TMI Blog2023 (3) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... orms is not a taxable service and therefore, no demand is leviable on such sale of loan forms. Seed Capital Assistance Scheme - HELD THAT:- Though the term used in service charge but the underlying nature of the 1% and 10% is nothing but interest on the seed capital loan, extended to the entrepreneurs. Therefore the same is not liable to service tax. As observed, it is a settled principle of law that interest on loans is not taxable to service tax. Service charge for prepayment/foreclosure of premature payment of loan - HELD THAT:- The leviability of Service Tax on foreclosure has been examined in detail by this Tribunal in COMMISSIONER OF SERVICE TAX, CHENNAI VERSUS M/S REPCO HOME FINANCE LTD. [ 2020 (7) TMI 472 - CESTAT CHENNAI ] where it was held that Foreclosure charges collected by the banks and non-banking financial companies on premature termination of loans are not leviable to service tax under banking and other financial services as defined under Section 65(12) of the Finance Act - thus, the service charges for pre-payment or foreclosure of loan amount by the customer cannot be treated as taxable service and is not chargeable to service tax. Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than and has been formed for non-business/ non commercial purposes to facilitate the growth of the industry in Rajasthan. The appellant was registered with the Service Tax Department for providing Banking and other Financial Services as defined in section 65(12) of the Finance Act, 1994 and are taxable under section 65(105) (zm) of the Act. During the course of audit of service tax records, the service tax department observed the following: (i) The appellant was collecting rent of its immovable property let out for commercial use. (ii) The appellant was selling loan application forms, on which no service tax was paid. (iii) The appellant was collecting service charges against seed capital assistance sanctioned to the new entrepreneurs. (iv) The appellant was collecting financial/foreclosure charges on account of premature repayment of loans by the borrowers. (v) The appellant had been collecting financial charges on account of service charges against Working Capital Term Loans. 3. Thereafter, the department issued a show cause notice dated 18.10.2010 for demanding aggregate service tax of Rs.48,51,115/- in respect of above issues and sought to imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. CCE, Pune-III 2015 (40) STR 1107 (Tri-Mum) wherein it was held that the amount collected on sale of forms, prospectus etc. would not be includible in the value on which service tax is demanded. (iii) Service tax of Rs. 3,32,612/- against concessional interest charged under Seed Capital Assistance Scheme The learned Counsel submits that the appellant acts as an agent of IDBI, for the implementation of the Seed Capital Scheme of IDBI. The Scheme is operated by notified State Industrial Development Corporations (SIDCS) and State Financial Corporations (SFCs) as agents of IDBI. The appellant being a State Financial Corporation of the Rajasthan Government helps the new entrepreneurs to start or enlarge their industrial activity through sanctions of seed capital. The main beneficiaries are new entrepreneurs or the small scale industries. Learned Counsel drew the attention of the Bench to Seed Capital Scheme and specifically to paragraph 4 of the scheme which provides that the amount of seed capital assistance per concern shall not exceed 10% of project cost and is subject to ceiling of Rs.15 lacs. As per paragraph 7(i) of the said Scheme, seed capital loan wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd public sector for liability of interest and penalty. 6. He further argued that the Commissioner (Appeals) had erred in waiving the penalty under the aforesaid sections as the penalty cannot be reduced below the minimum penalty prescribed under Section 76, 77 78 of the Finance Act. Since the appellant has not been set up by an Act of Legislature, it cannot be considered a Governmental authority. He relied on the decision of M /s RIICO LTD Vs. Commissioner of C. Ex., Jaipur-I 2018 (10) G.S.T.L. 92 (Tri.- Del). The relevant paragraphs are as follows: 22. However, regarding other services rendered by the appellant to the allottees in the industrial areas, we find no exemption is available. The claim of the appellant that they have undertaken the said maintenance as a Governmental authority and, hence, not liable to tax, is not tenable. The appellant is a corporate company, allotting industrial plots for commercial purpose. As a part of the arrangement of developing industrial areas, they have undertaken certain maintenance works in these industrial areas, which is in furtherance of commercial activity. There is no exemption available for such services prior to 1-4-2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Service Tax in respect of functions entrusted to them in terms of Article 243W of the Constitution w.e.f. 30-1-2014. We note that the 12th Schedule of the Constitution specifies fire services/public amenities including street lightings, parking lights, public convenience etc. as the nature of services to be provided by the municipalities. As such we hold that appellant is liable to Service Tax for the period prior to 30-1-2004 as no exemption is available to them. Therefore, all the activities/services performed by the appellant are liable to be taxed unless there is implicit remission examination. 