Case Details: Sundaram Finance Ltd. vs. Commissioner of GST & Central Excise, Chennai (2026) 40 Centax 121 (Tri.-Mad)
Judiciary and Counsel Details
- S/Shri P. Dinesha, Member (J) & Vasa Seshagiri Rao, Member (T)
- Ms G. Vardini Karthik, Adv., for the Appellant.
- Ms O.M. Reena, Authorised Representative, for the Respondent.
Facts of the Case
The appellant, a Non-Banking Financial Company (NBFC), was engaged in financing vehicles and immovable properties under hire-purchase or loan agreements. Customers who opted for pre-closure or foreclosure of loans paid additional charges in terms of the contracts. The department treated such receipts as liquidated damages and proposed the levy of service tax under Banking and Financial Services and as declared service under Section 66E(e) of the Finance Act, 1994. For an earlier period, the Tribunal had allowed the appellant’s appeals on the identical issue, and refunds had been granted. For the present period, the appellant paid the amount under protest and filed refund claims, which were rejected by the refund authority, and the rejection was sustained in appeal. The matter was accordingly placed before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
CESTAT Held
The CESTAT held that a Larger Bench had already ruled that foreclosure charges collected by an NBFC were not liable to service tax under Banking and Financial Services. The Tribunal further held that once the same receipts were not taxable under that category, the department’s plea of treating them as liquidated damages could not survive. It was also held that such amounts could not be regarded as consideration for tolerating an act so as to attract levy under Section 66E(e) of the Finance Act, 1994. Accordingly, the Tribunal held that the denial of a refund by treating the receipts as taxable lacked a legal basis and the impugned orders were set aside.
List of Cases Cited
- Commissioner v. Repco Home Financial Limited — 2020 (42) G.S.T.L. 104 (Chennai – CESTAT) — Relied on [Paras 4, 5]
- Nayveli Lignite Corporation Ltd. v. Commissioner — 2021 (53) G.S.T.L. 401 (Chennai – CESTAT) — Relied on [Para 6]
- South Eastern Coalfields Limited v. Commissioner — 2021 (55) G.S.T.L. 549 (New Delhi – CESTAT) — Relied on [Para 5]
- Sundaram Finance Ltd. v. Commissioner — Final Order Nos. 40067-40068/2023, dated 22-2-2023 by CESTAT, Chennai — Referred [Para 2]
