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2020 (3) TMI 151 - AT - Service TaxDemand of service tax - receipts generated from securitization agreements entered into by the appellant prior to February 2006 that continued to subsist during the period of dispute - Proceedings were initiated against the appellant on the ground that the receipts from ‘special purpose vehicles’ were not included in the assessable value even though this constituted consideration that could not be construed as interest on loans which were exempt. HELD THAT:- Barring a bald assertion that ‘cash management’ has been undertaken, the adjudicating authority has not made any effort to analyse the nature and circumstances in which the contract with ‘special purpose vehicles’ undertook to provide such facility. On the most superficial evaluation, we take note that there is a facility that may be drawn upon by the utilising entity with the ceiling linked to the collectables for the specified period and interest liability arising therefrom. It would appear to be nothing other than an overdraft and the attempt to levy a tax on the consideration earned by the bank is in breach of the exemption afforded to interest. It would also appear that the primary purpose of providing such liquidity is to make the derivative issued by ‘special purpose vehicles’ more attractive to investors and, in the process, enhance the value to be realized by the bank on sale of the securitized asset. Consequently, it would appear that the beneficiary of the facility is not the ‘special purpose vehicle’ but the appellant themselves. This clearly does not conform to the concept of service which must, necessarily, be rendered to another person. Rendering of ‘cash management services’ - HELD THAT:- It is worth noting that the transfer to ‘special purpose vehicle’ is not of the loan customers of the appellant but of the assets including such loan accounts. The relationship between the bank and its loan customers does not alter; all that the bank has undertaken, by affording ‘liquidity facility’, is to ensure that the collections that would otherwise have accrued to the bank is transferred at the specified intervals to the ‘special purpose vehicle’ and the facility extended is the contractual undertaking to do so - the bank is merely fulfilling such obligation and not rendering service to any other person. There is nothing on record in the impugned order to substantiate the finding that the claim of the appellant herein of having extended an overdraft facility on which interest is chargeable to the extent of availment is not tenable on facts and law. In the absence of such legally valid conclusion, the claim of the appellant does not merit disregard. Even if, while enhancing the marketability, the securitization terms are made attractive for better returns to the appellant, the ‘special purpose vehicle’ too finds itself blessed with brighter prospects of attracting investors for the ‘pass through certificates’ – a service with the potential of taxability under some other enumeration in section 65(105) of Finance Act, 1994 - there is neither notice nor finding on the taxability or consideration for a valid confirmation of demand. The levy of tax and imposition of detriment in the impugned order is without authority of law - Appeal allowed - decided in favor of appellant.
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