9911796707
TMI Blog2015 (6) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements/contacts, the Appellant had been approached by the respective customers for procuring/purchasing a vehicle, (except agreement dated 22.03.2000 between the Appellant and M/s.Shiva Cement Ltd. which relate to lease of equipment). We find that the customers were required to pay the amount/value shown in the schedule-II of the agreements in monthly installments for the period specified in schedule-III agreed between the appellant and the customers. We find that most of these transactions are not supported with purchase and allied documents by which it could be ascertained as to the true intention of the parties in advancing/purchasing the equipment/vehicle. Even though theoretically it has been argued that the equipment/vehicle was purchased by the appellant and thereafter leased to the customer's against. lease rent, but examining such agreements, we noticed that some amount was initially paid, thereafter, the remaining amount was paid by the appellant to the dealer and the initial payment is described as down payment, margin money, etc., but it is not clear in all cases as who had paid this initial payment. In the event such margin money is paid by the customer, and from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of client-banks and hence classifiable under BAS. As held in Pagaria Auto centre's case, it is necessary to examine/scrutinize the transaction to ascertain whether it is BAS or otherwise. Therefore, this issue also needs to be remitted to the Ld. Adjudicating authority for consideration afresh. Non deposit of amount collected as service tax - It has not been substantiated by the appellant as to how the said contingency deposits had been collected from the customers, that is, whether it was collected in lump sum or was shown as deposits in the respective agreements/contracts or Bills raised by the appellants or any other manner during the relevant period. Advancing the bare claim that collection was towards contingency deposit could not lead to any conclusion that these amounts have been collected as deposits, not as representing service tax as alleged by the department since at the initial stage of investigation the said facts were admitted by the Assistant Vice President (AVP) of the appellant/ Thus, it is necessary to lead more evidences by the appellant to substantiate their claim that the amount of ₹ 69,52,945/- which was collected from the customers/clients were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period from 01.04.2002 to 31.03.2007. Also, it was alleged that they have collected an amount of ₹ 93.00 Lakhs as service tax from their customers which is recoverable, under section 11D of Central Excise Act, 1944 as applicable to the Finance Act,1994. On adjudication, the Ld. Commissioner had confirmed the demand of service tax and education cess ₹ 4,64,49,133/- and imposed equivalent penalty under section 78 and penalty of ₹ 5,000/- under section 77 of the Finance Act, 1994. Besides, he has directed recovery of interest and also the recovery of collected service tax amount of ₹ 93.00 Lakhs in terms of section 11D of Central Excise Act read with Section 73A of Finance Act, 1994. Aggrieved by the said order, the assessee-appellant are in Appeal. 3. The Ld. Commissioner has dropped Service Tax demand of ₹ 37,74,26,080/- and education cess.of ₹ 50,18,780/-. Aggrieved by the same, the Revenue is also in Appeal. 4.1 At the outset Shri Ravi Raghavan, Ld.Advocate for the assesse-appellant had submitted that the assesse-appellant is a Non-Banking Financial Company(NBFC) engaged in the business of financing of assets including vehicles by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assignment of the contracts/agreements, with their customers he has submitted that ownership of the asset at all times vests with appellant, and in the agreement no where it stipulates that the clients have the option to purchase the asset on expiry of the lease agreement. Also, the agreement clearly states that the clients cannot capitalize the vehicles/assets leased in their balance sheets. From this it is clear that the assets/vehicles provided on lease basis by the appellant are owned by it and the customers/clients do not have the option to purchase the vehicles/asset on expiry of the contract. The customers can only renew the contract for a specified period and can take the goods again on lease from the appellant. These services could be taxable under the category of 'supply of tangible goods' introduced subsequently and made chargeable to service tax but not under 'banking and other financial services'. 4.5 Further disputing the demand of ₹ 305.91 lakhs confirmed on 'hire purchase' services, the ld. Advocate has submitted that the appellant are not rendering any activity of 'hire purchase'. It is the submission that the income show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance on the judgement of Hon'ble Rajasthan and Allahabad High Court in the cases of Padma Devi . Ors. Vs. Gurbakhsh Singh Ors, AIR 1973 Raj 317 and Babu Singh vs. Champa Devi Ors. AIR 1978 All 90. The Ld. Advocate also placed heavy reliance on the judgments of Hon'ble Apex Court in Sundaram Finance Ltd. v. State of Kerala AIR 1966 SC 1178, and the Tribunal in Kusulava Finance Ltd. v. CCE 2008 (10) STR 150 (Tri-Bang) affirmed by Hon'ble Supreme Court as reported in 2010 (19) STR 175 (SC) and Bajaj Auto Finance Ltd. v. CCE - 2007 (7) STR 423(Tri-Mum) affirmed by the Supreme court reported at 2008 (10) STR 433(SC). It is his submission that the ratio of these decisions are squarely applicable to the facts of the cases. 