2008 (8) TMI 69 - AT - Service Tax

Banking institution providing credit card services - Bank is certainly providing services to the card holders & to the merchant establishments selling goods and providing services - we are not prima facie convinced that during the relevant period the term customer will include such merchant establishments - from 01.05.06 the services rendered by the Bank to both the card holders and the merchant establishments have been specifically and comprehensively, brought under ST stay granted

Summary

Issues:
1. Taxability of credit card services provided by a banking institution.
2. Interpretation of the term 'customer' in the context of credit card services.
3. Applicability of the extended period of limitation for assessment.
4. Pre-deposit requirement for safeguarding the interest of the Revenue.

Analysis:

1. Taxability of Credit Card Services:
The case revolves around the taxability of credit card services provided by a banking institution. The applicant, a banking institution offering credit card services, has been paying service tax on charges collected from cardholders under the category of 'credit card services.' The Department contends that transactions between the bank and cardholders, as well as various establishments, fall under banking and financial services, including credit card services.

2. Interpretation of the Term 'Customer':
The crux of the dispute lies in the interpretation of the term 'customer' concerning the merchant establishments accepting credit cards. The appellant argues that only cardholders should be considered customers, while the establishments are partners in business. The Circulars issued by the Department in 2001 and 2006 are referred to delineate the scope of credit card services and the timeline for service tax applicability.

3. Applicability of Extended Period of Limitation:
The issue of invoking the extended period of limitation for assessment is raised. The Department seeks pre-deposit to safeguard the Revenue's interest, citing the possibility of invoking the extended period due to substantial demands relating to the period before a specified date. However, the Tribunal opines that, in the present circumstances, the extended period may not be applicable.

4. Pre-Deposit Requirement:
Considering the arguments presented, the Tribunal decides to waive the pre-deposit of dues as per the impugned order and stays the recovery pending the appeal's disposal. The case's significance leads to the direction for a final hearing on a specific date to address the substantial stakes involved.

In conclusion, the Tribunal, after considering the submissions from both sides, rules in favor of the appellant regarding the taxability of credit card services and the interpretation of the term 'customer.' The decision to waive the pre-deposit and stay recovery reflects the Tribunal's acknowledgment of the complexity and importance of the case, leading to a scheduled final hearing to address the matter thoroughly.