Service Tax : "Credit card, debit card, charge card or other payment care service" was introduced only from 1-5-2006; hence, they cannot be taxed under 'Banking and Other Financial Services' prior thereto.
Service Tax : Merchant/Merchant Establishment (ME) is "a customer" in the context of credit card services and an acquiring bank is "a customer" of an issuing bank. However, ME discount, by whatever name called, representing amounts retained by an acquiring bank from out of amounts recovered by such bank for settlement of payments to ME does not amount to consideration received "in relation to" credit card services.
• The various issues involved and their answer is as follows :
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Issue
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Legal bench’s order
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Whether the
introduction of the new, comprehensive definition of "credit card, debit
card, charge card or other payment care 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 ABN Amro decision in so far as credit card services are
concerned?
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Introduction of a
comprehensive definition of "credit card, debit card, charge card or
other payment service" in Section 65(33a) read with Section 65(105)
(zzzw), by the Finance Act, 2006 is a substantive legislative exertion which
enacts levy on the several transactions enumerated in sub-clauses (i) to
(vii) specified in the definition set out in Section 65(33a); and all these
transactions are neither impliedly covered nor inherently subsumed within the
purview of credit card services defined in Section 65(10) or (12) as part of
the BOFS;
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Whether the
sub-clause (iii) in the definition of taxable service viz. "credit card,
debit card, charge card of 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?
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Sub-clause (iii) in
Section 65(33a) is neither intended nor expressed to have a retroactive reach
i.e. w.e.f. 16.07.2001. Services enumerated in these sub-clauses are not
implicit in the scope of credit card services;
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Can 'merchants/merchant
establishments' be considered 'customer' as envisaged in Section 65(72)(zm)
of the Finance Act, 1994 as it stood prior to 1-5-2006?
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Merchant/ Merchant
Establishment is "a customer" in the context of credit card
services enumerated in Section 65(72)(zm), subsequently Section 65(105)(zm)
and an acquiring bank is "a customer" of an issuing bank.
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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?
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ME discount, by
whatever name called, representing amounts retained by an acquiring bank from
out of amounts recovered by such bank for settlement of payments to the ME
does not amount to consideration received "in relation to" credit
card services.
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