4.6 The Ld. Advocate has submitted that no service tax is payable on contracts entered prior to 16.07.2001 involving demand of ₹ 108.25 Lakhs. He has submitted that assuming that the Appellant had been undertaking the activity of hire purchase and financial leasing, even then service tax is not payable in respect of hire purchase contract and financial leasing contracts for the contracts entered into prior to 16.07.2001. In this regard he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases, only those amounts which are collected as representing service tax are to be deposited. Therefore, the amounts which were collected as contingent deposit are not covered under the provisions of section 11D of Central Excise Act, 1944, in support of which the Ld.Advocate referred to the judgement in the case of CCE vs. Mahindra Mahindra Ltd. - 2001 (132) ELT 632. 4.8 It is his submission that if at all any amount that could be recoverable under section 11D of CEA,1944 then it could be only ₹ 7,54,659/- and not ₹ 93.00 Lakhs as confirmed by the adjudicating authority. 4.9 Rebutting the arguments advanced by the Ld. Spl. Counsel for the Revenue that securitization transaction is classifiable under section 65(12)(a)(v) or section 65(12)(a)(ix) of the Finance Act,- 1994, the Ld. Advocate submitted that the said additional grounds taken by the department at this stage is inadmissible as no such ground was either alleged in the show cause notice nor discussed in the impugned order of the Ld. Commissioner. It is his submission that the show cause notice has only demanded service tax on the total financial income shown in the balance sheet of appellant and during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rer of the goods has the option to purchase the goods on payment of periodical installments. In support he has referred to the judgements of Sundaram Finance, Kusalava Finance, Bajaj Auto Finance (supra). 4.11 The ld. Advocate further submits that the Commissioner has rightly dropped the demand on operating lease (Rs.673.20 Lakhs). He has submitted that in the case of operating lease, the vehicles are owned by the appellant and given on lease to the customers. He has submitted that the transaction is in the nature of deemed sale as provided under Article 366(29A) of Constitution of India. The 46th amendment to the Constitution of India empowers the states to levy sales tax/VAT on transaction in the nature of right to use goods which were earlier not excisable to sales tax as such transaction are not covered by the definition of sale as provided in Sale of Goods Act, 1930. The appellant has been paying sales tax/VAT under the respective state laws. In the event it is chargeable to Service Tax then the present transaction would be leviable to tax under supply of tangible goods brought into effect from 16.05.2008. 4.12 The ld. Advocate further submitted that the ld. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done by the SPV and purchasing banks/financial institution as contended by the special counsel for the department. 4.14 He has further submitted that after sale of the financial assets there is a service element which could either be done by the buyer himself or the buyer may appoint either the seller of the securities or a third party to undertake activities of collection, recovery, accounting of the installments due from the customers. For such activities which are in the nature of rendering service/separate agreements are entered into for a consideration. He has categorically submitted that during the relevant period, the assesse-appellant had undertaken in respect of securitization transaction only and they did not undertake the activity of collection, recovery, accounting of the installments due from the customers etc. after sale of such securities. The appellant had neither charged nor collected any service charges for the same. The appellant submits that in respect of the securitization agreement entered into for the subsequent periods, it has entered into with separate service agreement for a separate consideration on which service tax has been discharged. In the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authority has erroneously confirmed the demand of service tax of ₹ 58,19,425/- under the category of BAS during the period 2003-2006. It was confirmed against the appellant on the amount received by it as collection commission which is paid by the banks to appellant for recovery of EMIs from various borrowers of such banks. The adjudicating authority while confirming the demand on this count has held that the appellant is acting as collection agents for the banks and is promoting and marketing the services of such banks. He has submitted that the ld. Commissioner has failed to consider the actual activities undertaken by the appellant. The allegations in the show cause notice in this regard is vague as no particular sub-heading under which the activity of collection commission is held to be liable to service tax has been alleged. Referring