TaxTMI 
TaxTMI 
2024 (5) TMI 1130
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....r (Appeals) confirming demand of service tax. 2. Learned counsel pointed out that service tax has been demanded under the head of banking and financial services in respect of charges collected by them in respect of i) Service charge received against WCTL ii) income from pre-payment for financial charges received against seed capital iii) registration charges on the one time settlement. Learned counsel pointed out that the appellants are engaged in providing banking and other financial services. The objection regarding taxability of amounts received under aforesaid heads was raised during audit objection, the learned counsel pointed out that these issues have been decided by Tribunal in their own case vide order No. 50303/2023 dated 13.03....
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.... "21. It is, thus, clear that where service tax is chargeable on any taxable service with reference to its value, then such value shall be determined in the manner provided for in (i), (ii) or (iii) of sub-section (1) of Section 67. What needs to be noted is that each of these refer to "where the provision of service is for a consideration", whether it be in the form of money, or not wholly or partly consisting of money, or where it is not ascertainable. In either of the cases, there has to be a "consideration" for the provision of such service. Explanation to sub-section (1) of Section 67 defines "consideration" to include any amount that is payable for the taxable services provided or to be provided, or any reimbursable expenditure, or an....
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.... against the aforesaid decision of the Tribunal, also explained the scope of Section 67 of the Act, both before and after the amendment, in the following words : "The amount charged should be for "for such service provided" : Section 67 clearly indicates that the gross amount charged by the service provider has to be for the service provided. Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charged has to be necessarily a consideration for the service provided which is taxable under the Act. By using the words "for such service provided" the Act has provided for a nexus between the amount charged and the service provided. Therefore, any amount charged wh....
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....hen the loan agreement is terminated prematurely. In fact, foreclosure charges seek to deter the borrowers from switching over to cheaper available sources of loan, as has been so clearly stated in the Circular dated 26 June, 2012 issued by the Reserve Bank of India. 36. The basis for charging foreclosure amount has also been explained by the Karnataka High Court in M/s. Hotel Vrinda Prakash and Another v. KSFC and Another [ILR 2008 KAR 1311]. The writ petitioner had borrowed a loan from the Karnataka State Financial Corporation but before the period of loan could expire made an application for foreclosure of the loan. The Corporation, however, demanded premium on the advance payment/foreclosure amount which demand was challenged i....
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....ing terms : "Foreclosure charges collected by the banks and non-banking financial companies on premature termination of loans are not leviable to service tax under "banking and other financial services" as defined under Section 65(12) of the Finance Act." ( emphasis supplied ) In view of the above decision, we hold that the service charges for pre-payment or foreclosure of loan amount by the customer cannot be treated as taxable service and is not chargeable to service tax. (iv) Service charge against Working Capital Term Loan: A perusal of the scheme for short term financing of Working Capital Term loan reveals that the scheme was meant for all small scale and medium scale industrial units financed by th....