TaxTMI 
TaxTMI 
2018 (9) TMI 312
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....hile the administrative charges in respect of these services were leviable to service tax. Appellant had had been availing the CENVAT Credit in respect of the input services received by them. However they did not reversed the credit as required in terms of Rule 6 of the CENVAT Credit Rules, 2004, on the ground that as per them the service was not an exempt service as defined under Rule 2(e). A show Cause Notice was issued to the Appellant demanding them to pay/ reverse the CENVAT Credit to tune Rs. 193,82,99,055/- for the period from 2008-09, 2009-10 & 2010-11. Interest was also demanded and penalty proposed in respect of the amounts not reversed. Commissioner has adjudicated the matter and confirmed the amount demanded by the show cause notice along with interest at applicable rate. He has also imposed mandatory penalty of the equivalent amount in terms of section 78 of the Finance Act, 1994. Against this order of Commissioner Appellants have preferred this appeal. 3. In their Appeal, Appellants have challenged the order of Commissioner, stating that Cash Credit/ Over Draft (CC/OD) services provided by them are not the exempt services as defined by Rule 2(e) of the CENVAT Credi....
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....law that they were entitled to discharge the reverse charge liability by credit therefore there is no question of delayed or short payment of Service Tax, hence there can be no demand for interest under Section 75. Since the issue under consideration is in respect of interpretation of law, no penalty should have been imposed on them. 4.3 Learned AR arguing on behalf of revenue submitted that the issue involved in the matter has been comprehensively considered by the Kolkata Bench of Tribunal in case of UCO Bank Vs Commissioner of Service Tax Kolkata [2014 (36) STR 1169 (T-Kol)], and they have held that "A simple reading of the definition of 'exempted services reveals that it also includes services that are exempt under section 66 of the Finance Act, 1994. In the present case, interest on overdraft facility and cash credit facility are exempted from service tax under section 66 of the Finance Act, 1994 by virtue of Notification No. 29/2004-ST dated September 22, 2004. Therefore, these services would definitely come under the scope of the definition of 'exempted services', hence, the argument of the learned CA that to attract rule 6(3) of the CENVAT Credit Rules, 2004, the ....
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.... mutual funds, surrender value of LIC policy and debentures or even the personal worth of account holder etc. 6.2 The definition of Banking and Financial Services (BOFS) as per section 65(12) of the Finance Act, 1994, at the relevant time is reproduced below: (a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or (commercial concern), namely:- (i) financial leasing services including equipment leasing and hire-purchase; Explanation.-For the purposes of this item, 'financial leasing' means a lease transaction where - (i) contract for lease is entered into between two parties for leasing of a specific asset; (ii) such contract is for use and occupation of the asset by the lessee; (iii) the lease payment is calculated so as to cover the full cost of the asset together with the interest charges; and (iv) the lessee is entitled to own, or has the option to own, the asset at the end of the lease period after making the lease payment. (ii) omitted; (iii) merchant banking services; (iv) securities and foreign exchange (forex) broking, and purchase o....
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....company to its customers is taxable service. Notification No 29/2004-ST dated September 22, 2004, which provides exemption in relation to these services is reproduced below: "In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts so much of the value of taxable service provided to a customer, by a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, in relation to, - (a) overdraft facility; (b) cash credit facility; or (c) discounting of bills, bills of exchange or cheques, as is equivalent to the amount of interest on such overdraft, cash credit or, as the case may be, discount, from the service tax leviable thereon under section 66 of the said Act, subject to the condition that the said interest amount is shown separately in an invoice, a bill or, as the case may be, a challan issued for this purpose." 7.2 From plain reading of the exemption notification it is quite evident that the said exemption notification do not exe....
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....eping in view the credit exposure norms and various other guidelines issued by the Reserve Bank of India from time to time. Some of the currently applicable guidelines are detailed in the following paragraphs. 1.4 Banks are now operating in a fairly deregulated environment and are required to determine their own interest rates on deposits (other than saving account) and interest rates on their advances. The interest rates on banks' investments in government and other permissible securities are also market related, Intense competition for business, involving both the assets and liabilities, together with increasing volatility in the domestic interest rates as well as foreign exchange rates, has brought pressure on the management of banks to maintain an optimal balance between spreads, profitability and long-term viability. The unscientific and ad-hoc pricing of deposits in the context of competition, and alternative avenues for the borrowers, results in inefficient deployment of resources. At the same time, imprudent liquidity management can put banks' earnings and reputation at great risk. These pressures call for a comprehensive approach towards management of banks'....
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....erest should be charged for loans up to Rs. 25,000. Penal interest may be levied for reasons such as default in repayment, non-submission of financial statements, etc. However, the policy on penal interest should be governed by well-accepted principles of transparency, fairness, incentive to service the debt and due regard to genuine difficulties of customers. (v) Banks should ensure that the total interest debited to an account should not exceed the principal amount in respect of short term advances granted to small and marginal farmers. The small and marginal farmers for the purpose shall include those with land holding of 5 acres and less. (vi) An appropriate ceiling may be fixed on the interest, including processing and other charges that could be levied on such loans, which may be suitably publicised." 7.4 From the above mentioned Master Circular issued by RBI, it is quite evident that banks are free to determine their own interest rate after taking into account all the administrative expenses and the cost of advancing the loans, cash credit or overdraft facility. However all the purpose of the customer, or the bank financial institution all the recoveries made agains....
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....ule 2(e) of the CENVAT Credit Rules, 2004, exempt services have been defined as to "means taxable services which are exempt from the whole of the service tax leviable thereon, and includes services on which no service tax is leviable under section 66 of the Finance Act;". Since in respect of these services the entire consideration received from the customer is exempt from payment of service tax these services would definitely be covered by the definition of exempt service as provided by this rule. 7.7 Courts have often employed the doctrine of pith and substance to understand the true nature of any entry in legal instrument. Applying the same doctrine for ascertain the true nature of exemption provided by the said notification, we are of the view that interest is not only the major component but is the only component for providing the said CC/OD services. What so ever minor amounts appellants may have charged towards the administrative fees etc., will not in fact change the nature of exemption provided to the said services. Further even appellant cannot claimed that these services were being provided by them for a consideration of administrative fees. Even the customer while opt....
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....l determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely:- (i) and (ii)... (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods [and their clearance up to the place of removal] or provision of exempted services = (M/N) multiplied by P, where (M) denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, (N) denotes total value of (output) and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and 1 (P) denotes total CENVAT credit taken on input services during the financial year;" 8.2 Since we have held that the CC/OD services provided by the appellant are exempt from payment of service tax to the extent of interest recovered, the view of Commissioner in including the quantum of interest recovered against the provision of said services for determination of the amount to be reversed in term of Rule 6(3A)(c) of the CENVAT Credit Rules, 2004 cannot be faulted with. ....