7. We have heard Shri S C Kamra Shri N D Dubey, Advocates appearing for the appellant and Dr. Radhe Tallo, Authorized Representative for the Department. 8. So the issues for consideration before us are as tabulated below: Sl.No. Nature of service Service Tax (including cess) (Rs.) demand Current appeal status 1. Renting of immovable property - 01.06.2007 to 31.03.2009 1,58.377 Dropped and accepted by the Dept. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy of service tax. For ease of reference, the relevant paragraph is reproduced below:- 10. We also find that the amount collected towards sale of forms, prospectus will not be includible in the value on which service tax is demanded relying on the Tribunal s judgment in the case of Cerebral Learning Solutions P. Ltd., 2013 (32) S.T.R. 379 (Tri.-Del.) which held that Notification 12/2003-S.T., dated 20-6-2003 exempts service tax on so much of the value of taxable service as is equal to the value of the goods and materials sold by the service provider to the respondent of service. The same decision was taken by the Tribunal in the case of Chate Coaching Classes P. Ltd., 2013 (29) S.T.R. 138. 10.1 We also note that the Tribunal held the same view in its decision in the case of Cerebral Learning Solutions Pvt Ltd vs. Commissioner of Central Excise Service Tax, Indore 2018(10) G.S.T.L. 37 (Tri.-Del.) which was upheld by the Supreme Court in the appeal filed by the Department viz., Commissioner of Central Excise Service Tax, Indore vs. Cerebral Learning Solutions Pvt Ltd. 2022 (1) Centax 7 (S.C.). Accordingly, we hold that the sale of loan application forms is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive definition. 22. A Larger Bench of the Tribunal in Bhayana Builders (P) Ltd. v. Commissioner of Service Tax [2013 (32) S.T.R. 49 (Tri. - LB)] observed that implicit in the legal architecture is the concept that any consideration whether monetary or otherwise, should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the latter. In the said decision, the Larger Bench made reference to the concept of consideration , as was expounded in the decision pertaining to Australian GST Rules, wherein a categorical distinction was made between conditions to a contract and consideration . It has been prescribed under the said GST Rules that certain conditions contained in the contract cannot be seen in the light of consideration for the contract and merely because the service recipient has to fulfil such conditions would not mean that this value would form part of the value of the taxable services that are provided. 23. The Supreme Court in Commissioner of Service Tax v. M/s. Bhayana Builders [2018 (2) TMI 1325 = 2018 (10) G.S.T.L. 118 (S.C.)], while deciding the appeal filed by the Department against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en so clearly stated in the Circular dated 26 June, 2012 issued by the Reserve Bank of India. 36. The basis for charging foreclosure amount has also been explained by the Karnataka High Court in M/s. Hotel Vrinda Prakash and Another v. KSFC and Another [ILR 2008 KAR 1311] . The writ petitioner had borrowed a loan from the Karnataka State Financial Corporation but before the period of loan could expire made an application for foreclosure of the loan. The Corporation, however, demanded premium on the advance payment/foreclosure amount which demand was challenged in the writ petition. The High Court, after noticing that the contract contained a clause giving discretion to the Corporation to impose premium on the balance amount of loan, observed that granting of loans is a business of the Corporation and if the loan is prepaid, the Corporation may have to suffer loss. It is to overcome this situation that premium is charged. The observations are as follows; 13 .Therefore, the granting of loans or advances is one of the business of the Corporation. As stated above, the Corporation borrows funds from the financial institution at the prevailing rate of interest. If an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is Service Charge, the 1% charge is actually akin to the interest charged on the Working Capital Term loan. We are unable to accept this argument of the learned Counsel. The scheme document has clearly differentiated between the interest liable to be charged on such loans and the service charges on such loan. Therefore service charges of 1% indicated separately clearly shows that this amount is a consideration for the services being provided by the appellant to the borrowers. It is apparent that the said service charge is a financial charge on account of providing financial services of loans and advances. In view of the same, we hold that service tax is leviable on the service charge, realized on Working Capital Term Loan by the appellant. 12. We note that the learned Authorised Representative has argued that the Commissioner(Appeals) has erred in waiving the penalty under Section 76, 77 78 of the Act. The Appellant is a State Government enterprise, and in such a case allegation of willful suppression of facts with an intention to evade the duty payment cannot be made. It is seen that the Tribunal in several cases has held that where the waiver of penalty under Section 80 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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