TMI Blog2018 (9) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... is the only component for providing the said CC/OD services. What so ever minor amounts appellants may have charged towards the administrative fees etc., will not in fact change the nature of exemption provided to the said services - by exempting the value equivalent to interest recovered for providing these services, in fact, in pith and substance exemption has been granted to the services of CC/OD provided by Banking and Financial Companies. Since, the CC/OD services provided by the appellant are exempt from payment of service tax to the extent of interest recovered, the view of Commissioner in including the quantum of interest recovered against the provision of said services for determination of the amount to be reversed in term of Rule 6(3A)(c) of the CENVAT Credit Rules, 2004 cannot be faulted with. Time Limitation - Held that:- It is difficult at this stage, to ascertain whether all the facts in relation to these services and all facts including availment of CENVAT credit and its reversal as per rule 6(3A)(c) of the CENVAT Credit Rules, 2004 were disclosed is a question of fact which cannot be ascertained by us at this moment. Commissioner has also not recorded a speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice along with interest at applicable rate. He has also imposed mandatory penalty of the equivalent amount in terms of section 78 of the Finance Act, 1994. Against this order of Commissioner Appellants have preferred this appeal. 3. In their Appeal, Appellants have challenged the order of Commissioner, stating that Cash Credit/ Over Draft (CC/OD) services provided by them are not the exempt services as defined by Rule 2(e) of the CENVAT Credit Rules, 2004. Notification No 29/2004-ST dated 22.09.2004 only exempts that portion of the value from the payment of service tax as is equivalent to the interest charged on this facility. Since on the remaining part service tax is payable/ paid Commissioner has erred by holding that the service provided by them is exempt from payment of service tax. Since factually CC/OD is only partially exempt, rule the proportionate reversal under rule 6 (3A)(c) of the CENVAT Credit Rules, 2004 is not warranted in this case. The reliance placed by the Commissioner on the report of Reserve Bank of India is not correct. In any case the demand is barred by limitation in this case. 4.1 Have heard Ms Prajakta Menezes learned Advocate on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt under section 66 of the Finance Act, 1994. In the present case, interest on overdraft facility and cash credit facility are exempted from service tax under section 66 of the Finance Act, 1994 by virtue of Notification No. 29/2004-ST dated September 22, 2004. Therefore, these services would definitely come under the scope of the definition of exempted services , hence, the argument of the learned CA that to attract rule 6(3) of the CENVAT Credit Rules, 2004, the entire taxable service, i.e., banking and financial services should be exempted and not few services mentioned under the categories of clause (ix) of the said banking and financial services, is untenable. Thus, the learned Commissioner is right in its approach to include the value of exempted services, namely, overdraft facility and cash credit facility in computing the CENVAT credit attributable to input services used in providing exempted services, as laid down under rule 6(3A)(c) of the CENVAT Credit Rules, 2004. In view of the above he argued in the favour of the order and requested to dismiss the appeal. 5. We have considered the submissions made. Issues involved in the Appeal are as follows- i. Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a specific asset; (ii) such contract is for use and occupation of the asset by the lessee; (iii) the lease payment is calculated so as to cover the full cost of the asset together with the interest charges; and (iv) the lessee is entitled to own, or has the option to own, the asset at the end of the lease period after making the lease payment. (ii) omitted; (iii) merchant banking services; (iv) securities and foreign exchange (forex) broking, and purchase or sale of foreign currency, including money changing; (v) asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services; (vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice 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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) discounting of bills, bills of exchange or cheques, as is equivalent to the amount of interest on such overdraft, cash credit or, as the case may be, discount, from the service tax leviable thereon under section 66 of the said Act, subject to the condition that the said interest amount is shown separately in an invoice, a bill or, as the case may be, a challan issued for this purpose. 