TMI Blog2019 (1) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... e of services in respect of which demands can be made - Further the basic document in respect of the registration and payment of the service tax by the authorized dealers in respect of free warranty services provided needs to be examined and then only a final view and quantification of service tax to be paid can be done - Since it is an admitted fact that certain information as required by the department was not made available to the department by the Appellants, the extended period of Limitation as per proviso to sub section (1) to Section 73 of Finance Act, 1994 shall be available to the department. Business Auxiliary services - reverse charge mechanism - Appellants have challenged the demand stating that these services have been provided by the foreign buyers outside India, they cannot be taxable in India - Held that:- Section 66A clearly and unambiguously provides that, the services provided by the person (person A) having any fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India to any person (person B) who has his place of business, fixed establishment, permanent addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Services . Considerations received and accounted for as 'credit card receipts' - Held that:- The assessee claims that these pertain to some past period not covered by the show cause notice. Appellants have not substantiated the said claim. Further in terms of the law service tax is payable on the realization basis and not on the accrual basis. Since the matter are being remanded the quantum of penalties too need to be determined after determination of duty demand - Interest is payable as statutory liability in case of short payment of service tax by the due date. Thus Demand for interest under Section 75 of Finance Act, 1994 is also upheld. Appeal disposed off by way of remand. - APPEAL Nos. ST/87648/2013,86215/2015,86329/2016 - A/85016-85018/2019 - Dated:- 8-1-2019 - Dr. D.M. Misra, Member (Judicial) And Mr. Sanjiv Srivastava, Member (Technical) Shri V. Sridharan, Sr. Advocate, with Shri Vinay Jain, Advocate, And Shri Aditya Jain, C.A., for appellant Shri K.M. Mondal, Spl. Counsel, for respondent ORDER Per: Sanjiv Srivastava These appeals are directed against the Order in Original of Commissioner Service Tax Mumbai II dated 26. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 312,45,23,327/- along with interest in respect of Authorized Service Station Services, Banking and Other Financial Services and Business Auxiliary Services. Imposed penalty under section 76 for the period from 1/4/2004 to 17/04/2008 and imposed penalty of ₹ 5000/- under Section 77 of the Finance Act, 1994. He also imposed a penalty of ₹ 312,45,23,327/- under Section 78 of the Finance Act, 1994. ii. Show Cause Notice dated 22.10.2010: Confirmed the demand of ₹ 25,60,88,900/- along with interest. Imposed penalty under section 76 for the period from 1/4/2009 to 31/3/2010 and also imposed penalty of ₹ 5000/- under Section 77 of the Finance Act, 1994. iii. Show Cause Notice dated 19.10.2011: Confirmed the demand of ₹ 41,01,97,500/- along with interest. Imposed penalty under section 76 for the period from 1/4/2010 to 31/3/2011 and also imposed penalty of ₹ 5000/- under Section 77 of the Finance Act, 1994. iv. Show Cause Notice dated 17.10.2012: Confirmed the demand of ₹ 46,63,42,800/- along with interest. Imposed penalty of ₹ 23,31,71,400/- under Section 78 of the Finance Act, 1994. v. Show Cause Notice dated 21.02.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey have taken registration in respect of the said shop from 1.04.2007 and have been paying service tax in respect of the service provided from there. In view of Appellants, the said car repair shop at Worli is not an Authorized Service Station, and is their own repair shop, hence they were not liable to pay service tax in respect of services provided from the said shop. However in view of the department since they have registered themselves with effect from 01.04.2007 and have been paying service tax in the category of Authorized Service Station Service with effect from 01.04.2007 there contention for not paying the service tax for the period prior to that date is not tenable. Thus service tax is demanded in respect of the value of the service provided from the Tata Car Repair Shop. 3.4 Several Letters were issued to the appellant by the department calling for information in respect the payment of service tax on taxable services in this category. Appellants have vide their letter dated 5.09.2008 submitted that in the case of reimbursement made by them to the dealer in respect of the taxable services provided under the category of Authorized Service Station Services the liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , have been included in the value of the taxable service provided by the said service stations. 3.8 The department has issued the show cause notice only for the reason that they have failed to provide the list of dealers and hence were liable to pay service tax. While adjudicating Commissioner has gone beyond the scope of show cause notice and has confirmed the demand holding that the it was the contractual obligation on the appellant to provide the said services. 