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TMI Blog2006 (11) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... hire purchase by a body corporate , and penalty of amount equal to the service tax and cess, under section 78, in addition to Rs. 200 per day during which failure to pay tax continues under section 76, and Rs. 1,000 under section 77. The period in dispute is July 16, 2001 to March 31, 2005. It is the contention of the applicants that they are not carrying on the business of hire purchase but that of hire purchase financing and therefore not liable to service tax under section 65(10), while it is the contention of the Revenue that the two expressions are synonymous for the reason that (a) in both cases, the hirer enters into agreement with the person who provides financial services to the hirer and (b) in lieu of such services, hirer pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has prima facie force in the light of the apex court's decision in Sundaram Finance Ltd. v. State of Kerala [1966] 17 STC 489, in which the distinction between hire purchase and hire purchase financing has been brought out. In paragraph 10 of the judgment, the apex court has held that a hire purchase agreement is normally one under which an owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel when he has paid a certain sum, or when the hire-rental payment has reached the hire purchase price stipulated in the agreement. But, there are variations when a financier is interposed between the owner of the goods and the customer, while in the case of hire purchase fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods, the property ostensibly passes under the documents embodying the transaction, but subject to the terms of the hiring agreement, which become part of the buyer's title, and confer a licence to seize. When a person desiring to purchase goods and not having sufficient money on hand borrows the amount needed from a third person and pays it over to the vendor, the transaction between the customer and the lender will unquestionably be a loan transaction. The real character of the transaction would not be altered if the lender himself is the owner of the goods and the owner accepts the promise of the purchaser to pay the price or the balance remaining due against delivery of goods. But a hire-purchase agreement is a more complex transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In all hire purchase financing agreements there are terms and conditions giving the finance company control over the goods as in the present case and, therefore, prima facie, the fact that the applicants herein have the right and control over the goods, as seen from the contract between them and their customers, would not lead us to conclude that they had entered into a hire purchase agreement with their customer. For the above reasons, we hold that prima facie the nature of the transaction between the applicants and their customers is a hire purchase finance transaction and prima facie hire purchase and hire purchase financing are not synonymous. Since the applicants have made out a strong prima facie case on merits in the light of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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