TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 1007
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.... demand of Rs. 62,81,48,000 against the first demand of Rs. 76,78,00,000 and limited the confirmation in the other two to Rs. 5,38,000 and Rs. 4,33,000 respectively while ordering recovery of interest and imposing penalty of Rs. 62,81,48,000 under section 78 and appropriate penalties under section 76 of Finance Act, 1994. 2. In the impugned order, the adjudicating authority placed reliance on the clarification issued by Central Board of Excise & Customs in F No. B.11/1/2001-TRU dated 9th July 2001 and the decision of the Hon'ble Supreme Court in Association of Leasing and Financial Service Companies v. Union of India [2001 (20) STR 417 (SC)] to hold that service tax liability arises on the finance/interest charge component of the equated monthly instalment paid by lessee/hirepurchaser. Accordingly, the benefit of notification no. 4/2006-ST dated 1st March 2006, the confirmed demand was scaled down from the proposal in the show cause notices. 3. Mapping out the cavil, Learned Counsel for appellant submits that, of the three components that make up the receipt from their customers, there is no dispute that recovery of principal is beyond the scope of taxability and that tax has bee....
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....ion at the end of the submissions of Learned Counsel that make up the first pillar. Here again, we prefer not to be diverted by the purported flaws in the thought process of the adjudicating authority. There is a tax and a path to that tax; as long as the taxing authority has arrived at the destination from the point of origin, his meanderings and jaywalking are not of material concern. The world of taxation is one of hard-boiled reality which suffers the consequence of frailty of expression both in promulgating intent and in articulation of logical thought - the one by the sovereign legislature and the other by the tax collector. In the present dispute, the first is not the problem; the second maybe but, to the extent that the recovery conforms to the intent, is irrelevant. 7. According to him, the decision of the Hon'ble Supreme Court has, indubitably, brought hire-purchase and financial transactions within the fold of loans and lending. That being the ratio of the decision re Association of Leasing and Financial Service Companies, it is his submission that, had the provisions of section 67 of Finance Act, 1994 and the Service Tax (Determination of Value) Rules, 2006 been brough....
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....f the Hon'ble Supreme Court in Commissioner of Income Tax v. Sirpur Paper Mills [(1999) 237 ITR 4] and of the Hon'ble High Court of Bombay in Commissioner of Income Tax v. Mahindra Sintered Products Ltd [252 ITR 576]. We cannot but be in agreement with Learned Counsel that an exemption notification cannot determine taxability and if the adjudicating authority has made that premise, he is in error. However, we note that he has merely pointed out that notification no. 4/2006-ST dated 1st March 2006 would be rendered infructuous if the proposition of exclusion from tax were to be accepted and found that course of action to be repugnant as a creature of the very same statute that parented the exemption notification. Siblings may bicker, they may ignore one another but they cannot wish away the existence of the other. Those are the horns of dilemma that confronts the tax authority in this peculiar situation and there only two ways out of a dilemma: take hold of the horns or pass betwixt them. He chose the former. 11. In the decision of the Tribunal in Karur Vysya Bank Ltd v. Commissioner of Central Excise, Trichy [2015-TIOL-635- CESTAT-MAD] and in Jayalaxmi Credit Company Ltd v. Commis....
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....scribed in law. According to him, appellant is engaged in the business of lease and equipment financing which is squarely covered by the definition of 'banking and other financial service' in section 65 (12) of Finance Act, 1994, that the decision in re Association of Leasing and Financial Service Companies upheld the coverage under section 65 (105) (zm) of Finance Act, 1994 but had not approved the exclusion of interest income now claimed by the appellant, that the exemption claimed under notification no. 4/2006-ST can be conceded only if the validity of the levy contained in the notification was accepted and that the existence of that truncated levy was not erased by any judicial ruling. 13. It is now well settled in law that hire purchase is but a loan: that the hirer obtains goods from a seller and the banking and financial institution finances the purchase of goods with the title firmly resting with the hirer and the institution vested with right to acquire possession of the goods, through judicial intervention, in the event of non-payment of contracted amount. This differs substantially from operating lease. Therefore, the taxability of the service is not in question. The de....
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....y processing/management fees can be subjected to tax. 17. The claim of appellant is that such charges as are subjected to tax have already suffered the burden; the ostensible base for this claim is the compliance on the processing fee collected upfront. Interest is an allencompassing expression used in the banking industry to describe the recompense for lending money besides the recovery of principal along with interest or at some agreed upon point in time. This interest must, to meet the commercial objective of profit, pay for the cost of funds deposited with the financial institution and other overheads. To the extent that the bank or institution is solely in the business of lending, such expenses are a charge on the income and interest earned is only that. 18. However, while conferring the mantle of lending on hire purchase and leases, other than operating leases, the Hon'ble Supreme Court in re Association of Leasing and Financial Services added another factor of income, viz., processing or management fee, to interest and principal and held it liable to tax. The judgement also distinguished these loans from normal bank loans by reference to banking companies undertaking such ....