SBI Cards & Payment Services Private Limited Vs Commissioner of Central Excise And Central Goods & Service Tax (CESTAT Chandigarh)
The appeal challenged the order dated 20.04.2020 passed by the Commissioner of CGST, Rohtak confirming service tax demands of ₹4,26,41,080 in respect of services received from VISA Worldwide International PTE Ltd. and ₹5,30,197 in respect of services received from MasterCard Asia Pacific PTE Ltd., together with interest and penalties. The appellant, engaged in providing credit card services, had availed credit card settlement services from these overseas entities and deposited withholding tax (WHT) on payments made for such services.
The Tribunal noted that the contractual arrangements with VISA and MasterCard were materially different. Under the MasterCard agreement, WHT paid by the appellant was not reimbursable, and the appellant had discharged service tax on the grossed-up consideration from 01.04.2013 onwards, except for the period 01.07.2012 to 31.03.2013. Under the VISA agreement, however, the appellant furnished proof of WHT payment and VISA periodically reimbursed the WHT. The WHT amount was reflected as recoverable in the appellant’s books and adjusted upon reimbursement, with the burden of WHT ultimately not being borne by the appellant.
Following investigation by the DGCEI, Chennai, a show cause notice alleged that WHT formed part of the taxable value for service tax under the reverse charge mechanism. The appellant contended that WHT reimbursed by VISA did not constitute consideration under Section 67 of the Finance Act, 1994, since the invoices issued by VISA and MasterCard did not charge WHT as consideration for services. It further submitted that reimbursable expenditure did not form part of consideration, particularly where reimbursement was contractually provided. In the alternative, it claimed adjustment under Rule 6(3) of the Service Tax Rules, 1994, asserted that the demand was revenue neutral, challenged invocation of the extended limitation period, and opposed imposition of penalties, stating that it had regularly filed ST-3 returns and entertained a bona fide belief regarding taxability.
