TaxTMI 
TaxTMI 
2024 (10) TMI 568
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....vices alleged to have been provided for the normal period of limitation from October 2013 to March 2015 under section 73(1) of the Finance Act 1994 [the Finance Act]. The demand proposed for the extended period of limitation under the proviso to section 73 (1) of the Finance Act has been dropped. The order also imposes penalty under sections 75 and 76 of the Finance Act. Cross Objection No. 50518 of 2019 has been filed by the department in Service Tax Appeal No. 50862 of 2019 filed by SBI. 2. The second set of five appeals have been filed by the department to assail that part of the order passed by the adjudicating authority that drops the demand of service tax for the extended period of limitation from October 2010 to September 2013 under the first proviso to section 73(1) of the Finance Act. The order also drops the penalty imposed under section 78 of the Finance Act. Four Cross objections have been filed by SBI in the four appeals filed by the department. 3. The five banks which merged with SBI on 01.04.2020 shall collectively be called as "Associate Banks". The Associated Banks including SBI shall collectively be referred to as "SBG Banks". 4. A summary of the demand rais....
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....00,000 2. State Bank of Patiala 4,29,93,542 4,92,94,126 9,22,87,668 Rs. 35,00,000 3. State Bank of Mysore 5,50,05,037 5,18,43,061 10,68,48,098 Rs. 40,00,000 4. State Bank of Bikaner and Jaipur 4,84,55,862 5,05,07,436 9,89,63,298 Rs. 37,00,000 5. State Bank of Travancore 5,06,48,891 5,03,12,779 10,09,61,670 Rs. 5,000 23,28,41,553 25,97,15,668 49,25,57,221 D S. No. Name of Bank Appeals filed by the Banks Appeals filed by the department Cross Objection filed by SBI in appeals filed by the department Total Demand Confirmed in Rs. Penalty in department appeal under sections 1. State Bank of Hyderabad ST/50862/2019 ST/54179/2018 43,65,37,379 77 and 78 2. State Bank of Patiala ST/50860/2019 ST/54175/2018 ST/CROSS/50317/2019 20,59,78,946 77 and 78 3. State Bank of Mysore ST/50859/2019 ST/54176/2018 ST/CROSS/51340/2019 21,47,45,900 77 and 78 4. State Bank of Bikaner and Jaipur ST/50861/2019 ST/54178/2018 ST/CROSS/50490/2019 23,84,82,428 77 and 78 5. State Bank of Travancore ST/52326/2018 ST/54177/2018 ST/CROSS/50318/2019 20,....
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....tween SBI and the Associate Banks that provides that SBI is required to discharge service tax liability on behalf of the Associate Banks; and (ii) The free ATM services provided by the constituents of the SBG Banks to each other are chargeable to service tax on notional consideration. 10. The findings recorded by the adjudicating authority on the two issues are as follows: First issue "A 10.1. In this context, I find from the facts that the Interchange fee transferred by SBI to SBH is only as a result of providing of services by SBH on its ATMs and not as a result of pooling of their assets in the common network run and managed by SBI. SBI as per the facts of the case are only acting as a settlement agency for settlement of amounts due from or earned by the SBG banks (including their own transactions). The question regarding payment of Service Tax by SBI on behalf of other SBG banks in this regard is a question being dealt by me in the later part of the order. The Common Switch deployed for settlement of amounts with other Non-SBG banks is a common asset of SBI and other Associate Banks with 50% share of SBI and 10% share being held by each of the other five Associate Banks. ....
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....but is limited to some common costs related to SBI Switch centre [which may be one time investment made @ 10% of the total cost plus some running expenses]. Therefore, the venture cannot be termed as a joint venture between SBI and the associates. xxxxxxxxx B 1.6. Now considering the above provisions relating to ATM services, there is no doubt that debit cards are being issued by each of the five Associate Banks and by SBI separately and ATMs machines are also deployed by each of the Associate Bank and by the SBI separately. Thus in case the SBI customer goes to the SBH's ATM and avails the ATM services, then in that case the SBI is the issuing bank and SBH is the acquirer bank for ATM or Debit card services provided by the SBH. The position is similar in the vice-versa situation, i.e. in case the customer of SBH goes to the ATM of SBI and avails services, then in that case SBH is the issuing bank and SBI is the acquirer bank. Thus, considering the above provisions of service Tax and facts of the case there remains no doubt that ATM services are provided by the SBH, is any customer of SBI or any of the rest of Associate Bank avails the ATM services of SBH. Similar is the situat....
