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TMI Blog2020 (10) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... om the card holder is in excess of the purchase price contracted with the member establishment for the goods or service transacted and as the issuing bank escapes tax liability only to the extent of the purchase price, the mark-up represents consideration for a service. This is, thus, liable to tax except if the consideration was, as claimed by Learned Counsel, transacted for export of service. In the intangible world of service transactions, the location of recipient and flow of consideration in foreign currency are sure demonstration of exports. In the present dispute, there is no doubt that the recipients are domestically based and the claim of overcoming the first test by temporary location overseas is but a poor excuse. Learned Counsel submits that, for the entire period of the dispute, repatriation of consideration in convertible foreign currency, was not a necessary qualification. Notification no. 6/99-ST dated 9th April 1999, circular no. 36/4/2001 dated 8th October 2001 of Central Board of Excise Customs and notification no. 2/2003-ST dated 1st March 2003 do not address exemption to export of services but with taxability when the services are rendered in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y challenge to order in-original no. 33/AC/COMMR/Th-II/ST/2014 dated 12th August 2014, confirming tax of ₹2,03,83,370 under section 73 of Finance Act, 1994, along with interest thereon under section 75 of Finance Act, 1994, and imposition of penalty of like amount under section 78 of Finance Act, 1994 on the appellant as provider of banking or financial services , defined in section 65 (12) of Finance Act, 1994, till 30th April 2006 and as provider of credit card service , defined in section 65(33a) of Finance Act, 1994, thereafter, is that the service, having been exported, is beyond the pale of taxation and that the activity, pertaining, as it did, to conversion of foreign exchange, was not liable to tax till the incorporation of section 65(105)(zzk) in Finance Act, 1994 to tax purchase and sale of foreign exchange including money changing with effect from 16 May 2008 or, at best, when the expanded definition of credit card service was rendered taxable with a separate, and specific, enumeration in May 2006. 2. This dispute is before us for the second time having, on the former occasion, been remanded to the original authority vide order no. A/561/2012 dated 14th Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Rules, 2005, tax treatment was, by and large, determined upon the territorial aspect of the transaction. 4. Export of Service Rules, 2005, as originally issued under section 94 of Finance Act, 1994 with effect from 15th March 2005 and, in acknowledgment of the complexity of determining the stage at which intangible services cross territorial frontiers, trifurcating the taxable enumerations in the context of the target of the activity, the place of performance and the location of the recipient, was amended by notification no. 28/2005-ST dated 7th June 2005 for incorporating delivery and usage outside India as well as receipt of payment in convertible foreign exchange as conditions. Further amendments, effected by notification no. 13/2005-ST dated 19th April 2006, appropriated authority for the issuance of the Rules from section 93, besides the existing section 94, of Finance Act, 1994 while re-numbering the existing trifurcation within sub-rule (1) of rule 3 and the conditions of delivery-cum-use and payment in convertible foreign exchange under sub-rule (2) of rule 3 of Export of Service Rules, 2005. 5. These clarifications, including those issued after the disputed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services which are mentioned in the sub- rule (1) including the services rendered by the appellant would be deemed to be treated as export of service only when the payment is received by the service provider in convertible foreign exchange. Alternatively, the appellant has to fulfil the condition of receipt of payment in convertible foreign exchange only with effect from 1-3-2007. urged before us. 6. It is the contention of Learned Authorized Representative that the decision in re SBI Cards and Payment Services Pvt Ltd was, in the light of decision of the Hon ble Supreme Court in Union of India v. West Coast Paper Mills Ltd [2004 (164) ELT 375 (SC)], in jeopardy owing to the appeal of Revenue having been admitted by the Hon ble Supreme Court on 24th March 2017. He points out that the decision of the Tribunal in Tata Steel Ltd v. Commissioner of Service Tax, Mumbai-I [2016 (41) STR 689 (Tri-Mumbai)] had distinguished the decision in re Cox Kings India Ltd cited by Learned Counsel and had, therefore, been inappropriately relied upon in the other decisions preferred on behalf of the appellant. 