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Issues involved: Interpretation of Section 65(11) of the Finance Act, 1994 for taxation of ATM-related services, applicability of Service Tax on equipment leasing, registration and de-registration for banking and financial services, plea of limitation, quantification of tax liability.
Interpretation of Section 65(11) of the Finance Act, 1994: The case involved the rendering of ATM-related services by the appellants to banks and financial institutions, with a dispute period from 16-8-2002 to 31-3-2005. The lower authority demanded Service Tax based on the services falling under the definition of "Banking and other Financial Services" u/s 65(11) of the Finance Act, 1994. The contention revolved around whether the leasing of ATMs constituted "equipment leasing" under the said provision, which was crucial for tax liability determination. Applicability of Service Tax on equipment leasing: The Commissioner found that the appellants owned the ATMs, leased them to customer-banks, and provided electronic connectivity, collecting monthly charges. The argument was made for considering this as "equipment leasing" falling under "banking and other financial services." However, the appellants argued that for Service Tax to apply on "equipment leasing," it must be shown as a financial leasing service, which was not established in the show-cause notices or orders. Reference to literature from the Institute of Chartered Accountants of India was made, but not cited by the appellants, leading to a debate on the nature of the leasing service provided. Registration and de-registration for banking and financial services: The appellants had obtained registration for "banking and other financial services" before the dispute period but later applied for de-registration. The argument was made that services rendered before the introduction of Service Tax on ATM-related services should not be taxable. However, the department contended that registration was obtained well before the dispute period, making the appellants liable for tax during that time. The issue of time-bar against the tax demand was also raised, with the appellants claiming the notices were issued beyond the normal limitation period. Plea of limitation and quantification of tax liability: The show-cause notices invoked Section 73 of the Finance Act, 1994 for demanding Service Tax for the extended period. The appellants argued against the quantum of tax demanded, pointing out numerical errors in the assessable value calculation. The plea of financial hardships was not raised, and the tribunal directed the appellants to pre-deposit a specified amount within a given timeframe for compliance. Conclusion: The tribunal found no prima facie case against the demand of Service Tax on ATM-related services, considering the leasing of ATMs as falling within the definition of "banking and other financial services." The registration obtained by the appellants supported their liability for tax during the dispute period. The plea of limitation was not established, and the appellants were directed to pre-deposit a specific amount pending further proceedings.
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