3.9 The estimated expenditure towards warranty is taken into consideration while calculating the price of vehicle and excise duty discharged on the value of vehicle determined after adding the estimated expenses towards warranty. They also have paid VAT on the said price inclusive of estimated warranty charges. Once having paid excise duty and VAT on the said estimated warranty charges, Service Tax cannot be demanded again in view of the decisions as follows: i. ASL Motors Co [2008 TIOL 114 CESTAT-KOL] ii. Indus Motor Co [2008 (9) STR 18 (Tri Bang)] iii. Pillai Sons Motor Co [2009 (14) STR 844 (Tri Chennai)] 3.10 They also referred to various text books on the Contract Law, to submit There is a Colla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -38.34 -41.11 -38.18 Value attributable to servicing of commercial; vehicles for good transport applications from July 12 to Mar 13. -130.28 Value attributable to servicing of passenger cars etc. 227.06 55.78 65.73 128.37 149.60 104.47 Value attributable to material included in the reimbursement -193.64 -49.44 -56.79 -94.33 -67.81 Net Value for payment of Service Tax 33.42 6,34 8.94 34.04 81.79 104.47 Recomputed Service Tax demand 3.89 0.65 0.92 3.51 10.11 12.91 3.13 In respect of demand, made for services provided from Tata Car Repair Shop, Worli the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinct from the relationship between the appellants and their authorized dealers. Payment of service tax by the dealers would be in respect of the services provided by the dealers, as part of their obligation for which consideration has been received by them. The demand is not in respect of the dealers service tax liability, but is in respect of taxable services agreed to be provided by the appellant for which the consideration has been received by them from the recipient of service. 3.17 If appellants can show that dealers have paid service tax on the amount of re-imbursement made by them to the dealers by producing necessary evidence they can be absolved of the demand. For such verification matter should be remanded for consideration of the adjudicating authority. 3.18 The contentions of the appellant in respect of Tata Car Service Centre Worli Mumbai are without any justifiable basis or reason. Appellants have themselves started paying the service tax, in respect of the services provided from the said service centre, with effect from 1.04.2007, without any change in the facts or law expanding the scope of definition of taxable services. Thus there is no justifiable reason w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.21 Commissioner has in his order in para 6.24 to 6.26 of the order concluded as follows: 6.24 The noticee is under contractual obligation with their customers, to provide warranty service during the period of warranty as integral part of the sale of vehicles. The noticee has got an option to provide the Service required to be provided to their customers either wholly or partly on their own and also either directly or through an agent appointed by him. The noticee has also got an option to out-source part of services required to be provided under the warranty obligation. The Noticee can also outsource the labour component. What is relevant is that the Noticee is under obligation to provide the greed services to their customers during the warranty period. 6.25 The question is who is the service provider who is liable to pay Service Tax. Payment otherwise of Service Tax by dealers is of no relevance or consequence for the issue under consideration. As such the Noticees claim that the demand has been made from them merely because of the reason that they did not provide the list of dealers during the investigation, is skirting the issue. The payment of Service Tax, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessable value of the vehicles manufactured by us (para 4) As regards providing the services by authorized service station to the owner of vehicle, the manufacturer is the service provider and owner of vehicle is the beneficiary. The fact that the dealer recovering the amount from us substantiates the same (para 7) 6.28 Assuming but without accepting that the services are provided through dealers, the law protects third parties dealing with agents. In the present case, the customer is protected by law as if they receive the services directly from the principal and they are legally entitled to deal only with the principal and not the agent. The Noticee himself categorically and un-ambiguously affirmed this view in their letter dated 22.06.2009. The law does not even compel the customer to recognize the agent appointed by the Noticee to provide the service. The customer is in fact dealing only with the principal and not with his agent though the agent may be a complete substitute for the principal. Dealer is not under obligation to take care of manufacturing defects, if any. Deale s role in providing the service is only limited. Appointment of any agent does not preve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the taxable person and the registered person. Without making such a determination no tax liability could be determined. The observations of Commissioner if examined with reference to the observations made by Delhi High Court, referred above, we find, Appellants have a contractual binding to ensure that during the warranty period, warranty services are provided to the buyers of the TATA vehicles free of any cost. The contractual obligation cannot mean that appellant is responsible for providing the warranty services himself. The Contractual obligation is to ensure that service is provided free. Once that service is provided free of cost, the contractual obligation is discharged. The appellants are free to organize the manner of provision of the service in the manner they desire, i.e. it can be by themselves, or by arranging the same through some other person. In case where the appellants themselves provide the free warranty services they should be held liable for providing the said services to the consumer of the said service and in case the same is provided through some third person that person becomes liable for providing the service. A contractual obligation, or collection of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the revenue submitted that the transaction between the assessee and the manufacturer was a separate transaction. It is not the case of the assessee that the manufacturer had supplied the goods to the customers. If it had supplied parts to the customers through assessee; the position may have been different. The manufacturer was obligated to make the replacement. If