TMI Blog2007 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,89,31,078/- and education cess of Rs. 16,72,844/- by holding that the appellants who were engaged in the business of hire purchase finance, were liable to service tax under Section 65(10) of Chapter V of the Finance Act, 1994, which covers banking and other financial services which inter alia means financial leasing services including equipment leasing and hire purchase by a body corporate , and penalty of equal amount under Section 78, in addition to Rs. 200/- per day during which failure to pay tax continues, and penalty of Rs. 1,000/-. The period of demand is 16-7-2001 to 31-3-2005. 2. The case of the department is that there is no difference between hire purchase which is admittedly covered under Section 65(10), and hire pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the goods vests in the purchaser right from the beginning and the hire purchase finance company who has only a right to seize the goods for non-payment of the loan, is not the owner of the goods. This contention requires to be accepted in the light of the apex court's decision in Sundaram Finance Ltd. v. State of Kerala another (1966) 17 STC 489 in which the distinction between hire purchase and hire purchase financing has been brought out. Paragraphs 10 and 11 of the judgment which are relevant in this regard, are re produced below :- 10. A hire-purchase agreement is normally one under which an owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of the agreement considered in the light of the surrounding circumstances. In each case, the court has, unless prohibited by statute, power to go behind the documents and to determine the nature of the transaction, whatever may be the form of the documents. An owner of goods who purports absolutely to convey or acknowledges to have conveyed goods and subsequently purports to hire them under a hire-purchase agreement is not estopped from proving that the real bargain was a loan on the security of the for goods. If there is a bona fide and completed sale of goods, evidenced by documents, anterior to and independent of a subsequent and distinct hiring to the vendor, the transaction may not be regarded as a loan transaction of even though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t must be distinguished from a transaction in which the customer is the owner of the goods and with a view to finance his purchase he enters into an arrangement which is in the form of a hire-purchase agreement with the financier, but in substance evidences a loan transaction, subject to a hiring agreement under which the lender is given the licence to seize the goods. 3. Although the above decision was hi the context of sales tax and the issue was whether the nature of the transaction between the finance company and certain hirers within the State of Kerala was sales within the meaning of the Travancore-Cochin General Sales Tax Act (which stand of the Sales Tax authorities was rejected by the Supreme Court by holding that the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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