Coordinate Bench conflict on commitment charges taxability led to Larger Bench reference, leaving service tax liability unresolved.

Conflicting coordinate Bench decisions on the service tax treatment of commitment charges collected by a bank prompted a reference to a Larger Bench. One view treated the charges as consideration for the bank's contractual commitment to keep sanctioned funds available, while the other applied judicial discipline and declined to decide the merits in light of existing divergence. The Bench concluded that a fresh final ruling on taxability could not properly be recorded in the present proceedings and that authoritative resolution was required by a Larger Bench. The substantive question whether commitment charges are taxable service consideration or akin to interest therefore remained unresolved.

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Issues: Whether, in view of conflicting coordinate Bench decisions on the taxability of commitment charges collected by a bank, the matter required reference to a Larger Bench, and whether any final view on service tax liability could be recorded in the present proceedings.

Analysis: The Members noted that the controversy concerned commitment charges collected in relation to banking and financial services and that prior Tribunal decisions had taken divergent views on whether such charges were taxable or were in the nature of interest. One Member held that commitment charges were consideration for a taxable service, being payment for the bank's contractual commitment to keep the sanctioned loan available. The other Member, relying on judicial discipline, declined to decide the merits because conflicting coordinate Bench rulings were already on record and the matter ought to be considered by a Larger Bench to restore certainty in law. In consequence, no final majority adjudication on the substantive taxability question emerged from the Bench.

Conclusion: The matter was held to require placement before the Hon'ble President for constitution of a Larger Bench, and no conclusive determination on the taxability of commitment charges was finally returned by the Bench as constituted.

Final Conclusion: The proceedings concluded only with a reference for authoritative resolution of the conflict, leaving the substantive service tax dispute unresolved at this stage.

Ratio Decidendi: Where co-equal coordinate Bench decisions on the same tax issue are in conflict, judicial discipline requires reference to a Larger Bench rather than a fresh merits determination by the later Bench.

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