Custom, Excise & Service Tax Tribunal
Lic Housing Finance Ltd. vs Commissioner Of Service Tax Mumbai-I on 3 October, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 347of 2012
(Arising out of Order-in-Original No. 5/PKA/COMMR/Th-II/2012 dated
06.02.2012 passed by the Commissioner of Service Tax-I, Mumbai)
LIC Housing Finance Ltd. .... Appellant
Bombay Life Building, 2nd Floor,
45/47, Veer Nariman Road, Mumbai- 400 001.
Versus
Commissioner of Service Tax-I, Mumbai .... Respondent
8th Floor, Central Excise Building, Churchgate, Mumbai.
With Service Tax Appeal No. 87431of 2013 (Arising out of Order-in-Original No. 05/NG/COMMR/Th-II/2013 dated 04.03.2013 passed by the Commissioner of Service Tax-II, Thane) LIC Housing Finance Ltd. .... Appellant nd Bombay Life Building, 2 Floor, 45/47, Veer Nariman Road, Mumbai- 400 001.
Versus Commissioner of Service Tax-II, Mumbai .... Respondent 4th Floor, Navprabhat Chambers, Ranade Roade, Dadar-West, Mumbai- 400 028.
With Service Tax Appeal No. 87781of 2013 (Arising out of Order-in-Original No. 34/ST/HB/12-13 dated31.03.2013 passed by the Commissioner of Service Tax (Adj), Mumbai) LIC Housing Finance Ltd. .... Appellant Bombay Life Building, 2nd Floor, 45/47, Veer Nariman Road, Mumbai- 400 001.
Versus Commissioner of Service Tax-II, Mumbai .... Respondent 5th Floor, New Central Excise Building, Mharshi Karve Road, Churchgate Mumbai- 400 020.
Appearance:
Shri Vinod Awtani, Chartered Accountant for the Appellant Shri Shashank Kumar Yadav, Authorized Representative for the Respondent 2 ST/347/2012, ST/87431, 87781, 88057/2013 & ST/85079/2017 With Service Tax Appeal No. 88057of 2013 (Arising out of Order-in-Original No. 34/ST/HB/12-13 dated31.03.2012 passed by the Commissioner of Service Tax-I, Mumbai) Commissioner of Service Tax-II, Mumbai .... Appellant 5th Floor, New Central Excise Building, Mharshi Karve Road, Churchgate Mumbai- 400 020.
Versus LIC Housing Finance Ltd. .... Respondent Bombay Life Building, 2nd Floor, 45/47, Veer Nariman Road, Mumbai- 400 001.
Appearance:
Shri Shashank Kumar Yadav, Authorized Representative for the Appellant Shri Vinod Awtani, Chartered Accountant for the Respondent And Service Tax Appeal No. 85079of 2017 (Arising out of Order-in-Original No. 36/STC-I/SM/16-17dated29.09.2016 passed by the Commissioner of Service Tax-I, Mumbai) LIC Housing Finance Ltd. .... Appellant Bombay Life Building, 2nd Floor, 45/47, Veer Nariman Road, Mumbai- 400 001.
Versus Commissioner of Service Tax-I, Mumbai .... Respondent 8th Floor, Central Excise Building, Churchgate, Mumbai.
Appearance:
Shri Vinod Awtani, Chartered Accountant for the Appellant Shri Shashank Kumar Yadav, Authorized Representative for the Respondent CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) FINAL ORDER NO. A/86110-86114/2024 Date of Hearing: 03.10.2024 Date of Decision: 03.10.2024 Per: S.K. MOHANTY Heard both sides and examined the case records.
