ST - Whether introduction of new definition of credit card or other card service by FA, 2006 by excluding from Banking services is substantive & prospective or is in continuation of levy u/s 65 (10)/(12) & retrospective - Matter goes to LB: CESTAT
By TIOL News Service
MUMBAI, DEC 10, 2014: THE issue before the Bench is - Whether the commission/discount earned by the acquiring bank from the Merchant Establishment is liable to service tax under the category of banking and financial services for the period prior to 01.05.2006 ?
The Member (Judicial) writing for the Bench observed that the issue in the present case is akin to the case of HDFC Bank Ltd.,HSBC Bank Ltd., ICICI Bank Ltd., Standard Chartered Bank wherein vide order dated 16.08.2013 - 2013-TIOL-1363-CESTAT-MUM the Bench [of which the Member(J) was a Member] took a prima facie view that when Credit Card Services were brought under the tax net in 2001, what was brought under the levy was the service rendered by the issuing bank to the credit card holder and the expansion, in 2006, of the coverage of credit card services to bring into tax net the transactions/services between Merchant Card Association and Acquiring Bank, Acquiring Bank and Credit Card Association and Credit Card Association and Issuing Bank was only prospective in nature.
Nonetheless, the said Bench also observed that a contrary view had been taken by the co-ordinate Bench in the case of ABN Amro 2011-TIOL-1147-CESTAT-DEL , where it was held that expression “in relation to” preceding banking and financial services occurring in taxable service defined under section 65(72)(zm) and such an expression is expansive in nature and scope, and therefore all services rendered in relation to credit card services, whether by merchant establishments, acquiring banks or others would be chargeable to service tax even prior to 01.05.2006 and which view was disagreed to by the said Bench in the HDFC Bank case.
In the result, the said Bench had referred the following points of law for consideration by the Larger Bench -
“(i) Whether the introduction of the new, comprehensive definition of "credit card, debit card, charge card or other payment card service" vide section 65 (33a) read with section 65 (105)(zzzw) by the Finance Act, 2006, is substantive and seeks to levy all the transactions covered by use of Credit/Debit/Charge Card or is in continuation of the levy under Section 65 (10) or (12), as the case may be, as held in the case of ABN Amro decision in so far as credit card services are concerned?
(ii) Whether the sub-clause (iii) in the definition of taxable service viz. "credit card, debit card, charge card or other payment card service" in section 65 (33a) can be said to be applicable retrospectively, i.e. from 16 July 2001 when section 65 (72) (zm) became effective?
(iii) Can ‘merchants / merchant establishments' be considered as ‘customer' as envisaged in Section 65 (72)(zm) of the Finance Act, 1994 as it stood prior to 1-5-2006?
(iv) Whether Merchant Establishment Discount can be said to be received "in relation to" credit card services when in fact in a particular transaction, the Acquiring bank receiving ME Discount may not have issued that particular credit card at all?"
On similar grounds/points, the present Bench also referred the present appeal for consideration by the Larger Bench to be heard along with the earlier referred matters in the case of Commissioner of Service Tax vs. HDFC Bank Ltd. & Others (supra).
The Registry was directed to place the matter before the President, CESTAT for constitution of the Larger Bench.
In passing : It is more than a year since the matter was referred to the Larger Bench in the HDFC case and the wait continues…
Money is a poor man's credit card - Marshall McLuhan
(See 2014-TIOL-2487-CESTAT-MUM)
