2017 (11) TMI 1333 - AT - Service Tax

Valuation - includibility - finance charges - additional finance charges - Fleet Card issued by the appellant to the customer, who availed vehicle loan facilities from them, is for facilitating the customers to procure fuel from the outlets of petroleum companies, with whom the appellant-assessee had prior arrangement - claim of appellant is that these charges are nothing but interest - Held that - We perused the account statement of the appellant-assessee of one of the months during the material time. In May, 2009, the statement shows the amount charged by the appellant-assessee is exclusive of interest and other charges. However, interest for the month is also shown separately. Hence, the claim that finance charge and additional finance charge are interest is not correct. Such transaction between the appellant-assessee and the customer being not one of lending loan, the question of exclusion of Interest on Loan in terms of Board s Circular dated 17.09.2004 does not arise. In terms of agreement between the oil companies and the appellant-assessee, it is clear that the Fleet Card holder enjoys various privileges - the finance charge and additional finance charge are to form part of taxable value for taxable service of BOFS/Credit Card Services during the material period. Extended period of limitation - penalty - Held that - the case is of interpretation issue - The impugned order did not bring out sustainable reasons for invoking willful suppression, mis-statement etc., against the appellant-assessee - extended period cannot be invoked - penalty also set aside. Appeal allowed in part.

Summary

Issues:
Disputed tax liability on "Fleet Card Income" under various taxable services - Interpretation of "finance charge" and "additional finance charge" - Taxability under "Banking and Other Financial Services" - Extended period demand and penalty under section 78 - Original authority's decision vs. Commissioner (Appeals) decision.

Analysis:

1. The case involves eight appeals concerning the disputed tax liability on "Fleet Card Income" by an appellant-assessee engaged in finance operations as an NBFC. The Revenue contended that certain incomes, including "finance charges" and "additional finance charges," were taxable under "Banking and Other Financial Services" from specific dates. Show-cause notices were issued, and the original authority confirmed tax liability and penalties. The Commissioner (Appeals) later set aside the order, leading to appeals by both parties.

2. The appellant-assessee argued that "additional finance charge" equates to interest, citing relevant circulars and definitions. They emphasized that the income in question was akin to interest on loans given to customers, thus not subject to service tax. They also contested the demand for an extended period and penalty under section 78, highlighting the absence of prior claims on "finance charges."

3. The Revenue countered that "finance charge" and "additional finance charge" did not involve loan transactions but facilitated credit for fuel purchases under agreements with oil companies. They argued that the transaction did not resemble traditional loan arrangements and should be taxable under Credit Card Services, not exempt as interest on loans.

4. The dispute centered on whether the "finance charge" and "additional finance charge" constituted interest on loans or credit card services. The appellate authority examined the nature of "Fleet Card" transactions and agreements between the appellant-assessee and oil companies. It concluded that the arrangement did not qualify as loans but as credit card utilizations, making the charges taxable under Credit Card Services.

5. The appellate tribunal upheld the original authority's decision, ruling that the charges were part of the taxable value for BOFS/Credit Card Services. Consequently, the Commissioner (Appeals) decision favoring the appellant-assessee was deemed unsustainable, and the Revenue's appeal was allowed.

6. Regarding the demand for an extended period and penalty under section 78, the tribunal acknowledged the possibility of differing interpretations and the appellant-assessee's genuine belief in non-liability. It found insufficient grounds for willful suppression or misstatement, leading to the dismissal of the penalties and extended period demands.

7. Ultimately, the tribunal dismissed the appeals by the appellant-assessee, except for setting aside the demands for an extended period and penalties under section 78. The decision favored the Revenue's stance on tax liability for "Fleet Card Income" under Credit Card Services, emphasizing the non-loan nature of the transactions.

Judgment Delivery:
The appeal by the Revenue was allowed, and the decision was pronounced in open court on 14/09/2017.