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TMI Blog2018 (3) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... y excluded from the ambit of service tax which has been clarified by the Board vide Circular dated 10.9.2004. It is clarified that commitment charges are in the nature of interest on unutilized portion of credit facilities. The department has proceeded to demand service tax only for the reason that the respondent has accounted it as guarantee commission. When the charges have been received separately under the head of guarantee commission as well as commitment charges, merely by accounting the same as guarantee commission, the amount received cannot be subjected to levy of service tax if the nature of the amount received is not a commission but interest of unused credit. The commitment charges being in the nature of interest cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest and the penalties. Aggrieved, the department is now before the Tribunal. 2. On behalf of the department, ld. AR Shri R. Subramanian reiterated the grounds of appeal. He submitted that the Commissioner (Appeals) has erred in accepting the contention of the respondent that commitment charges are to be treated as interest and therefore not liable to levy of service tax. This contention of the respondent is not acceptable as the commitment charges are shown in their books of accounts as guarantee commission and not as interest. When service tax is leviable and paid on guarantee commission, the respondent ought to have paid service tax on the commitment charges also. The Commissioner (Appeals) has relied on the interpretation given und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the commitment charges on the unavailed portion of the credit, the same has to be construed as interest. The subsidiary companies also treat the commitment charges as interest. He supported the findings of the Commissioner (Appeals) and submitted that the Commissioner (Appeals) has rightly relied upon the Board Circular dated 10.9.2004 as well as the interpretation of commitment charges under the Income Tax law. 4. Heard both sides. 5. The demand of service tax is raised on the commitment charges received by the respondent. The Commissioner (Appeals) has set aside the demand observing that such charges are in the nature of interest. It is brought out from the records that while paying commitment charges the subsidiary companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarified that commitment charges are in the nature of interest on unutilized portion of credit facilities. The department has proceeded to demand service tax only for the reason that the respondent has accounted it as guarantee commission. When the charges have been received separately under the head of guarantee commission as well as commitment charges, merely by accounting the same as guarantee commission, the amount received cannot be subjected to levy of service tax if the nature of the amount received is not a commission but interest of unused credit. The department has also relied upon the single Member decision of the Tribunal in the case of Punjab National Bank (supra). The Tribunal in the said decision has observed that commitmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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