7.2 From plain reading of the exemption notification it is quite evident that the said exemption notification do not exempt the Banking and Financial Services as such but only is in respect of one limb of the said service i.e. overdraft facility, cash credit facility and discounting of bills, bills of exchange or cheques. Further what has been exempted is equivalent to the amount of interest on such overdraft, cash credit or, as the case may be, discount. Appellants have argued that in respect of these services apart from the interest, there are certain administrative fees also charged from their customer which is liable to service tax as this exemption notification grants exemption only in respect of the interest charged and not the administrative fees. Hence these services are not exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates as well as foreign exchange rates, has brought pressure on the management of banks to maintain an optimal balance between spreads, profitability and long-term viability. The unscientific and ad-hoc pricing of deposits in the context of competition, and alternative avenues for the borrowers, results in inefficient deployment of resources. At the same time, imprudent liquidity management can put banks' earnings and reputation at great risk. These pressures call for a comprehensive approach towards management of banks' balance sheets and not just ad hoc action. The managements of UCBs have to base their business decisions on sound risk management systems with the ultimate objective of protecting the interest of depositors and stakeholders. It is, therefore, important that UCBs scrupulously follow the Asset-Liability Management (ALM) guidelines issued by the Reserve Bank of India. 4. CREDIT ADMINISTRATION 4.1 Rate of interest 4.1.1 UCBs are permitted to determine their lending rates taking into account their cost of funds, transaction costs etc with the approval of their Board. However, banks are advised to ensure that the interest rates charged by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of 5 acres and less. (vi) An appropriate ceiling may be fixed on the interest, including processing and other charges that could be levied on such loans, which may be suitably publicised. 7.4 From the above mentioned Master Circular issued by RBI, it is quite evident that banks are free to determine their own interest rate after taking into account all the administrative expenses and the cost of advancing the loans, cash credit or overdraft facility. However all the purpose of the customer, or the bank financial institution all the recoveries made against such facilities would be classified under the category of interest. It is not the case after deregulation of the Banking and Financial services that the interest rates are externally dictated, but are to be determined by the banks themselves taking into account their cost of funds, transaction costs etc (Para 4.1 of the Master Circular). Thus the claim of the Appellant in respect of administrative fees etc., charged by them separately in respect of the CC/OD services appear to be contrary to the said Master Circular. 7.5 In Reserve Bank of India Report dated 28 September, 2000 of the Working Group on Discounting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal instrument. Applying the same doctrine for ascertain the true nature of exemption provided by the said notification, we are of the view that interest is not only the major component but is the only component for providing the said CC/OD services. What so ever minor amounts appellants may have charged towards the administrative fees etc., will not in fact change the nature of exemption provided to the said services. Further even appellant cannot claimed that these services were being provided by them for a consideration of administrative fees. Even the customer while opting or selecting for the such facilities being provided by the banking, financial or even non-financial companies is ever much concerned about these charges whereas he is mostly concerned about the interest charges that he is required to pay as consideration for availing these services. Thus by exempting the value equivalent to interest recovered for providing these services, in fact, in pith and substance exemption has been granted to the services of CC/OD provided by Banking and Financial Companies. 8.1 Rule 6 of the CENVAT Credit rules at the relevant period provided as follows: 6. Obligation of manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and 1 (P) denotes total CENVAT credit taken on input services during the financial year; 8.2 Since we have held that the CC/OD services provided by the appellant are exempt from payment of service tax to the extent of interest recovered, the view of Commissioner in including the quantum of interest recovered against the provision of said services for determination of the amount to be reversed in term of Rule 6(3A)(c) of the CENVAT Credit Rules, 2004 cannot be faulted with. 8.3. The view expressed by us is in line with decision of the Kolkata Bench of Tribunal in case of UCO Bank Vs Commissioner of Service Tax Kolkata [2014 (36) STR 1169 (T-Kol)]. 8.4 In their submissions Appellants have placed reliance on the decisions referred in para 4.2. However we find that none of these decisions have considered the scheme of CC/OD vis a vis the exemption notification No 29/2004-ST. These decisions have gone on the bare reading of the said exemption notification to hold that the said exemption notification are only partially exempting the said services, even without d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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