2016 (3) TMI 1053 - AT - Service Tax

Liability of Service tax - Banking and Financial Service during the period September, 2002 to August, 2006 - Credit cards are used by appellant to customers, who use the same various outlets and the said payments are made by the bank to the outlet after retaining the small amount - Held that - by following the ratio as settled by the larger bank in the case of Standard Chartered Bank Vs CST 2015 (8) TMI 686 - CESTAT DELHI (LB) , the service tax liability for the activity indicated in these appeals of the assessee is not taxable. - Decided in favour of appellant

Summary

Issues:
Whether appellant assessee is liable for service tax under Banking and Financial Service category from Sep 2002 to Aug 2006. Interpretation of the new definition of credit card services. Applicability of Merchant Establishment Discount as consideration for credit card services.

Analysis:
The judgment revolves around the service tax liability of the appellant assessee under Banking and Financial Service category for services provided to customers using credit cards. The Revenue challenged the Orders-in-Original, while the assessee appealed against different orders. The core issue was whether the appellant was liable to discharge service tax for services provided to credit card holders. The Revenue contended that the amount retained by the assessee banks from payments made by customers should be considered as consideration for services rendered.

The Tribunal referred specific questions to a larger bench for clarification, including the interpretation of the new definition of credit card services introduced by the Finance Act, 2006. The larger bench concluded that the new definition was a substantive legislative effort to levy transactions specified within the definition, separate from the previous definitions. It also clarified that the new definition did not have retroactive reach from July 16, 2001. Moreover, the bench held that Merchant/Merchant Establishment could be considered as customers in the context of credit card services.

Based on the conclusions of the larger bench, the Tribunal ruled that the service tax liability for the appellant's activities was not taxable. Consequently, the appeals of the assessee were allowed, setting aside the impugned orders, while the Revenue's appeals were rejected, upholding the respective Orders-in-Original. The judgment emphasized following the settled ratio by the larger bench in making this decision.

In conclusion, the Tribunal allowed the appeals of the assessee and rejected those of the Revenue, based on the interpretation of the new definition of credit card services and the applicability of Merchant Establishment Discounts as consideration for such services.