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....G Switch in their respective books of accounts. All the capital expenditure and operating expenses relating to SBG Switch were shared amongst each of the SBG Banks in proportion of their ownership interest in the SBG Switch; (vii) SBG Switch processes all ATM transactions of SBG Banks. Before centralisation of service tax registration with effect from 01.10.2010, SBI had registered the SBG Switch as a separate assessee in its own name, as the SBI had the largest share in the SBG Switch; and (viii) SBI had also been authorised by the Reserve Bank of India to act as a settlement agency under the Payments and Settlement Systems Act, 2007 for settlement of ATM transactions of SBG Banks; 13. It is also important to understand the ATM transactions on SBG Switch. It has been described in the following manner: (i) In case of ATM transactions involving two Banks where the ATM Card issuing bank is different from the bank on whose ATM the card has been used, ATM Switches of both the banks interact through National Payments Corporation of India [NPCI] Switch for completion of ATM transaction. For such services, the bank owning the ATM charges a fee, known as "interchange fees" or "acqui....
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....uthorities and service tax was claimed to have been paid by SBI as their agent, the Associate Banks claim that they were under a bona-fide belief that the same was not required to be registered again in their own name in proportion of their share. On the same ground, the Associate Banks also claim that they were under a bona-fide belief that since SBI had been discharging service tax liability as their agent, the question of again paying service tax did not arise; (viii) This arrangement was followed since the inception of the SBG Switch i.e. for more than 10 years prior to show cause notice period. It is stated that the audit wing of the service tax department conducted multiple audits of the SBG Switch and did not find anything objectionable in the manner of discharging service tax liability by SBI as agent of the Associate Banks or claiming CENVAT credit by SBI as agent of the Associate Banks; (ix) Post the enquiry initiated by the Directorate General of Goods and Services Tax Intelligence [DGGI] in 2013 and taking cognisance of alternate views, the NPCI agreed to recognise each of the Associate Banks transactions separately by allotting them separate BIN ID by treating SBI ....
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....was an afterthought; (v) The Associate Banks had submitted various documents including a chartered accountant certificate certifying that SBI had paid service tax on the entire revenue of SBG Switch, including on the services provided by Associate Banks to non SBG Banks, but the adjudicating authority has held that none of the documents submitted by the Associate Banks justify the payment of service tax by SBI acting as their agent; (vi) The show cause notice proposed demand of service tax on interchange fee received on the ground that interchange fee is commission from SBI for deployment of ATMs owned by Associate Banks in the shared network. However, the adjudicating authority has held that interchange fees is not a consideration for deployment of ATM but is a consideration for the services provided to non-SBG Banks. Thus, the adjudication authority has travelled beyond the allegations made in the show cause notice to confirm the demand; Second issue (i) SBG Switch is a common switch co-owned by all SBG Banks. For the purpose of customers, all the ATMs are known as "State Bank ATM". Associate Banks do not charge any fee from each other if a customer of one Associate Bank t....
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....not correct as the order has been passed by the adjudicating authority with reference to submissions made by the Associate Banks at the time of investigation regarding the practice being followed for payment of tax by SBI; (ii) The contention of SBI that show cause notice is based on presumptions is not correct; (iii) The Associate Banks have claimed that SBI acted as their agents as there was an implied agreement. There is no written agreement and even the essential characteristics of a principal-agent relationship have not been demonstrated by the Associate Banks; (iv) Associate Banks have also not pointed out any provision in the service tax law whereby a tax payer can authorize his agent to pay service tax on his behalf; (v) SBI had taken a separate service tax registration for SBI Switch centre prior to October 2010. Subsequently, SBI took centralized service tax registration and continued the practice of payment of service tax on interchange fee charged from other banks, which was earlier being paid by the SBI Switch Centre. The co-ownership of SBI Switch by SBI and other SBG banks will not make any difference as the SBI had taken a separate service tax registration f....
