2007 (11) TMI 372 - AT - Service Tax

Banking and other Financial Services - Hire Purchase - service tax during the period from 16.7.2001 to 31.12.2003 - Held that - the appellants are simply lending money as per the records available and receiving interest. The lending during the relevant period was not a taxable service. Even if is held that the appellant is giving money under the Hire purchase Scheme it is clearly seen that the Mumbai Bench Hire purchase Scheme , it is clearly seen that the Mumbai Bench of the CESTAT in the case of Bajaj Auto Finance- 2007 -TMI - 1546 - CESTAT,MUMBAI has clearly drawn a distinction between Hire purchase Service which is Taxable and Hire purchase Finance Service which is not a taxable service. In any case, it is very clear that the appellants have not rendered the services of Hire purchase

Summary

Issues: Alleged provision of banking and financial services without payment of service tax, legality of the original order, applicability of penalties.

Analysis:

The appeal was filed against an Order in Revision passed by the Commissioner of Central Excise, Mangalore, alleging that M/s. Praveen Autofin Pvt. Ltd. provided banking and financial services without paying service tax. The Assistant Commissioner initially dropped the proceedings, but the Commissioner, under Section 84 of the Finance Act 1994, reviewed the order and held the original order as not legal and proper. The Commissioner demanded a sum of Rs. 3,37,771 for the period in question, along with interest and various penalties for non-compliance.

During the proceedings, it was argued that the company primarily lent finances to individuals for vehicle purchases and collected interest, asserting that they were not engaged in banking and financial services as alleged. The Revenue contended that the company's activities fell under "Hire purchase Services" due to agreements with borrowers. However, the original authority found these agreements invalid under the Hire Purchase Act, thereby excluding the services from taxable services. Disagreeing with this finding, the Commissioner upheld the duty liability, leading to the appeal.

Upon careful consideration, the Tribunal found that the company was merely lending money and receiving interest, which did not constitute a taxable service during the relevant period. Reference was made to a Mumbai Bench decision distinguishing between taxable Hire purchase Service and non-taxable Hire purchase Finance Service. It was concluded that the company did not provide Hire purchase services but only lent money, thus not falling under the taxable category of banking and financial services. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, determining that the activities did not amount to taxable services, thereby overturning the Commissioner's decision and relieving the appellant of the levied penalties and tax liability.