2011 (7) TMI 312 - AT - Service Tax

Demand - Evasion of tax - Credit card facilitates - taxable entry provided by section 65(72)(zm) of the Act not only brought taxable services provided by banking company or a financial institution including a non-banking company to a customer to the tax net but also related banking and other financial services were brought to the scope of taxation using the term in relation to in that section of the Act - When Tax Administration noticed that different types of card facilities were provided by banking sector and other financial service sector to facilitate credit transactions, they considered proper to bring all such card facilities under one definition in clause (33a) of section 65 of the Act for taxing under the taxing entry in section 65 (105)(zzzw) of the Act enacting Finance Act, 2006 for convenience of tax administration - It is well settled that in matters of taxation laws, the court permits greater latitude to pick and chose objects and rates for taxation and has a wide discretion with regard there to. - levy of service tax justified. Extended period of limitation - The appellant although was registered with Service Tax Authorities from 18.07.2002, failed to prove its innocence nor could it establish that there was no suppression of fact disclosing in its return filed. - Extended period was rightly invoked by the SCN dated 31.10.2007 when the evasion came to notice of Revenue by investigation to make good of the loss to revenue. Bonafide of the appellant did not surface. Taxes due to exchequer remained unpaid. The appellant was liable for the contravention of law. Penal consequence of law has rightly followed.

Issues Involved:
1. Demand of Service Tax and Education Cess under Section 73 of the Finance Act, 1994.
2. Imposition of Interest under Section 75 of the Finance Act, 1994.
3. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
4. Applicability of extended period of limitation.
5. Classification and taxability of credit card services under the Finance Act, 1994.
6. Applicability of CBEC circulars and instructions.
7. Entitlement to tax-cum-price benefit.

Detailed Analysis:

1. Demand of Service Tax and Education Cess under Section 73 of the Finance Act, 1994:
The appellant was demanded Service Tax of Rs. 2,63,42,711.00 and Education Cess of Rs. 4,13,431.00, aggregating Rs. 2,67,56,142.00, for providing credit card services under the category of "Banking and Other Financial Services" as per Section 65(72)(zm) of the Finance Act, 1994. The adjudicating authority held that the services provided by the appellant, including interchange fees received from acquiring banks and credit card charges from cardholders, were taxable.

2. Imposition of Interest under Section 75 of the Finance Act, 1994:
Interest on the aforementioned amount of service tax was demanded under Section 75 of the Finance Act, 1994. This was upheld based on the appellant's failure to pay the due service tax on the credit card services provided during the specified period.

3. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
Penalties were imposed under:
- Section 76: For failure to pay service tax from the due date to the date of payment.
- Section 77: A penalty of Rs. 1000.00 was imposed.
- Section 78: A penalty of Rs. 4,00,00,000.00 was imposed for suppression of facts with intent to evade payment of service tax.

4. Applicability of Extended Period of Limitation:
The adjudicating authority invoked the extended period of limitation under Section 73(1) of the Finance Act, 1994, due to the appellant's suppression of facts and failure to disclose the taxable services in their returns. The Tribunal upheld this, noting that the appellant was aware of its obligations and had intentionally evaded tax.

5. Classification and Taxability of Credit Card Services under the Finance Act, 1994:
The appellant argued that credit card services were defined and taxed only from 01.05.2006 under Section 65(33a) and Section 65(105)(zzzw). However, the Tribunal held that credit card services were taxable under "Banking and Other Financial Services" as defined in Section 65(10) and later Section 65(12) of the Act, effective from 2001. The Tribunal emphasized that the reclassification in 2006 did not imply a new levy but was for administrative convenience.

6. Applicability of CBEC Circulars and Instructions:
The appellant contended that CBEC circulars and instructions, which stated that credit card services were taxable from 01.05.2006, should be binding. However, the Tribunal found that the adjudicating authority had correctly applied the law as it stood during the relevant period, and the circulars did not exempt the appellant from tax liability for the period before 01.05.2006.

7. Entitlement to Tax-Cum-Price Benefit:
The appellant's plea for a tax-cum-price benefit was accepted. The Tribunal directed the adjudicating authority to recompute the tax liability, considering the gross value received as inclusive of service tax.

Conclusion:
The Tribunal confirmed the adjudication, except for the recalculation of tax liability to include the tax-cum-price benefit. The penalties and interest were upheld, and the matter was remanded to the adjudicating authority for recomputation of tax, penalty, and interest based on the recalculated tax liability. The appeal was partly allowed to this extent.

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