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SBI Cards and Payment Services Pvt. Ltd. Versus CST, New Delhi

2015 (11) TMI 909 - CESTAT NEW DELHI

Demand of service tax - Credit card services - Mark up charges - Held that:- The term ‘Credit Card Services’ was not defined during the impugned period. A new tax entry was introduced in 2006 under Section 65(12) as ‘Credit Card Services’ with much wider scope as defined under Section 65 (33a). The period relevant for the present appeal is prior to this new entry - when card is issued with international credit facility, service charges collected at that time or on periodical basis are subjected .....

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since card is an instrument which only enables such conversion of currency, hence any mark up collected on this account is leviable to tax as credit card service. - mark up charges accruing to the appellant when card holder uses card to pay in foreign exchange abroad is not liable to service tax under ‘Credit Card Services’ during the impugned period. This conclusion is based both on merit of scope of ‘Credit Card Services’ during relevant period and lack of territorial jurisdiction of charge. .....

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B. Ravichandran: The appellant is engaged in credit card business and is constituted as a non-banking Financial company. The appellant is registered for payment of service tax under Banking and other Financial Services (BOFS) since July, 2001. 2. Proceedings were initiated against the appellant to demand service tax on the following categories of income linked to credit card business: a) revenue generated from interchange - the differential amount generated by the appellant for funding the recei .....

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l, the question of service tax liability on interchange income has been settled in their favour by the larger Bench of the Tribunal in the case of Standard Chartered Bank and others 2015-TIOL-1713-CESTAT-DEL-LB. The ld. AR Shri Amresh Jain agreed with the said submission of the appellant. As such we find that the service tax liability confirmed in the impugned order on this income is not sustainable. The ld. Counsel informs that tax amount of ₹ 6,13,44,046/- is attributable to this categor .....

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ign exchange, the VISA system tracked the transaction and debited the customers statement in Indian rupees at pre-determined currency conversion rate, which includes mark up. The appellant debit the account of the customer and credit the account of VISA the entire amount as above in Indian rupees. When VISA made its daily settlements with the appellant, 2.15% share of the conversion mark up was adjusted as payable / receivable to/ from VISA. The dispute is relating to the mark up income accrued .....

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ontended that the mark up on conversion of the foreign currency cannot be taxed under credit card services. The appellant while issuing card or on periodical basis collects certain service charges in respect of international cards. The service tax on such service charges stands discharged. Thus the use of card in international transaction is enabled by the appellant. However, when card holder uses card to pay in foreign currency for any goods/ services abroad this will necessarily involve conver .....

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the mark up revenue is solely attributable to service of conversion of foreign exchange which is not covered by credit card services during the impugned period. 8. Without prejudice to the above contention, the ld. Counsel also contended that the whole service is rendered, received and consumed outside territory of India and hence cannot be subject to service tax levy. For this he relied on the Tribunal s decision in Cox & Kings India Ltd. 2014 (35) STR 817. The ld. Counsel also contested th .....

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ard holder by the appellant and are directly attributable to use of credit card. He further stated that the provider/ receiver of service were ordinary resident of India and the consideration for service is settled in India in rupees. Hence, the service is in taxable territory only. The conversion in foreign currency is enabled by usage of card and such the revenue accruing to appellant is relatable to card services only. He further contended that the larger Bench of the Tribunal (supra) followe .....

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rm Credit Card Services was not defined during the impugned period. A new tax entry was introduced in 2006 under Section 65(12) as Credit Card Services with much wider scope as defined under Section 65 (33a). The period relevant for the present appeal is prior to this new entry. The relevant statutory provisions are as below: Section 65 (10) of Finance Act, 1994: Banking and Financial Services means the following services provided by a banking company or a financial institution including a non-b .....

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n card is issued with international credit facility, service charges collected at that time or on periodical basis are subjected to service tax under credit card service. When such card is used to pay in foreign exchange outside India there will necessarily be a charge for conversion of currency. The card holder is settling his dues with appellant only in rupees. The card is used for payment in foreign exchange. As such the mark up charge is directly attributable to the conversion of currency. T .....

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sed in the larger Bench decision of this Tribunal (supra) the Finance Act, 1994 has not defined, even illustratively, the nature and variety of services which amount to credit card services. The larger Bench of Tribunal in agreement with clarification in para 2.2 of Board s circular dated 09.07.2001 confirmed the restricted scope of levy prior to 01.05.2006. We find on examining the discussion in the said order and the nature of transaction now in dispute, that the mark up charges attributable t .....

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tax liability on service rendered and consumed outside India. The Tribunals decision in Cox & Kings India Ltd. (supra) is applicable to the present case. The essence of taxability of service is that it should be taxed in the jurisdiction of its consumption. Here, the service, namely facility of use of card for payment, is rendered outside India and duly consumed by the recipient-card holder outside India. We find service tax liability on such service is not sustainable for want of jurisdict .....

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