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....ment agency authorized by the Reserve Bank of India. 19. In case of ATM transactions involving two Banks where the ATM Card issuing bank is different from the bank on whose ATM the card has been used, NPCI would settle interchange fees with SBI. In turn, SBI would settle the same with the Associate Banks without any mark-up. Conversely, if a customer of an Associate Bank transacted on the ATM of a Bank other than that of SBG Banks ATM, the Associate Banks would have to pay the required to pay interchange fees, which was settled by the Associate Banks through SBI and SBI in turn settled it with NPCI. Since SBI had the largest share in the SBG Switch, the SBG Banks agreed amongst themselves that SBI would discharge their service tax liability on the interchange fees settled by SBI as their agent, after adjusting the service tax paid on the interchange fees paid by SBI as their agent. There was, however, no formal written agreement to this effect. It has been stated that this was not felt necessary when the SBG Switch was initially set up and thereafter considering that none of the party ever disputed the arrangement and the Associate Banks were subsidiaries of SBI, the same was not ....
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....rior to that, SBI was discharging the service tax liability of the Associate Banks on the interchange fees. It also needs to be noted that even after the Associate Banks started separately paying service tax, the service tax liability of the SBG Banks remained the same. This demonstrates that the earlier arrangement that existed between the Associate Banks and SBI was merely for smooth settlement and did not have any service tax impact. 22. Thus, discharge of service tax liability of the Associate Banks by SBI as their agent shall be considered as sufficient discharge of their service tax liability, and even under section 65 (7) or section 65B(12) of the Finance Act, an "assessee" has been defined to be a person liable to pay the service tax and includes his agent. 23. The adjudicating authority has also recorded a finding in paragraph A.17.3 that the contention that SBI was acting as an agent of the Associate Banks is partially correct. The relevant finding is reproduced below: "A 17.3. Further as regards the contention that SBI was acting as an agent of the Associate Banks is also partially correct, as explained above, in so far as settlement of amounts for such transactions ....
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.... amount, including share of City Bank, the demand should not be raised again. The issue involved in the present case relates to ATM transaction, while the issue involved before the Supreme Court in City Bank relates to Credit Card transactions, though the mode of settlement of ATM as well as Credit Card transaction is similar. 27. It further needs to be noted that while the show cause notice proposed demand of service tax on interchange fees received on the ground that interchange fee is commission from SBI for deployment of ATMs owned by Associate Banks in shared network, but the adjudicating authority has held that interchange fees is not a consideration for deployment of ATM, but is a consideration for the services provided to non-SBG Banks. 28. Thus, the demand of service tax on the ATM interchange fee (termed as commission) received by the Associate Banks from the SBI for deployment of ATMs owned by the Associate Banks in the shared network could not have been confirmed. Second Issue 29. This issue relates to demand of service tax on a notional basis on the free ATM services provided by the constituents banks of the SBG Banks to each other. 30. The SBG Switch is a common ....
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....o describe a relationship in which two people or groups agree to do something similar for each other, to allow each other to have the same rights, etc. Barter S. No. Dictionary Meaning 1. Merriam Webster : to trade by exchanging one commodity for another : to trade goods or services in exchange for other goods or services 2. Cambridge Dictionary : to exchange goods for other things rather than for money 3. Investopedia Barter is an act of trading goods or services between two or more parties without the use of money- or a monetary medium, such as a credit card. In essence, bartering involves the provision of one good or service by one party in return for another good or service from another party. 4. Collins If you barter goods, you exchange them for other goods, rather than selling them for money 5 Oxford Learner's : to exchange goods, property, services, etc. for other goods, etc. without using money barter (with somebody) (for something) 6. Britannica Dictionary : to exchange things (such as products or services) for other things instead of for money. 33. It is clear that 84% of the total number of ATMs were owned by SBI and the othe....
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....eference to the concept of "consideration", as was expounded in the decision pertaining to Australian GST Rules, wherein a categorical distinction was made between "conditions" to a contract and "consideration". It has been prescribed under the said GST Rules that certain "conditions" contained in the contract cannot be seen in the light of "consideration" for the contract and merely because the service recipient has to fulfil such conditions would not mean that this value would form part of the value of the taxable services that are provided. 38. The Supreme Court in Commissioner of Service Tax vs. M/s Bhayana Builders [2018 (2) TMI 1325], while deciding the appeal filed by the Department against the aforesaid decision of the Tribunal, also explained the scope of Section 67 of the Act, both before and after the amendment, in the following words: "The amount charged should be for "for such service provided": Section 67 clearly indicates that the gross amount charged by the service provider has to be for the service provided. Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charged has to be necessari....
