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TMI Blog2016 (4) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... of transaction. Therefore, all the 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. 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. Leviability of Service tax - Whether value representing securitization transaction deducted from the total value as non-taxable service for the period 2002-03 & 2003-04 is correct or not - Appellant also entered into the transaction of securitization, whose value had been rightly ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the service rendered by the Appellant are in the nature of promoting the business of client-banks and hence classifiable under BAS. As held in Pagaria Auto Centre vs. CCE, Aurangabad [2014 (2) TMI 98 - CESTAT NEW DELHI (LB)], 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. 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. 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 - Appellant contended 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 but not supported by any evidence - Held that:- It has not been substantiated by the appellant as to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 - Dated:- 3-2-2016 - DR. D.M. MISRA, MEMBER(JUDICIAL) AND SHRI H.K.THAKUR, MEMBER(TECHNICAL) For the Petitioner : Shri B.K.Singh, Advocate and Shri Garvit Chauhan, Advocate For the Respondent : Shri D.K.Acharya, Spl.Counsel ORDER PER DR. D.M. MISRA. The aforesaid appeals were heard by this Tribunal and order was passed on 11.05.2015, which was challenged by the Appellant before Hon'ble High Court at Calcutta. After hearing both the sides, by Order dt.23.09.20915, the Hon'ble High Court remanded the matter to the Tribunal for hearing the Appeal afresh. Consequently, the Appeals are taken up for hearing and disposal. 2. These Appeals are filed by the assesse-appellant M/s. Magma Finance Corporation Ltd. and also by the Revenue challenging the same Order-in-Original No.61/Commr./ST/Kol/ 2008-09 dated 31.03.2009, passed by the Commissioner of Service Tax, Kolkata. 3. The facts of the case are that pursuant to the visit of the premises of the Appellant on 09.08.2007 by the officers of the service tax department and on completion of investigation, a show cause cum demand notice was issued to the Appellant on 16.10.2007 alleging non-payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act, 1994, the Ld. Advocate has submitted that the financial lease agreements entered into by the Appellant involving a total demand of ₹ 48.95 Lakhs cannot come under the scope of banking and other financial services . He has submitted that it is not the legislative intent to cover all types of lease, as there has been an accepted distinction between financial lease and operating lease and the services relating to operating lease are not covered under the scope of said definition which applies only to the equipment lease having the character of financial lease distinct from non-operating lease. 5.4 It is contended that whether a lease is a financial lease requires to be decided as per the definition provided in the Finance Act,1994. Financial leasing has been defined to mean a transaction where the lease payment for the leasing contract (in respect of a specific asset provides for the lease and occupation of the assets by the lessee) is calculated to cover the full cost of asset together with interest charges and the lessee is entitled to own or has the option to own the asset, at the end of the lease period after making the lease payments. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hicles were owned by the customers, the invoices were in the name of customers, the RTO registration certificate is also issued in the name of customers and name of appellant is only shown as for hypothecation purpose. At the end of the term period, the appellant furnishes Form 34 and Form 35 as prescribed under the Motor Vehicles Act so as to enable the customers to remove the hypothecation charge in the registration certificate. It is his submission that in view of the provisions of Sale of Good Act, 1938 and the Motor Vehicles Act, 1988 since the customer/client is the owner of the vehicle and there is no question of appellant giving further ownership to the customers and there is no option in the agreement for the customer to purchase the vehicle, hence it is in the nature of hire purchase finance only. Further, he submits that in the relevant agreements though it has been mentioned that the appellant is the owner, but in fact, it does not give ownership to the appellant and take away the basic character of the agreements which is mere financing of the vehicles which were purchased by the customers. Such clauses are put in the agreement to ensure that the appellant retain the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has only excluded the amount received towards rental by the appellant which is incorrect. He has submitted that when it is clear that the activity of financial lease is in the nature of operating lease and not covered within the scope of banking and financial services, accordingly any amount charged towards the same would not be subjected to service tax. Hence, the amount charged as financial lease is not liable to service tax. Further, the Ld. Advocate has submitted that the demand confirmed by the Ld. Commissioner amounting to ₹ 93.00 Lakhs under section 11D of Central Excise Act, 1944 is incorrect inasmuch as only ₹ 7,54,689/- is the amount which had been collected by the appellant from