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TMI Blog2015 (8) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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; Scope of the term Customer - merchants/merchant establishments’ (ME) - Held that:- Held that:- a 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 a fortiori an acquiring bank is “a customer” of an issuing bank. Scope of the term “in relation to” - Merchant Establishment Discount - Held that:- 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. - Service Tax Misc. Application No. 93629 of 2015 in Service Tax Appeal Nos. 117/2010, 143 to 145/2007 ,Service Tax Appeal Nos. 711/2011, 462/2008 and 405 of 2009 - Interim Order No. 162 / 2015 - Dated:- 14-8-2015 - Mr. Justice G. Raghuram, President, Mr. Ashok Jindal, Member (Judicial), Mr. R. K. Singh, Member (Technical), J. For the Petitioner : Shri V. Lakshmi Kumaran, Shri Badar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 65(72)(zm) became effective? 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? 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? 4. We have heard Shri V. Lakshmikumaran, Shri Badarinarayan, Shri Yogendra Aldak, Shri Mihir Mehta, Shri Prakash Shah, Ms. Nupur Maheshwari, Learned counsel; Ld. Consultants Shri. Nihal Kothari, Shri Sunil Gabhawala and Shri Kewal Shah for the several assessees; and Shri B. K. Singh, Shri Rajiv Tandon, Shri Govind Krishna Dixit and Shri Amresh Jain for Revenue. Textual and contextual ambiguity in enumeration and definition of relevant provisions of the Act pertaining to BOFS invite interpretive exertion and have occasioned conflicting views regarding the reach and trajectory of the taxable service, at the level of departmental adjudication and in CESTAT as well. The reference order exemplifies the conflict of views on this aspect, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as passed in four appeals; three preferred by Revenue against adjudication orders which dropped demands of service tax for periods prior to 01.05.2006, on a conclusion that activities of acquiring and credit card issuing banks were brought under the purview of service tax only w.e.f. 01.05.2006. Consequently, the adjudicating authority dropped demands for service tax for periods prior to 01.05.2006. Another appeal before the referring Bench was preferred by Standard Chartered Bank. This appeal was against an adjudication order confirming demand of service tax against the appellant (an acquiring bank), in respect of ME discount retained by it for a pre- 01.05.2006 period. It is thus apparent that different adjudicating authorities adopted inconsistent interpretations of identical provisions of the Act, in respect of periods prior to 01.05.2006. Adjudications orders dated 21.11.2006, 22.05.2007 and 23.05.2007, passed by the Commissioners of Service Tax, Chennai and Mumbai, respectively had dropped, proceedings against acquiring and issuing banks in respect of commissions/ discounts / service charges received by Citi Bank, HSBC and HDFC on an interpretation that the provisions of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment. 10 . (A) Parties involved in credit card transactions : Transactions arising out of the use of credit cards normally involve five parties. Sr. No. Player Role Card holder The person possessing and using the card. Issuing bank The Bank issuing the card to its customer viz. the card holder. Card association (VISA/Mastercard, etc.) Provides the payment infrastructure. Issuing/ acquiring banks are its members. Merchant Establishment The vendor of goods or service who accepts the card in lieu of cash payment from the card holder. Acquiring bank Provides payment processing services to Merchant Establishments by entering into a separate agreement with the merchant and places a swipe machine at the merchant outlet. Transactional flow in a credit card use scenario (C) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the credit card agreement between the issuing bank and the card holder). (D) On an interactive analysis of parties to a credit card transaction; the transactional flow that occurs in a credit card use; and the process involved when sale of goods or rendition of services through a credit card takes place, it is apparent that an issuing bank, an acquiring bank and the card association network receive consideration for participation in and facilitation of several obligations inherent in the sequence of events contributing to successful culmination of a transaction involving use of a credit card. The issuing bank recovers from its card holder certain charges such as the joining fee; additional card fee; annual fee etc. (set out in the transaction flow table, supra). An acquiring bank (which may or may not be the issuing bank) enters into an agreement with the Merchant Establishment (ME) in terms whereof the acquiring bank undertakes to settle amounts owed to the ME by the cardholder in terms of and for goods supplied or services rendered by the ME to the cardholder through use of the credit card. Under the terms of the said agreement the acquiring bank settles dues of the ME ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the scope of its components as well as the trajectory of the several components of this service, during this period. W.e.f. 01.05.2006, Finance Act, 2006 introduced a distinct Card Service s which was defined in Section 65(33a) and enumerated to be a taxable service in Section 65(105)(zzzw). Credit Card Services was deleted from the ambit of BOFS and incorporated as a specie of Card Services , w.e.f. 01.05.2006. Relevant statutory provisions pertaining to BOFS and Card Services is extracted hereinafter. 