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2023 Supreme(Cal) 1017
IN THE HIGH COURT AT CALCUTTA
I.P. MUKERJI, BISWAROOP CHOWDHURY, JJ.
Ramesh Kumar Patodia – Appellant
Versus
City Bank N.A. and Ors. – Respondents
APO 10 of 2023 With WPO 547 of 2019
Decided on : 25-07-2023
Advocate Appeared:
For the Appellant : Mr. Ramesh Kumar Patodia,
For the Respondent: Mr. Prabhat Kr. Srivastava, Ms. Ankita Singh, Mr. K. K. Maiti, Mr. Tapan Bwanja, Advs., Mr. Rajesh Kr. Shah, Adv.
A loan granted to a credit card holder, even though offered as a credit card facility, is not a credit card service and is not exigible to IGST under the notification dated 28th June, 2017.
Headnote:
IGST - CREDIT CARD SERVICE - EXEMPTION - LOAN - APPLICABILITY: The loan granted to the appellant by the respondent bank, though offered to him as a credit card holder, was not a credit card service and was not exigible to Integrated Goods and Service Tax (IGST) under the notification dated 28th June, 2017.
Fact of the Case:
The appellant challenged the deduction of IGST on the interest charged by the respondent bank on a loan of Rs.6,50,000/- granted to him, arguing that the loan was not related to the credit card services rendered by the bank.
Finding of the Court:
The court held that the loan transaction was an altogether separate transaction from the credit card relationship, and was not exigible to IGST under the notification dated 28th June, 2017.
Issues: Whether the loan granted to the appellant was a credit card service and exigible to IGST under the notification dated 28th June, 2017.
Ratio Decidendi: The court applied the definition of "credit card services" in the Finance Act, 2006, and held that the loan transaction had no relationship with the relationship between the appellant and the bank arising out of the issue, holding, or operation of the credit card.
Final Decision: The court allowed the appeal, set aside the impugned judgment and order of the learned single judge, and directed the respondent bank to refund the IGST paid by the appellant to the bank.
JUDGMENT :
I.P. Mukerji, J.
1. This case is not of the ordinary kind. Most interesting points are involved in it.
2. The appellant writ petitioner (the appellant) has argued this case remarkably well in person.
3. The facts are these.
4. At the material time, the appellant had a credit card provided by Citi Bank (the respondent bank). On 21st February and 28th February, 2019 the respondent bank offered a loan of Rs.6,50,000/-being “increased pay lite loan” to him for 12 months with interest @ 13% per annum payable in 12 equated monthly instalments. The loan amount was disbursed by the bank by an account payee cheque. The date of advancement of loan was 2nd March, 2019. The equated monthly instalment (EMI) amount was Rs.58,050/-. From the statement enclosed by the appellant at Pg. 68A of the paper book, it appears that with the payment of EMIs, the interest amount in each EMI gradually reduced. At the start, the interest amount in the first EMI was Rs.7,041.44/-. In the last EMI, the interest amount was Rs.621.98/-. The principal amount was adjusted accordingly so that in the last EMI the principal amount was shown as Rs.57,434.02/-, interest Rs.621.98/-resulting in the last EMI of Rs.58,056/-. In respect of the appellant’s credit card, monthly statements were issued where this loan and the EMI payable thereon were indicated. On 16th May, 2019 the bank received a letter dated 13th May, 2019 from the appellant challenging the deduction of the said amount on account of IGST.
5. The entire amount of loan has been repaid to the bank by him together with interest and IGST.
6. By this writ application, the appellant has sought a declaration that the transaction between him and the bank was exempted from the levy of IGST and that no amount on that account should have been charged and if charged refunded.
7. What calls for interpretation and adjudication in this writ application is Notification No. 9/2017-Integrated Tax (Rate) issued by the Department of Revenue, Ministry of Finance, Government of India dated 28th June, 2017 in exercise of its powers conferred by sub-section 1 of Section 6 of the Integrated Goods and Services Tax Act, 2017. It exempted certain categories of service from tax. In Sl. No. 28 of the said notification, against heading 9971, except tax levied on interest in credit card services, the services specified in Column-III were exempt from the said tax.
8. Now, the question which arises is whether the tax charged by the bank on each instalment of interest together with the loan amount paid by the appellant was exigible to the said tax?
9. Mr. Patodia, appearing in person very strongly argued that it may be true that possession of the bank’s credit card by him entitled him to be offered the loan. But that was all. The advancement of loan by the bank had nothing to do with the credit card or the service which the bank was rendering in relation to it. The bank and he entered into an independent agreement under which the former advanced Rs.6,50,000/-to him by cheque to be repaid along with 13% interest in 12 equated monthly instalments. Hence, the interest charged on the loan was not interest which is usually charged by the bank on account of loan advanced by use of the credit card. Therefore, the interest charged by the bank and paid by the appellant could not be subject to IGST.
10. Mr. Patodia added that only for the purpose of payment of equated monthly instalments, each instalment amount was reflected in the credit card statement. There was reference to the loan as Loan Ref. No. 479832. On this basis, the bank treated the interest as credit card service charge exigible to Integrated Service Tax, he argued. He showed us the Finance Act, 1994. In Section 65(12) which defined banking and other financial services, credit card service was not specifically included within those services. However, by the Finance Act of 2006, the credit card services were separately defined in Section 65(33A) of the Finance Act, 1994 as follows:-
“1.