their clients as representing service tax under banking and financial services. The balance amount of service tax has been collected by the appellant as contingency deposit. The said details would make it clear that the Appellant had collected an amount of ₹ 69,52,945/- towards contingency deposits and the total amount of service tax charged on the same ₹ 7,54,689/-. Further he has submitted that the amount of ₹ 93.00 Lakhs has been arrived at by the department by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial services. It is his submission that the customers entered into contract only for the purpose of receiving finance from the appellant and the customers identifies the supplier and pass certain portion of the purchase amount directly to the supplier and receives financing facility for balance amount from the appellant. Thereafter, the appellant and the customers enter into agreement which stipulates the terms and conditions to be observed by the customer towards re-payment of the finance amount taken from the appellant. The invoices show sale of the vehicle by the dealer in the name of the customer and also the vehicle is registered in the name of the customers. The vehicle is insured by the customer and in case of any default in payment of installment to the appellant, the appellant could only seize the vehicle for the purpose of recovery of the loan amount, therefore, the transaction is in the nature of financing only. He further submits that it is a settled legal position that the definition of banking and financial services would cover only hire purchase and not the transactions which are in the nature of hire purchase finance. Referring to the definition of hire purchase ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vesting in the portfolio. The cash flow from the unlined pool of assets is used to re-pay the principal and pay the interest on the securities issued by SPV. 5.13 It is his submission that securitization thus follows a two stage process. In the first stage, there is sale of single asset or polling and sale of poll assets to a bankruptcy remote special purpose vehicle in return for an immediate cash payment and in the second stage re-packaging and selling the interest representing schemes on incoming cash flows from the assets or poll of assets from the third party customers tradable debt securities. The first stage of transaction happens between originator and SPV and second stage between SPV and investor. Further, referring to the different dictionary meaning of securitization, the ld.Advocate submitted that the activity undertaken by the appellant is sale of financial assets and not a service as contended by the department. Further he has submitted that in the present case the activities of the appellant are limited to first stage only i.e. creation of financial assets by giving out loans, creating a portfolio of financial assets and selling the financial assets to SPV. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The appellant has been paying stamp duty on sale transaction of loan pools under the Bombay Stamp Act, 1958 and specifically covers the securitization transaction under the category of conveyance and specifies the term duty payable. 5.16 Rebutting the grounds set out by the department in their Appeal that on the basis of figures submitted by the appellant the adjudicating authority has accepted it without due verification, hence, the order of the adjudicating authority to the extent it dropped the demand is incorrect, the ld. Advocate submitted that the appellant had provided figures taking it from the audited balance sheet and other financial documents which were duly verified by the chartered accountant and these documents were also verified by the authorities before passing the order by the ld. Commissioner. Hence, it is incorrect to say that these figures were not verified by the department. Further he submits that in the event the department does not accept these figures as correct, the burden lies on the department to prove the same by introducing evidences. In support, he has referred to the decision of this Tribunal in the case of Rajendra Jagannath Parekh and Ajay Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of services for a consideration. Therefore, if at all the appellant were liable to pay service tax as commission agent, then it would be only w.e.f. 16.06.2005 due to the extended meaning of commission agent in the Finance Act, 2005. 5.19 Further, the Ld. Adv. has submitted that the services that were provided by the appellant would be liable to service tax only from 01.05.2005 under the category of Business support Service . The appellant is neither acting as a commission agent, nor is promoting and marketing services of the banks. The scope of service relates to interviewing of the customers, who seek finance from the respective banks and after interview, the customers were assisted in the documentation work; it verifies all the documents of the customers and passes it on to the banks, who on the basis of such verification extend the financial facility to such customers. The appellant is also responsible for the recovery of EMIs from the borrowers. Thus, the appellant is undertaking a host of activities such as evaluation, verification of the customers, processing of transaction, providing operational assistance to the banks, collecting EMIs etc., hence, such services are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable in public domain. In support he has referred to the various decisions of this Tribunal in the following cases:- * Anantpur Textiles Ltd. v. CCE 1994 (72)ELT 48 (Tri.) * Hindalco Industries Ltd. v. CCE 2003 (161) ELT 346 (Tri.) * Kirloskar Oil Engines Ltd. v. CCE 2004 (178) ELT 998 (Tri.) * Paro Food Products v. CCE, Hyd. 2005 (184) ELT 50 (Tri.