13. Relevant Statutory Provisions : BOFS : On its introduction w.e.f. 16.07.2001, BOFS was defined in Section 65(10) of the Act, as under: banking and financial services means the following services provided by a banking company or a financial institution including a non-banking financial company, namely:- financial leasing services including equipment leasing and hire purchase by a body corporate; credit card services; merchant banking services; securities and foreign exchange (forex) broking; asset management including portfolio management, all forms of fund management, pension fund management, custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of BOFS; substituted the expression commercial concern with any other person , in the definition of this service provider; relocated components of BOFS enumerated in sub-clause (viii) to sub-clause (ix) and substituted in place of pre-existing components in (viii), the words, Banker to issue services ; and . Initially BOFS was enumerated to be a taxable service in Section 65(72) (zm), later renumbered as Section 65(105)(zm). Throughout the relevant period in issue i.e. 16.07.2001 to 30.04.2006, relevant provisions Section 65(72)(zm) or Section 65(105)(zm) as the case may be, enumerated BOFS as meaning any service provided (or to be provided) to a customer by the provider of this service (as the provider was defined, from time to time, in the definitional part of the Act i.e. in Section 65(10), (11) or (12), as the case may be). Card Services (w.e.f. 01.05.2006) : Section (33a) Credit card, debit card, charge card or other payment card service includes any service provided,- by a banking company, financial institution including non-banking financial company or any other person (hereinafter referred to as the issuing bank), issuing such card to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit card services by a banking company, a financial institution including a non-banking financial company, any other body corporate or a commercial concern (provider), to a customer of the provider. Thus, services rendered to a customer of the provider in relation to credit card services would alone amount to the taxable service; (b) The word Customer is not defined in the Act. In law, customer means one who has a habitual or continual business relationship with a bank (provider).The word signifies a relationship in which, while the duration thereof is not determinative and the relationship commences as soon as the first transaction is entered into, yet the relationship must be in respect of the business of banking. Contextually and in respect of credit card services, a customer must therefore mean the holder of a card of the issuing bank; (c) The ME has a contractual arrangement with an acquiring bank, which undertakes settlement of payments to the ME in respect of the value of goods sold or services provided under a credit card transaction, employing the point of sale (POS) machine provided by the acquiring bank. ME is not a customer of the issuing bank nor has a contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use related transactions in favour of an acquiring bank or obligations undertaken by an acquiring bank to settle payments to the ME, are not legally enforceable obligations arising out of the activity of the issuing bank providing a card not do they per-se arise out of possession of a credit card by its holder. These obligations are predicated in law, upon independent agreements between an issuing and an acquiring bank and an acquiring bank and the ME, respectively; (h) While the process of effectuation of credit card transactions is accomplished by confluence of activities and undertaking of obligations by several participants [set out in para 10(A), (supra)], there is no privity of contract qua which an ME acquires a right in law to payment for its transactions with card holders through use of credit cards. Similarly in respect of an acquiring bank s liability to the ME for settlement of dues arising out of a credit card transaction, the obligation is legally enforceable on the basis of a distinct contract. Settlement of payments to the ME by the acquiring bank; to the acquiring bank by the issuing bank and to the issuing bank by the card holder, thus arise out of distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) of Section 65(33a), considered in an interactive context reads: Credit card, debit card, charge card or other payment card service includes any services provided, by any person, including an issuing bank and an acquiring bank, to any other person in relation to settlement of any amount transacted through such card. Thus only w.e.f. 01.05.2006 services of settlement of amounts transacted through