TMI Blog2024 (2) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant for the purpose of financing the same. the ownership of the goods vests with the customers and the Appellant merely finances the purchase of such products by the owner. The ownership solely vests with the customers and there is no clause in the agreement providing the customers an option to purchase the product at the end of payment of all instalments. When a customer who is the owner of the goods enters into an agreement for financing the purchase of such goods, it is in effect a loan transaction and the lender is just given a license to seize the goods in case of breach/ default. In the present case, the ownership of the goods vests with the customers and the Appellant merely finances the purchase of such products by the own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 78 of the Finance Act, 1994. Aggrieved against the confirmation of the demands, the Appellant has filed this appeal. 2. Briefly stated facts of the case are that the Appellant is a Non-banking Finance Company engaged in the business of financing tractors to farmers for which it charges interest at an agreed rate. The Appellant enters into financing agreements with the customers wherein the customers purchase the assets in their name and approach the Appellant for the purpose of financing the same. The Department issued a SCN dated 23/10/2013 to the Appellant demanding service tax on (i) interest on hire purchase finance under Banking and Other Financial Services , (ii) interest on assignment of receivables under Recovery Agent s Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing / Hire Purchase under Section 65(12) of the Finance Act, and hence, taxable as per Section 65(105)(zm) of the Act. Accordingly, he held that by virtue of Notification No. 04/2006-ST dated 01.03.2006, 10% of the value of total interest of Rs. 1,17,54,96,822/- as taxable value and confirmed service tax amounting to Rs. 1,07,99,413/-. 4. The Appellant submits that the issue is no longer res-integra since the CESTAT Mumbai in the case of Bajaj Auto Limited v. CCE, Pune 2007 (7) S.T.R. 423 (Tri. Mumbai) held that Hire Purchase Agreements are different from Hire Purchase Finance, and the latter is not covered under Section 65(10) of the Act, and hence, not leviable to service tax. This decision of the Tribunal was affirmed by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to purchase the product at the end of payment of all instalments. Therefore, the transaction between the Appellant and its customers is not hire purchase agreements and are merely hire purchase finance agreements which is not under the ambit of service tax as held in the case of Bajaj Finance (supra). Accordingly, they prayed for setting aside the demands confirmed in the impugned order and allow the appeal. 7. The Ld. D.R reiterated the findings in the impugned order. 8. Heard both sides and perused the appeal documents. 9. We observe that the Appellant enters into financing agreements with the customers wherein the customers purchase the assets in their name and approach the Appellant for the purpose of financing the same. the ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase he enters into an arrangement which is in the form of a hire-purchase agreement with the financier, but in substance evidences a loan transaction, subject to a hiring agreement under which the lender is given the licence to seize the goods. 9.2 Following the aforesaid ratio of the decision of the Hon'ble Supreme Court, the CESTAT in the case of Bajaj Finance (supra) held as follows: 3. Although the above decision was in the context of sales tax and the issue was whether the nature of the transaction between the finance company and certain hirers within the State of Kerala was sales within the meaning of the Travancore-Cochin General Sales Tax Act (which stand of the Sales Tax authorities was rejected by the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, when a customer who is the owner of the goods enters into an agreement for financing the purchase of such goods, it is in effect a loan transaction and the lender is just given a license to seize the goods in case of breach/ default. 9.4. In the present case, the ownership of the goods vests with the customers and the Appellant merely finances the purchase of such products by the owner. The ownership solely vests with the customers and there is no clause in the agreement providing the customers an option to purchase the product at the end of payment of all installments. Therefore, by relying on the decision of the Hon ble Supreme Court in Sundaram Finance (supra) which has been relied upon in Bajaj Finance case, we hold that the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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