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2019 (8) TMI 1029 - AT - Service TaxValuation - nature of pre-pay penalty towards foreclosure of credit facility (loan) - in the nature of interest or not - Banking and Financial Services - inclusion of commitment charges in assessable value - appellant submitted 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. Since these are in nature of interest/ damages they are not to be included in the value of taxable services provided by them - time limitation - HELD THAT:- The Commitment Charges are neither the interest charges as claimed by the appellant nor the liquidated damages. The clear distinction has been drawn in respect of interest charges and the commitment charges. Interest charges are in respect of the amount availed or drawn /utilized from the clean line of credit facility made available by the appellant to CCIL, whereas commitment charges are in respect of un-availed portion of the credit limit. These charges are also in not nature of liquidated damages but are towards making available the clean line of credit facility available to their client/ customer. There are no merits in the submissions of the appellant that the commitment fees charged by them for extend clean line of credit facility to CCIL is interest charge or in nature of liquidated damages. The reliance placed by the counsel for appellant on the decision of this tribunal in case of COLLR. OF C. EX., BOMBAY VERSUS RAM DECORATIVE & INDUSTRIES LIMITED [1998 (2) TMI 402 - CEGAT, NEW DELHI] is not of any help. In that decision the tribunal was dealing with goods which are tangible in nature and were produced for sale to the customer on an agreed price. The charges which were collected towards the goods not actually lifted by the buyer were held not to be added to the value of the goods that were actually lifted by the buyer - In the case of services, which are intangible in nature the same principle cannot apply. For levy of liquidated damages the existence of specific contract, whose performance has been vitiated by the actions of the parties to the contract need to be established. In the present case appellants have not been able to establish existence of such a contract whereby CCIL had agreed to borrow the said amount of ₹ 100 Crores from them. On the contrary as banking industry product Clear Line of Credit has been sanctioned by the appellant in favour of CCIL against agreed consideration. Thus the findings recorded by the Commissioner in this respect cannot be faulted with. Time Limitation - HELD THAT:- The only ground urged by the appellant is that was confusion prevailing in respect of levy of Service Tax in respect of the Commitment Charges, which lead to delay in payment of taxes. There are no merits in the submissions of the Appellant. 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 - demand upheld by invoking extended period of limitation. Also the demand made in respect of the interest at appropriate rate under Section 75 is upheld - however penalties set aside. Appeal allowed in part.
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