TaxTMI 
TaxTMI 
2018 (7) TMI 622
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....cle, Chennai, alleging non-payment of service tax on charges/fees received out of the profit on sale of securitization of future receivables. 2. The appellant is a Non-Banking Financial Company engaged in extending finance facilities in the area of vehicle finance, including that of equipment through hypothecation, leasing and hire-purchase modes. The appellant provides taxable services under the categories of Banking and other financial services, Business Auxiliary Services and Business Support Services. The appellant is an assessee on the file of the service Commissionerate, Chennai. 3. The transaction carried out by the appellant as Non-Banking Financial institution would result in receiving the finance facilities extended by it to var....
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....rther inspite of the explanation given by the appellant, a writ petition was filed in W.P.No.35241 of 2016 challenging the show cause notice dated 9 June 2016. 7. The appellant challenged the show cause notice before the Writ Court on the ground that the profit element, which is termed as Excess spread of income on sell-down amount is merely the difference between the actual interest collected on a hire-purchase transaction and that paid to the financial institutions, who had purchased the debtors from the company. It is the grievance of the appellant that the show cause notice considered the aspect of sale of securitization/sell-down of future receivables as being liable to tax and thus calculated the service tax liability. 8. The learne....
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....nt, there is no question of interdicting the proceedings during the show cause stage. Discussion 11. The only question that arises for consideration is as to whether the appellant has made out a case for quashing the show cause notice issued by the first respondent. 12. The appellant is providing service under the category of banking and other financial services. The primary business of the appellant is providing Loans, Hire Purchase and Financial Leasing, which includes, Equipment Leasing to their customers. The appellant during the course of its business enters into loan / hire-purchase / leasing transactions with its customers. The appellant receives the principal and interest amounts in equated monthly instalments. The appellant secu....
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....rom the customers and paid to the assignee is a profit to the appellant in the form of 'Excess Spread Income Sell-down on securitization / sell-down. Similarly, the Collection Efficiency Fee is paid by the assignee to the appellant by judging the efficiency shown in collecting the Equated Monthly Instalments from the customers. As per the Service Agreement, when the appellant collects above 98.76% of the Equated Monthly Instalments from the customers, they are eligible for the 'Collection Efficiency Fee'. This fee is paid on a monthly basis at a rate which varies from 0.05% to 1.25% of the principal amount collected during the month when the collection of receivables was made in the range of 98.76% to 100%. The respondent consid....