-Bang) * UT Ltd. v. CCE 2001 (130) ELT 791(T) 5.24 Further he has submitted that the constitutional validity of the levy on financial leasing including equipment leasing and hire purchase had been challenged by the association in the Honble High Court of Madras even though the appellant sought registration under banking and financial service in the year 2001, however, they did not pay service tax as the issue was pending before the Honble High Court. Since they have not suppressed any information from the department with intent to evade payment of service tax therefore extended period is not applicable as has been affirmed by the Hon ble Apex Court in the case of Association of Leasing and Financial Service Companies v. UOI - 2010 (20) STR 417 (SC). 6. Per contra, Shri D.K.Acharya, ld.Special Counsel for the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause was inserted by an amendment to the Finance Act from 01.06.2007 i.e. after the period of dispute hence not applicable to the present case. 6.1 On the issue of securitization, the ld. Special Counsel cited the authority (Dr.Frederic S Mishkin, Ex-Executive Vice President of Federal Reserve Bank of New York) and strongly argued that it is a financial service. Citing an example in consonance with the said meaning, the ld.Special Counsel has submitted that M a NBFC gives an asset based loan to real estate sectors, namely to : (i) Promotor-A - ₹ 5.00 Crores, (ii) Promotor-B - ₹ 10.00 Crores,(iii) Promotor-C - ₹ 1.50 Crores. The terms of repayment comprising the principal + interest in ten years are: (i) ₹ 50.00 Lakhs + ₹ 5.00 Lakhs (per annum), (ii) ₹ 1.00 Crore + ₹ 10.00 Lakhs (per annum) and (iii) ₹ 1.50 Crores + ₹ 15.00 Lakhs (per annum), respectively. M s loan is asset backed or mortgaged backed and hence an asset, but not a liquid asset. M decides to convert ₹ 30.00 Crore loan into 100 securities of ₹ 30.00 Lakhs each and sells the securities to 100 parties with the terms that annual installment payment equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss taxable value for the financial years2004 to 2006-07, hence the Order is bad in law. 7. Heard both sides at length and perused the records. The appellant M/s Magma Financial corporation are a Non Banking Financial Company (NBFC) registered with the Reserve Bank of India. During the relevant period, the appellant had rendered various financial services and received financial income, which the Department alleged to fall under the taxable category of banking and other financial services as defined under section 65(12) and also some receipts as Business Auxiliary Services falling under section 65(19) of the Finance Act,1994. Consequently, demand notices were issued to the appellant on the basis of the income shown in the respective balance sheet for the said period. The assesse-appellant disputed the said demand contending that the services rendered by them do not fall under the category of banking and financial services, and business auxiliary services, therefore, no service tax was required to be paid in rendering those non-taxable services. 8. The Ld. Advocate has contended that the appellant had been rendering the services, namely, (i)Financial leasing (which was last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of this item, financial leasing means a lease transaction where (i) contract for lease is entered into between two parties for leasing of a specific asset; (ii) such contract is for use and occupation of the asset by the lessee; (iii) the lease payment is calculated so as to cover the full cost of the asset together with the interest charges; and (iv) the lessee is entitled to own, or has the option to own, the asset at the end of the lease period after making the lease payment;] 12. On levy of service tax on banking and other financial services with effect from 16.07.2001, its scope has been clarified by the Board under F.No. BII/I/2000 -TRU, dated 09.07.2001 as: 2.Financial services covered under the tax net are specifically mentioned in the definition itself. 2.1 Financial leasing including equipment leasing and hire purchase: 2.1-1 In case of-financial leasing including equipment leasing and hire-purchase, the service is taxable only if it is rendered by a body corporate. The term body corporate' has the meaning assigned to it in clause (7) of section 2 of the Companies Act, 1956. Briefly, body corporate means a private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not on the principal amount. 2.1-4 A question has been raised whether lease or hire-purchase agreements entered into prior to the imposition of levy (prior to 16-7-2001) would be leviable to service tax. In this regard, it is clarified that such agreements entered into prior to 16-7-2001 will not be liable to service tax, provided the property/goods has also been received by the lessee prior to 16-7-2001. 