Tribunal rules in favor of appellant on service tax exemption for interchange and mark-up charges

The Tribunal ruled in favor of the appellant on both issues. The appellant was not liable to service tax on 'interchange charges' as it was not taxable under credit card services. Additionally, the mark-up charges from currency conversion when a cardholder used the card abroad were found not to fall under 'Credit Card Services' and were not subject to service tax. Consequently, the appeal was allowed in favor of the appellant.

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Issues:
1. Service tax liability on revenue generated from 'interchange' income.
2. Service tax liability on revenue generated from mark-up amount over official conversion rate when credit card is used abroad.

Issue 1: Service tax liability on revenue generated from 'interchange' income:
The appellant, engaged in credit card business, was registered for service tax under 'Banking and other Financial Services' (BOFS). The Commissioner confirmed the demand for service tax on 'interchange' income. However, citing a precedent case, the Tribunal held that the service tax liability on this income was not sustainable. The appellant successfully argued that the 'interchange' income was not taxable under credit card services.

Issue 2: Service tax liability on revenue generated from mark-up amount over official conversion rate when credit card is used abroad:
The dispute centered around whether the mark-up income accrued to the appellant from currency conversion when a cardholder used the card abroad was taxable under credit card services. The appellant contended that the mark-up revenue was solely attributable to the service of currency conversion, not covered by credit card services. The Tribunal analyzed the statutory provisions and found that the mark-up charges related to currency conversion did not fall under 'Credit Card Services' during the relevant period.

The Tribunal also considered the argument of the service being outside the taxable territory of India. It was established that the service, namely the facility of using the card for payment in foreign exchange, was rendered, received, and consumed outside India. Citing a previous decision and the principle of territorial jurisdiction, the Tribunal concluded that the mark-up charges were not liable to service tax under 'Credit Card Services' during the impugned period.

In conclusion, the Tribunal ruled in favor of the appellant on both issues. The appellant was not liable to service tax on 'interchange charges' based on the precedent case and the mark-up charges were also deemed not liable to service tax. Therefore, the appeal was allowed.

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