TaxTMI 
TaxTMI 
TaxTMI 
2021 (12) TMI 1533
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....onal Payment Corporation of India Ltd. (in short NPCI) in respect of service tax paid on 'Interchange Fee', which was not a proper document to avail Cenvat credit as interchange fee was charged by other banks and not by NPCI, officers of Directorate General of Central Excise Intelligence, Mumbai Zonal Unit, initiated investigation and called for month-wise details of Cenvat credit availed by them in respect of ST paid on 'Interchange Fee' on the basis of invoices issued by National Payment Corporation of India Ltd./Extranet/ etc. 2.2 On scrutiny of records and after completion of investigation it was observed that appellant have availed Cenvat credit on the interchange fee and the same was not admissible. (in Rs.) Period Amount of Interchange Fee Cenvat credit Availed (50% of Cenvat credit availed) Cenvat Credit availed and to be reversed by HDFC Oct 11 to Mar 12 130,60,07,562 6,72,59,390 6,72,59,390 Apr 12 to Mar13 255,00,46,950 15,75,92,903 15,75,92,903 Apr 13 to Mar14 269,72,47,862 16,66,89,917 16,66,89,917 Apr 14 to Mar 15 288,46,09,074 17,82,68,840 17,82,68,840 Apr 15 to Mar 16 331,56,98,149 22,80,20,647 22,80,20,647 Total 79....
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....or, as the case may be on the basis of an invoice, a bill or challan issued by a provider of input service on or after the 10th day of September, 2004; b. The provider of output service shall maintain proper records for the receipt and consumption of the input services in which the relevant information regarding the value, tax paid, CENVAT credit taken and utilized, the person from whom the input service has been procured is recorded; c. Every person providing taxable service, shall issue an invoice, bill or, as the case may be, a challan signed by such person or a person authorized by him in respect of such taxable service provided or agreed to be provided; and in case the provider of taxable service is a banking company, an invoice, a bill or as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered, and whether or not containing address of the person receiving the taxable service but containing other information in such documents as provided under relevant rule. ⮚ All the conditions mentioned above were not followed while availing the input service tax credit on the strength of the certificate issue by NPCI. ....
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.... which have been taken on record. 3.2 Arguing for the revenue learned Authorized Representative while re-iterating the submissions made in appeal, submitted as follows: ⮚ In the instant case, it appears that the conditions prescribed for availing the CENVAT Credit were not fulfilled in as much as: o Respondent had not received any bill, challan, invoice as prescribed under proviso to Rule 4A of Service Tax Rules 1994 from the service provider namely the acquiring banks. o As no such invoice was received the condition that credit can be availed on receipt of such document was not fulfilled. The third and the o The document against which the CENVAT credit has been availed is not the one issued by the person providing the taxable service. Credit has been availed against the document/ statement issued by the NPCI o In the absence of above the credit availed by respondents is against the express legal provisions mandated by the CENVAT Credit Rules, 2004. ⮚ In his statement the Chief Financial Officer of NPCI, stated that NPCI does not raise any invoices in respect of Interchange Fee and the Service Tax payable thereon, however, NPCI do provide daily settlement....
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....hallan signed by the authorised person or the person providing the taxable service. It does not stipulate the document on the basis of which Cenvat Credit can be availed. Hence, the interpretation of the adjudicating authority that the provider exams the banking company and financial institutions to the extent that they could avail credit based on any document is totally incorrect. ⮚ The adjudicating authority has also relied on Rule 9(2) of Cenvat Credit Rules for arriving at his conclusion. Rule 9(2) states that no Cenvat Credit under sub-rule(1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document, and if the said document does not contain all the particulars but contains the details of duty or Service Tax payable, description of the goods or taxable service, assessable value, Central Excise or Service Tax Registration number of the person issuing the invoice, as the case may be, name and address of the factory or warehouse or premises of first or second stage dealers or provider of taxable service, and the Deputy Commissioner of Central Excise ....
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....n the appeals filed by the respondents is that they had collected interchange fee totalling Rs. 8,06,66,65,515/- during the financial years 2007-08, 2008-09, 2009-10, 2010-11, 2011-12 and 2012- 13 (upto June, 2012), whereupon they were liable to pay service tax totalling Rs. 87,95,55,556/-. On being pointed out, respondent paid the same along with the accrued interest of Rs. 28,26,50,508/-under protest. Show cause notices were issued to them and demands were also confirmed therein. In reply to these SCNs, the respondents had pleaded that interchange fee was a portion of the merchant service fee, which was already subjected to tax at the hands of the acquiring bank. It was not a separate consideration received by them. The levy of tax again would be a re-tax on a portion of the same consideration. This was against the principles of taxation and a tax burden to them. The Adjudicating Authority confirmed the demands while observing that it needs to be emphasised that the issuing bank, after receipt of payment from the card holder transfers the money to the acquiring bank after deducting the portion of the interchange fee. The taxability of this portion, in the hands of the acquiring b....
