TaxTMI 
TaxTMI 
2008 (7) TMI 29
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.... w.e.f. 20.12.2002 and received Rs.8,33,333/- per month as user charges. Revenue proposed to treat this as banking and financial service and two show cause notices were issued which culminated into confirmation of demand for service tax amounting to Rs.25,96,626/- with interest and equal amount of penalty and penalty of Rs.100/- per day till the date of full payment, subject to maximum of Rs.25,96,626/-. The service tax has been demanded for the period Dec.-02 to March-04 and April-04 to Dec.-05. While the original adjudicating authority confirmed the demand, on appeal, the Commissioner (Appeals) set aside the OIO and allowed the appeal and Revenue has filed this appeal against the order of Commissioner (Appeals). 2. Heard both the sides. ....
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....oods on lease basis on account of financial constraints of such customers". Appellant only collected interest on unpaid amount of credit, and charged no amount on account of lease management fee, processing fee or documentation charges. Activity confined to own products, and appellant not professional in leasing business for any other product. "Interest on loan" not to form part of value of taxable service in view of Explanation 1 to Section 67 of Finance Act, 1994 inserted w.e.f. 10.9.04 and Circular No.80/10/2004-S.T. dt.17.9.04 - Demand not sustainable". 3. The relevant extracts of the definition of Banking and Financial Service under Section 65 of the Finance Act, 1994 are given below: Section 65 (2) "banking and financial service- m....
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....of the lease itself. In the instant case, the agreement is only for the period of 35 months during which a monthly user charge is required to be paid and agreement does not provide for transfer of the assets at the end of the term. Further from the agreement it is also seen that all risks and rewards incidental to the ownership have also not been transferred and ownership of the asset and effective control of the assets remain with the applicant in this case. Further, lease is for a short period of 35 months extendable to another period of 2 years and has no relation to the economic life of the asset which is invariably a consideration in lease. Further, the Board in Circular B/II/I/2000/TRU, dt.9.7.01, has clarified as follows: "2.1....