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Kansai Nerolac Paints Ltd. Versus Commissioner of Customs, Mumbai

2017 (2) TMI 262 - CESTAT MUMBAI

Renting of machinery - Computer Colour Display Machines along with software for matching of shades - whether the rent received will be taxable under the category of Banking & Other Financial Services or not? - Held that: - Applying the definition of Banking and other Financial Services and the definition of other taxable service, it is found that the amount received by appellant in the case in hand would not be covered for taxing under Banking and other Financial Services. - The Tribunal in .....

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-2017 - Mr. M. V. Ravindran, Member (Judicial) And Mr. C.J. Mathew, Member (Technical) Mr. Mehul Jiwani, C.A. for appellant Shri R. Kapoor, Commr (AR) for respondent ORDER Per M.V. Ravindran This appeal is directed against order-in-original No. 246-247/14-15/V/2011/COMMR/KS/ST dated 13.09.2011. 2. The relevant facts, after filtering out unnecessary details, are the appellant herein during 2002-03 to 2006-07 had provided Computer Colour Display Machines along with software for matching of shades .....

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. Appellant contested the show-cause notices on merits as well as on limitation. Adjudicating authority did not agree with the contentions raised and confirmed the demand with interest and also imposed penalties. 3. Learned C.A. would submit that the definition of Banking & Other Financial Services under Section 65(12) provides that the services shall be provided by the banking company or a financial institution including a non-banking financial company. It is his submission that the appell .....

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oducts Ltd. 2015 (38) STR 191 (Tri Mum) (d) Commissioner of Central Excise v. G.E. India Inds. (P) Ltd. 2008 (12) STR 609 (Tri.). (e) Mega Enterprises 2015 (40) STR 528 (Tri. Mum) wherein it was held that the demand under Banking & Other Financial Services is not sustainable. 3.1 It is his further submission that the entire arrangement by an agreement entered with the dealers is not a financial leasing but transaction of operating lease. He would submit that the Apex Court in the case of Ase .....

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the appellant with the dealers. He would submit that the entire issue is regarding whether this operating lease is financial leasing services . He would submit that financial leasing is a financial loan and operating lease is a lease other than the finance lease. Hence the term finance lease into financial leasing is covered by the definition of business and other financial services . It is his submission that the adjudicating authority was correct in confirming the demands. 5. We have consider .....

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chargeable under Banking & Other Financial Services . We have read the definition of Banking & Other Financial Services provided under Section 65 (12) of the Finance Act, 1994 during the relevant period which reads as under:- Section 65 (12) (July 2004) (12) banking and other financial services means (a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate namely : (i) financial leasing serv .....

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and acquisitions and advice on corporate restructuring and strategy; and (vii) provision and transfer of information and data processing; (b) foreign exchange broking provided by a foreign exchange broker other than those covered under sub-clause (a); Section 65 (12) (August 2006) (12) banking and other financial services means (a) the following services provided by a banking company or a institution including a non-banking financial company or any other body corporate namely : (i) financial lea .....

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ce on corporate restructuring and strategy; (vii) provision and transfer of information and data processing; and (viii) banker to an issue services; and (ix) other financial services, namely, lending; issue of pay order, demand draft, cheque, letter of credit and bill of exchange; transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank acco .....

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of Banking and other Financial Services and the definition of other taxable service, we find that the amount received by appellant in the case in hand would not be covered for taxing under Banking and other Financial Services . The Circular dated 04.07.2006 of the CBEC indicates as under:- 3. Banking and other financial services are defined under section 65(12). Such services provided to a customer by a banking company or a financial institution including a non-banking financial company or any o .....

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a financial institution or a non-banking financial company or any other service provider similar to a bank or a financial institution are liable to service tax under section 65(105)(zm) of the Finance Act, 1994. Department of Posts is not similar to a bank or a financial institution and hence does not fall within the category of any other similar service provider. 6.3 The Tribunal in the case of Banswara Syntex (supra) while considering a similar issue of whether leasing of land, building as we .....

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ng service in relation to banking and other financial services are liable to service tax on the value of taxable services. The meaning of the term other financial services is given by Section 65(12) of the Finance Act, 1994. One of the categories of service covered by such activity is financial leasing services including equipment leasing and hire-purchase. These provisions were examined by us. We notice that meaning of the term body corporate adopted from Companies Act brings the appellant to t .....

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we read the decision of the Tribunal in the case of CCE, Vadodara v. G.E. India Industries (P) Ltd. reported in 2008 (12) S.T.R. 609. So also when we read the letter dated 9-7-2001 issued by the TRU of the CBEC vide No. BII/I/2000-TRU, it is made clear that a company falling under the definition of body corporate should either be a banking company or a financial institution or a non-banking financial company which came under the purview of law. Such essential ingredient is absent in the present .....

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ere was a issue of charging service tax on an amount received as lease rent under Banking and other Financial Services for lease of storage tanks to customers. The Tribunal held as under:- 8. Further, we find that the Board by the circular relied upon by the appellants, clarified in respect of the activity covered under banking and financial services. As the appellants are not a banking company or a financial institution including a non-banking financial company or any other body corporate or co .....

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ince the Finance Act, 1994 does not define what is financial leasing, the Commissioner (Appeals) has relied upon the Accounting Standard published by ICAI. According to the accounting standards, the leasing is classified as a financial leasing if the ownership of the assets on lease is transferred to lessee by the end of the lease term and this opinion is created at the inception of the lease itself. In the instant case, the agreement is only for the period of 35 months during which a monthly us .....

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invariably a consideration in lease. Further, the Board in Circular B/II/I/2000/TRU, dated 9-7-2001, has clarified as follows : "2.1 Financial leasing including equipment leasing and hire-purchase : 2.1.1 ....... 2.1.2 In the case of leasing or hire purchase, it is understood that the general business practice is as follows : The service provider enters into a leasing or hire-purchase agreement with the lessee or hire-purchaser. At the time of entering into the agreement, they collect a cha .....

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