13. On insertion of the explanation to the meaning of banking and other financial services, board has issued a circular dated 28/2/2007 clarifying the meaning and scope of finance leasing, which says: 7.6 Banking and other financial service : (i) .. (ii) .. (iii) The term financial leasing is explained as a lease transaction fulfilling the following conditions, namely :- (a) a contract for leasing of a specific asset is entered into between two parties, (b) the contract is for use and occupation of the specific 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the State of Kerala and that they were not dealers within the meaning of the Act. The Sales Tax Officer by orders dated March 25, 1962, and July 6, 1962, held that the transactions between the appellants and certain parties within the State of Kerala were sales within the meaning of the Act and the appellants were dealers liable to be assessed under the Act. The Sales Tax Officer accordingly reiterated his demand upon the appellants to file returns of their turnover in respect of sales for the five years in question along with details of all transactions in the State and to produce evidence to prove the correctness and completeness of their returns . 16. Their Lordships after consideration of the arguments advanced by both sides observed as; 24. The true effect of a transaction may be determined from the terms of the agreement considered in the light of the surrounding circumstances. In such case, the court has, unless prohibited by statute, power to go behind the 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 subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the transactions of the appellants may now be stated. The appellants are carrying on the business of financiers : they are not dealing in motor vehicles. The motor vehicle purchased by the customer is registered in the name of the customer and remains at all material times so registered in his name. In the letter taken from the customer under which the latter agrees to keep the vehicle insured, it is expressly recited that the vehicle has been given as security for the loan advanced by the appellants. As a security for repayment of the loan, the customer executes a promissory note for the amount paid by the appellants to the dealer of the vehicle. The so-called sale letter is a formal document which is not made effective by registering the vehicle in the name of the appellants and even the insurance of the vehicle has to be effected as if the customer is the owner. Their right to seize the vehicle is merely a licence to ensure compliance with the terms of the hire-purchase agreement. 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 appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 37,325/-. It is necessary to refer to the some of the relevant clauses of the said agreement which are reproduced as below: 01. The Lessor hereby leases and the Leasee hereby takes on lease the Equipment described in the FIRST SCHEDULE on the terms and conditions stated hereunder. The Lessee shall pay promptly and regularly the instalments to the Lessor in the manner set out in Schedule II and Schedule III to this Agreement. 02.DELIVERY OF EQUIPMENT The Equipment will be delivered by the supplier to the Lessee and it is agreed that the risk in respect of the Equipment shall be to the account of the Lessee at the time of clearing the Equipment from the premises of the supplier to the Lessees premises and the Lessee shall accordingly bear responsibility for any damage prior to or during delivery. The delivery and freight charges from the premises of supplier shall be to the account of the Lessee. It is hereby agreed that notwithstanding any delay in delivery caused 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 caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of discounting at the sole discretion of the Lessor) of all future instalments. 15. DETERMINATION In case the Lessee shall during the continuance of this Agreement do or suffer any of the following acts or things :- (a) fail to pay within the stipulated time any of the lease rentals, interest or other amounts payable under this Agreement or under any other Agreement with the Lessor, whether demanded or not ; (b) die, become insolvent or compound with creditors ; (c) in the opinion of the Lessor, substantial change in Lessees ownership takes place ; (d) the Lessee being a limited company shall pass a resolution for voluntary winding-up or suffer a petition for winding up presented against it or if receiver be appointed to its undertakings; (e) pledge or mortgage or hypothecate or sell or attempt to pledge or sell or part with possession of or otherwise alienate or transfer the Equipment; (f) do or suffer any act or thing whereby or in consequence of which the Equipment 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 perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and Policies of Insurance and all other documents relating to the said Equipment. 20.FINANCE CHARGES The Lessee shall also be liable to pay Finance Charges @ 2.25% per month to the Lessor on the amount disbursed by the Lessor under this agreement. Such finance charges shall be paid immediately on demand for the period from the date of payment by the Lessor for the purchase of the Equipment till the date of commencement of this agreement as detailed in Schedule II of this agreement. 24.TERMINATION It is agreed between the Lessor and the Lessee that the period of lease agreed to between the Lessor and the Lessee is non-cancellable. The lease cannot be cancelled unilaterally by the Lessee for any reason whatsoever until the period indicated in the schedule is over and the Lessee has completed payments of all contracted lease rentals. 27.COLLATERAL SECURITY The monthly payment of lease rentals for the Equipment shall be secured by delivery to the Lessor of a Demand Promissory Note to be executed by the Lessee for the value of ₹ 8,95,800/-(Rupees Eight Lacs Ninety Five Thousand only). 