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2016 (2) TMI 983 - AT - Service TaxDemand - currency conversion charges - Credit Card Services - Debit Card Service - ‘mark up’ considered as service - whether the mark up/currency conversion charges in case of foreign currency transactions which were done, using either a credit or a debit card under the category of “Banking and other Financial Services”? - Held that: - the mark-up is essentially a part of the exchange rate that is to be applied for arriving at the cost of goods or services purchased by the cardholder and hence is a part of the cost of goods/services purchased which are recoverable from the user and is not a consideration for the services of providing credit to the user - “mark up” charges accruing to the issuing bank when cardholder uses credit card to pay in foreign exchange abroad is not liable to service tax under credit card services (under Banking & Other Financial Services) during the relevant period. The demand of ₹ 5,12,64,532/- confirmed in the impugned order is liable to be set aside. Demand on the amount of “mark up” charges accruing to the issuing bank when cardholder uses debit card to pay in foreign exchange abroad - Held that: - the adjudicating authority demanded service tax under, “operation of Bank a/c” Section 65(12)(ix), under Banking and Other Financial Services. For the identical issue of “mark up”, amount for credit card and debit card, the department cannot demand service tax one under “credit card services - Section 65(12)(ii) and the other under “Operation of Bank a/c”, Section 65(12)(ix). - the mark up is essentially to meet the foreign exchange fluctuations for arriving the cost of the goods/services purchased by the cardholder. Since we have already held in respect of credit card services, the markup charges is not liable to service tax under credit card services - Section 65(12)(ii), the same is applicable to the mark up charges accruing to the issuing bank in respect of debit card charges. The demand of ₹ 24,51,538/- confirmed by the adjudicating authority in the impugned order is liable to be set aside. As we have already held that service tax is not payable on mark up charges accruing on both credit card and debit card, on merits, we do not go into the other issues, viz. limitation, export of services, place of provision, etc - As regards the penalty imposed under Section 78 of the Act, since the demand of service tax is set aside, the question of penalty does not arise. Accordingly, the penalty imposed under Section 78 is set aside. Appeal allowed.
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