it did not possess the parts to meet the contractual obligation, it would have purchased the parts from any seller of the parts and would have paid the sales tax. In the instant case, the assessee had supplied the goods for which it received the consideration by way of credit notes and/or other mode of payment. That being the position, the High Court was justified in its view about the taxability of the transactions. The decision in Premier Automobiles case (supra) is really of no assistance to the assessee. The fact situation there was different. The issues in the said case were different. One of the issues was whether the expenses on account of warranty and statutory bonus were to be excludable while working out the ex-work cost. It was held by this Court that manufacturers furnish warranty coverin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service recipient during the course of providing taxable services, Notification No 12/2003-ST dated 20.06.2003 provides for exemption of Service Tax to the extent of value of goods and materials so sold by the service provider to the service recipient, if documentary proof of such sale exists and no credit of excise duty paid on such spares or consumables have been taken. The circular further goes on to note that for availing such exemption, the goods must be sold and consequently they must be available (whether independently or as a part used for repair of a vehicle) for sale. In other words, the exemption would not be available to such consumables which have been consumed during the process of providing service and are not available for sale. 6.36 In the instant case, the Noticee has not come up with any evidence regarding sale of any goods or materials used while providing taxable service during the warranty period, nor has the Noticee made a categorical submission that they were not taking CENVAT credit of Central Excise duty paid on such materials. The other circular dated 23.08.2007 relied upon by the Notice also stresses the same aspects. It is clarified that wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid if any in respect of Show Cause Notice dated 16.10.2009. In all other show cause notices, the demand has been made within the normal period of limitation as provided for by sub section (1) to Section 73 of Finance Act, 1994, hence they shall in any case not be hit by limitation. 3.26 In respect of the services provided through the Tata Car Service Centre Worli, the appellants have themselves by taking registration with effect from 1.04.2007 have admitted that service tax was payable in respect of the services provided from the said Service Centre. It is also a fact that with effect from 1.04.2007 onwards they have been service tax on the services provided from the said service centre, and have been filing the service tax returns in form ST-3, we are of the view that appellants should have paid the Service Tax for the period prior to 01.04.2007. Since the demand cannot be made for the period beyond five years by invoking the extended period of limitation as per proviso to sub section (1) to Section 73 of Finance Act, 1994, the demand has to be limited accordingly. Thus we uphold the demand of service tax for the period 1/4/2004 to 31/3/2007 in respect of the services provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply: Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1.--A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2.--Usual place of residence, in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided from outside India received in India shall be such services as are received by a recipient located in India for use in relation to business or commerce. In the present case, indisputedly the recipient of services is the appellant located in India. The expression received by a recipient located in India in Rule 3(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 matches the expression received by a person who has his place of business, fixed establishment, permanent address or usual place of residence, in India in clause (b) of Section 66A of the Finance Act, 1994. Harmonious reading of the provisions of clause (b) of Section 66A of the Finance Act, 1994 and the provisions of Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 makes it clear that the recipient located in India is liable to pay tax on the taxable services received for use in relation to business or commerce. In this case, money was received by the appellant. The fact that this money was used abroad to acquire certain assets will not make any difference. Location of assets, procured as a result of receiving th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aries have merged with the appellant. Table: Income to be Taxed under Banking Financial Service Amount Rs Crore Particulars Financial Year 2005-06 2006-07 2007-08 2008-09 Total Tata Motors Limited 432.67 546.52 363.20 275.17 1617.56 Sheba Properties Limited 2.90 3.78 0.00 0.00 6.68 Tata Motors Finance Limited 0.00 122.25 0.00 0.00 122.25 Total 435.57 672.55 363.2 275.17 1746.49 5.2 Appellants contended the income in respect of Banking and Financial Service, comprise of various components and in respect of certain components they have paid the service tax. The details (as stated in table ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.45 0.36 1.13 Termination Charges 0 1.08 1.44 1.11 3.63 Processing Fee 0 4.73 4.36 6.30 15.39 Total Leviable to Service Tax (B) 47.3 42.18 33.64 20.29 143.41 Total (A) + (B) 432.67 546.52 367.23 277.58 1624.00 Service tax paid debited in Income 0 0 -4.03 -2.41 -6.44 Total Income 432.67 546.52 363.20 275.17 1617.56 Income on which Service Tax is paid under heading Banking and Financial Services 52.23 53.14 63.49 47.54 216.4 5.3 There is no di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of taxable service interest on loans may not be included in the value of taxable services. However said provision do not perse exempt the income earned against loan contract from the levy of service tax, if the same is classifiable under category of taxable services specified under the Finance Act, 1994. In this case revenue has contended that if the income from loan contract, is in classifiable under the category of Banking and Financial Services, then the same do not get exempted in view of the provisions relating to determination of value of taxable services. 