20. Four sample copy of agreement for the period after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lia mentioned as operating lease. 20.2 The third agreement of lease dated 31.01.2006 between the appellant and Tarmani Mahakud submitted reflects at Schedule-I, under the column description as multi-utility vehicle Bolero DX Mahindra , its cost as ₹ 4,95,776/- and period of lease as 35 months. Schedule-III of the said agreement shows the period as from 01.03.2006 to 01.12.2008, payment of the amount in 34 installments of ₹ 12,441/- and 1 installment of ₹ 12,441/-. A Promissory note was also enclosed along with the agreement for a sum of ₹ 4,34,285/- in favour of the appellant by Tarmani Mahakud. 20.3 The fourth agreement enclosed is dated 30.01.2006 between Shri Pawan Kr.Singh and the appellant whereby the appellant had extended finance of ₹ 5,44,000/- against the cost of vehicle of ₹ 7,23,366/- and the period of lease 46 months. In Schedule-III the installments are also reflected. In the letter addressed to Shri Motors, Faridabad, Haryana, it is mentioned the customer of the appellant approached for a loan-cum-hypothecation facility. 21. The Appellant have submitted 5 (five) numbers of hire purchase agreements entered into before 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommencement of this Agreement regardless of the date of physical delivery of the Hired Article for the period as slated in Schedule-II hereof subject only to Hirers user rights upon the terms and condtions, herein contained. The Hirer shall not be entitled to make any claim whatsoever on the Company in respect of the Hired Article and/or relating to its specifications and/or its condition and/or in any other manner whatsoever. The Annexures hereto shall form an integral part of this Agreement. 03. HIRER S WARRANTIES c) LOCATION Keep the Hired Article at the Hirers said premises and shall permit the Company and/or its agent at all times to enter upon any premises at which the Hired Article is kept/parked for the purpose of verification and also repossessing the Hired Article under the provisions of Clause 15 of this Agreement, and shall not under any circumstances change the location of the Hired Article, without express approval of the Company. 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of Shri Harish Kumar dated 27.04.2001 was also enclosed wherein the total price of the asset was shown as ₹ 2,90,400/- 21.2 The second agreement was dated 13.03.2001 between Mr.Tariq Khursheed reflecting the same conditions. In Schedule-I the description of the asset was shown as Mahindra Sawari and the cost of asset as ₹ 3,93,117/-. In Schedule-II besides cost of asset initial payment was shown as ₹ 1,18,117/-, the amount financed ₹ 2,75,000/-, financial charges ₹ 72,586/- and the total amount payable in installments was ₹ 3,47,586/-, comprising of 11 installments of ₹ 14,521/-, 12 installments ₹ 1,135/- and another 12 installments of ₹ 5,767/-. The Schedule-III of the said agreement reflects the due date of installment and the amount of installment. A promissory note for ₹ 3,47,585/- was executed by the customer Mr.Tariq Khursheed in favour of the Appellant dated 13.03.2001. A letter of the Appellant dated 13.03.2001 addressed to 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 ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allments of 13,000/- each. Schedule-III shows the due dates and the amount installment payable. A promissory note is issued in favour of the Appellant by the said Mrs.Barnali Dey for ₹ 4,68,000/-. Copy of invoices was issued in the name of Mrs.Barnali Dey to M/s.K.V. Motors Pvt.Ltd. for ₹ 5,67,050/-. The third and fourth agreement is between Shri Ashish Mehrotra and the Appellant dated 13.07.2002 and Mr.Birender Sah and the appellant more or less on the same terms and conditions relating to the asset/vehicle HM-Porter cost of which is shown as ₹ 2,55,000/- and HM-RTV cost of which was shown as ₹ 5,12,305/-. The total financial amount was ₹ 2,60,150/- and payable in 33 installments of ₹ 6,550/- in the former case and in the second case it was ₹ 4,38,912/- payable in 36 installments of ₹ 12,192/-. Promissory note was executed with the respective customer for ₹ 2,15,350/- and ₹ 4,12,918/- in favour of the Appellant respectively. 23. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -I, the description of the asset is shown as Tata 8K/1613 and the cost of the asset is shown as ₹ 10,96,348/-. The amount financed as ₹ 8,17,289/-, financial charges ₹ 2,20,668/-, insurance charges for second and third year as ₹ 37,835/-. The total amount of ₹ 10,75,792/- was payable in 47 installments and the period and the installments are shown therein. 