7. Learned Counsel for appellant has contended that the impugned order lack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Railways which was ultimately dismissed by the Hon ble Supreme Court on 14th October 1970. A consequential application by M/s West Coast Paper Mills Ltd before the Hon ble High Court, seeking issue of writ for refund of excess charged, was dismissed on 29th October 1973 with liberty accorded for filing of suit for recovery. The contention of Indian Railways, that these suits were barred by limitation, not having been accepted by the trial court and not having found favour with the High Court, was carried in appeal before the Hon ble Supreme Court. 10. While considering the plea of the Indian Railways that the bar of limitation operated with reference to the date on which the Railway Rates Tribunal pronounced its order, and in accordance with section 58 of Limitation Act, 1963, the Hon ble Supreme Court, in doubt over the correctness of the law laid down in PK Kutty Anuja Raja another v. State of Kerala another [JT 1996 (2) SC 167], referred the issue to a larger bench which opined that the said decision was not applicable for not having noticed certain crucial decisions and the doctrine of merger. In deciding upon the applicability of limitation, various aspects and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as receipt and processing of credit card applications; transferring of embossing data issuing bank s personalisation agency; teller machine personal identification number generation; renewal or replacement of a credit card; change of address; payment updates and an statement generation; settlement of accounts transacted through credit card; services provided by the owner of trademarks or bank name to the issuing bank for use of the trademark or brand name; and a host of other services which are interspersed in the sequence of transactions occurring on the use of a credit card, would all these services provided in relation to credit card services. These services are expressly enumerated in sub- clauses (ii), (iii), (vi) and (vii) of Section 65 (33a), w.e.f 1-5-2006... makes it abundantly clear that the ambiguity was restricted to the transactions that is not germane to the card holder - issuing bank engagement and that too for the period prior to May 2006. The determination thereafter that 40. On the basis of the principles and guidance derived from aforementioned authority we are compelled to the conclusion that in the context of BOFS, credit card services cover only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xport of service. 13. It is contended by Learned Counsel that an identical dispute was settled in favour of assessee by the Tribunal in re SBI Cards and Payments Services Ltd and followed in re Citibank NA. In the first of the two, it is seen that the appeal was allowed with the finding that 13. Considering the above discussion and findings we hold that the mark up charges accruing to the appellant when cardholder uses card to pay in foreign exchange abroad is not liable to service tax under Credit Card Services during the impugned period. This conclusion is based on merit of scope of Credit Card Services during the relevant period and lack of jurisdiction of charge. which was arrived at with reference to decision of the Larger Bench in re Standard Chartered Bank and in re Cox Kings India Ltd. We take note that, in re Standard Chartered Bank, the specific findings of the Tribunal on the interchange fee appears to have been argued without drawing the attention to the elucidation of the unambiguous element of banking and other financial services therein. Relying upon the congruity of the fact that the location of the recipient of service in the impugned purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax find its true fulfillment. The billing occurs in India as does the payment to the issuing bank , and even the rate of exchange , though relevant to the date of transaction, is applied only when the acquiring bank debits the issuing bank ; the impugned transaction can only be subsequent to it. There is no evidence on record that the recipient of banking and other financial service , by being the card holder was not in India when those services were rendered. The presumption of the card holder being located outside the taxable jurisdiction is a stretch too close to the breaking point. 15. In the intangible world of service transactions, the location of recipient and flow of consideration in foreign currency are sure demonstration of exports. In the present dispute, there is no doubt that the recipients are domestically based and the claim of overcoming the first test by temporary location overseas is but a poor excuse. Learned Counsel submits that, for the entire period of the dispute, repatriation of consideration in convertible foreign currency, was not a necessary qualification. Notification no. 6/99-ST dated 9th April 1999, circular no. 36/4/2001 dated 8th Octobe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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