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2015 (11) TMI 909 - CESTAT NEW DELHI

2015 (11) TMI 909 - CESTAT NEW DELHI - 2016 (41) S.T.R. 846 (Tri. - Del.) - 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, .....

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d holder is also aware of the nature of mark up. The case of Revenue is that 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 Servi .....

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. Narasimhan, Advocate For the Respondent : Shri Amresh Jain, DR ORDER Per: 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 interchang .....

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Narashimhan, submitted that out of two issues involved in the present appeal, 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 info .....

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When the card holder transacted in a foreign currency using his card in foreign 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 / rec .....

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e credit card outside India and (b) the conversion of foreign currency. He contended 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 .....

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d for payment in foreign currency also. Hence, the ld. Counsel pleaded that 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 .....

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Shri Amresh Jain submitted that the mark up charges are collected from the card 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 .....

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anking and Financial Services introduced with effect from 16.07.2001. 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. The relevant statutory provisions are as below: Section 65 (10) of Finance Act, 1994: Banking and Financial Services means the following service .....

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arification and judicial interpretation. 11. It is an admitted fact that when 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 .....

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g certain charges to convert the currency through any other means. As discussed 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 n .....

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t and card holder having normal residence in India is of no consequence for 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 se .....

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