credit card, debit card etc. are brought within the purview of services provided in relation to card services, not earlier. (m) Neither the expression issuing bank nor acquiring bank were defined in the Act including in Section 65(10), (11) or (12). These expressions are defined only on enactment of Card Services and in Section 65(33a). Services provided by an issuing bank to the acquiring bank or those provided by an acquiring bank to the ME are neither credit facilities nor services in relation to Credit Card Services and are either expressed nor intended to be exigible to service tax, prior to 01.05.2006. (n) Revenue contends that any services provided in relation to card transactions are taxable under BOFS prior to 01.05.2006, as well. On the basis of this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is misconceived. Section 65(72), later Section 65(105) employ different expressions to identify persons to whom different taxable services are provided, so as to cover only so specified transactions between specified parties. Different taxable services identify recipients of the several services as: a subscriber ; a policy holder ; a client ; a shipping line ; any person ; and a customer. While expressions like policy holder ; investor ; and subscriber indicate a specified status of the service recipient; where the service recipient is expressed as being, a client or a customer ; the legislative intention is to cover a broader class of recipients. Credit card services in BOFS is not expressed to restrict rendition of the service to only an account holder of a bank or financial institution. (iii) In the enumerative provision relating to this taxable service i.e., Section 65 (72)(zm) or Section 65(105) (zm), it is expressed that the recipient is a customer, not only of a banking company but of a non-banking company, a financial institution, any other body corporate or a commercial concern, as well. Therefore, it is impermissible to confine the recipient of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an acquiring bank by an issuing bank are services in furtherance of and contribute to effectuation of credit card services and are thus provided in relation to credit card services. The interchange fee retained by an issuing bank or the settlement fee / ME discount retained by the acquiring bank are exclusively in relation to rendition by these entities, of credit card services. The definition and enumeration of card services w.e.f. 01.05.2006 does not support a narrow interpretation/ construction of the scope of credit card services in BOFS, for the prior period. While drafting Section 65(33a), including sub-clause (iii) thereof, Parliament adopted a different, detailed and annotative form of drafting, than in BOFS. In so far as credit card services under BOFS, the same result was achieved by enacting that any service provided in relation to credit card services is the taxable service. The expansion brought about by words used in the definition of card services in Section 65(33a) is in several other areas. All services provided by an issuing bank whether to a card holder or to an acquiring bank and by an acquiring bank to the issuing bank (by facilitating card transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such service rendered by him. During the relevant period, i.e. the period during which credit card services were in BOFS, enumeration of this taxable service was in Section 65 (105)(zm). This provision specified the service as one provided or to be provided, to a customer, by a banking company, a financial institution, including a non banking financial company (for a later period, any other body corporate or a commercial concern, as well), in relation to BOFS. Thus, services provided to a customer, in relation to credit card services, by a provider (as defined) was alone the taxable service. On 09.07.2001, the Board (TRU) issued a clarificatory circular explaining the scope of BOFS. Para 2.2 of this circular sets out clarifications in respect of credit card services. These read: 2.2 Credit card services 2.2-1 This is a service where the customer is provided with credit facility for purchase of goods and services in shops, restaurants, hotels, railway bookings, petrol pumps, utility bill payments, etc. Cash advances are also permitted upto specified limits in most of the cases. This service is provided by nationalised banks, multi-national banks and private banks. