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TMI Blog2015 (2) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... income without provision in that regard in the Finance Act, 1994 (hereinafter referred to as the Act ). 2. Revenue seriously opposes above proposition of the appellant on the ground that the hypothecation is also a banking service. Even leasing of the equipments and the goods shall be covered by the banking and financial services. Therefore, any amount received other than the recovery of principal amount shall be liable to service tax reading provision of section 65(105)(zm) combinedly with section 65 (105)(12) of the Act. He further submits that loan and hypothecation are different. Therefore any consideration received from hypothecation is taxable by the above said taxing entry. 2. Heard both sides and perused the adjudication order. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inning phraseology employed in section 65(105), which reads as taxable services means the service provided are to be provided . This presupposes that the service to be taxable should have been provided or to be provided, notified to be taxable. Consideration received towards such provision of service becomes taxable under the provisions of the Act. The law also provides that the gross amount charged by an assessee may constitute several receipts. But, only that part of the consideration, which relates to provision of taxable services is brought by scope of taxation. Accordingly such fundamental concept of law is exhibited by section 67 of the Act stating that prior to 18.2.2007, interest on loan is specifically excluded by an explanation ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a tax on an activity. That, service tax is a value added tax. The value addition is on account of the activity which provides value addition, for example, an activity undertaken by a chartered accountant or a broker is an activity undertaken by him based on his performance and skill. This is from the point of view of the professional. However, from the point of view of his client, the chartered accountant/broker is his service provider. The value addition comes in on account of the activity undertaken by the professional like tax planning, advising, consultation etc. It gives value addition to the goods manufactured or produced or sold. Thus, service tax is imposed every time service is rendered to the customer/client. This is clear from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f service. The impugned tax is not on material or sale. It is on activity/service rendered by the service provider to its customer. Equipment Leasing/Hire-Purchase finance are long term financing activities undertaken as their business by NBFCs. As far as the taxable value in case of financial leasing including equipment leasing and hire-purchase is concerned, the amount received as principal is not the consideration for services rendered. Such amount is credited to the capital account of the lessor/hire-purchase service provider. It is the interest/finance charge which is treated as income or revenue and which is credited to the revenue account. Such interest or finance charges together with the lease management fee/processing fee/document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, while State Legislature is competent to impose tax on sale by legislation relatable to Entry 54 of List II of Seventh Schedule, tax on the aspect of the services , vendor not being relatable to any entry in the State List, would be within the legislative competence of the Parliament under Article 248 read with Entry 97 of List I of Seventh Schedule to the Constitution. 8. The financial leasing services and hire purchase of vehicles/machineries squarely falls under the explanation of financial leasing services as defined under Section 65(12) of the Finance Act, 1994. But from the reading of the aforesaid provisions of law and judgment of the Apex Court, it can held that the service tax is the tax on an activity carried out and considera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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