to the definition of 'Business Auxiliary Service' as was in existence w.e.f. 01.07.2003 and amended thereafter, the ld. Advocate submitted that the burden of proof that the activities were covered under 'Business Auxiliary Service' rests on the revenue. In support he has referred to the judgement of the Kerala Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2006. In support he has referred to the judgement of the Tribunal in the following cases:- Fifth Avenue v. CST - 2009 (15) STR 387(Tri.Chen) Wings Group of Companies v. CCE - 2008(12) STR 287(Tri.Bang) S.R.Kalyanakrishnan v. CCE - 2008 (9) STR 255(Tri-Bang) 4.20 The ld. Advocate further submitted that management and consultancy fees is also not liable to service tax under the category of BAS. The said fees were received on account of differential interest. The ld. Commissioner has rightly dropped the demand as the said amount received by the appellant on account of difference in the Fixed Deposit rate and applicable discount rate. The department has failed to establish as to how the aforesaid amount received by the appellant could be taxable under the category of BAS. 4.21. Further, he has submitted that the ld. adjudicating authority has confirmed the demand on management fees, penal interest and termination charges. The ld. Advocate submits that penal interest is in the nature of penalty and involves no provision of service, accordingly no service tax is payable. In support, he refers to the Circular F.NO.137/1/2008-TRU dated 29.2.2008. Also he has referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in the proceedings incorporated in the memorandum of association. He has submitted even in the AGM held on 23.07.2008 as per clause 6, it is mentioned as business of equipment leasing, hiring, hire purchase and asset based finance of all kinds. Hire purchase finance or operating lease other than financial leasing are not shown therein. He has further submitted that as per the Hon'ble Supreme Court's judgement in Sundaram Finance's case the fundamental difference between hire purchase finance agreement and hire purchase agreement is that in case of the former the title to the goods vests on the purchaser right from the beginning and the hire purchase finance company has the right to seize the goods in case of default in non-payment of the loan by the purchaser; in case of latter the title to the goods remained with the hire purchase company which bails the goods to the hirer in return of periodical payments. Hire purchase is taxable under banking and financial service defined under section 65 (12((iv) of the Finance Act, 1994. He has submitted that in all the agreements under different periods, in their compendium, the appellant is always the owner of the equipment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est) for 10 years period. The NBFC 'M' however, provides the service of collecting the principal + interest from three real estate promoters and distribution of annual installment to 100 holders of securities against service charges, thus securitization is a financial service. 5.3 He submits that major component of service tax demand, that is, nearly ₹ 18.00 Crores is on this account of securitization service. Refuting the argument that gain on account of securitization is not a taxable service and the appellant did not create the securities, but sold the asset bagged loans or actionable claims to IDBI, who created the security and sold the same, it is his submission that this argument is not plausible because of the fact that if the appellant did not create and sale securities, gain on securitization would be a gain for IDBI and not to the appellant. Another, inconsistency is that gain on securitization of the appellant is claimed for two financial years i.e. 2002-03 and 2003-04 and not for any other year during the period of dispute. It is unlikely that such a structural change in their business and resultant income would have taken place for two financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments, Operating lease agreements, Hire Purchase Finance Agreements, Loan against Hypothecation. 8. The ld. Commissioner after discussing the meaning of 'banking and other financial services' as prescribed at section 65(12) of the Finance. Act,1994 and the explanation inserted to the said provision with effect from 01.06.2007, Board's circular dt. 09.07.2001 and 28.02.2007, the judgements of the Hon'ble apex court in Federation of the Hotel and Restaurant Association of India Vs. union of India (1989) 3 SCC 634, Gannon Dunkerley's case 1993 1KTR-178 Builders Association case(1993 1KTR 169 concluded that 'financial leasing' , 'equipment leasing', and 'hire purchase' are taxable services under the category of banking and other financial services with effect from 16.07.2001; whereas, 'operating lease', 'loan against hypothecation', and 'hire purchase finance' are not taxable under the category of 'banking and other financial services'. 9. Before proceeding ahead, it is necessary to refer to the meaning of the taxable entry, namely, 'banking and other financial services', as prescribed at sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate' has the meaning assigned to it in clause (7) of section 2 of the Companies Act, 1956. Briefly, body corporate means a private limited, public limited company or a Government company. Such companies should be either a banking company or a financial institution or non-banking financial company to come under the tax net. In other words individuals, proprietorship or partnership firms will not come under the tax net. The leasing or hire-purchase may be of motor vehicles, machinery and equipment or other goods. 