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rextended and unable to repay the dues in full. As banks are aware, credit card operations entail credit risk in their overall credit portfolio. Relaxed underwriting standards, aggressive solicitation programmes, inadequate account management increase credit risk and may lead to overdues and non-performing assets in the credit card portfolios of banks. It is therefore imperative that banks take immediate steps to reduce the incidence of default in the business and closely monitor the recovery of credit card outstandings. Banks may formulate specific Action Plans to this effect with the approval of their Board of Directors. (v) Fees/Charges on credit cards Fees are charged by banks for services in respect of credit card operations. These include membership/ entrance fees, renewal / annual fees, service charges on revolving credit card facility and penal charges for overdue payments. Disputes often occur between card issuing banks and card holders regarding the basic level of penal charges. Banks are advised to clearly spell out fees/ charges to the cardholder at the time of their applying for credit card, if not done so far. In particular, banks should bring to the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (C.A.). The principle is this. In construing a legislation relating to a particular industry, it is legitimate to give to the words used, a special technical meaning if it can be established that at the date of passing the statute such meaning was well understood and accepted by those conversant with the industry. Assessees point out that this principle was quoted with approval and followed in several decisions including Indian Cable Co. Limited vs. Collector of Central Excise AIR 1995 SC 64 ; Union of India vs. Garware Nylons Limited AIR 1996 SC 3509; and Indian Aluminium Cables Limited vs. Union of India (1985) 3 SCC 284. Assessees also refer to the decision in The Great Western Railway Company vs. London and County Banking Co. Ltd .; (1901) AC 414; of the Court of Appeal in E. B. Savory and Company vs. Lloyds Bank, Limited 1932 (2KB) 122; ; and Woods vs. Martins Bank Limited and Another AIR 1957 Mad 745 ; to judgments of the Madras High Court in N.M.N. Duraiswami Chettiar vs. The Dindigul Urban Cooperative Bank Ltd. , and another ; AIR 1957 Mad 745 and the Official Assignee, Madras vs. Natesan Pillai AIR 1970 Ker 74 ; and judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gwith the relevant enumerative provision does not confine the status of the provider (of the service) only to a banking company but includes any other body corporate as well. Paget s law of Banking explains, by reference to precedents, that while continuum of transactions may not be necessary nor is the duration of a relationship of the essence, entering upon a course of dealing with a banking entity is sufficient to establish the relationship of a banker and a customer and that it is the business relation, a continued practice of rendition of banking services, as distinct from an isolated act or a transaction, that is the essence of a customership relation. It is a settled position that the legislature is authorised to identify persons, things, transactions or events for legislating a social or taxation policy; and where legislature provides a definition or a meaning distinct from what an expression in its technical sense connotes or is understood by the concerned trade or business, the artificial or distinct meaning given to such persons, things, transactions, events or expressions, must prevail. Assessees do not contend that Parliament has no power to define the expression a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of issuing banks. Issuing and acquiring banks are recognised participants in the nuanced business of credit card transactions. The interdependant and seamless but distinct transactions that occur between the ME, an acquiring bank and an issuing bank therefore fall to be considered as a customary relationship amongst these parties. We are fortified in this conclusion by the circumstance that the Act specifies that the provider of credit card services is identified as a banking company, a financial institution including a non-banking financial company or any other body corporate or a commercial concern as well. In the circumstances, confining the expression a customer , to an individual or an entity which has a savings or a current account with a bank, is textually inappropriate. Further, banking companies, in the current scenario of expanding commercial transactions undertake a variety of activities which were not conceived as part of ancient or traditional banking activities. It would therefore be appropriate to conclude (in the context of BOFS), that a customer of a bank includes any person or entity having a continuum of relationship or transactional intercourse with a ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the actual value received by the ME but not on the amount reflected in the bill issued to the purchaser. The Court opined that the reduction made by the card issuing organisation towards consideration for the service rendered by it to the supplier, is qua an independent transaction in respect of which the purchaser is a third party. Primback Limited reiterated the analyses and the ruling in Bally to hold that the relationship between the seller and purchaser and between the seller and the finance house, must be distinguished for the purpose of determining the basis for calculating VAT. Consequently, the fact that the supply of services by the finance house is, in principle VAT exempt has no bearing on the basis of assessment for charging of VAT, in respect of transactions between the seller and purchaser. Dixons Retail plc reiterated and followed the principle evolved in Bally, though in a different factual context. The appellant, an ME sold electrical items and the transaction was concluded through cards. ME remitted VAT on the