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2016 (1) TMI 767

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..... rvices", 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 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 definition of "Banking and Other Financial Services" in clause (vii) of Section 65 (12). Moreover the appellant being liable to pay the service tax is ‘deemed service provider'. Therefore, the status of the appellant is required to be considered and not the status of service 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 .....

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..... s. Society for Worldwide Interbank Financial Telecommunication (SWIFT) which is a non-resident entity, not having an office in India; that BOB was utilizing the services of SWIFT network essentially to transmit, financial messages internationally which culminated in foreign exchange remittance 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 (12) provision and transfer of information and data processing are liable to service tax from 16-7-2001. In the show cause notice, it was also contended that as per rule 2(1)(d)(iv) of Service Tax Rules, 1994, as it existed w.e.f. 16-8-2002 and the subsequent introduction of Section 66 A of the Finance Act, 1994, the person liable for paying ST means- in relation to any taxable service provided by a person who is non- .....

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..... ody corporate' and any other person' shall be read ejusdem generis with preceding words. Therefore, any other service provider, similar to banking or financial institution are only liable for payment of service tax. M/s SWIFT is not engaged in business similar to banking and other financial institution. SWIFT is basically providing telecommunication service of transfer of messages. Accordingly no tax is payable under reverse charge. He further submits that the service provider is located in Belgium which is outside India and tax has been demanded for the period 1-1-2005 to September 2008. In view of the judgment of Indian 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 cannot be considered as two different persons. In view of the foll .....

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..... nancial company or any other body corporate or any other person namely :- (i) financial leasing services 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 advice on corporate restructuring and strategy; (vii) provision and transfer of information and data processing ; and (viii) banker to an issue services; and (ix) other financial services, namely, lending, issue of pay order, demand draft, cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts; (b) foreign exchange broking .....

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..... lated to financial transactions viz. transfer of funds; transfer of information contained in the said message after processing the data contained therein. Data processing in any computer is a process that converts data into information. The data contained in the said financial message when presented for processing is raw data which when processed become useful information for the customers viz. banks, financial institutions etc., who then use the said processed information to debit and credit the customers accounts accordingly, i.e., funds settlement between the banks. The computer network operating systems i.e., SWIFT network, installed 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 data available from the said messages transmitted from BOB. Info .....

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..... he 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 financial institution's as SWIFT is not engaged in the business of banking and other financial services, 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. Moreover there is no dispute that the SWIFT is a body corporate' and covered under the definition of Banking and Other Financial Services . 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 providin .....

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..... subject service is cenvatable, we are of the view that the bank is providing various services, some of the services are taxable and some are exempted. Therefore, it cannot be decided that the entire service tax payable on services of SWIFT can be allowed as Cenvat Credit. We do not agree that it is a case of revenue neutrality. However if the appellant, is able to satisfy the concerned jurisdictional authority that the service is used for providing the taxable services, Cenvat Credit shall be allowed. On limitation, the appellant claim that the demand is time barred on the ground that Ld. Adjudicating Authority is time barred on the ground that Ld. Adjudicating Authority has refrained from imposing penalty by invoking Sec 80. We do not agree with the appellant, as there are two separate provisions, one is for the invoking extended prior i.e. proviso to Section 73(1) and other is Section 80 under which if a reasonable cause is shown, penalty can be waived. Therefore, merely because Section 80 was invoked, it cannot be said that proviso to Sec 73(1) shall not apply. Both provisions have separate ingredients. In the present case the appellant have not disclosed the data related to se .....

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