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2018 (3) TMI 116 - AT - Service TaxLevy of service tax - commitment charges - Board vide Circular dated 10.9.2004 - Held that: - It is brought out from the records that while paying commitment charges the subsidiary companies deduct TDS considering it to be payment of interest. The Board vide its Circular dated 10.9.2004 has clarified that no service tax is leviable on interest in the category of Banking and Financial service. The respondent is receiving 2% as guarantee commission and 1% as commitment charges. The term interest has not been defined in the Finance Act, 1994. However, interest on loans has been specifically excluded from the ambit of service tax which has been clarified by the Board vide Circular dated 10.9.2004. It is clarified that commitment charges are in the nature of interest on unutilized portion of credit facilities. The department has proceeded to demand service tax only for the reason that the respondent has accounted it as guarantee commission. When the charges have been received separately under the head of guarantee commission as well as commitment charges, merely by accounting the same as guarantee commission, the amount received cannot be subjected to levy of service tax if the nature of the amount received is not a commission but interest of unused credit. The commitment charges being in the nature of interest cannot be subject to levy of service tax - appeal dismissed - decided against Revenue.
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