2016 (11) TMI 61 - AT - Service Tax

Service tax on credit card commissions dismissed in appeal, pre-June 1, 2005 transactions exempt

The Revenue's appeal against dropping service tax demands on commission from credit card transactions was dismissed. The Commissioner held that the ... Levy of service tax - commission received by the Banks on credit card transactions - Banking and Other Financial Services - Held that: - the matter stands decided by the decision of the Larger Bench in the case of Standard Chartered Bank vs. CST, Mumai-I [2015 (8) TMI 686 - CESTAT DELHI (LB)] where matter was decided in favor of assessee. Introduction of comprehensive definition of credit card, debit card, charge card or other payment service in Section 65(33a) read with Section 65(105)(zzzw), by the Finance Act, 2006 is a substantive legislative exertion which enacts levy on the several transactions enumerated in sub-clauses (i) to (vii) specified in the definition set out in Section 65(33a); and all these transactions are neither impliedly covered nor inherently subsumed within the purview of credit card services defined in Section 65(10) or (12) as part of the BOFS. Section 65(33a) is neither intended nor expressed to have a retroactive reach i.e., w.e.f. 16.7.2001. Services enumerated in these sub-clauses are not implicit in the scope of credit card services. A Merchant/Merchant Establishment is a customer in the context of credit card services enumerated in Section 65(72)(zm), subsequently Section 65(105)(zm) and a fortiori an acquiring bank is a customer of an issuing bank. ME discount, by whatever name called, representing amounts retained by an acquiring bank from out of amounts recovered by such bank for settlement of payments to the ME does not amount to consideration received in relation to credit card services. Appeal dismissed - decided against Revenue. Issues:Revenue's challenge against dropping service tax demands on commission from credit card transactions.Analysis:The Revenue challenged an order dropping service tax demands on commission from credit card transactions. The Banks provided credit card services and received commissions from merchant establishments. The Revenue contended that service tax should be levied on the commissions. The Commissioner held that the commissions did not constitute taxable service value. The Banks argued that credit card services were separately categorized only from June 1, 2005, and relied on a decision by the Larger Bench in their favor. The Larger Bench held that the Finance Act, 2006 introduced a comprehensive definition for credit card services, and transactions prior to this were not subject to service tax. The Bench clarified that the commissions retained by the Banks did not constitute consideration for credit card services. Consequently, the impugned orders were upheld, and Revenue's appeals were dismissed.