2015 (1) TMI 687 - AT - Service Tax

Waiver of pre deposit - Banking and Other Financial Services - Held that - decision of HUDCO 2011 (11) TMI 95 - CESTAT, AHMEDABAD cannot be straight away applied to the present case in view of the difference. Taking into account the fact that for the earlier periods, Commissioner himself had taken a view and dropped the proceedings, we consider it appropriate that at this stage, the appeal can be heard without any pre-deposit. Accordingly the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.

Summary

Issues:
1. Liability of service tax on penalty for premature loan repayment under Banking and Other Financial Services.

Analysis:
The judgment by the Appellate Tribunal CESTAT Bangalore addressed the issue of whether the penalty imposed for premature repayment of a loan by a term lending institution is liable to service tax under Banking and Other Financial Services. The appellant, a term lending institution under the State Financial Corporations Act, was engaged in providing term loans and charged a penalty for premature repayment. The demand for service tax of approximately &8377; 1.6 lakhs for the period 2009-10 was confirmed, and a penalty of &8377; 2,000 was imposed. The appellant contended that the impugned order was based on a previous decision involving different circumstances and that the penalty imposed by the appellant did not involve a processing of application or an element of service. The appellant highlighted that the percentage of penalty was fixed at 2% without considering other factors as in the previous case. Additionally, the Commissioner had dropped proceedings for earlier periods, indicating a difference in treatment.

The Tribunal acknowledged the differences between the present case and the previous decision involving HUDCO, where various factors were considered in determining the penalty for preclosure, unlike the fixed percentage penalty imposed by the appellant. Considering the Commissioner's earlier decision to drop proceedings for previous periods, the Tribunal deemed it appropriate to hear the appeal without requiring a pre-deposit. Consequently, the requirement of pre-deposit was waived, and a stay against recovery was granted during the pendency of the appeal. The Tribunal's decision emphasized the need to assess each case's specific circumstances and the absence of a uniform application of precedents, especially when significant differences exist in the factual and legal aspects of the cases.