2.1-2 In the case of leasing or hire purchase, it is understood that the general business practice is as follows: The service provider enters into a leasing or hire-purchase agreement with the lessee or hire-purchaser. At the time of entering into the agreement, they collect a charge called lease management fee or processing fee or documentation charges or by any other name, which is usually a percentage of the transaction value. The lease rental or hire purchase amount is recovered in 'equated monthly instalments (EMI) over the period of lease or hire-purchase as indicated in the agreement through post dated cheques and no separate bills are raised for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific asset, (c) the lease payments are calculated so as to cover the full cost of the asset together with the interest charges, and (d) the lessee is entitled to own or has the option to own, the asset at the end of the lease period after completing the lease payment; 7.6.1 International Accounting Standards Committee defines financial lease as lease that transfers substantially all the risks and rewards incidental to ownership of an asset, title may or may not eventually be transferred . Financial lease is a way of purchasing an asset with the help of the loan and the lessee uses the asset. Risks and rewards incidental to ownership of an asset is also with the lessee. All lease transactions particularly sale and lease back transactions are to be examined carefully on the basis of this clarification. 13. Both sides have referred to the judgement of the Honourable apex Court in Sundaram Finance Ltd's case (supra). The special Counsel Shri D.K.Acharya for the revenue argued that the services rendered by the appellant even though claimed as financial leasing, equipment leasing, operating lease, loan against hypothecation but in fact the arrangement between the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e documents and to determine the nature of the transaction, whatever may be the form of the documents. An owner of goods who purports absolutely to convey or acknowledges to have conveyed goods and subsequently purports to hire them under a hire-purchase agreement is not estopped from proving that the real bargain was a loan on the security of the goods. If there is a bona fide and completed sale of goods, evidenced by documents, anterior to and independent of a subsequent and distinct hiring to the vendor, the transaction may not be regarded as a loan transaction, even though the reason for which it was entered into was to raise money. If the real transaction is a loan of money secured by a right of seizure of the 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 ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. The customer remains qua the world at large the owner and remains in possession, and on condition of performing the covenants has. a right to continue to remain in possession. The right of the appellants may be extinguished by payment of the amount due to them under the terms of the hire-purchase agreement even before the dates fixed for payment. the agreement undoubtedly contains several onerous covenants, but they are all intended to secure to the appellants recovery of the amount advanced. We are accordingly of the view that the intention of the appellants in obtaining the hire-purchase and the allied agreements was to secure the return of loans advanced to their customers, and no real sale of the vehicle was intended by the customer to the appellants. The transactions were merely financing transactions.The appeals will therefore be allowed with costs in this Court and the High Court. One hearing fee. 17. Needless to emphasize, in considering the applicability of the ratio of the aforesaid judgement, and also the Board's Circular to the facts of the present case, it is necessary to understand the true nature of the agreements/contracts entered into between the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aused for reasons beyond the control of the Lessor, the Lessee shall be liable to pay the lease amount from the date of commencement of the lease and the Lessor shall not be liable for any loss caused to the Lessee by reason of delayed delivery and all charges and obligations of the Lessee shall commence and be enforceable as if delivery had been effected on that date in view of and in consideration of the Lessor having entered into appropriated the Equipment for lease to the Lessee. 03. ACCEPTANCE OF THE EQUIPMENT The Lessor shall not be responsible for any direct, indirect or consequential loss to the Lessee or to any other third party arising from any delay in delivery and/or installation of the Equipment either by the action of the manufacturer or otherwise. 04. RENT PAYMENTS Subject to right of the Lessor to vary rent as provided hereinafter, the Lessee shall during the said term (in addition to other considering payable in respect of this lease) punctually pay to the Lessor at its Registered Office on the respective due dates, free of any other deduction whatever, as rent for the Equipment, the sum of money specified in the SECOND SCHEDULE to this Agreement. 