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....ers Vs CST, Mumbai-I and Others - 2015-TIOL-1713-CESTATDEL- LB [wherein HDFC Bank was also an appellant], and o ABN Amro Bank NV (Presently known as Royal Bank of Scotland NV Vs Commissioner of Central Excise, Customs and Service Tax, Noida - 2018-TIOLl-2811- CESTAT ⮚ Thus, it appears that Service Tax on interchange fees is under dispute in overall banking industry and it is not likely that even other banks might have paid service tax on interchange fees. The claim of the respondent that they have taken CENVAT Credit of the Service Tax paid by the acquiring banks therefore needs to be substantiated with documentary evidence. ⮚ The matter may be remanded back to the original authority for verification of the documents on the basis of which the CENVAT credit was availed by the respondents. 3.3 Arguing for the respondents learned counsel submits as follows: ⮚ The Respondent is a scheduled commercial Bank engaged in the business of providing Banking and financial services as approved by the Reserve Bank of India from time to time. They issue Debit Cards/ ATM Cards to its customers, as issuer bank, who can withdraw cash from ATMs of any bank by using the sa....
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....y be a debit or a credit. If the net settlement position is a debit amount, it indicates that members' issuing transactions are more than its acquiring transactions and vice versa. The net settlement amount would include transaction amount, net dispute/adjustment amount, late reversals, interchange fees, penalties, customer compensation amount, service tax, and switching fees. ⮚ The Acquiring Bank would receive Acquiring Fee (also known as 'interchange fees') from the issuing bank . NPCI collects the acquiring fee from the Issuing Bank along with applicable tax and pass the same to Acquiring Bank;. ⮚ NPCI do not charge Interchange Fee but only pass information regarding the Interchange Fee between the Banks and facilitates the settlement process. Interchange fee is being charged by the Acquiring Banks to the Issuing Banks for providing its ATM facilities to the customers of the Card Issuing Banks. ⮚ Agreement with NPCI, establishes that NPCI is acting as an agent of HDFC Bank for issuing statements on behalf of the Acquiring Bank. Undisputedly NPCI acts a central nodal agency for all Banks who wishes to avail the services of NFS platform for A....
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....collected from the Respondent Issuing Bank and remitted to the Acquiring Bank. ⮚ Mr Sanjay Saxena, Chief Financial Officer of NPCI has in his statement stated that * Interchange fee is charged by Acquiring Banks from Issuing Banks. * NPCI does not raise any invoice in respect of interchange fee and service tax payable thereon. * NPCI provides a settlement report which contains amongst other information, interchange fee and service tax leviable thereon. * NPCI provides monthly service tax applicable thereon which contains details of interchange fee and service tax. ⮚ In Pragati Steels (P) Ltd. [2006 (205) ELT 662] CENVAT/MODVAT credit was held to be admissible on invoice issued by consignment agent of the input supplier when duty paid nature and receipt inputs by the appellant are not in doubt. ⮚ Commissioner of C.Ex, Rohtak [2017(49) STR 573] CENVAT credit was allowed on invoices issued by banks on the strength of proviso to Rule 9(2) of the CENVAT Credit Rules, even if even if desired information are not available in the invoice, when such invoice has been approved by jurisdictional excise authorities. ⮚ Substantive benefit should not be....
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....s. Chemphar Drugs and Liniments [(1989) 40 ELT 276]. ⮚ Normal period of limitation should be 18 months and not 30 months as have been held in Coastal Housing [2021 (8) TMI 83 - CESTAT Bangalore] and Aveco Technologies Pvt. Ltd. [2018 (2) TMI 1269 - CESTAT Hyderabad] ⮚ In Karur Vysya Bank Ltd (Supra) while dealing with similar facts, CENVAT credit on the basis of e-statements issued by Banks were allowed to the Bank. In the event, the Hon'ble Tribunal is not in a position to accept the correctness of the decision of coordinate bench judgment, in Karur Vysya Bank Ltd (Supra) the correct course of action would have been to seek the views of the Larger Bench rather than to remand the matter back for readjudication, especially when an order has been passed in terms of Proviso to Rule 9(2) of the CENVAT Rules, as per the decision in case of Fuji Film India Pvt Ltd. [2017 (349) ELT 203 (SC)] and Gammon India Ltd [2011 (269) ELT 289 (SC)] ⮚ Decision of Hon'ble Supreme Court in Dilip Kumar & Co. [2018-TIOL-302-SC-Cus-DB] relied upon by the revenue has been in Metro Shoes Pvt [2019 (9) TMI 1532 - CESTAT MUMBAI] observed that CENVAT Credit Rules, 2004 fails the pres....