5.6 Commissioner has examined the issue in detail in the order, and found that the loan agreement between the appellant and the prospective purchaser (s) of a vehicle is titled Loan Cum Hypothecation Cum Guarantee Agreement. Commissioner has thus recorded that very title suggests that agreement is not merely for providing loan, but consists of series of transactions relating to loan, hypothecation and guarantee, thus services provided under the agreement are not relating to loan transactions only. The findings of commissioner recorded, are reproduced below: 7.10 The agreement is entered into between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirement of the borrower as would be the case in respect of a plain loan agreement. The expected date of delivery of the vehicle by the seller to the prospective purchaser of the vehicle forms a relevant part of the agreement. In case the prospective purchaser requests the Noticee to cancel the loan because of non-delivery of the vehicle by the seller, then the prospective purchaser is bound to pay to the Noticee, in addition to any other charge, payable by him under the agreement, cancellation charges as set out in the agreement. This condition is not generally seen in an ordinary loan agreement. In case repayment is sought to be made by the purchase of the vehicle of the entire outstanding amount, then the Noticee would be entitled to charge penalty. As regard the method of appropriation, when any payment due is received by the Noticee, it shall be appropriated not just towards the principal and interest but towards the dues in the following order, viz.- (a) Cost, charges, expenses and other monies; (b) Interest on cost, charges, expenses and other monies; (c) Delayed Payment Charges, if any; (d) Interest payable in terms of this L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire dues. As and when insurance claim is received, the Noticee will arrange to refund to the purchaser of the vehicle the said claim only if the purchaser has repaid in full the outstanding principal and interest when the Noticee receives the above referred claim cheque. The movable asset shall be hypothecated and charged in favour of the Noticee by the purchaser. The charge/hypothecation so created shall continue in full force so long as all the amounts due under the agreement have been paid by the purchaser of the movable asset to the Noticee. The Noticee may at his absolute discretion, require the vehicle purchaser to deposit a certain sum of money as security deposit (margin money), which shall not earn any interest to the depositor. 7.12 The Noticee, in addition to the above mentioned agreement with the customers, also enters into a Deed of Assignment of loan with underlying securities, like financial institutions and banks, whereby the receivables from the so called Hire Purchase contracts are immediately assigned. The Noticee states that this is similar to discounting of bill of exchange. They get cash immediately, which is equal to the EMIs (Equated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Deed of Assignment of Loans with underlying Securities, cannot be treated merely as a plain and straightforward loan transaction. Material facts on record and the surrounding circumstances indicate that there are number of transactions, all constitute an integral part of the single composite transaction, intended to be carried through as a whole to achieve the specific objective. 7.14 The money stated to be money loaned in the so called Loan Agreement was not for any general purpose. It was specifically given for purchase of a vehicle or other movable assets mentioned therein. It is subject to the condition that the vehicle shall be hypothecated in favour of the Noticee. It is the Noticee who decides from whom the movable asset should be purchased. The money said to be loaned is not given to the borrower but to the seller of the vehicle. The borrower is in no position to question the method of computation of interest by the Noticee. On one extreme, even cancellation charges are levied where the vehicle purchaser decides to cancel his booking on account of the reason there is likelihood of delay in the expected date of delivery of the vehicle. On the other extreme, the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are treated as considerations for the services rendered and accordingly they constitute the value of taxable services on which service tax is made payable. In fact, the Government has given exemption from payment of service tax to financial leasing services including equipment leasing and hire-purchase on that portion of taxable value comprising of 90% of the amount representing as interest, i.e., the difference between the installment paid towards repayment of the lease amount and the principal amount in such installments paid (See Notification No. 4/2006 - Service Tax dated 1.3.2006). In other words, service tax is leviable only on 10% of the interest portion. (See also Circular F.No. B.11/1/2001-TRU dated 9.7.2001 in which it has been clarified that service tax, in the case of financial leasing including equipment leasing and hire-purchase, will be leviable only on the lease management fees/ processing fees/ documentation charges recovered at the time of entering into the agreement and on the finance/ interest charges recovered in equated monthly installments and not on the principal amount). Merely because for valuation purposes inter alia finance/ interest charges are taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended) on the value