05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment may be distrained, or taken in execution under legal process, or by any public authority; (g) fail to keep the Equipment comprehensively insured during the period of the Agreement ; (h) fail to pay to the Government or any public authority any taxes or charge due in respect of the Equipment ; (i) remove any of the Equipment to any other place without prior written permission of the Lessor ; (j) break or fail to perform or observe any conditions on his/its part herein contained ; (k) in the opinion of the Lessor (which shall be conclusive and binding on the Lessee) there shall be or arise any danger or possibility of the Lessor's not receiving or recovering the full amount due to the Lessor under this Agreement or of Lessor's being unable to exercise any or all of the powers or rights or enforce any or all of the benefits conferred upon it by this Agreement whether by reason of any act, deed or omission on the part of the Lessee or by reason of any circumstance or occurance whatsoever beyond the power and control of the Lessor (expressly including any ordinance and legislation by or under the authority of the Central or any State Government or other body ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Lessee for the value of ₹ 8,95,800/-(Rupees Eight Lacs Ninety Five Thousand only). 18.2. Four sample copy of agreement for the period after 16.07.2001 have been enclosed. The first agreement was entered into between the appellant and its customer Mr. Rais Ahamad on 10.04.2006 titled as Agreement of Lease . The Schedule-I to the said agreement mentions the cost of the equipment/vehicle i.e. 'Mahindra Pick-Up' as ₹ 4,08,248/-, Schedule-II mentions the period of lease as 47 months and lease rent as ₹ 8,561/- and Schedule-Ill shows the period of lease from 01.04.2006 to 28.02.2010, number of installment as 47 and each installment as ₹ 10,253/-. Also, the delivery order enclosed there with reflects that it was addressed to M/s Dehradun Premier Motors Pvt.Ltd., wherein the cost of vehicle was shown as ₹ 4,08,248/-, margin money paid directly as ₹ 53,506/-, the loan amount to the customer as ₹ 3,65,000/- and the arrangement between the appellant and the customer was shown as a loan-cum-hypothecation'' facility. On going through the said agreement it is noticed that more or less the stipulations contained in the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is mentioned the customer of the appellant approached for a loan-cum-hypothecation facility 27.04.2015. 18.5 The Appellant have submitted 5 (five) numbers of hire purchase agreements' entered into before 16.07.2001.First agreement dated 27.04.2001 was between Shri Harish Kumar and the Appellant. The title of the agreement is Hire Purchase Agreement . The description of the Appellant and the hirer and other particulars mentioned in the said agreement strongly relied by the ld.Advocate is reproduced below:- WHEREAS the Company is a financial institution providing funds, inter alia, for hire purchase of vehicles, and other assets to individuals/business concerns/other entities. WHEREAS the Hirer has approached the Company for obtaining finance and has agreed to acquire/purchase; has acquired/purchased; holds; the vehicles, more fully described in Schedule-I hereunder, hereinafter referred to as 'Hired Article' on the terms and conditions as laid down and stipulated in the proforma of this Agreement provided to the Hirer by the Company and the Company has agreed by its scheme of operation duly accepted by the Hirer to provide funds to the Hirer, for the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. 06 RELEASE OF PROPERTY If the event the hiring continues for the full period referred to in Schedule-III hereof and the following sums of money been punctually paid:- a. all instalments due under this Agreement; b. other sums of money due hereunder; then in such event the Company shall release and relinquish all its rights and interest in the Hired Article Until such payments, the Company shall continue to have all rights and interests created by the these presents over the Hired Article together with any accession, improvements and additions made thereto by the Hirer as clearly provided in Clause 3(1) of this Agreement and rights of the Hirer shall be subject to the beneficial rights of the Company and the Hirer shall be deemed to be holding the Hired Article in trust for the Company. The Company shall be at liberty to hypothecate the Hired Article in favour of the Bankers until the Hirer shall pay the entire amount due hereunder. 09. COLLATERAL SECURITY The monthly/quarterly payment of hire charges for the Hired Article shall be secured by the delivery to the Company of a Promissory Note to be executed by the Hirer for the value of ₹ 3,29,040/- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amit Auto Sales intimating that the Appellant could extend finance to Mr.Tariq Khursheed. Also the invoice of Amit Auto Sales dated 12.03.2001 was enclosed showing the total cost of the vehicle as ₹ 3,93,117.00. 