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....s entered by the customer to NPCI who forwards it to the issuer bank to verify whether the requested amount is available in the customer's account. If transactions can be allowed, the amount is debited in the customer's account and messages passed on through NPCI to the acquiring bank for dispensing of cash. NPCI will debit the total aggregate amount of settlements during a day to the issuers bank account to the RBI on behalf of the acquiring bank. NPCI also issues a daily summary sheet giving details of the amount withdrawn through ATM's on the previous date. 4.6 All member-banks are required to enter into a NFS Master Service level Agreement with NPCI. The said agreement would require NPCI to facilitate transaction switching service in respect of ATM transaction between member-banks and settlement process by clearing and settlement of EFT transaction. NPCI is also mandated to charge one time subscription fee and periodic switching fee from the member-banks. In addition NPCI is authorized required to collect acquiring fee from the issuing bank along with the applicable taxes and pass on the same to the acquiring bank. 4.7 The short question to be decided is wheth....
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.... a challan signed by the authorized person of the person providing the taxable service. The proviso to the rules make an exemption for banking company and financial institutions to the extent that they could avail credit based on any document, called by whatever name containing all information specified in the full form of the Service Tax Rules, 1994 even if they do not contain the address of the person providing the taxable service. In the present case NPCI has been set up by Government as an institution to facilitate the functioning of the retail banking sector of the country. NPCI acts as a platform which links the issuing banks to the acquiring banks and stands as guarantee for the transactions while also providing the necessary technical, logistical and documentary support. The fact that NPCI debits the aggregated amount of the withdrawal settlements to the issuing bank's account maintained by treasury department of RBI proves that the institution is functioning in coordination with the Central Bank of the country. Thus the document issued by NCPI at the culmination of a day's transactions indicating the amount to be debited from the issuing bank's accounts as well....
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....iver, he may allow the cenvat credit". 4.12 Based on the above discussion, I hold that the contention in the Show Cause Notice to the effect that assessee is not eligible for availing cenvat credit in as much as the document based on which it was availed was issued by NPCI, would not sustain." 4.3 To consider the issue in right perspective it is necessary to consider the basic scheme of CENVAT Credit Rules, 2004. These rules provide that the provider of the output service is entitled to claim the credit of the service tax paid on the input services received by him. Rule 3, 4 & 9 of the CENVAT Credit Rules, 2004 lay down as follows: 3. CENVAT credit.- (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of - (i) ....... paid on- (i) .......; and (ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004, ......... 4. Conditions for allowing CENVAT credit.- ................. (7) The CENVAT credit in respect of input service shall be allowed, on or after ....
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....anufacturer or provider of output service taking such credit. (4) .............. 4.4 Rule 4A of the Service Tax Rules, 1994 states as follows: 4A. Taxable service to be provided or credit to be distributed on invoice, bill or challan - (1) Every person providing taxable service[, not later than [thirty] days from the date of [completion] of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier, shall issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him in respect such taxable service provided or [agreed]to be provided and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely :- (i) the name, address and the registration number of such person; (ii) the name and address of the person receiving taxable service; (iii) description and value of taxable service provided or agreed to be provided; and (iv) the Service Tax payable thereon. Provided that in case the provider of taxable service is a banking company or a financial institution including a non-banking financial company providing ....
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.... transaction by providing interconnectivity of switches of member banks, thus enabling the ATM users to utilize the ATM's of all connected banks. Presently more than 100 banks are registered with NPCI for availing this facility. The bank which issues the ATM card is known as the issuer bank while the bank at whose ATM the customer withdraws his money is called as acquiring bank. 4.5 A typical transaction flow in NFS involves the customer visiting the ATM of acquiring bank and entering his ATM card and PIN for withdrawing cash. The acquiring bank's system sends the details entered by the customer through NPCI protected network to NPCI. NPCI checks the card details to identify the issuer bank and sends the details to the said bank. The issuer bank validates the card and confirms the details to NPCI and through them to the acquiring bank. Following this the ATM machines prompts the customer to withdraw cash and customer enters the amount that he seeks to be withdrawn. Acquiring bank sends the details entered by the customer to NPCI who forwards it to the issuer bank to verify whether the requested amount is available in the customer's account. If transactions can be all....
