TaxTMI 
TaxTMI 
2016 (2) TMI 983
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....tember, 2004 to April, 2006 in respect of Debit Card Service. The adjudicating authority in his impugned order confirmed the demand, also imposed equivalent penalty of Rs. 5.15 crores under Section 78 along with interest. Hence the present appeal. 3. Learned counsel Shri A.R. Krishnan, Chartered Accountant and Shri Girish Raman, consultant appeared for the appellant and submitted their written synopsis along with relevant documents in the form of two paper books Vol-I & Vol-II and reiterated the same. He submits that they are registered with service tax and are regularly paying service tax. They are paying Rs. 172 crores towards service tax to the LTU during the relevant period under Banking and Financial Services. He drew our attention to scheme of both credit card and debit card transactions. The flow diagram is enclosed at Page 2 of the paper book for both domestic as well as for overseas transactions of credit card and debit card. He submits that while rendering credit card services, they issue credits (Money Exchange). It is to be regulated by VISA or Master Card which is a transaction of overseas since the cardholder transacts involving payment of foreign exchange. He d....
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....a transaction in foreign currency abroad and services were rendered outside India and hence not taxable which is outside the scope of levy itself. He drew our attention to Para 16 of SCN where the allegation in the SCN is made and also referred to Page 98 of appeal memo of the order which confirms that the activities were rendered outside India. He relied the following decisions : (i) Cox & Kings India Ltd. v. CST - 2014 (35) S.T.R. 817 (Tri.-Del.) (ii) Grey Worldwide (India) Pvt. Ltd. v. CST - 2015-TIOL-2057-CESTAT-Mum = 2015 (40) S.T.R. 1104 (Tribunal). He also relied Board's circular dated 25-4-2003. He also relied Tribunal's decision in the case of SGS India Pvt. Ltd. v. CST - 2011 (24) S.T.R. 60 (Tri.-Mumbai) which was upheld by Hon'ble Bombay High Court - 2014 (34) S.T.R. 554 (Bom.) and also relied Hon'ble Supreme Court's decision in the case of All India Federation of Tax Practitioners v. UOI - 2007 (7) S.T.R. 625 (S.C). 3.3 Ld. counsel submits that even if it is considered that services were rendered outside India, it is not taxable. In their case, service rendered is towards an individual and not to a commercial conc....
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....09 (13) S.T.R. 138 (Tri.-Kol.). 4. On the other hand, ld. AR reiterated the findings of the impugned order. He drew our attention to Page 79 of OIO on the charges. He drew our attention to Page 18 of the grounds of appeal wherein appellant discussed the main demand in respect of credit card services. He drew our attention to definition under Section 65(105)(zm) of the Finance Act where the 'taxable service' has been defined to mean any service provided to any person in relation to ..... "banking and other financial services". He also refers to Section 65(12) of BOFS wherein "credit card services" is covered. He drew our attention to Paras 5.2 to 5.8 of OIO wherein the adjudicating authority has clearly discussed the domestic transaction as well as international transactions in respect of credit card services. He particularly referred to Para 5.5 wherein the adjudicating authority clearly discussed the "mark-up" that it is not towards cost of the goods or service purchased by the customer. In the schedule of standard charges levied by appellant, "Mark up" is mentioned as "charges" and included in the list of other charges like, joining and annual fees, cash advance fees, late ....
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....nt is collecting towards foreign exchange transaction, no charges can be collected as "reimbursement" from the cardholder. All the amounts were included in the credit card services. He relied Tribunal's LB decision in the case of Sri Bhagavathy Traders v. CCE, Cochin - 2011 (24) S.T.R. 290 (Tri.-LB). 5.2 On the limitation issue, ld. AR submits that even though department sought clarification by letter dated 2-12-2003, adjudicating clearly brought out in Para 7.1 that appellant vide their reply letter dated 4-12-2003 on which reliance has been placed suppressed the vital fact that mark-up has been excluded and no service tax has been paid on the same. Even otherwise, appellants aware that have not claimed service tax and if so, they should have indicated the same in their ST-3 returns under the category of 'Exempted Services'. He relied the Hon'ble Supreme Court's decision in the case of UOI & Ors v. Bombay Tyre International Ltd. and others - 1983 (14) E.L.T. 1896 (S.C.). The said decision is pertaining to excise valuation and the same is applicable to this case as far as leviability of service tax and also marketability is concerned. 6. In rejoinder, learned counsel co....
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....terest, joining fee, annual fee but in the case of debit card transaction, the issuing bank immediately debits the value of goods to the cardholder's bank account. We further find that the cost of goods and services in $ has to be converted to INR at the rate which is given by Visa which are generally the rates prevailing in the wholesale currency market on the date of the transaction or when Reserve Bank of India (RBI) notifies exchange rates on the date of transaction Plus (or minus) any 'adjustment' which the appellant determines. The period involved is April, 2002 to April, 2006 in respect of credit card services and Sept., 2004 to April, 2006 in respect of debit card services. There is no dispute on the fact that the bank discharged service tax on credit card services rendered to the cardholder. On the issue of conversion charges i.e. mark up of 3%, the Hon'ble Tribunal's Principal Bench, Delhi in the case of SBI Cards and Payment Services Ltd. v. CST, New Delhi in the Final Order No. 53252/2015, dated 15-10-2015 [2016 (41) S.T.R. 846 (Tri.-Del.)] discussed this issue at length and allowed the appeal. The relevant paragraphs are reproduced as under : 2. Proceedings were ....
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....the conversion of currency. This much is clear from the terms of usage and the cardholder is also aware of the nature of mark up. The case of Revenue is that since card is an instrument which only enables such conversion of currency, hence any mark up collected on this account is leviable to tax as credit card service. As discussed above the mark up comes only when currency exchange is involved. If not using the card the cardholder will be spending certain charges to convert the currency through any other means. As discussed in the Larger Bench's decision of this Tribunal (supra) the Finance Act, 1994 has not defined, even illustratively, the nature and variety of services which amount to credit card services. The Larger Bench of Tribunal in agreement with clarification in para 2.2 of Board's circular dated 9-7-2001 confirmed the restricted scope of levy prior to 1-5-2006. We find on examining the discussion in the said order and the nature of transaction now in dispute, that the mark up charges attributable to currency conversion will not fall under the category of 'Credit Card Services' during the impugned period. 12. Without prejudice to the above findings we find strong f....
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.... not liable to service tax as concluded above. Accordingly the appeal is allowed. The Tribunal's above decision is squarely applicable to the present case. The Tribunal based its conclusions by relying the LB decision of Standard Chartered Bank (supra) and the Hon'ble Supreme Court's decision in the case of Ishikawa-Ima-Harima Heavy Industries Ltd. and Tribunal's decision in Cox & Kings India Ltd. (supra). 9. The learned Authorized Representative had relied upon the decision of the Hon'ble Supreme Court in the case of Union of India and Others v. Bombay Tyre International Ltd. reported in 1983 (14) E.L.T. 1896 (S.C.) which decided various disputes on valuation. The learned AR had relied on this judgment for the purpose of maintainability and stated that the principle decided would equally apply to service tax matters. Further reliance was made on the Larger Bench's decision in the case of Sri Bhagavathy Traders v. Commissioner of Central Excise, Cochin, reported in 2011 (24) S.T.R. 290 (Tri. - LB) with particular reference to Para 6.1 of the said judgment. In our view, both the judgments are inapplicable to the case on hand as in the former, the Hon'ble Supreme Court was dea....