18.8 The third agreement is between Mr.Surinder Singh and the Appellant dated 14.06.2000 on some conditions. The cost of the vehicle in Schedule-I was shown as ₹ 3,10,000/- and initial payment in Schedule-II was shown as ₹ 1,00,000/- amount financed ₹ 2,10,000/- and financial charges as ₹ 85,580/- and payable in 36 installments of ₹ 8,155/-. Schedule-III shows the period and the installments. The 4th Agreement is between Shri Rakesh Bhutoria and the Appellant dated 28.06.1999. Schedule-I shows the cost of asset Maruti Standard Car as ₹ 1,89,224/-, in Schedule-II besides cost of asset initial payment ₹ 47,224,-, amount financed ₹ 1,42,000/- with financial charges ₹ 39,831/- and the total amount payable in 36 installments was ₹ 1,81,831/- having 1 installment of ₹ 5,081/- and 35 installment as ₹ 5,050/-. Schedule-Ill mentions total number of installments with due date and the amount of installme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.11 Also there are four numbers of 'hire purchase finance agreement' have been submitted by the Appellant. The first hire purchase finance agreement is dated 07.08.2003 between one Rajpal Singh and the Appellant. The conditions of the agreements which is as follows:- CONDITIONS OF THE AGREEMENT It is hereby agreed and declared by the parties as under: a) The Hirer/s shall always remain liable to repay the Financed Amount as mentioned the Schedule if hereto along with finance charges thereon and all other charges payable under this agreement irrespective of MAGMA taking possession of the said Asset(s) which would form part of the security of MAGMA for recovery of its dues. The said Asset(s) shall be held by the Hirer/s for and on behalf of MAGMA and in trust for MAGMA. b) for the purpose of accruing re-payment of the Financed Amount and all the sums payable hereunder, the Hirer/s hereby transfers/shall be deemed to have transferred the right to possess and use the said asset(s) to MAGMA. c) The Hirer/s has examined (or caused to be examined) the said Asset(s) and satisfied himself as to its operation, condition and running. No warranty and responsibility is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 21.05.2004t. In the schedule the description of the asset was shown as M/s.Tata Model LPT 2513 and cost of the said asset as ₹ 9,74,857/-, loan amount as ₹ 8,42,000/- payable in 47 installments during the period 01.07.2004 and 01.04.2008. 19. From the ratio laid down by the Hon'ble Supreme Court in Sundaram Finance Ltd.'s case, it is crystal clear that the effect of transaction be determined from the terms of the agreement considered in the light of surrounding circumstances and the court has power to go behind the documents and to determine the nature of transaction whatever may be the form of the documents. An attempt has been made by us to analyze the true nature of the transaction between the Appellant and its customers from the agreements/documents placed before us. Broadly, we find that in almost all the cited agreements/contacts, the Appellant had been approached by the respective customers for procuring/purchasing a vehicle, (except agreement dated 22.03.2000 between the Appellant and M/s.Shiva Cement Ltd. which relate to lease of equipment). We find that the customers were required to pay the amount/value shown in the schedule-II of the agreements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the ownership of the goods under hire purchase agreement has been retained or conveyed on completion of transaction. Therefore, all these agreements need to be scrutinized along with supported evidences/documents which could not be possible at this appellate stage as all the transaction documents are not enclosed with the agreement; besides these agreements were not examined/scrutinized by the original adjudicating authority even though equipped with enough manpower to undertake such a herculean task. In the result, we are of the firm opinion that ascertaining of the facts are vital, to application of the principle of law, in the interest of justice this aspect need to be remitted to the ld. Commissioner for verification of the facts in detail and ascertain the true nature of transaction between the appellant and its customers during the period under dispute and arrive at the conclusion whether the transaction/services falls within the scope of taxable services of banking and other financial services defined at Section 65(12) of Finance Act, 1994. 20. The next important issue needs determination is whether value representing securitization transaction deducted from the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zation transaction and they did not undertake services of collection, recovery, accounting, installments due from the customers. However, for the subsequent periods, the Appellant had entered into separate servicing agreements for separate consideration on which service tax has been discharged. The grievance of the Revenue, on the other hand is that without due verification of any of the facts the ld.Commissioner has simply allowed the deduction on account of securitization, hence the same is bad in law. 21. The Ld. Spl. Counsel Shri D.K.Acharaya referring to the meaning of securitization mentioned at page 286 of The Economics of Money Banking and Financial. Markets(fifth edition) By Fredric S. Mishkin contended that the process of securitization involves rendering financial services. It reads as: SECURITIZATION. An important example of a financial innovation arising from improvements in both transaction and information technology is securitization, one of the most important financial innovations in the past two decades. Securitization is the process of transforming otherwise illiquid financial assets (such as residential mortgages), which have typically been the bread and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice tax or otherwise. Therefore, this aspect also needs to be remitted to the Ld. Commissioner for consideration afresh. 