TaxTMI 
TaxTMI 
2026 (8) TMI 1214
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....assed by the Commissioner of Service Tax-Thane-II, Commissioner of Service Tax-V and Commissioner of CGST & Central Excise, Mumbai Central. 2. In all the orders-in-original/impugned orders the dispute involved is arising from common issue of non-payment service tax on 'interchange fee' earned by the appellants, but covering different periods involving demand of service tax, interest and penalty thereon. Show Cause Notice (SCN) No. 623/COMMR./2012-13 dated 19.10.2012 was adjudicated vide impugned order dated 29.11.2013 covering adjudged demands for the period September, 2006 to March, 2011; SCN No. V/ST-I/Dn-II/Gr./VIIA/HDFC/ SCN/30/13 dated 14.10.2014 was adjudicated by impugned order dated 14.12.2015 covering adjudged demands for the period 01.04.2013 to 31.03.2014; and SCNs No. 1044/COMMR/2013-14 dated 26.11.2013 (July, 2012 to March, 2013), SCN/12/Pr. Commr./2016 dated 12.04.2016 (April, 2014 to March, 2015), SCN/25/Pr. Commr./2017-18 dated 16.06.2017 (April, 2015 to March, 2016), was adjudicated vide impugned order dated 14.12.2017 covering adjudged demands for the periods July, 2012 to March, 2013; April, 2014 to March, 2015 & April, 2015 to March, 2016. Thus, we are of the....
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....he same as 'interchange fee'. On both accounts, the appellants did not pay any service tax on 'interchange fee'. The department had interpreted that in terms of Sections 65(33a) and 65(105)(zzzw) of the Finance Act, 1994 that any service provided to any person, by any other person, in relation to credit card, debit card, charge card or other payment card services, in any manner would be liable to service tax and the appellants having failed to pay service tax, are liable to be proceeded with service tax demands and exposed to penal consequences. Accordingly, the Department had issued various SCNs dated 19.10.2012, 26.11.2013, 14.10.2014, 12.04.2016 and 16.06.2017 proposing for demand of service tax for the period September 2006 to March, 2016 under Section 73(1) read with Section 68 of the Finance Act, 1994 along with interest and for imposition of penalty on the appellants under Section 76, 77 & 78 ibid. The afore said SCNs were adjudicated by various original authorities in confirming all the proposals made in the SCNs vide Orders-in-Original dated 29.11.2013, 14.12.2015 and 14.12.2017. Feeling aggrieved with the impugned orders, the appellants have filed these appeals before the....
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....r Section 65(105)(zzzw) of Chapter V of the Finance Act, 1994 to their card holders. The nature of service is essential and of importance because the noticee had raised the issue of double taxation. 16. The merchant service fee is collected by the acquiring bank for rendering services to the merchant establishment. This is done by the acquiring bank by installing the EDC machines at their premises. This installation enables the merchant establishment to enter into transactions, the payments wherefore, can be made by their customers through the credit cards issued by the noticee. The acquiring bank receives merchant service fee therefor. There is no role of the issuing bank, namely, the noticee, in this transaction vis-à-vis the merchant establishment. 17. The noticee (or the issuing bank) receives interchange fee for the reason that it is the cardholder client of the noticee, who has made a transaction with the merchant establishment through the card issued by the noticee. The issuing bank, upon such transaction, conveys the authenticity and currency of the card holder to the EDC machine to enable the card holder to complete the transaction. This service is....
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....Bank issues credit cards and therefore, effectively lends monies to its Card Holders. The contractual relationship between an Issuing Bank and its Card Holders is spelt out in the cardholder agreement / terms & conditions. Service fees are charged to service tax. (b) Credit Card holders (CH) - The Card Holder is the customer to whom the Issuing Bank issues a credit card. The credit card evidences a potential line of credit established by the Issuing Bank using which the Card Holder may purchase goods or services at any of the Merchant Establishments. (cc) Acquiring Bank (AB) - The Acquiring Bank is a bank which recruits, screens, and accepts Merchant Establishments into a Card Network's network. They provide a Point of Sale (hereinafter referred to as 'POS') machines to Merchant Establishments which enable Merchant Establishments to validate and accept credit card payments. The Acquiring Bank processes credit card transactions for Merchant Establishments within the respective Card Network and also operates per the respective Network's Operating Regulations. Any service fees (typically Merchant Discount Fee / MDF) from Merchant Establishment is full....
