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2016 (1) TMI 767 - CESTAT MUMBAI

2016 (1) TMI 767 - CESTAT MUMBAI - 2016 (43) S.T.R. 141 (Tri. - Mumbai) - Classification of Import of services from M/s. Society for Worldwide Interbank Financial Telecommunication (SWIFT) which is a non-resident entity, not having an office in India - reverse charge - service involved is transfer of information and also includes data processing - Banking and Other Financial Services or not - Held that:- From the detailed process involved, it is clear that the activities appear to amount to prov .....

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es, we find that if any person provides the service which is covered under the four corners of definition of "Banking and Other Financial Services", it shall be taxable. - As per the plain reading of the definition, apart from ‘banking and other financial institution', the category of a person such as ‘body corporate' and ‘any other person' are also covered. Therefore it is not significant as to what is the nature of the person who is providing the service, but if the service is covered unde .....

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ce provider who is located outside India. For this reason the appellant is undisputedly the deemed banking and other financial institution. - However the demand of the period prior to 18-4-2006 is not sustainable. - On the issue of principle of mutuality, we find that the relationship between the SWIFT and the Appellant is not like club or Association and their members. - As regards the submission of the appellant that present case is of revenue neutrality as the tax payable on the subj .....

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harges paid to SWIFT to the department. Therefore, as there is a suppression of the fact on the part of the appellant, proviso to Section 73(1), gets correctly invoked. - Demand conformed invoking the extended period of limitation - Decided partly in favor of assessee. - Appeal No. ST/166/11-Mum - A/85101/16/STB - Dated:- 5-1-2016 - P. S. Pruthi, Member (T) And Ramesh Nair, Member (J) For the Appellant : Shri S S Gupta, CA For the Respondent : Shri A B Kulgod, AC, (AR) ORDER Per Ramesh Nair .....

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ix Lakhs Ninety Six Thousand Five hundred only) for the period March 2005 to September 2008 towards the services received by BOB under the provisions of Section 73 of the Act. The demand for the period prior to 1-1-2005 is not sustainable and accordingly dropped. The amount already paid on 1-11-2008 is appropriated against this confirmed demand. 5.3 BOB are liable to pay appropriate interest at the applicable rates under Section 75 of the Act for delayed payment of the Service Tax. 5.4 No penalt .....

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mittance transactions getting completed, between BOB and the intended recipient of the said foreign exchange, like banks, customers etc; that BOB was paying commercial considerations to SWIFT for hiring the said services periodically. A show cause notice was issued wherein it was contended that the said services rendered by SWIFT to BOB appeared to amount to a taxable service classifiable under the category of "Banking and Other Financial Services" under sub clause (vii) of Section 65 .....

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le service in India". Therefore, the liability to discharge ST on the said taxable services appeared to lie on BOB. The show cause notice culminated into adjudicating order, wherein the Ld. Commissioner confirmed the charges proposed in the show cause notice. Being aggrieved by the said Adjudication order, the Appellant are before us. 3. Shri S.s. Gupta, Ld. C.A. appearing on the behalf of the appellant submits that the demand of service tax was made under the category of Banking and Other .....

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ed entry i.e. "provision and transfer of information and data processing". To bring a service under purview of said entry, both the activities i.e. information and data processing together should be provided and transferred. In the present case the service of SWIFT is confined to only transmission of messages and there is no provision of processing of any data. He submits that the activity of carrying messages through telecommunication is not classifiable under Banking and Other Financ .....

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tion services not liable to service tax. He further submits that as per definition of Banking and Other Financial Services', the service shall be rendered by Banking Company or Financial Institution including non-banking financial company or other body corporate or any other person. He refers to Circular No. 83/1/2006-ST dtd 4-7-2006 clarifying that meaning of body corporate' and any other person' shall be read ejusdem generis with preceding words. Therefore, any other service provid .....

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ndian Ship Owners Association - 2009 (13) STR 235 (Bom.), which was upheld by the Hon'ble Supreme Court - 2011-TIOL-05-SC-ST, tax under reverse charge is not payable for import of services prior to 18-4-2006. Therefore, in any case, no tax is payable for period upto 18-4-2006. Ld. Counsel also submits that SWIFT is a society where all the commercial banks are member of the society and the services are provided only to members. Therefore, principle of mutuality applies and society and members .....