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....such person or a person authorized by him in respect of such taxable service provided or agreed to be provided and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely, (i). The name, address and the registration number of such person, (ii). The name and address of the person receiving taxable service, (iii). Description and value of taxable service provided or agreed to be provided (iv). The service tax payable thereon; Provided that in case the provider of taxable service is a banking company or a financial institution including a non-banking financial company providing service to any person, an invoice, a bill or, numbered, and whether or not containing address of the person receiving taxable service but containing other information in such documents as required under this sub-rule. 4.9 Thus it can be seen that the document is required to be issued by a person providing taxable service and the said document could be an invoice, a bill or a challan signed by the authorized person of the person providing the taxable service. The proviso to the rules make an exemption for banking company and financia....
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....lfilled. 4.11 I am relying on the following provision of Rule 9(2) of Cenvat Credit Rules for arriving at this conclusion. "Rule 9(2)- No cenvat credit under sub-rule (1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document: Provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, [assessable value, Central Excise or Service tax registration number of the person issuing the invoice, as the case may be,] name and address of the factory or warehouse or premises of first or second stage dealers of [provider of output service], and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, he may allow the cenvat credit". 4.12 Based on the above discussion, I hold that the contention in the Show Cause Notice to the effect that assessee....
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....f the member banks. The said agreement also records that in the event payments are made by one Member bank ATM operated by the appellant to the customers of another bank, then the banks are required to settle such payments made with the member bank who had issued the subject card. In nutshell, the above agreement provides for smooth operation of member banks regarding transaction through credit or debit cards or such other instruments, to the customers who perform transactions through ATMs for specified services. The agreement also provides for the NPCI to raise invoices on member bank and it is that payment made by the appellant for which the NPCI has only issued a e-statement that has triggered the first issue. From a perusal of the statement issued by NPCI, we note that it is a self-contained document incorporating all the mandatory requirements of proviso to Rule 4A and in any case, NPCI is not a private body just to ignore its statement; as to the nature of service, there is an agreement in place. 5.4 It is not the case of the Revenue that NPCI has not filed its ST-3 return or that there was any contravention by NPCI whereby a doubt is entertained as to the transactions, to....
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....ocument do not file within the category of the prescribed documents as per Rule 9 (1) then the burden to establish the payment of the tax shifts on to the person claiming the credit. Rule 9 (2) do not prescribe any document but provides for relaxation in respect of the documents as specified in the Rule 9 (1) and subject to those relaxation the credit can be allowed in respect of the document fulfilling the requirement of Rule 9 (2). 4.13 NPCI is body constituted by the RBI, and may be providing certain services/ platform for undertaking the transactions in relation to the ATM services provided by the banks. However NPCI, is not a body specified under the CENVAT credit Rules, 2004 or any law in force which could have prescribed the document for allowing the CENVAT Credit. In absence of any such vested authority we do not find any merits in any submission of the respondent that the document issued by NPCI are prescribed documents as per Rule 9 (1) and 9 (2). It is settled law as stated in the following decisions, that if this document was to be considered as prescribed document then the same should have been done by due process of law, rather than by way of argument or interpretati....
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....sue of levy of service tax on the interchange fees was in dispute and in various decisions relied upon by him tribunal has held that the service tax was not leviable on the interchange fees. In fact respondent himself was not paying the service tax on the interchange fees for which show cause notices have been issued to them and are now pending in appeal before the tribunal. Also the matter is before the Hon'ble Apex Court on the same issue. In the present case it would be for the respondent to establish the payment of the service tax by the NPCI/ acquiring banks for which they have claimed the credit. In the case of Citi Bank NA [2021-TIOL-262-SC-ST], relied upon by the authorized representative Hon'ble Supreme Court has clearly observed as follows: "109. Therefore, the upshot of the above discussion is as follows: ..... VII. The respondent, as issuing bank, was liable to pay service tax, under Section 68(1), being the service provider. Being liable to pay the tax under Section 68(1), it was also liable to file the Return including the amount of interchange fee; VIII. The acquiring bank was obliged to value the service, which it provided or agreed to provide. The measur....