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ST – Amount received towards foreclosure of loans, whether chargeable to service tax - President requested to constitute LB as expeditiously as possible to reduce litigation and protect interest of justice: CESTAT

By TIOL News Service

MUMBAI, MAY 04, 2017: IN the case of M/s SIDBI - 2011-TIOL-581-CESTAT-DEL, the CESTAT had held that the activity of foreclosure of loans cannot be treated as   "banking and financial services" and accordingly the demand of service tax on such amount received towards foreclosure was held to be not sustainable. The period involved was 1.9.04 to 31.3.06 and the judgment was delivered on 20.01.2011.

However, for the later period, the original authorities again confirmed the Service Tax demand. Incidentally, the appellant had deposited the entire amount of tax, interest thereof and 25% of the Tax liability as penalty before approaching the Tribunal.

When the matter was heard by the Tribunal, the appellant M/s SIDBI submitted that since there are conflicting views, one in their case in support and the contrary decision in the case of Housing & Development Corporation Ltd (HUDCO) -   2011-TIOL-1606-CESTAT-AHM, the matter may be referred to Larger Bench and for which proposition, they relied on the judgment of the Apex Court in the case of CCE Mumbai vs. Mahindra & Mahindra Ltd   -   2014-TIOL-71-SC-CX .

Accordingly, the matter was referred to the President for constituting a Larger Bench to decide as to which view is correct.

We reported this November 2014 order as - 2014-TIOL-2463-CESTAT-AHM .

In the present case involving similar issue, the appellant mentions that the matter may be adjourned sine die for the reason that the issue involved in these appeal has been referred to Larger Bench in the case of Small Industries Development Bank of India - 2014-TIOL-2463-CESTAT-AHM .

It is also mentioned that in the first appeal the demand involved is Rs.3,28,602/- and in the second the demand is Rs.5,75,19,824/-.

The Bench noted that an interim order has been passed granting stay of recovery of the demands.

The CESTAT further observed -

"…The reference order has been made on 13/11/2014. To reduce litigation and to protect interest of justice, Hon'ble President is requested to constitute Larger Bench in Small Industries Development Bank of India v. Commissioner of Service Tax, Ahmedabad as expeditiously as possible. Both sides are also directed to move before Hon'ble President for constitution of the Larger Bench.

2. The interim order granting stay of recovery of demand will continue till 30th June 2017. Appellants, in their own interest, may move before President for constitution of the Larger Bench to reduce the pendency as expeditiously as possible otherwise appropriate order shall be passed."

The Registry was directed to place a copy of the present order before the President.

(See 2017-TIOL-1493-CESTAT-MUM)


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