Delayed payment charges are not taxable value where they are penal in nature and not consideration for service.

Delayed payment charges recovered from customers on overdue instalments were treated as penal charges for late payment, not as consideration for a taxable service under Banking and Other Financial Services. The analysis relied on departmental clarification that such delayed payment charges are not charges for providing taxable services and therefore do not form part of the taxable value. On that basis, incidental charges recovered on delayed instalments were also excluded from the tax base, and no service tax was payable on them.

---

---

Issues: Whether delayed payment charges recovered from customers on delayed instalments are includible in the taxable value for levy of service tax under the category of Banking and Other Financial Services.

Analysis: The amount recovered as delayed payment charges was held to be in the nature of penal charges for delay in payment and not consideration for the provision of service. Reliance was placed on the departmental clarification stating that delayed payment charges are not charges for providing taxable services and are not includible in taxable value. The same principle was applied to the appellant's incidental charges recovered on delayed instalments.

Conclusion: The delayed payment charges are not includible in the taxable value and no service tax is payable on such incidental charges.

---