CESTAT, BANGALORE BENCH
Commissioner of Central Excise and Customs (LTU)
Stay Order Nos. 975/2012
Stay Application No. 1927/2011
Service Tax Appeal No. 3083/2011
Date of pronouncement – May 30, 2012
P.G. Chacko, Judicial Member – This application filed by the appellant seeks waiver of pre-deposit and stay of recovery in respect of service tax and education cesses totaling to Rs.1,14,24,247/- (Rupees One crore fourteen lakhs twenty four thousand two hundred and forty seven only) demanded for the period from April 2005 to March 2010, interest thereon and penalties. The impugned demand of service tax is under the head, “Credit Card, Debit Card, Charge Card or other payment card” service, defined under Section 65(33a) read with Section 65(105)(zzzw) of the Finance Act 1994. The appellant-bank paid service tax under the said head in respect of the payments collected by them from their customers towards issue of credit cards etc. during the said period. However, the interest which accrued to the bank on account of delayed payments by customers in connection with transactions involving use of the credit cards was not included in the gross taxable value. The present demand is on this differential value. The learned counsel for the appellant has invited “our attention to certain relevant provisions having a bearing on the question whether such interest is liable to be included in the taxable value of the ‘credit card service’. He submits that Section 67 of the Finance Act 1994 initially did not expressly provide for exclusion of interest from taxable value of taxable services for the purpose of payment of service tax. This was the legal position from 16.07.2001 to 10.09.2004. An amendment of Section 67 added “interest on loans” to the excluded category under Section 67 w.e.f. 10.09.2004. This legal position continued up to 18.04.2006. The exclusion of “interest on loans” from the taxable value under Section 67 came to be incorporated in Rule 6 of the Service Tax (Determination of Value) Rules 2006 w.e.f. 18.04.2006 and this legal position is still in vogue. On this basis, the learned counsel submits that the appellant was not liable to include the interest in question in the gross value of ‘credit card services’ for the purpose of payment of service tax during the period of dispute, which is entirely post 10.09.2004. These arguments are based on the premise that the interest in question is essentially “interest on loans”. We have heard the learned Commissioner (AR) also who has reiterated the relevant findings of the adjudicating authority and has opposed the plea that the interest in question is the same as “interest on loans”. The learned Commissioner submits that the interest paid by the bank’s customers to the bank on account of the delay on their part in clearing the debt cannot be equated to “interest on loans” and therefore, the legal provisions cited by the counsel may not be applicable.
2. After giving careful consideration to the submissions, we are inclined to agree with the point made by the learned counsel. The bank’s customers holding credit cards purchase goods from shops and the bank pays to the shop keeper on their behalf. Till the customers pay up the money to the bank, they are debtors and they stand in the shoes of borrowers. If that be the case, the amount transacted is a “loan” and interest must accrue to the bank in the event of delay in repayment thereof. In this scenario, the legal provisions cited by the learned counsel become relevant. During the period of dispute, “interest on loans” was in the excluded category and was not to be included in the gross value charged by the bank for rendering ‘credit card services’.
3. The appellant having made out a prima facie case is, therefore, entitled to waiver and stay. We, therefore, allow this application granting waiver and stay in respect of the adjudged dues.