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.... (viii) Judgment in the case of Standard Chartered not applicable in the present case. 5.6 On the other hand, the adjudicating authority has found that interchange fee is paid for facilitating the purchase using the card and not for lending the money for the purchase; that interchange fee is a consideration that accrues to the issuing bank for verifying, facilitating and extending the purchase value in line with the contractual agreement, the issuing bank has with the card association and taking the risk for collection of amounts from the card holder. 5.7 In response to the appellant's contention that service tax is being paid on the entire MDR (Merchant Discount Rate), the adjudicating authority in para 8.11 of the impugned order has taken a stand that no proof has been furnished to that extent. Moreover, the interchange fee is the consideration given to issuing bank for validating the transaction and the MDR is the consideration for the acquiring bank for settling the merchant establishment. 5.8 We further find that although the appellant in the course of adjudication proceedings had contended that the decision of the Larger Bench of the Trib....
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.... 5.10 Viewed in this light, notwithstanding the contentions of the ld. AR, we find that the Standard Chartered Bank decision of Larger Bench supra does not help the case of the Revenue and on the other hand it only, in our view, buttresses the stand of the case of the appellant. 5.11 Be that as it may, we find that in a very recent decision of the Tribunal in the case of ABN Amro (supra), it has been categorically held that the amount received by the appellant does not qualify as credit card services that when acquiring bank has discharged service tax liability on the entire amount, no service tax is payable by the appellant and that the amount offered by the appellant does not qualify a credit. The relevant portion of the order is as under:- "5. Considered the submissions. 6. It is a fact on record that the acquiring bank is discharging his service tax liability on the amount in question, in that circumstances, no service tax is payable by the appellant (and the said fact has not been disputed by the learned AR during the course arguments) as held by the Hon'ble Allahabad High Court in the case of Commissioner of C. Ex. Lucknow v. Chotey Lal Radh....
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....l. 2. We have perused the written note submitted by the learned AR Shri Suvir Misra, wherein it has been stated that the Revenue has filed a Civil Appeal being No.8228 of 2019 before the Hon'ble Supreme Court in the case of Commissioner of CGST & Central Excise Vs. City Bank N.A. Since, the Civil Appeal filed in the case of City Bank N.A., having similar set of facts as involved in the present appeal, is sub-judice before the Hon'ble Supreme Court, we are of the view that being the sub-ordinate judicial body, it would not be proper on our part to take up the present appeals for a decision on merits. 3. Therefore, Registry is directed not to list the matter till disposal of Civil Appeal by the Hon'ble Supreme Court. Both sides are at liberty to appraise the Bench about the development of the matter pending before the Hon'ble Supreme Court and thereafter, appropriate steps would be taken for deciding the appeals on merits. The written submissions filed by both sides would be considered at the time of final hearing of the appeals. Accordingly, after the matter was of finally decided by the Hon'ble Supreme Court in the case of Citi Bank (supra), the....
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....nue. It is not the case of the Revenue that payment by the acquiring bank to the issuing bank, known as interchange fee, is separately chargeable, in addition to the service tax on the MDR. 5. To support the conclusion, S. Ravindra Bhat, J. has said that, in reality, there is one unified service which is rendered to the consumer, that is, the credit card holder, and the merchant. The subsequent bifurcation in the context and the nature of the transaction, read with Sections 66 and 68 of the Act and Rule 5 (1) of the Service Tax (Determination of Value) Rules, 2006, is immaterial as MDR is taxable and service fee is to be taxed. MDR, as a service, has been taxed and also paid. 6. We wonder whether the Revenue would have accepted the bifurcation as argued by them in case the acquiring bank and the issuing bank had taken the stand which is now taken by them. While interpreting a tax provision, one must keep in mind that the legislature ennobles the ease of collection of tax and payment of tax. These principles, especially when there is no loss of revenue, can be taken into consideration for interpreting a provision in case of doubt or debate. 7. It is pertin....