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....the value of taxable service shall be the gross amount charged by the service provider "for such service" and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. 25. This position did not change even in the amended Section 67 which was inserted on May 1, 2006. Sub-section (4) of Section 67 empowers the rule making authority to lay down the manner in which value of taxable service is to be determined. However, Section 67(4) is expressly made subject to the provisions of sub-section (1). Mandate of subsection (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider." 40. What follows from the aforesaid decisions is that "consideration" must flow from the service recipient to the service provider and should accrue to the benefit of the service provider and that the amount charged has necessarily to be a consideration for the taxable service provided under the Act. It should also be remembered that there is marked distinction between "conditions to a contract" and "considerations for the contract". A service reci....
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....y the Supreme Court and the decision is reported as 2023 (4) TMI 170 - SC Order [Commissioner of CGST and Central Excise vs. M/s. Edelweiss Financial Services Ltd.]. The relevant paragraph of the judgment of the Supreme Court is reproduced below: "7. The above would suggest that this was a case where the assessee had not received any consideration while providing corporate guarantee to its group companies. No effort was made on behalf of the Revenue to assail the above finding or to demonstrate that issuance of corporate guarantee to group companies without consideration would be a taxable service. In these circumstances, in view of such conclusive finding of both forums, we see no reason to admit this case basing upon the pending Civil Appeal No. 428 @ Diary No. 42703/2019, particularly when it has not been demonstrated that the factual matrix of the pending case is identical to the present one." 38. The second set of five appeals have been filed by the department against the finding recorded by the adjudicating authority that the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act could not have been invoked. 39. The adjudicating a....
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....dated 06.01.2011 covering the period from 2006-07 to 2008-09. Similarly the Service Tax and Financial records of the Noticee were audited by the Department as per the Audit report submitted by the Noticee vide Annexure-7 covering the period from April 2011 to March 2014. I find from the audit reports as submitted by the Noticee that no such objection was raised by the Department as regards the two objections being under consideration in the show cause notice regarding the non-payment of service Tax on the ATM transactions with Non-SBG Banks and as well as non-payment of Service Tax on the ATM transactions within the SBG members. Further, I also find that none of the ground as mentioned in the SCN and as briefed under para no. C.1. above could be attributed to cover any suppression of facts by the Noticee. In my view all the grounds on which the extended period is proposed to be covered in the present SCN could well be known from the records of the Noticee as were discovered by the Investigating officers during the Investigations. Further also looking to the fact that Noticee is a Public Sector Bank, suppression or mis-declaration with intent to evade Service Tax cannot be assumed i....
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....paid or has been short-levied or short paid- (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;" 43. The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall have effect as if, for the word "eighteen months", the word "five years" has been substituted. 44. In Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Bombay [1995 (78) E.L.T. 401 (S.C.)], the Supreme Court examined whether the ....
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....hile dealing with the meaning of the expression "suppression of facts" in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held:- "In taxation, it ("suppression of facts") can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." 27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that "suppression of facts" can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of th....
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....viso, i.e. "fraud, collusion, wilful misstatement". As explained in Uniworth (supra), "misstatement or suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty. xxxxxxxx Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention." xxxxxxxx The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief." (emphasis supplied) 49. It is, therefore, clear that even when an assessee has suppressed facts, the extended period of limitation can be invoked only when "suppression" is shown to be wilful with intent to evade the payment of service tax. 50. The Commissioner has correctly appreciated the legal position relating to the invocation of t....
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....fide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it is the responsibility of an assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bonafide manner. The relevant portion of the judgment of the Supreme Court is reproduced below: "23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief of the assessee a mala fide belief particularly when such a belief was emanating from the view taken by a Division Bench of Tribunal. We note that the issue of valuation involved in this particular matter is indeed one were two plausible views could co-exist. In such cases of disputes of interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation by considering th....