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2023 (7) TMI 65 - BOMBAY HIGH COURTWaiver of penalty u/s 76, 77 and 78 of the Finance Act, 1994 - demand of service tax on prepayment charges upheld - Banking and other financial services - HELD THAT:- Reliance placed in an order passed by the CESTAT in the case of M/S SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA VERSUS CST AHMEDABAD [2014 (12) TMI 668 - CESTAT AHMEDABAD], whereby the issue in regard to whether foreclosure charges collected by the Banks and Non-banking Financial Companies on premature termination of loans attract a levy of Service Tax under the heading “Banking and other financial services” as defined under Section 65(12) of the Finance Act 1994, came to be referred to the Larger Bench of the Tribunal. There were two decisions which were in favour of the assessees, firstly, in the case of M/S SMALL INDUSTRIES & DEVELOPMENT BANK OF INDIA VERSUS CCE, CHANDIGARH [2011 (1) TMI 495 - CESTAT, NEW DELHI] also subsequently the decision in M/S. MAGMA FINCORP LTD. VERSUS COMMISSIONER OF SERVICE TAX, KOLKATA AND VICE-VERSA [2016 (4) TMI 21 - CESTAT KOLKATA]. On the backdrop of conflicting views, the Larger Bench of the Tribunal adjudicated such issue in the case of Commissioner of COMMISSIONER OF SERVICE TAX, CHENNAI VERSUS M/S REPCO HOME FINANCE LTD. [2020 (7) TMI 472 - CESTAT CHENNAI] whereby it was held that the view taken by the Tribunal in the case of M/S HOUSING & DEVELOPMENT CORPORATION LTD (HUDCO) VERSUS CST, AHMEDABAD [2011 (11) TMI 95 - CESTAT, AHMEDABAD] was not the correct view. It was held that service tax cannot be levied on the foreclosure charges levied by the banks and nonbanking financial companies on premature termination of loans under “Banking and Other Financial Services” as defined under Section 65(12) of the Finance Act and accordingly answered the question in favour of the assessees. Having considered the decision of the Larger Bench and the questions which otherwise would have fell for consideration in relation to both what has been held in the impugned order in favour of the revenue and against the assessee, and also in regard to the orders on penalty, on which the revenue is aggrieved, in our opinion, it is appropriate that these appeals are remanded to the Tribunal by setting aside the impugned orders subject matters of these appeals, with a direction that the Tribunal on remand reconsiders the issue in the light of the decision of the Larger Bench in the case of Repco Home Finance Limited. Appeal disposed off.
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