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TMI Blog2008 (12) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... financial services" which includes "equipment leasing and hire purchase". The provisions providing for service tax on equipment leasing and hire-purchase transactions are introduced by amending the Finance Act, 1994. The relevant definition clauses introduced therein are extracted hereunder for easy reference: "Section 65(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 or commercial concern namely:- (i) financial leasing services including equipment leasing and hire-purchase. Explanation. - For the purposes of this item, 'financial leasing' means a lease transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India has vide Notification No. 4/2006-ST. dated 1-3-2006 granted exemption on 90 percent representing interest income earned by the service provider. Therefore, according to respondents, while considering the constitutional validity, this Court should consider that the incidence of service tax falls only on 10 per cent of the receipts. Since the writ petition was filed soon after the introduction of the impugned provisions and stay was also granted, petitioners 2 and 3 or any other member of the first petitioner-association has not received any assessment determining service tax liability on their leasing or hire-purchase arrangements. Therefore, the exact service tax liability on any transaction is not on record. However, on the constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the residuary Entry 97 to List I of VIIth Schedule to the Constitution in the decisions in Tamil Nadu Kalyana Mandapam Association v. Union of India [2004 167 ELT 3/[2006] 4 STT 308 (SC), C.K. Jidheesh v. Union of India [2005] 2 STT 242 (SC) and Gujarat Ambuja Cements Ltd v. Union of India [2005] 1 STT 41 (SC) and thereafter through Constitutional amendments Entry 92C to List I of VIIth Schedule and Article 268A are introduced expressly giving authority to the Parliament to legislate on service tax. Respondents further contended that validity of legislation and the grievance of the petitioners should be considered with reference to the notification above referred by which rigour of the levy is neutralised by granting exemption on 90 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges on hire-purchase and leasing transactions. Petitioners 2 and 3 and other members of the first petitioner are only engaged in banking and financial services and are not dealers in goods. Admittedly, hire purchase is for vehicles and vehicles for this purpose are purchased from manufacturers/dealers after agreement between the Financier and the Hirer under which price in part or full is advanced by the Financier as a loan under agreement between them. In fact the vehicle is purchased in the name of the Hirer and in the certificate of registration obtained under the Motor Vehicles Act, hire purchase/hypothecation in favour of the Financier is endorsed. In other words, besides collateral security, if any, obtained by the Financier, loan ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deny or dispute that hire-purchase agreement involves only sale of goods and no service is rendered by them. Obviously and admittedly petitioners are rendering services and service charges are also collected along with interest on loan advanced. In fact, hire-purchase agreement between the Financier and the Hirer of the vehicle does not affect sales tax liability, whether it is payable at the point of sale of vehicle from the manufacturer or dealer to the Financier or to the Hirer or whether it is payable on delivery by the Financier to the Hirer under the hire-purchase agreement. Hire-purchase arrangement after the change introduced in Sales Tax Act involves purchase of vehicle by Hirer from the manufacturer or dealer with the fund partly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds by paying balance price. Here again, if the purchase of leased article has suffered tax under Sales Tax Laws of the State, then no further sales tax is payable on lease charges. On the other hand, if goods are not purchased in the State where leasing is done, then sales tax is payable on lease charges. However, this does not mean that incidence of sales tax falls on the entire charges collected by Financier which includes service charges and repayment of loan amount with interest. Petitioners do not deny that they are not collecting anything other than instalments of loan and interest thereon and that they are not collecting any charges for the services rendered in the leasing arrangement. Here again the decision of the Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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