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2020 (10) TMI 379 - AT - Service TaxLevy of service tax - mark-up’, charged by them for recovery from the holders of credit cards issued by them towards transactions entered into with overseas merchant establishments - export of services - period from April 2002 to April 2007 - HELD THAT:- The amount recovered from the ‘card holder’, to the extent paid out by ‘issuing bank’ to ‘acquiring bank’, is not in dispute. The claim made on behalf of the appellant is that the ‘mark-up’ is also an element of the ‘foreign exchange’ rate for conversion of the invoice amount to Indian currency. This submission does not find favour as this ‘mark-up’ is, demonstrably, not shown separately, either as exchange rate or additionally, in the statement issued to the ‘card holder’. Exchange rate for reimbursement to ‘acquiring bank’ is contractually enshrined and, in the absence of any other cost associated with the conversion taxation to be borne by the ‘issuing bank’, is not an element of the rate for conversion of the invoice amount to domestic currency. The amount charged by the appellant from the ‘card holder’ is in excess of the purchase price contracted with the ‘member establishment’ for the goods or service transacted and as the ‘issuing bank’ escapes tax liability only to the extent of the purchase price, the ‘mark-up’ represents consideration for a service. This is, thus, liable to tax except if the consideration was, as claimed by Learned Counsel, transacted for export of service. In the intangible world of service transactions, the location of recipient and flow of consideration in foreign currency are sure demonstration of exports. In the present dispute, there is no doubt that the recipients are domestically based and the claim of overcoming the first test by temporary location overseas is but a poor excuse. Learned Counsel submits that, for the entire period of the dispute, repatriation of consideration in convertible foreign currency, was not a necessary qualification. Notification no. 6/99-ST dated 9th April 1999, circular no. 36/4/2001 dated 8th October 2001 of Central Board of Excise & Customs and notification no. 2/2003-ST dated 1st March 2003 do not address exemption to export of services but with taxability when the services are rendered in India even though clarifying for exemption, or otherwise, in the circumstances narrated therein. This is apparent from circular no. 56/5/2003 dated 25th April 2003 of Central Board of Excise & Customs which distinguishes exports for exemption despite domestic rendition of services being taxable even if transacted in convertible foreign currency. The essential qualification of export is the delivery thereof outside the territory of India and, in the absence of palpable markers, there can be no alternative to receipt of consideration in foreign currency as the underlying condition even if not articulated specifically - there is no statutory basis for arriving at the conclusion that delivery of service outside the tax jurisdiction could be established without corresponding inflow of convertible foreign currency. The complexity of exports and the lack of distinguishment for exports during much of the period of dispute is obvious from our exposition supra and it may not be unnatural for an assessee to resort to superficial interpretation without intention to evade tax - the show cause notice, and the impugned order, lack convincing evidence of suppression or misrepresentation and, in the circumstances of discharge of tax liability, along with interest, for the period of dispute, it would have been appropriate for the proceedings to have terminated under section 73(3) of Finance Act, 1994 without issue of show cause notice. The imposition of penalty under section 78 of Finance Act, 1994 is not merited - Appeal allowed - decided in favor of appellant.
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