TaxTMI 
TaxTMI 
2018 (10) TMI 217
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....ir of such plants. The appellants have entered into an agreement with Usha Martin Ltd. (UML) and Usha Alloys and Steels Division, a division of Usha Beltron Ltd, over a period of time. 2. The Revenue contended that the appellants are engaged in banking and other financial services, management maintenance or repair service, storage and warehousing service. Initially, a show-cause notice dated 6.2.2007 was issued to the appellants covering the period August 2005 to August 2006 and demand of service tax raised therein were confirmed. Subsequently, show-cause notices were issued for further periods and the demands were confirmed by the adjudicating authorities along with interest and penalties. Details of orders passed, amounts demanded and appeals preferred by the appellants are as follows: Appeal No OIO /OIA No. /Date Period Amounts demanded under various Heads (INR) Banking & Other Financial Services Management& Maintenance or Repair Services Storage and warehousing Services ST/496/2008 15/2007 9.10.2007 August 2005 to August 2006 32,40,622 20,18,865 72,452 ST/973/2009 90/2009 25.8.2009 August 2007 to September 2008 1,00,13,752 ....
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....ants only. The nature of the agreement also would indicate that the appellants have given to the lessee the plant on purely a lease-rent basis. Agreement dated 29.12.2006 also had similar clauses as mentioned in the agreement dated 11.7.2001 except for the fact that lease rent per month was revised. 3.1.1 The learned counsel submitted that the Ld. Commissioner has observed that the equipment is whether operational or financial are covered under 'Banking and Other Financial Services' and therefore, taxable. Ld. counsel has brought the attention of the Bench to Accounting Standards AS-19 to distinguish between a 'finance lease' and 'operating lease'. "A Finance Lease is a lease that transfers substantially all the risks and rewards incident to ownership of an asset." "An operating Lease is a lease other than a finance lease." "A lease is classified as a finance lease, if it transfers substantially all the risk and rewards incident to ownership. Title may or may not eventually be transferred. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incident to ownership." 3.1.2 The Ld. counsel also ref....
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....n-banking financial company, or any other body corporate or (any other person) in relation to banking and other financial services". Therefore, in respect of both the plant (1) leased out prior to 16.7.2001 and plant (2) set up in terms of agreement dated 29.12.2006, so service tax is leviable in terms of Section 65(105) (zm) of the Finance Act, 1994. 3.2 Ld. Counsel submitted regarding demand of service tax on Management, Maintenance and Repair services is concerned, the appellant entered into a separate agreement dated 30.12.2006 for operation and maintenance of the oxygen plant set up by them and owned by them. As per para 2 of the agreement, the appellants will maintain the oxygen plant themselves and M/s. UML shall pay the appellants the operations and maintenance charges at the rate of Rs. 15,40,000/- per month during the first year, Rs. 10,00,000/- per month during the second year and from third year onwards Rs. 13,40,000/- per month. The appellants being the owners of the oxygen plant set up and they only undertake managing, maintenance and repair services. Thus, they are providing services to themselves and not to any other person. Therefore, no service tax is leviable ....
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....ng to the issue No. (i), the learned Commissioner has contended that CBEC vide letter F. No.B-11/1/2001-TRU dt.9.7.2001 clarified that agreements entered before 16.7.2001 will not be liable to service tax provided the property/goods have also been received by the lessee prior to 16.7.2001. The Commissioner contended that the stamp paper on which the said agreement was made was purchased on 4.9.2001 as per the endorsement on the reverse side of the stamp paper. He contended that therefore, by any stretch of imagination, the agreement could not have been concluded before 16.7.2001 and that Shri Asith Gangopadhyaya in his statement dated10.8.2005 has admitted that the agreement was not signed on 11.7.2001. The appellants contended that it is not denied that the stamp paper was purchased on 4.9.2001, however, the agreement dated 13.7.2001 superseded an earlier agreement entered in the year 2000. The Ld. Commissioner was under the assumption that there does not exist any oral or written agreement. The Indian Contract Act recognizes both written and oral contracts. The appellants have submitted the following documents along with written submissions to substantiate their argument that ....
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....r the stay was vacated and hence, the agreement effective from 11.7.2001 was signed. However, the actual signature was taken at a later date. Going by the circumstances of the case, it is evident that the plant was in existence in the premises of M/s. UML well before 16.7.2001. Therefore, in view of the Board Circular cited above, the appellants cannot be charged to pay service tax under the heading 'Banking and Other Financial Services' for leasing of the plant to M/s. UML. 5.1.3. The counsel for the appellants has also taken a plea that the services rendered by them was only for leasing of the equipment and was not a financial lease. Therefore, they cannot be categorized under 'Banking and Other Financial Institutions'. They have tried to differentiate between finance lease and operating lease by taking recourse to Accounting Standards AS19 as cited above. We find that the Tribunal in the case of G.E. India, Industries Ltd.: 2008 (12) STR 609 in a similar situation where extrusion material was given on lease to Jain Irrigation, the Tribunal after looking into the terms and conditions of the agreement which are similar to the present agreement, set aside the demand. The T....
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....f leasing and hire purchase, the amount recovered as principal is not the consideration for services rendered but is credit to the capital account of the lessor/hire-purchase service provider. The interest/finance charges is the Revenue or income and is credited to the Revenue account. Such interest or finance charges together with the lease management fee/processing fee/documentation charges is the consideration for the service rendered and therefore, they constitute the value of taxable service and Service Tax is payable on this value. Accordingly, it is clarified that Service Tax in the case of financial leasing including equipment leasing and hire purchase will be leviable only on the lease management fee/processing fee/documentation charges (recovered at the time of entering into the agreement) and on the finance/interest charges (recovered in equated monthly installments) and not on the principal amount." 5.1.4 On going through the agreement, for establishment of VPSA based oxygen plant between M/s. Usha Beltron Ltd. (M/s. UML) and the appellants, we find at para 1.7 that subject to other provisions of this agreement, title to all oxygen plant equipment will remain vested ....