2021-TIOL-262-SC-ST
CGST & CE Vs CITI Bank NA
ST - Interchange Fee - A credit card transaction involves five parties, namely the issuing bank, the credit card holders, the acquiring bank, the merchant establishment & the card network - Revenue is of the view that these would fall within the ambit of Credit Card Services and accordingly service tax is payable - Four show cause notices were issued to the appellants covering the period from October 2007 to March 2015 alleging that service tax liability is required to be discharged on these fees under taxing entry for "Credit Card Services" amounting to Rs.1,64,28,86,059/- with interest thereon as also proposing imposition of penalties under various provisions of law - All these four notices / statement of demand were adjudicated by a common Order-in-Original No. dated 24.1.2017, wherein the proposed tax liabilities were confirmed with interest thereon, and penalties also imposed under various provisions of law - In appeal, the Tribunal noted that in the case of ABN Amro ( 2018-TIOL-2811-CESTAT-ALL ), it has been categorically held that the amount received by the appellant does not qualify as credit card services that when acquiring bank has discharged service tax liability on the entire amount, no service tax is payable by the appellant and that the amount offered by the appellant does not qualify a credit - Tribunal observed that since the very issue that is in dispute in the present appeal has been conclusively decided by the Tribunal in the aforementioned final order ( ABN Amro ) against Revenue, there was no reason to differ from the same - Appeal was allowed by CESTAT, Chennai [ 2019-TIOL-659-CESTAT-MAD ] [Order dt. 16.11.2018] with consequential relief - Revenue is in appeal before the Supreme Court against this order as well as order dt. 20.11.2019.
Held:
Per: K.M.Joseph (J)
+ Respondent, as issuing bank, was providing service, as found by the Commissioner; For the period prior to 01.07.2012, theservice of the respondent, as issuing bank, squarely fell within Section 65(33a)(iii) of the Act; rejects the contention of the respondent that interchange fee is to be treated as interest and, therefore, not taxable under the Act; contention that case based on the credit card transaction, being a transaction in money and, therefore, excluded from the definition of “service” in Section 65B(44), is unacceptable;
+ The Order of the Tribunal in ABM Amro (supra), dealing with the position of an issuing bank, under the framework of the Act, is patently unsustainable; contention that appeal of Revenue needs to be dismissed only on the ground that no Appeal was carried against the Order in ABN Amro (supra) is declined;
+ The respondent, as issuing bank, was liable to pay service tax, under Section 68(1), being the service provider. Being liable to pay the tax under Section 68(1), it was also liable to file the Return including the amount of interchange fee;
+ The acquiring bank was obliged to value the service, which it provided or agreed to provide. The measure of tax, which is found in Section 67(1)(i), is entirely related to the service that the acquiring bank provided and agreed to provide. Likewise, the value of the service provided by the issuing bankand which would be the value of the service, for the purpose of Section 67(1), is relatable to the services it provided. Therefore, the respondent bank was liable to include the interchange fee and file Return and pay the tax on the same;
+ While the service tax may be a value added tax, all that it can mean, is that, for separate services, tax is payable on each separate service. The concept of value added tax cannot mean that if the tax is already paid by the acquiring bank in this case, on the amount of interchange fee, for the service provided by the respondent as issuing bank, the respondent bank should be called upon to pay the service tax all over again. Such an exercise, would undoubtedly constitute double taxation;
+ The Tribunal has not considered whether there was suppression within the meaning of Section 73 of the Act by the respondent in relation to part of the period covered by Show Cause Notice dated 24.04.2013. … the respondent should be provided an opportunity to establish that the acquiring bank has discharged the tax liability in regard to interchange fee.
Appeals are allowed and the matter is remanded back to the Tribunal for considering:
+ Whether the finding of the Commissioner, which was challenged by the respondent, that there was suppression, in relation to the period covered by the Show Cause Notice dated 24.04.2013, was justified or not? In case it was found that it was not justified, it is for the Tribunal to pass appropriate Orders;
+ The Tribunal will provide an opportunity to the respondent to produce material to show that the acquiring bank had discharged the liability of the respondent as issuing bank with regard to the interchange fee for the period covered by the Show Cause Notices.;
+ If the amounts are seen paid by the acquiring bank, then, necessarily, the Orders passed by the Commissioner will stand set aside. Conversely, should it not be proved that payment was made, the Orders of the Commissioner will stand subject to the finding relating to the availability of extended period under Section 73 in relation to the SCN dated 24.04.2013.
Appeals by Revenue are allowed
Differing view - Per S Ravindra Bhat (J)
(A) On Conclusion I: Agreethat the respondent Citibank, as issuing bank was providing service, as found by the Commissioner. However, this service was a part of a single unified service - of settling transactions - which is provided by both the acquiring and issuing bank (which in some circumstances may well be the same bank).
(B) On Conclusions II, III, and IV: Agreethat prior to 01.07.2012, the service of issuing bank fell within Section 65 (33a) (iii); interchange fee cannot be treated as interest, as argued by Citibank; and lastly the case that credit card transaction, being a transaction in money and therefore excluded from the definition of “service” in Section 65B (44) is unacceptable.
(C) On Conclusion VI: Agree that the plea to dismiss the appeals solely on the ground that no appeal was carried against the Order in ABN Amro (supra) has no merit.
(D) On Conclusion V, VII - X: Service tax is undoubtedly a value added tax. However, having characterised the service to be a single unified service - wherein service tax, by way of business convenience, is collected from/remitted by the acquiring bank on the value (whole Merchant Discount Rate (MDR) which includes the interchange fee that is retained by the issuing bank) taxable for the single service rendered by both the acquiring and issuing bank - Citibank cannot be called upon to pay the service tax again as this would result in double taxation.
+ For the same reasons, the question of remand to the tribunal does not arise.The only point of contention seems to be whether they were reflecting the payment of service tax separately in their ledgers, as issuing and acquiring bank. However, as a result of the reasons already elaborated, this is rendered to be a purely academic question.
+ As regards the revenue's allegation of wilful suppression, the settled view of this court, is best explained from the following extract of a previous three judge ruling, in Cosmic Dye Chemical [ 2002-TIOL-236-SC-CX-LB ] followed in M/s Uniworth Textiles [ 2013-TIOL-13-SC-CUS ]. Hence no merit with regards to the revenue's allegation of wilful suppression.
+ Moreover, the representations sent by the Indian Bank Association to the Joint Secretary, TRU, Central Board of Excise and Customs confirm that there was a lack of clarity with regards to the method of payment of this tax, for which there was an ongoing dialogue between the banking institutions and Central Government, negating any claims of “wilful suppression”. One cannot also be oblivious of the fact that the position of law, was in a state of flux, at the relevant period.
+ Present case does not warrant remand to the Tribunal, and this dispute should stand finally concluded at this stage.
Appeals by Revenue ought to be dismissed.
- Difference of Opinion: SUPREME COURT OF INDIA |
