The Karnataka High Court Ruled that the ATM Management Service Provided to Banks as Pure Service, Exempts VAT Payment for Banks.
Facts
The common issue for consideration in the writ petitions is whether the respondents have jurisdiction to levy Value Added Tax under the provisions of the Karnataka Value Added Tax Act, 2005 KVAT Act on ATM Management Services provided by the petitioner to various Banks across the State of Karnataka on which the petitioner has already paid Service Tax as per the Finance Act 1994.
Submissions
Senior Counsel for the Petitioner submitted that the transaction between the Petitioner and Banks does not involve a financial lease. The payment of Service Tax by the Petitioner is not in dispute but the VAT authorities have ignored that payment by stating that such payment was incorrect and that the transaction is one involving financial lease on which VAT ought to be paid.
AGA and CGSC for the respondents submit that the sale of goods is effected after incorporating the same into a structure and when connected to bank network.
Decision
The single judge bench of Justice S.R.Krishna Kumar noted that the agreements make it unmistakeably clear that it is nowhere evident that the ATMs and equipment at any stage are transferred/delivered to the banks and neither does the possession get transferred to the bank.
The bench observed that a deemed sale or delivery on hire purchase would arise only when goods are either delivered physically or on the grant of effective control and possession therein to the recipient. In the present case, the transaction is a pure service transaction not entailing any transfer of property of goods or effective control of the goods to the recipient.
“The various terms of the Agreements with the Banks discloses that the only intent of the contract is only provision of ATM management service for which the petitioners deploys ATMs and other assets at various sites across India. The petitioners uses the ATMs and other assets merely as a means for providing ATM management services to banks”, the court said.
The bench held that the impugned orders, levies and demands are illegal, arbitrary and without jurisdiction or authority of law.
Case title: FIS Payment Solutions And Services India Private Limited V/S The State Of Karnataka
Citation: Writ Petition No. 9550 Of 2020