25. There are two numbers of agreements titled as vehicle loan cum hypothecation agreement are enclosed. The first agreement was dated 17.05.2004 between M/s.Santosh Pargal Co. and the Appellant. In Schedule-I the cost of vehicle was mentioned as ₹ 3,87,000/- loan amount as ₹ 3,25,000/-, payable in the 32 installments of ₹ 12,643/- during the period 01.07.2004 to 01.02.2007. A promissory note for ₹ 4,04,576/- had been issued in favour of the Appellant by the customer. The second agreement was between the Appellant and Mr.Rajkumr Mr.Bajrang Agarwal dated 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e true colour of the transaction between the appellant and its customers. Also, we find that even though the demand is spread over a period of five years i.e. from April 2002 to March, 2007, however, agreements for all these years had not been enclosed. In absence of complete facts supported by documents indicating the nature of true transaction between the appellant and its customers, it would certainly be difficult to arrive at a conclusion, whether the claim of the appellant that their transactions involve financial leasing, equipment leasing and hire purchase, where the commissioner confirmed the demand and others are operating lease, loan against hypothecation and hire purchase finance, where the demands were dropped. The Hon ble Supreme Court in Sundaram Finance s case has categorically laid down that the nature of transaction culled out from the documents and surrounding circumstances are the decisive factors in arriving at a conclusion whether 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 po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f financial assets by giving out loans, creating a portfolio of financial assets and selling the financial assets to SPV. He has categorically submitted that the appellant does not undertake the second stage of the transaction i.e. activity of re-packing of financial assets into salable securities which is done by the SPV and purchasing banks/financial institutions. The ld. advocatge however fairly accepted that after sale of the financial assets there is a service element which can either be performed 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. He has submitted that for such activities which are in the nature of servicing separate agreements are entered into for a consideration. It is his categorical submission that during the relevant period the appellant had undertaken only the securitization 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective years without verification of the facts whether it was a sale or service by analyzing the respective agreements. 30. From the submissions advanced by both sides we find that the securitization as narrated by the ld. Advocate, taking cue from the RBI guidelines, is claimed by the Appellant to have been limited to the first stage, however, whether it involved the second stage of rendering service has not been scrutinized/examined by the ld. Commissioner before deducting the said securitization amount from the gross taxable value for two financial years considering the same as non-taxable under the Finance Act,1944. Therefore, in our opinion the true transaction of securitization contracts entered into with respective Banks/customers ought to be examined before arriving at any conclusion whether the amount claimed by the appellant is the result of a sale transaction or service as argued by the revenue, and accordingly are leviable to service tax or otherwise. Therefore, this aspect also needs to be remitted to the Ld. Commissioner for consideration afresh. 31. it is also the grievance of the revenue in the appeal filed against the impugned order that while calculating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain judgments of this Court as well as of the High Courts which have taken this view. 33. Therefore, the computation for the financial years 2004-05, 2005-06 2006-07 are set aside and the adjudicating authority is directed to record a detailed finding supported by reasons in discarding the RBI statement figures and adopting the figures submitted before him. 34. The next issue for determination is whether collection commission should be chargeable to service tax under the category of Business Auxiliary Service(BAS). The ld. Commissioner while confirming the said amount under the taxable service BAS as defined under Sec.65(12) observed that it was received towards the services rendered by the Appellant in relation to collection of EMI from the borrowers on behalf of the several Banks and providing financial service to the banks in disbursement of loan by the customer- banks which resulted in promoting or marketing of 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 comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Vs. commissioner of central excise, Kanpur 2015(37) STR 405(Tri.-Del.) held that such services are taxable being in the nature of promoting or marketing services provided by the Banks under the heading of Business Auxiliary services. 38. In the present case, we find that the Ld. Commissioner has without scrutiny of the agreements/contracts with the client Banks, arrived at the conclusion that the service rendered by the Appellant are in the nature of promoting the business 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. 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. 39. The next issue needs determination is recovery of ₹ 93.00 Lakhs, collected by the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Original No.04 05 /Commr./ST/Kol/2012-13 dt. 24.04.2012, dropped a total demand of ₹ 22,85,29,000/- on the delayed payment charges, cheque bouncing charges, pre-payment charges. The Department has not filed any appeal against the said order. Besides, we find that the Tribunal in the case of Bank of Baroda Bank of Baroda v. CCE, Jaipur 2014 (35) STR359(Tri.-Del.) Small Indistires Devlopment Bank of India Vs. CCE, Chandigarh 2011 (23) STR 392 (Tri-Del.) held that penal interest, prepayment charges are not be leviable to service tax under the category of banking and financial services. Following these decisions were of the view that service tax is not payable 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. 41. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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