24. It is also the grievance of the revenue in the appeal filed against the impugned order that while calculating the service tax liability for the period 2004 - 05, 2005 - 06 and 2006 - 07, the adjudicating authority had rejected,the RBI statement figures, without recording any reasoning in this regard. The total taxable value as mentioned and in the show cause notice for 2004-05 was ₹ 8910.56 lakhs, 2005 -06 was ₹ 14143.14 lakhs, and 2006-07 was ₹ 8356.04 lakhs, whereas, the Commissioner, the reduced the value to ₹ 494.55 lakhs, 137.93 lakhs and ₹ 39,37,000/- respectively. 25. In their submission, the appellant supporting the said finding of the Commissioner argued that the Department in its appeal could not place any material to negate the said findings. We do not see merit in the said contention of the appellant, in as much as, while rejecting the computation of the Department based on figures submitted to RBI, the ld. Commissioner has not recorded any observation as to why the said figures be discarded. Any order/findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the services provided by the clients (banks), hence fall under clause(ii) i.e. 'promotion or marketing of services provided by the client of the said definition of BAS. The ld. advocate countering the said observation submitted that the collection commission cannot fall under the scope of BAS brought into force w.e.f. 01.07.2003. It is their contention that commission agent involved in the sale and purchase of excisable goods are only liable to pay service tax under BAS and if at all any liability arises as commission agent then it would be after 16,06.2005. In support he has referred to the decision of this Tribunal in the case of S.R. Kalyankrishan Vs.CCE 2008 (9) STR 255 (Tri.-Bang.). 28. From the impugned order we find that the ld.commissioner has not confirmed demand of service tax on the collection commission considering the appellant as a commission agent and the amount received as agency commission but, he has confirmed the demand service tax on such receipts under Clause-(ii) of the Definition of BAS as defined under 65(19) of the Finance act, 1994. It reads as under:- business auxiliary service means any service in relation to - (i) ...................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise. Therefore, this issue also needs to be remitted to the Ld. Adjudicating authority for consideration afresh. We also find that in computing the demand under this category the ld. adjudicating authority has discarded the figures of the RBI statement without recording reasons. Therefore, the ld. Commissioner also should record reasons in computing the demand, in the event it is concluded by him that the said service is taxable. 28. The next issue needs determination is recovery of ₹ 93.00 Lakhs, collected by the Appellant representing the said amount as service tax, under section 11D of the Central Excise Act, 1944 as applicable to Service Tax matters. It is the contention of the Applicant that only an amount of ₹ 7,54,689/- was collected by the Applicant representing service tax and the amount of ₹ 69,52,945/- was collected as contingency deposit. Further, it is argued that that the amount of ₹ 93.00 Lakhs had been arrived by the department erroneously by considering the amount of ₹ 37,78,823/- twice. The adjudicating authority on the other hand observed that even though such claims have been made, but not supported by any evidence. We find mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on the penal interest and prepayment/termination charges. With regard to the Management fees the Ld. Commissioner is directed to record a detailed finding supported with reasons on its leviability to service tax. 30. Since most of the issues raised by the assesse and the revenue are remanded for reconsideration, hence, in our considered view, it would be inappropriate to record any observation on the applicability of extended period and penal provisions at this stage when the facts are not clear. The adjudicating authority would be free to decide after analysis of facts/evidences on record and that would be produced in the remand proceeding to arrive at a conclusion on the aspect of limitation and imposition of penalty accordingly Our findings on the issues are summarized as below: (I) The terms of the contract relating to all the agreements claimed to be financial lease, equipment lease, operating lease, hire purchase agreement, hire purchase finance agreements and loan cum hypothecation agreements be analysed/examined along with other relevant documents/evidences to ascertain the true nature of transaction between the appellant and its customers so as to arrive at a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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