of taxable services referred to in Section 65(105)(zm) read with Section 65(12) of the said Act, insofar as it relates to financial leasing services including equipment leasing and hire-purchase as beyond the legislative competence of Parliament by virtue of Article 366(29A) of the Constitution. In short, legislative competence of the Parliament to impose service tax on financial leasing services including equipment leasing and hire-purchase is the subject matter of challenge. Legislative competence was not the issue before this Court in the Bharat Sanchar Nigam Limited's case. In that case, the principal question which arose for determination was in respect of the nature of the transaction by which mobile phone connections are enjoyed. The question was whether such connections constituted a sale or a service or both. If it was a sale then the States were legislatively competent to levy sales tax on the transaction under Entry 54, List II of the Seventh Schedule to the Constitution. If it was service then the Central Government alone had the legislative competence to levy service tax under Entry 97, List I and if the nature of the transaction partook of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Sanchar Nigam Limited's case. The service tax in the present case is neither on the material nor on sale. It is on the activity of financing/funding of equipment/ asset within the meaning of the words financial leasing services in Section 65(12)(a)(i). Lastly, we may state that this Court has on three different occasions upheld the levy of service with reference to Entry 97 of List I in the face of challenges to the competence of the Parliament based on the entries in List II and on all the three occasions, this Court has held that the levy of service tax falls within Entry 97 of List I. The decisions are in the case of T.N. Kalayana Mandapam Association (supra), Gujarat Ambuja Cements Ltd. (supra) and All-India Federation of Tax Practitioners (supra). Conclusion 5.8 Thus in this case the agreement is not of a loan as understood in general terms but incorporates various other factors which are taxable under the category of Banking and Financial Services. Appellants have by way of these agreements extended credit facility to the buyers, for a consideration. The part of considerations which cannot be classified as interest on loan would be subjected to service tax, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contracts entered by them with the borrowers are in respect the services covered by the notification. In view of the decision of the Apex Court in case of Commissioner of Customs (Import) Vs M/s Dilip Kumar and Company Others [2018 (361) ELT 577 (SC)] the exemption notification needs to be construed strictly and person claiming the exemption has to show that he falls within the purview of the Notification. Relevant excerpts from the said decision are reproduced below: 27. Now coming to the other aspect, as we presently discuss, even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such exemption notification can be condoned if there is sufficient compliance with the main requirements. This, however, did not in any manner tinker with the view that an ambiguous exemption clause should be interpreted favouring the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration, we would be more than justified to conclude and also compelled to hold that every taxing statue including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State. 43. There is abundant jurisprudential justification for this. In the governance of rule of law by a written Constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the Constitution itself. It is for this reason that the Courts insist upon strict compliance before a State demands and extracts money from its citizens towards various taxes. Any ambiguity in a taxation provision, therefore, is interpreted in favour of the subject/assessee. The statement of law that ambiguity in a taxation statute should be interpreted strictly and in the event of ambiguity the benefit should go to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial manner. 5.12 Further in their submissions appellants have claimed the income that has been sought to be taxed under the category of banking and financial service to classified under various heads (refer para 5.2). They have in their submissions admitted that service tax is payable in respect of certain incomes and have also stated that certain incomes would not form the part of taxable service under the category of Banking and Financial Services. The banking and financial services have been defined in very wide manner and appellants need to show specifically how the incomes they have claimed under various heads do not get classified under the said definition for the purpose of levy of service tax. 5.13 In respect of dealer subvention income, the appellant states that the same is an interest income. The interest does not arise on account of any loan simplicitor. They recover from the vehicle purchaser, finance charges on the principal amount. Where a prospective purchaser is unwilling to pay at the said rate, the dealers in order to increase their sales, agree to bear part of these finance charges. It is clear that the real cost/ value of the services provided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hire purchase agreement the value of asset is shown as receivables but in the present case, the assessee sold, transferred and assigned their receivables entirely to the assignee as per the Deed of assignment of loan with underlying securities. Therefore the material facts and the documents on record clearly show that the assessee is not in the business of giving 'loan' on interest and consequently, the consideration received for the various services provided does not qualify as 'interest on loan'. The aforesaid services provided by the assessee would appropriately fall under the category of 'Banking and Other Financial Services'. 