2022 (6) TMI 1204 - HC - GST

Credit card loan EMI interest component subject to IGST levy, exemption notification inapplicable to such services

Calcutta HC dismissed a writ petition challenging IGST levy on interest component of credit card loan EMI. The court held the petition maintainable ... Levy of IGST - credit card services - interest component of the Equated Monthly Instalments (EMI) of the loan granted by the respondent Bank on credit card - seeking direction upon the Bank and the IGST authorities to refund the IGST collected from the petitioner - maintainability of writ petition as well as lack of jurisdiction of this Hon’ble Court - HELD THAT:- The principal objection of the respondents against maintainability of the instant writ petition is that the writ petition against the bank, which is not a nationalised bank is not maintainable. Article 226(1) of the Constitution of India lays down that notwithstanding anything in Article 32, High Court shall have power throughout the territories in relation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases, any government, within those territories directions, orders or writs including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari or any of them for the enforcement of any of the rights conferred by part III and for any other purpose - from a reading of the said constitutional provision it is evident that the High Court has power to issue directions, orders or writs to any person or authority. The petitioner has prayed for a declaration that the interest component of the EMI of the loan granted by the bank to the petitioner is exempted from the levy of IGST in view of the notification dated June 28, 2017. Apart from the bank the service tax authorities have also been impleaded as party respondents in this writ petition. This writ petition has been filed to compel the Bank and the Service Tax authorities to perform their obligations in accordance with the provisions of the statute regarding levy and collection of IGST and to grant exemption which the petitioner may be entitled to as per the notifications issued under the relevant statutes - by applying the proposition of law laid down by the Hon’ble Supreme Court in FEDERAL BANK LTD. VERSUS SAGAR THOMAS & ORS. [2003 (9) TMI 707 - SUPREME COURT] this court is of the considered view that since the petitioner has prayed for a relief to compel the respondent bank to grant exemption as per the provisions of the relevant statute upon a declaration being made in that regard, the instant writ petition is maintainable. Territorial jurisdiction of this court - HELD THAT:- It is not in dispute that the office of the respondent no. 1 is beyond the territorial jurisdiction of the High Court at Calcutta. In the credit card statements issued by the respondent no. 1 bank, it has been mentioned that the place of supply is the State of West Bengal. The demand draft was despatched to the petitioner at his residential address which falls within the territorial jurisdiction of this Hon’ble Court. Thus, the part of the cause of action arose within the territorial jurisdiction of this Hon’ble Court - since the part of cause of action arose within the jurisdiction of this Hon’ble Court, this court has no hesitation to hold that this Hon’ble Court has jurisdiction to try and entertain the instant writ petition. Whether the interest component of EMI of loan advanced by the Bank is exempted under notification dated June 28, 2017? - HELD THAT:- If the amount paid towards dues on the credit card is less than the total amount due finance charges shall be levied on such outstanding (including but not limited to the transaction fee and EMI as above) as per the applicable interest rates. The applicable interest rate shall be mentioned in the monthly statement - It is evident from the offer of loan that the same was not an offer to all intending borrowers but was restricted to a particular category of persons holding the Citi Bank Credit Card. The criteria for processing the loan, the manner in which the EMI of loan is reflected in the Credit Card statements and the charging of interest in case there is a shortfall in the payment of the amount due as well as the mode of payment all goes to prove that the service rendered by the Bank in extending the loan in question is nothing but a service pertaining to the said credit card. Since this Court has already held that the services rendered by the bank by way of extending loans to the petitioner in the instant case amounts to credit card services, the interest component of EMI of the said loan is nothing but interest involved in credit card services which is not exempted by notification no. 9/2017- Integrated Tax (Rate) dated June 28, 2017 - this Court holds that the interest component of EMI of loan advanced by the bank is not exempted under the said notification dated June 28, 2017. Thus, this issue is answered in the negative and against the petitioner. Petition dismissed. Issues Involved:1. Maintainability of the writ petition and territorial jurisdiction of the court.2. Exemption of the interest component of EMI from IGST under the notification dated June 28, 2017.Issue-wise Detailed Analysis:I. Maintainability of the writ petition and territorial jurisdiction of the court:Maintainability:The respondents argued that the writ petition against the bank, which is not a nationalized bank, is not maintainable under Article 226 of the Constitution of India. According to Article 226(1), the High Court has the power to issue directions, orders, or writs to any person or authority within its jurisdiction. The Supreme Court in the case of Federal Bank Ltd. vs. Sagar Thomas and others (2003) held that a writ petition may be maintainable against a private body discharging public duty or positive obligation of public nature, and also against a person or body under liability to discharge any function under any statute to compel it to perform such a statutory function.The court noted that the respondent bank is a private entity with no government shareholding, financial assistance, or involvement in its affairs. However, since the bank is a registered person under the CGST Act and is collecting IGST, it must act according to the provisions of the IGST Act. The petitioner's claim is that the bank is charging IGST in violation of the exemption notification dated June 28, 2017. Therefore, the court held that the writ petition is maintainable as it seeks to compel the bank to comply with statutory obligations.Territorial Jurisdiction:The respondents also contended that the court lacks territorial jurisdiction as the registered office of the bank is outside West Bengal. However, the court noted that the credit card statements issued by the bank mentioned that the place of supply is West Bengal, and the demand draft was dispatched to the petitioner's address within the court's jurisdiction. Citing the Supreme Court's decision in Om Prakash Srivastava vs. Union of India (2006), which held that a High Court can exercise jurisdiction if the cause of action arises in part within its territory, the court concluded that it has jurisdiction to entertain the writ petition.II. Exemption of the interest component of EMI from IGST under the notification dated June 28, 2017:The petitioner argued that the interest component of the EMI for the loan granted by the bank is exempted from IGST as per Serial No. 28 of Notification No. 9/2017-Integrated Tax (Rate) dated June 28, 2017. The petitioner contended that the loan should not be considered a credit card service merely because the EMI is indicated in the credit card statement.The court examined the terms and conditions of the loan offer, which was restricted to Citi Bank Credit Card holders and processed as part of the credit card services. The EMI was included in the monthly credit card statement, and the applicable interest rate was mentioned therein. The court concluded that the service rendered by the bank in extending the loan is a credit card service.The notification dated June 28, 2017, exempts interstate supply of services by way of extending loans insofar as the consideration is represented by way of interest, but it specifically excludes 'interest involved in credit card services.' Since the court determined that the loan in question is a credit card service, the interest component of the EMI is not exempted from IGST under the said notification.Conclusion:The court dismissed the writ petition, holding that the interest component of the EMI for the loan advanced by the bank is not exempted from IGST under the notification dated June 28, 2017. The petitioner's reliance on the Supreme Court's decision in Himalayan Co-operative Milk Product Union Ltd. was found to be inapplicable, as the notification clearly excludes interest involved in credit card services from the exemption.