Home Case Index All Cases Service Tax Service Tax + HC Service Tax - 2021 (2) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (2) TMI 836 - HC - Service TaxClassification of services - Banking and other Financial Services or otherwise? - entire interest component collected as equated monthly installments on transactions relating to "Financial Leasing Services including equipment leasing and hire-purchase" - absence of any mechanism to bifurcate the processing or management charges - period prior to 01.03.2006 - HELD THAT:- Explanation 1 to section 67 of the Finance Act prior to 18.04.2006 contained a specific exclusion vide sub clause (viii) excluding interest on loans. Though section 67 was substituted by Finance Act 2006 w.e.f. 18.04.2006, the corresponding Service Tax Determination of Value Rules 2006 vide rule 6(2)(iv) again excluded interest on loan from the purview of valuation of taxable services. However, the Board vide circular No.80/10/2004-ST dated 17.09.2004 clarified that interest on loan would stand excluded. Respondent has been discharging service tax regularly on processing charges and also filing returns regularly. Respondent gives loan to its customers / borrowers for the purpose of hire purchase agreement for purchasing the vehicles and this lending is in the nature of a loan. Since it is in the nature of loan consequently interest on loans stands excluded from the value of taxable services. Board circular dated 09.07.2001 referred to by the appellant in fact supports the case of the respondent. In view of the settled law and in exercise of the legislative and rule making power once parliament has excluded interest on loans from the purview of taxable service, it is not open to the authority to hold that the exemption notifications would not apply. Further in view of the decision of the Apex Court in the case of Association of Leasing and Financial Service Companies and Bajaj Auto Finance Ltd. [2010 (10) TMI 4 - SUPREME COURT] and [2008 (4) TMI 39 - SC ORDER] re-affirming the legal position that the respondent is not liable to pay service tax in respect of the interest on loan advanced as the same stands excluded from the purview of the taxable services, we find no reason to interfere with the impugned order. CESTAT was correct in holding that for the period prior to 01.03.2006 interest on loan is not taxable in the absence of mechanism for bifurcation of service. Therefore, recovery of service tax on interest for the period to 01.03.2006 is without authority of law as there is a presumption of attributing the entire amount to interest in the absence of any mechanism to isolate the processing or management cost even if that were collected by way of equated monthly installments - CESTAT has returned a clear finding that hire purchase is but loan and that hirer obtains goods from the seller and the banking and financial institution finalised the purchase of the goods with the title firmly resting with the hirer with the financial institution vested with the right to acquire possession of the goods through judicial intervention - appellant has not been able to show any illegality or perversity in the aforesaid findings rendered by the CESTAT. There are no error or infirmity in the view taken by the CESTAT qua the ground raised by the appellant. No question of law, much less any substantial question of law as pleaded by the appellant arises from the order of the CESTAT - appeal dismissed.
|