sections. Extended period of limitation - penalty - suppression of facts or not? - HELD THAT:- No question of suppression otherwise is possible. Department has failed to reflect any wilful misstatement. Appellant, admittedly, is an instrumentality of State Government. There cannot be an intent to evade the payment of tax - the Department is not allowed to invoke the extended period of limitation and the adjudication imposing penalties upon the appellant is also held to be apparently wrong. Appeal allowed - decided in favor of appellant.
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