HDFC BANK LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THE Appellant, HDFC Ltd. is a Banking company. A demand of service tax and education cess together amounting to Rs. 2.04 crores ( approx ) has been confirmed against them for the period April 2002 to April 2007 in adjudication of a show -cause notice dated 18 -10 -2007 which invoked the extended period of limitation. An amount of Rs. 1.30 Crores (approx.) was paid by the Bank during the course of investigations and the same stands appropriated towards about the demand. The remaining amount of service tax is for the period April 2002 to 31 -4 -2006 and the present application seeks waiver of pre -deposit of stay and recovery in respect of this amount (Rs. 74 lakhs approx.) as well as in respect of the penalty imposed on the Appellant. The interest on service tax and education cess worked out by the adjudicating authority also stands paid. At present, the issue debated before us is whether the Appellant -bank is liable to pay service tax amounting to Rs. 74 lakhs for the period from April 2002 to April 2006 under the head "Banking and other Financial Services"(BOFS). This demand is admittedly on certain charges collected by the bank from their credit card -holders in respect of the service through credit cards availed by them abroad. When the card holders used the cards for shopping abroad, they had to pay in foreign currency and HDFC recovered from them, in addition to the exact value of the goods in foreign currency, 3.5% towards what they called "margin of profit." The taxable value for the demand of Rs. 74 lakhs (approx.) is the aggregate of this margin collected by HDFC from their credit card holders, who used cards abroad during the material period (April 2002 to April 2006). The question is whether this amount should be regarded as value for service rendered by the bank to their own card holders abroad. In this connection, we have come across the definition of BOFS under Section 65(12) of the Finance Act, 1994. BOFS include "credit card services" provided by a banking company like HDFC. The Appellant through their Consultant has made an endeavor to show that the above profit margin cannot be reckoned as value of "credit card service". Prima facie we cannot agree with this argument. The learned JCDR has relied on a stay order passed by a co -ordinate Bench in the case of Citibank N.A. v. Commissioner of Service Tax, Chennai : 2009 (15) S.T.R.. 727 (Tri. -Chennai) : 2009 (242) E.L.T. 422 (Tribunal) wherein, for a comparable period, it was held that recoveries made by City bank from their credit card holders in respect of transactions done abroad were covered by "credit card services" falling under Clause (ii) of BOFS under Section 65(12) of the Act. HDFC has no financial hardships.

(2.) IN the result, there will be a direction to the Appellant to pre -deposit the amount of Rs. 74 lakhs within four weeks and report compliance on 15 -4 -2011. In the event of due compliance, there will be waiver of pre -deposit and stay recovery in respect of the penalty.