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2024-VIL-1225-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax on Automated Teller Machine interchange fee - Free ATM Services, Extended Period of Limitation - appeals filed by the Appellant and the Department against the orders passed by the adjudicating authority on service tax demands relating to ATM transactions - Service tax liability on ATM interchange fee (termed as commission) received by the Associate Banks from SBI for deployment of ATMs, and (ii) service tax on the notional consideration of the free ATM services provided by the Associate Banks on their ATMs to other Associate Banks and SBI - Whether the adjudicating authority was justified in confirming the demand of service tax on the ATM interchange fee received by the Associate Banks from SBI - HELD – Payment of service tax by SBI is not disputed. What is disputed is the payment of service tax by SBI as an agent of the Associated Banks. It has been found that there was an implied authority with SBI to discharge service tax liability of Associated Banks. Once service tax was paid by SBI as an agent of the Associate Banks, service tax cannot be demanded on the same transaction again from the Associate Banks - Discharge of service tax liability of the Associate Banks by SBI as their agent shall be considered as sufficient discharge of their service tax liability, and even under section 65 (7) or section 65B(12) of the Finance Act, an “assessee” has been defined to be a person liable to pay the service tax and includes his agent - the Associate Banks had appointed SBI as their agent to discharge the service tax liability on the interchange fees, and SBI had accepted this role - the department had not been able to prove any positive act of suppression or intent to evade tax by the Associate Banks. Therefore, the demand of service tax on the ATM interchange fee received by the Associate Banks from SBI cannot be sustained and set aside – Appeals filed by the assessee are allowed and appeals filed by Revenue are dismissed - Whether the adjudicating authority was justified in confirming the demand of service tax on the notional consideration of the free ATM services provided by the Associate Banks to other Associate Banks and SBI – HELD - there was no monetary or non-monetary consideration flowing from the SBG Banks to the Associate Banks for the free ATM services, and the arrangement was merely a condition of the contract for setting up the co-owned ATM Switch. Relying on the Supreme Court decisions, the Tribunal held that for levy of service tax, there must be a nexus between the amount charged and the taxable service provided, and any amount charged without such nexus cannot be included in the value of taxable service - in the absence of any consideration, service tax cannot be levied on the free ATM services provided by the Associate Banks to other SBG Banks - Extended Period of Limitation - since the SBG Switch was registered with the service tax authorities in the name of SBI and service tax is claimed to have been paid by SBI as agent of the Associate Banks, the Associate Banks claim that they were under a bona-fide belief that the SBG Switch was not required to be registered again in their own name in proportion of their share. On the same ground, the Associate Banks also claim that they were under a bona-fide belief that since SBI had been discharging service tax liability as their agent, the question of again paying service tax did not arise. The service tax returns were filed regularly in which all the required disclosures had been made. An audit of the records had also been conducted in 2011 for the period 2006-07 to 2008-09. The service tax and financial records were also audited by the department for the period covering from April 2011 to March 2015. No objection was ever raised by the department in these two audits regarding non-payment of service tax on the two ATM transactions referred to in the show cause notice. There is, therefore, no suppression of material facts from the department, much less with an intent to evade payment of service tax.
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