𝗖𝗘𝗦𝗧𝗔𝗧 𝗖𝗵𝗲𝗻𝗻𝗮𝗶 𝗥𝘂𝗹𝗶𝗻𝗴 𝗼𝗻 𝗦𝗲𝗿𝘃𝗶𝗰𝗲 𝗧𝗮𝘅 𝗮𝗻𝗱 𝗗𝗲𝗹𝗮𝘆𝗲𝗱 𝗣𝗮𝘆𝗺𝗲𝗻𝘁 𝗖𝗵𝗮𝗿𝗴𝗲𝘀 📢 𝗧𝗵𝗲 𝗧𝗿𝗶𝗯𝘂𝗻𝗮𝗹 𝗿𝘂𝗹𝗲𝗱: "‘Delayed payment charges’ cannot be held as ‘consideration’ and are not subject to service tax, as they arise from unintended non-compliance rather than for services rendered."

🔍 𝗙𝗮𝗰𝘁𝘀: 𝗖𝗼𝗺𝗽𝗮𝗻𝘆: M/s. Cholamandalam Investment & Finance Company Ltd. (CIFCL) 𝗜𝘀𝘀𝘂𝗲: The appellant, engaged in financing activities (e.g., automobile financing, consumer loans), was audited, revealing that it had not paid service tax on ‘delayed payment charges’ collected from borrowers who made late repayments. The appellant contended that these charges were not for any specific service but were penalties for late payment, challenging the service tax demand.

⚖️ 𝗝𝘂𝗱𝗴𝗺𝗲𝗻𝘁: The Tribunal ruled that delayed payment charges, as penal payments for non-compliance with loan terms, do not qualify as 'consideration' under the Finance Act, 1994, and are therefore not taxable as 'Banking and Other Financial Services.' The appeal was allowed, canceling the demand and penalties.

📜 𝗖𝗮𝘀𝗲 𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻: 𝗧𝗶𝘁𝗹𝗲: M/s. Cholamandalam Investment & Finance Company Ltd. vs. Commissioner of GST & Central Excise 𝗦𝗲𝗿𝘃𝗶𝗰𝗲 𝗧𝗮𝘅 𝗔𝗽𝗽𝗲𝗮𝗹 𝗡𝗼.42333 of 2016 𝗢𝗿𝗱𝗲𝗿 𝗗𝗮𝘁𝗲: 12 June 2023 📜 This ruling confirms that delayed payment charges, arising from late loan repayments, are not liable for service tax as they do not represent consideration for services rendered.