Service tax on loan portfolio assignment and servicing saw only partial waiver of pre-deposit and conditional interim stay.

In a service tax dispute over differential interest earned from assignment and servicing of loan portfolios, the Tribunal treated the arrangement as involving actionable claims and observed that where the assignor continues to recover amounts and remits principal and interest to the assignee, the retained differential interest may be regarded as consideration for servicing. On the material then available, the appellant did not establish a strong prima facie case for full waiver of pre-deposit. Questions of limitation and penalty were left for fuller examination at final hearing. Partial conditional waiver of the balance pre-deposit and interim stay were granted subject to deposit of the amount directed.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery pending appeal in a dispute over service tax on differential interest earned from assignment and servicing of loan portfolios.

Analysis: The transaction was examined as an assignment of actionable claims arising from unsecured microfinance loans. The order noted three possible structures of assignment and servicing, and held that where the assignor continues to recover amounts and remits principal and interest to the assignee, the differential interest claimed to be retained by the assignor could be treated as consideration for servicing. On the material then available, the appellant was held not to have made out a strong prima facie case on merits. At the same time, the questions of limitation and penalty were considered matters for fuller examination at the final hearing. In view of the dispute and the admitted normal-period demand, the Tribunal fixed a substantial partial pre-deposit and granted interim protection on compliance.

Conclusion: The appellant was granted only partial relief by way of conditional waiver of the balance pre-deposit and interim stay, subject to deposit of the amount directed.

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