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ce tax on various services and also availing the Cenvat Credit. If at all the service tax on the services of SWIFT is payable, the same will be available to the appellant in the form of Cenvat Credit and to the extent of Cenvat Credit on such service, the service tax liability of the bank shall stand reduced. Therefore, the whole exercise of payment of service tax and availing the Cenvat Credit shall amount to revenue neutrality'. On this ground the recovery of service tax is not tenable. In .....

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cause notice is time bar. He submits that there was reasonable cause for non payment of service tax and no penalty was imposed by the Adjudicating Authority invoking the provision of Section 80 of the Act. This shows that there is no malafide on the part of the appellant. Therefore, demand for the period beyond one year is time bar. 4. On the other hand Shri A.B. Kulgod, Ld. Asstt. Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. 5. We have car .....

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vices including equipment leasing and hire-purchase; (ii) credit car services (iii) merchant banking services; (iv) securities and foreign exchange (forex) broking, (v) asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services, but does not include case management; (vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and .....

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k accounts; (b) foreign exchange broking provided by a foreign exchange broker other than those covered under sub-clause (a). 6. From the above definition of the service in question, the service under the definition will fall if the following ingredients exist: (i) Service is provided by (a) a banking company Or (b) a financial institution Or (c) a non banking financial company Or (d) any other body corporate Or (e) any other person. (ii) Service is of - provision and transfer of information and .....

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Thus the message data is processed at both locations to prevent data loss. This clearly shows that the data is processed in the entire process of transferring of messages through SWIFT operating centre. 7.1 On further perusal of record, we observe that the SCN contended that services provided by SWIFT relate to transmission and exchange of financial messages through SWIFT NETWORK between two users, with SWIFT acting as the carrier of such messages on a day to day basis. As per the information a .....

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ange of proprietary data while ensuring its confidentiality and integrity. As per the history of SWIFT available in the said website, SWIFT started the mission of creating a shared worldwide data processing and communications link and a common language for international financial transactions. The services provided by SWIFT involves providing of information related to financial transactions viz. transfer of funds; transfer of information contained in the said message after processing the data co .....

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stalled at BOB, SWIFT Network at Belgium and at the recipient's end, for whom the message is intended, manipulate raw data into information and likewise information systems typically take raw data as input to produce information as output. In the context of data processing, data are defined as numbers or characters that represent measurements from the real world. Measured information is then algorithmically derived and/or logically deduced and/or statistically calculated from the multiple da .....

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nonyms. Data is defined as raw facts while information is processed data. Information is the thing that one knows and data is the representation of the information. Information has meaning while data does not. Computers work with data and not information. Information is a subject of data. Data is unstructured, lacks context and may not be relevant to the recipient. When data is correctly organized, filtered and presented with context, it can become information because it then has "value&quo .....

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n all intended sender's and recipient's end and SWIFT network based at Belgium, which acts as the transporter/carrier of messages, receives, processes and transmits data between such intended users. Therefore, it appears that the entire activity of messaging of financial transactions with the intention to transfer funds, confirm receipt of such messages etc. is done exclusively with the objective to retrieve the information contained in the said financial message, process the same and th .....

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above detailed process involved, it is clear that the activities appear to amount to provision and transfer of information and data processing in relation to banking and other financial services, as defined under the Act and clearly covered under the entry provided in sub-clause (a)(vii) of Section 65(12) i.e. "provision and transfer of information and data processing". 7.3 As regards the contention of the appellant that SWIFT does not fall under the category of banking and other finan .....

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r financial institution', the category of a person such as body corporate' and any other person' are also covered. Therefore it is not significant as to what is the nature of the person who is providing the service, but if the service is covered under the definition, such service is liable to service tax, even if it is presumed that SWIFT is not involved in "Banking and Other Financial Services". The service shall remain taxable as the service is clearly covered under the d .....

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. 7.4 As regards service tax liability prior to 18-4-2006, in view of Indian Ship Owners Association case (supra), the service tax is not payable prior to 18-4-2006, therefore the demand of the period prior to 18-4-2006 is not sustainable. Hence, the same is set aside. 7.5 On the issue of principle of mutuality, we find that the relationship between the SWIFT and the Appellant is not like club or Association and their members. In the judgments cited by the Ld. Counsel it was held that the subscr .....

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from the bank on the basis of actual quantum of service provided to the banks. The banks are not paying some subscription to the SWIFT but they are paying towards the actual quantum of services received by them from SWIFT. In view of this fact, it is clear that the transaction between the Bank and the SWIFT is purely a business transaction; therefore the principle of mutuality does not exist in such transaction. The judgments cited by the Ld. Counsel stand distinguished in the above facts of th .....

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