5.18 Commissioner has in para 7.50 and 7.51 of his order stated as follows: 7.50 Loan means a sum of money advanced on interest. In effect Loan is money lent on interest. The conditions for loan given is that the amount should be repaid generally within the agreed time frame and often at an agreed rate of interest in order to be loan , the amount paid must be recoverable from the burrower. The loan given may be secured or un-secured. The Bombay Money Lenders Act, 1946 regulates and control transaction of money le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assified under the category of taxable services specified under Banking and Financial Services needs to be examined Commissioner have concluded on the basis of extraneous or irrelevant considerations and concluded that the transactions are not of extending the loan. In such a situation we are not in position to uphold the order of Commissioner to this extent and remand the matter for consideration of the issues afresh in light of observations made in previous paras. 6.1 In respect of all the show cause notices other than notice dated 16.09.2009, demands have been made within the normal period of limitation, and penalties imposed under Section 76 and 77 of the Finance Act, 1994. We uphold the penalties imposed under the said sections for the reason that these penalties are vis a vis the contravention of the provisions and do not involve a guilty intent as has been held by the Hon ble Supreme Court in case of Gujarat Travancore Agency [1989 SCC (3) 52] case. Hon ble Apex Court held as follows: Learned counsel for the assessee has addressed an exhaustive argument before us on the question whether a penalty imposed under s. 271(1)(a) of the Act: involves the element of mensrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mensrea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum, volume 85, page 580, paragraph 1023: A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. Accordingly, we hold that the element of mensrea was not required to be proved in the proceedings taken by the Income tax Officer under s. 271(1)(a) of the Income-tax Act against the assessee for the assessment years 1965-66 and 1966-67. 6.2 However since we are remanding the matter for determination of service tax short paid, the quantum of penalty needs to be redetermined accordingly. 6.3 In respect of the Show Cause Notice that appellants have not provided the relevant information in respect of these services sought to be taxed in the their returns filed and have also not paid the service tax as required to be paid on these services. By not declaring all the said details in their return appellants are liable for suppression with the intent to evade pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to Section 11A of the Central Excises and Salt Act (earlier Rule 10 of the Rules made under the said Act), it has to be established that the excise duty had not been levied or paid or short levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or the Rules with intent to evade payment. Something more positive than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information when the assessee knew otherwise was required before the assessee could be saddled with any liability beyond the period of six months. 12. Learned Counsel further referred to the decision of this Court in the case of Collector of Central Excise, Hyderabad v. M/s. Chemphar Drugs Liniments, Hyderabad [1989 (40) E.L.T. 276 (S.C.) = 1989 (2) SCC 127], which has also been referred in the aforesaid decision. 13. Another submission is with reference to the decision in the case of J.K. Cotton Spinning Weaving Mills Ltd. v. Collector of Central Excise [1998 (99) E.L.T. 8 (S.C.) = 1998 (3) SCC 540] that this proviso should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haramendra Textile the court framed the issues before it, in paragraph 2 of the decision, as follows: 2. A Division Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff vs. Joint Commissioner of Income Tax, Mumbai Anr. [2007 (8) SCALE 304]. The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the `Act') inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1)(c) of the Income Tax Act, 1961 (in short the `IT Act') t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his is clear from the extended period of limitation permissible under Section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q was in vogue in which no mens rea was provided for. It only stated which he knows or has reason to believe . The said clause referred to wilful action. According to learned counsel what was inferentially pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccasioned by the breach on its part to deposit the amount of tax within the prescribed time. 7.1 In the result we uphold the demand of Service Tax made under in respect of services provided from Tata Car Care Centre, Worli, Mumbai and also in respect of the services provided under the category of Business Auxiliary Services. In respect of the Service Tax demands made for the reimbursements made to Authorized Dealers and that in respect of Banking Financial Services we are remand the matter to the original adjudicating authority for redetermination of the issues and quantum of demand after taking into account our observations in para 3 5 above. 7.2 Thus Appeal No ST/87648/13 in respect of adjudication order dated 26.03.2013 adjudicating the Show Cause Notices dated 16.09.2009, 22.10.2010 and 19.10.2011, is allowed partially by way of remand in respect of the issues mentioned in para 6.1 above. The Appeal No ST 86214/15 in respect of adjudication order dated 18.03.2016 adjudicating the Show Cause Notices dated 17.10.2012 21.02.2014 Appeal No ST/ 86329/16 in respect of adjudication order dated 07.03.2016 adjudicating the Show Cause Notices dated 23.01.2016 are allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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