TaxTMI 
TaxTMI 
2025 (6) TMI 1168
X X X X Extracts X X X X
X X X X Extracts X X X X
....the category of "banking and other financial services" allegedly rendered by the Appellant, under Section 73(1) of the Finance Act alongwith total penalty of Rs.2,21,43,700/- under Section 76, Rs.40,000/- under Section 77(2) and separately Rs.42,79,00,000/- under Section 78 of the Finance Act, 1994 alone as penalty for extended period invoked in first show-cause notice by the Commissioner, in his above referred common order adjudicated against all four show-cause notices, has been assailed by the Appellant in the present appeal filed by the Assessee. 2. The other appeal filed by the jurisdictional Commissioner has questioned the legality of the order passed by himself as the Adjudicating Authority in dropping Service Tax on the "liquidity facility" in all four appeals that did not find concurrence by the Committee of Chief Commissioners in their Review Order. 3. Voluminous appeals records (in 8 volumes) of more than 5000 pages are filed by the parties covering the modalities of transaction carried out by the Assessee-Appellant M/s. Shriram Transport Finance Company Ltd. which happens to be a non-banking financial institution h....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had assigned the loan amount to different banks and also additionally had kept with it the charge of collection of monthly instalments (EMIs) from its customers whose loans were sold away/assigned to the banks from the period from April, 2008 to March, 2012 Appellant had either agreed to collect the said EMIs and other payables like penalties, delayed interest etc. for 'nil' or for a nominal fee while for the period post 2012 till March 2015, it had agreed to collect the same with certain percentage of money receivable that varied between 0.01% and 2% on case to case basis. Holding the same collection charge and other services rendered by the Appellant as banking and financial services as defined under Section 65(12) of the Finance Act, 1994. The above referred Service Tax demand alongwith interest and penalty etc. were made and subsequently confirmed in part and dropped it completely on liquidity facility. While Appellant has challenged the legality of such demand of Service Tax in asserting that it has not provided any such service, Respondent- Department as Appellant also asserted that liquidity facility is taxable and both parties are before us in these two appeals challenging....
X X X X Extracts X X X X
X X X X Extracts X X X X
....services in relation to collection of loan receivables as well as scrutinisation and other fees payables which Respondent-Department terms as 'banking and other financial services' while Assessee-Appellant claims it to be categorised, at the best, as "collection agency services" since such collection were made either through separate collection agency agreement or a composite agreement containing both terms of sale of assignment receivable and periodic collection of such receivables from borrowers but the claim of the Appellant is primarily confined to the fact that against such collection services either 'nil' charge was collected or nominal charge, though proposed, was not collected and there can't be any Service Tax without payment of a consideration that has been clarified also in Circular No. 62/11/2003-ST dated 21.08.2003 issued by the CBEC Board that when the service render is free of charge, it means the value is zero in the absence of any consideration, and the tax will have to be zero even though service is taxable. 4.2 Learned Commissioner had answered the above referred submissions made before him also in his Order-in-Original by noting in para 7 page 136 of his order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat collection of receivables is a service covered under 'banking and other financial services', though such collection can also be treated as 'collection agency service' that was defined under "Business Auxiliary Service" but since in the present case Appellant itself is a non-banking financial company, classification made in respect of such service of collection of receivable etc. rendered by Appellant would fall in the category of 'banking and other financial services', for which we concur with the findings of the Commissioner regarding classification of service rendered by Appellant. (c) Transactions whether amounts to service and its value (consideration)! Appellant claims that it was providing bundle of interconnected activities namely sale of debts and services associated therein, which are not to be treated as services that is liable to Service Tax and collection of receivable is just a part of it and a pre- condition during transaction of assignment of receivables and the entire nature of transaction was interconnected to each other. Even the Authorised Executives of some of the banks/financial institutions namely the assignees have categorically stated that their bank h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the date of assignment, all the assignors right title and interest in the facilities (loan extended) would be with the assignee namely the bank/financial institution as purchaser of assignment, as defined in para 5 of the said assignment agreement while para 2 of it absolved the assignor from any liability to be discharged in respect of assignee by incorporative provision to the effect that assignee shall not have any recourse against the assignor for any reason whatsoever including non-performance or non- compliance by the borrowers in terms of facility arrangements. This being the contractual obligation existing prior to 2012 and learned Commissioner having observed in para 7 and 7.1 of his order that the content of assignment agreement-cum-collection agreement for all period being similar in substance with minor difference in form, which observation he made after going through several sample agreements including that of HDFC bank executed on 22.03.2012, we are of the considered view that collection of money/receivables that is been done by Appellant is independent of the transactions concerning assignment which Appellant can collect or any other Agent appointed thought 'Collecti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....SCNs. Accordingly, I agree with the contentions of the noticee and hold that the weightage average of each particular financial year should be the most appropriate method for computation of taxable value of all transactions where servicer charges prescribed is either nil or nominal amount of Rs.100 to 10000/- 38.13 However, the noticee has applied the weightage average of 0.17% of POS for the entire period of dispute and calculated their total service tax liability of Rs.7.75 crores only for such agreements (Nil or nominal) in respect of SCN dated 23.10.2013 as against demand of Rs.91,02,97,000/-." (Underlined to emphasise) It would also be worthwhile to record his answer in accepting part of the request made by the Assessee that relates to weightage average but non-acceptance of their views in respect of taking average for the entire transaction period covering more than 5 years and accepting only last available transaction amount towards collection charges for the extended period. It is recorded as last sub-para of 38.13 of his order, it also reads: "I find that the calculation adopted by the noticee cannot be accepted in view of the fact that each transactions are factore....