Axis Bank Limited Vs State of Karnataka (Karnataka High Court)
The Karnataka High Court dismissed the revision petition filed by Axis Bank Limited under Section 65 of the Karnataka Value Added Tax Act, 2003 (KVAT Act), challenging the Karnataka Appellate Tribunal’s order dated 12.12.2017 for assessment years 2006-07 to 2009-10. The Bank, a registered dealer under the KVAT and CST Acts, provided payment-processing services to merchant establishments through Electronic Data Capture Terminals (EDCTs), commonly known as swiping machines. The Bank collected transaction-based charges as well as separate charges for terminal rental, installation, maintenance and allied services and treated the entire consideration as banking and financial service consideration on which service tax was paid.
During Enforcement Wing proceedings, the Department found that rental receipts relating to EDCT machines had not been disclosed as taxable turnover under the KVAT Act. Reassessment proceedings under Section 39 were initiated. The Assessing Authority held that EDCT rental charges constituted consideration for transfer of the right to use goods and therefore amounted to deemed sale taxable under the KVAT Act. VAT of Rs.7,00,198/-, interest of Rs.5,77,808/- and penalty of Rs.70,700/- under Section 72(2) were levied. The First Appellate Authority and Karnataka Appellate Tribunal affirmed the reassessment orders.