transaction value despite fraudulent use of the cards. The card issuers did not resort to charge back and thus ME retained p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and between ME (retailer) and the Card issuer (tax payer), in the context of determining whether the card issuer was entitled to recover only a reduced portion of input tax on taxable supplies made to it during the course of separate agreements. On facts, the card issuer (appellant) operated a credit card scheme whereunder its card holders were liable for all charges incurred on the use of the card. The card issuer also entered into a contract with the ME whereunder it purchased all accounts created by use of the card, less a discount. Revenue claimed that the card issuer made exempt supplies for the purposes of VAT and were therefore entitled to recover only a reduced portion of input tax on taxable supplies made to it. In the factual context, the Court held that the services provided by the card issuer was the making of payments to the ME pursuant to a contractual obligation and in consideration for deduction of a discount and that the entire transaction was for supply of a service to the ME by the card issuer, falling within the ambit of provisions of the VAT Act, 1983. In Debenhams Retail plc , the respondent an ME introduced a scheme whereby sales through a card transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount which needed to be transferred to the relevant bank. Respondent made a payment out of its own funds to each client bank which was a net claimant and received on the same day a payment from each bank which was a net debtor and thereafter posted a debit to the card holder s account, to which it also posted credit entries when the card holder paid the monthly bill. The respondents also provided connected services comprising arranging of credit card embossing, preparing and sending to the card holder periodic statements of indebtedness to the issuing bank and like services. Revenue considered services provided by the respondent as exigible to VAT. This was contested on the plea that the services in issue were supplies falling within relevant provisions of the EC Council Directive which exempted from VAT transactions including negotiations concerning deposit and current account, payments, transfers debts, cheques and other negotiable instruments. Dismissing Revenue s appeal, the Court held that where a single supply for VAT purposes consisting not of any one supply to which others were ancillary, but comprised a bundle of supplies none of which predominated over others, it was nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng company, a financial institution including a non-banking financial company or any other body corporate to a customer, in relation to credit card services , is the taxable service we are concerned with. On a textual and grammatical construction, the integers of the taxable service are: The provider should be a banking company etc. and the recipient a customer of the provider; and The taxable rendition should be any service in relation to credit card services. On a grammatical construction of the relevant provisions, since services provided by an acquiring bank to the ME and an issuing bank to the acquiring bank are as essential to conclusion of transactions employing credit cards as are the services provided by an issuing bank to the card holder i.e. in issuing the credit card and the integral credit facility, it could be contended, as has been, that an acquiring bank and an issuing bank receive taxable consideration by way of ME discount and interchange fee. Assessees however contend that services provided by an acquiring bank to the ME and those provided by an issuing bank to the acquiring bank are not credit card services but are bill discounting or settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the issuing bank is a member of such club or association. The explanation to this sub-clause (vii) states that for the purposes of this sub-clause, an issuing bank and the owner of credit card and brand name shall be treated as separate persons. From the detailed specification of varieties of services defined as falling under card services, it is apparent that w.e.f. 01.05.2006 three significant changes are introduced, in contrast with the scope and definition of credit card services under BOFS. Finance Act, 2006 also deleted credit card services from the scope of BOFS in Section 65(12). The changes introduced w.e.f. 01.05.2006 are: Card services include debit card, charge card or other payment card, apart from credit card; The scope of the service provider is expanded. The service provider is now any other person as well; The identity of the service recipient also stands expanded in sub-clause (zzzw); Any service provided by any person in relation to credit card, debit card, charge card or other payment card, in any manner , is now the taxable service; The nature and variety of services included within the ambit of card services is now specifically enu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... huram Agrawal vs. State of M. P (1999) 8 SCC 667. Lord Atkinson pointed out in Ormond Investment Co. vs. Betts (1928) AC 