3 ST/347/2012, ST/87431, 87781, 88057/2013 & ST/85079/2017
2. Both the assessee-appellants as well as Revenue have preferred these appeals against the impugned orders passed by the adjudicating authority. The details of the adjudication orders, appeal numbers and the period of dispute, are furnished herein below, in the form of a date chart:
Sr. Appeal No. Order-In-Original Period No. (1) (2) (3) (4) 1 ST/347/2012 5/PKA/COMMR/TH-II/2012 10.09.04 to (by the assessee) dt. 06.02.2012 31.03.08 2 ST/87431/2013 05/NG/COMMR/TH-II/2013 2011-12 (by the assessee) dt. 04.03.2013 3 ST/87781/2013. 34/ST/HB/12-13 01.04.08 to (by the assessee) dt. 31.03.2013 04.06.09 4 ST/85079/2017 36/STC-I/SM/16-17 01.04.2012 to (by the assessee) dt. 29.09.2016. 30.06.2012 5 ST/88057/2013. 34/ST/HB/12-13 01.04.08 to (by Revenue) dt. 31.03.2013 31.03.2011
3. Briefly stated, the facts of the case are that the assessee-
appellants are engaged in providing housing finance to various individuals. Such service provided by the assessee-appellants are categorized under the taxable entry of "Banking and Other Finance Services" (BOFS), defined under Section 65(12) of the Finance Act, 1994. As per the procedure adopted by the assessee-appellants, for obtaining the housing loan, the individual customers are required to make the application in the prescribed form. The agreement with the customer for borrowing the housing loan is executed by the assessee-appellants, which contain various terms and conditions, to be fulfilled and complied with by both sides. As per the contractual norms, the borrower is required to make the payment on Equated Monthly Installments (EMI) basis, as per the terms and condition laid down therein. The agreement provides for levy of additional interest, if there is delay in paying the EMI amount. It has also been provided that the assessee-appellants shall collect a levy of 2% as pre- payment penalty, whenever the borrower intends to make early re- payment of the loan amount. Considering such modus operandi adopted by the assessee-appellants for collection of such additional amount as a provision of above taxable service, the department had initiated show cause proceedings, seeking for recovery of the Service Tax amount on such pre-payment penalty charges and foreclosure 4 ST/347/2012, ST/87431, 87781, 88057/2013 & ST/85079/2017 charges paid for early re-payment of the loan amount. The show cause notices issued in this regard, were adjudicated upon by the learned adjudicating authority, in confirming the adjudged demands on the assessee-appellants. Wherever the adjudication orders have confirmed the adjudged demands on the assessee-appellants, those orders were assailed by them, by way of filing the appeals before the Tribunal. Revenue has also preferred the appeal on the ground that the show cause notices dropped by the adjudicating authority and consequent interest liability thereon was required to be paid by the assessee-appellants and further ground assigned in the grounds of appeal by Revenue is that dropping of penalties under Section 76 and 77 ibid were not in conformity with the statutory provisions. Appeals filed by both the assessee-appellants as well as the Revenue were disposed off by the Tribunal vide Final Order No. A/86425- 86428/2019 dated 21.08.2019, in dismissing the appeals filed by both sides. However, penalties imposed on the assessee-appellants under Sections 76, 77 and 78 ibid in case of Appeal No. ST/347/2012 were set aside. Against the said Order dated 21.08.2019, both sides have preferred appeals before the Hon'ble High Court of Bombay, which were disposed off vide judgment dated 22.06.2023. In the said judgment, the appeals were remanded back to the Tribunal by setting aside the order impugned against. While remanding the matter, the Hon'ble High Court has directed the Tribunal for reconsideration of the issue(s), in light of the decision of the Larger Bench of Tribunal, in the case of Repco Home Finance Limited. Pursuant to the remand directions contained in the judgment dated 22.06.2023, these appeals are taken up for hearing and this common order is being passed.
4. The issue involved in these appeals for consideration by this Tribunal is whether, service tax is payable on pre-payment penalty charged for early re-payment of the loan amount, considering such activity as a 'service', under the category of BOFS, defined under Section 65(12) ibid.
5. We find that the issue of foreclosure charges levied by the banks and non-banking financial companies on pre-mature termination of loans, whether is liable to service tax under the BOFS, was highly contentious and there were divergent views expressed by 5 ST/347/2012, ST/87431, 87781, 88057/2013 & ST/85079/2017 different Benches of the Tribunal. Accordingly, the matter was referred to Larger Bench for resolving such dispute. In the case of Commissioner of Service Tax, Chennai Vs. Repco Home Finance Ltd.- 2020(42) G.S.T.L. 104 (Tri.-LB), the referred issue was answered by the Larger Bench of the Tribunal in the following manner:
"54. .......... "Foreclosure charges collected by the non-banking financial companies on premature termination of loans are not leviable to service tax under "banking and other financial services" as defined under Section 65(12) of the Finance Act."
6. In view of the fact that the issue arising out of the present dispute is no more open for any debate, in view of the order passed by the Larger Bench of the Tribunal (supra), we are of the opinion that the impugned orders passed by the adjudicating authority, in confirming the adjudged demands on the assessee-appellants should not stand the judicial scrutiny. Further, the appeal filed by the Revenue is also not maintainable on the ground that when the disputed services provided are not liable for payment of service tax, then there is no question of recovery of any interest and penalty amount, which have correctly been dropped by the adjudicating authority.
6. Therefore, the appeals filed by the assessee-appellants are allowed and the appeal filed by the Revenue is dismissed.
(Dictated and pronounced in open court) (S.K. Mohanty) Member (Judicial) (M.M. Parthiban) Member (Technical) SM