TaxTMI 
TaxTMI 
2006 (11) TMI 584
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot;financial leasing services including equipment leasing and hire purchase by a body corporate", and penalty of amount equal to the service tax and cess, under section 78, in addition to Rs. 200 per day during which failure to pay tax continues under section 76, and Rs. 1,000 under section 77. The period in dispute is July 16, 2001 to March 31, 2005. It is the contention of the applicants that they are not carrying on the business of hire purchase but that of hire purchase financing and therefore not liable to service tax under section 65(10), while it is the contention of the Revenue that the two expressions are synonymous for the reason that (a) in both cases, the hirer enters into agreement with the person who provides financial s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the goods for non-payment of the loan and is not the owner of the company, has prima facie force in the light of the apex court's decision in Sundaram Finance Ltd. v. State of Kerala [1966] 17 STC 489, in which the distinction between hire purchase and hire purchase financing has been brought out. In paragraph 10 of the judgment, the apex court has held that a hire purchase agreement is normally one under which an owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel when he has paid a certain sum, or when the hire-rental payment has reached the hire purchase price stipulated in the agreement. But, there are variations when a financier is interposed between the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the real transaction is a loan of money secured by a right of seizure of the goods, the property ostensibly passes under the documents embodying the transaction, but subject to the terms of the hiring agreement, which become part of the buyer's title, and confer a licence to seize. When a person desiring to purchase goods and not having sufficient money on hand borrows the amount needed from a third person and pays it over to the vendor, the transaction between the customer and the lender will unquestionably be a loan transaction. The real character of the transaction would not be altered if the lender himself is the owner of the goods and the owner accepts the promise of the purchaser to pay the price or the balance remaining due aga....