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TMI Blog2013 (8) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... service is calculated as 10% of interest charged for levying tax. But the notification does not imply that rest of the interest is value of service. If the value of the service is more than 10% of the interest that amount can be quantified and such factor will enter "F" as part of taxable service. Only such an approach can be consistent with provision in Rule 6 (2) (iv) of Service Tax (Determination of Value) Rules, 2006 and the notification. The activity was the trading activity and Cenvat credit cannot be taken on input services used for such activity – relying upon Association of Leasing & Financial Service Companies Vs. UOI [2010 (10) TMI 4 - SUPREME COURT OF INDIA] - Parliament is competent to charge service tax on leasing services and interest received can be a good measure of the value of service – the order had taken note of the fact that the Union of India was trying to charge tax only on 10% of the interest which was found to be quite a reasonable measure for charging tax. We propose to arrive at the ratio E/F by including 10% of the interest on services like Hire purchase, Leasing and loan in both the factors "E" and "F" and excluding the balance from both the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removal] or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of [output) and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month; .. 3. In the present appeal, the amount to be reversed for the period Oec'09 to Sept'10 is under dispute. There is no mention of any inputs involved in the dispute. So, it is obvious that dispute relates to input services only and Rule 6 (3A) (b) (iii) can be suitably constructed for easy understanding. 4. The major line of business of the applicant is giving loan against hypothecation of vehicles. Such service is taxable under the category of "banking and financial services" as defined at section 65 (12) and made taxable by Section 65 (105)(zm) of the Finance Act, 1994. 5. There is a provision under Rule 6 of Service Tax (Determination of Value) Rules, 2006 to the effect that inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit to be reversed as per Applicant Percentage of credit to be reversed as per Revenue E Total value of exempted services provided 22924 116625 Total value of taxable services provided 99408 5707 F Total value of exempted and taxable services provided 122332 122332 E/F Total value of exempted services/ total value of exempted and taxable services in % 18.74% 95.34% 12. He submits that the applicant have reversed CENVAT credit as per the above understanding (i.e. 18.74%) which is in full compliance with law and the argument of Revenue is not sustainable. 13. During the hearing for stay petition the Counsel gave a further breakup of the incomes received during the year 2009-10 and claimed that the amount already reversed by them is higher than what is required because they claim that incomes on the following items cannot be considered to be receipt of either taxable or non-taxable income: S. No. Income Type Amount Involved (Rs. Lakhs) 1 Bill discounting 185.47 2 Sale of Assets 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion can be consistent with exemption under Notification 4/2006-ST and definition at Rule 2(e) of Cenvat Credit Rules, 2004. Notification No.04/2006-ST dt. 01-03-2006 provides as under: "In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (herein referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service, specified in sub-clause (zm) of clause (105) of section 65 of the Finance Act, that is to say the financial leasing services including equipment leasing and hire-purchase as defined in item (i) of sub-clause (a) of clause (12) of section 65 of the Finance Act, provided or to be provided to any person, from so much of the service tax leviable thereon under section 66 of the said Finance Act, as is equivalent to the service tax calculated on ninety per cent of an amount, forming or representing as interest, i.e. the difference between the instalment paid towards repayment of the lease amount and the principal amount contained in such instalment paid. Explanation. - This exemption shall not apply to any amount, othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia is trying to charge tax only on 10% of the interest which the Hon Court found to be quite a reasonable measure for charging tax. 20. There is one more issue about which a prima facie view is to be taken. That is the issue whether the items of income as listed in para 13 above is to be excluded from both the factors E and F as argued by applicant at this stage or is to be included in both the factors as argued by Revenue. This issue can be a little more complicated than the first issue examined. This is because the law appears to be silent on this issue. At least either side has not argued any provisions of law to deal with the matter. However we propose to deal with this issue taking an example of an assessee who provides taxable service and also does trading in goods and makes use of service of a banking company which input service is common to both the streams of activities. Can it be argued that the assessee can take credit of the entire credit on input service? Prima facie the answer appears to be in the negative because for the reason that credit can be taking only if it is either a taxable service or an exempted service. Since trading is not either the most reasona ..... X X X X Extracts X X X X X X X X Extracts X X X X
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