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Case Law Details

Case Name : Cholamandalam Investment & Finance Company Ltd Vs Commissioner of GST (CESTAT Chennai)
Appeal Number : Service Tax Appeal No. 42333 of 2016
Date of Judgement/Order : 12/06/2023
Related Assessment Year :
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Cholamandala Investment &  Finance Company Ltd Vs Commissioner of GST (CESTAT Chennai)

CESTAT Chennai held that service tax could not be levied on ‘delayed payment charges’ collected by the appellant from their customers from 01.07.2012 also.

Facts- The Appellant, M/s. Cholamandalam Investment & Finance Company Ltd. (CIFCL) are engaged in the business of financing activities such as automobile financing, consumer loan, loans against securities etc.

During the course of audit conducted by the officers of the Service Tax Commissionerate, it was noticed that CIFCL had not paid service tax on the ‘delayed payment charges’ collected from the borrowers who made loan repayments belatedly i.e beyond the period stipulated in the agreement. Two orders have come to be passed by the Principal Commissioner, confirming service tax demands on ‘delayed payment charges’ under relevant sections of the Finance Act 1994. Being aggrieved, the appellant is in appeal before the Tribunal.

Conclusion- The issue regarding what constitutes a consideration for agreeing to tolerate an act or a situation has been elaborately discussed in the case of South Eastern Coalfields Ltd. Vs. Commissioner of CGST and Central Excise. It was held that the activities, therefore, that are contemplated under section 66E(e), when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity.

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