143 (HL) that, the proper course in construing revenue Acts is to give a fair and reasonable construction to their language without leaning to one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible . Precedents also clarify that if a taxing provision is, so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect vide IRC vs. Ross and Coulter (1948) 1 ALL ER 616 (HL) , a decision quoted with approval in Gursahai vs. CIT (1963) 3 SCR 893. If the words used in a taxing statute are ambiguous and reasonably open to be two interpretations, benefit of interpretation is given to the subject; vide CIT vs. Karamchand Premchand Limited AIR 1961 SC 609 ; C.A. Abraham vs. ITO, Kottayam AIR 1961 SC 609; Diwan Brothers vs. Central Bank, Bombay (1976) 3 SCC 800; Manish Maheswari vs. Assistant Commissioner of Income Tax (2007) 3 SCC 794. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter and are words of comprehensiveness which might have a direct signification as well as an indirect one depending on the context. Reiterating the principles of grammatical construction, the decision pointed out that words in a statute must, prima-facie , be given their ordinary meaning. Where the grammatical construction is clear and manifest and without doubt, that construction ought to prevail unless there are strong and obvious reason to the contrary (emphasis supplied). 25. It must however be noticed, that the interpretative rule of grammatical or literal construction is invariably stated with caveats. It is so expressed in Doypacks System (Pvt) Limited as well. Precedential and textual authorities characterise this rule as a golden rule. Francis Bennion in a preface to the treatise Statutory Interpretation cautions that the golden rule in statutory interpretation is that there are no golden rules. There is an equally established principle of construction, that if the language of the statute is capable of bearing more than one construction, in selecting the true meaning regard must be had to the consequences resulting from adopting the alternative construction; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of amounts transacted through credit card; services provided by the owner of trade marks or bank name to an issuing bank for use of the trade mark or brand name; and a host of other services which are interspersed in the sequence of transactions occurring on the use of a credit card, would all be services provided in relation to credit card services. These services are expressly enumerated in sub-clauses (ii), (iii), (vi) and (vii) of Section 65 (33a), w.e.f. 01.05.2006. On Revenue s interpretation, these services are subsumed within credit card services on account of the in relation to phrase. Wherever an issuing bank hives of some of its activities in relation to credit card operations, such as receipt and processing of credit card applications and the like and these services are provided by a outside agency, these would nevertheless fall within the ambit of BOFS, though not statutorily so identified and expressed. The scope of credit card services and BOFS would therefore be perpetually nebulous and its contours indeterminate, assessees contend. Assessees also urge that acceptance of Revenue s interpretation would lead to perpetual ambiguity in ascertaining the range and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1966 SC 1995 Ramaswami, J. stated: it is a well recognised principle that subsequent legislation may be looked at in order to see what is the proper interpretation to be put upon the earlier Act where the earlier Act is obscure or ambiguous or readily capable of more than one interpretation . 30. In Thirumanickam and Co. vs. State of Tamil Nadu (1977) 1 SCC 199 Section 15(b) of the Central Sales Tax Act, 1956 was amended by Act 61 of 1972. Prior to the amendment this provision did not specifically indicate to whom the Sales Tax Act paid on declared goods would be refunded in the event the goods are later sold in the course of inter-State trade or commerce. The amendment Act which was not retrospective provided that refund of tax was to be made to the person making the sale in the course of inter-State trade or commerce. The amendment was considered by the Supreme Court as an exposition by Parliament itself of its intent contained in the Section before its amendment and the Court held that it was the person making the sale in the course of inter --State trade or commerce who was entitled to refund even when the unamended section was in force. 31. In Zee Telefilms Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g whether advertising film will be violating copyright law or other laws relating to obscenity etc. would be treated as advertising agent. Similarly a broadcaster (on radio or television) of an advertisement will become an advertising agency, or a cinema hall flashing an advertisement or newspaper/magazine publishing an advertisement will become an advertising agency. Such absurdities, from an interpretation have to be avoided, the term service connected with used in the definition of Advertising Agency is to be understood in context of and in a restrictive manner. 32. In Union of India vs. Martin Lottery Agencies Ltd. , 2009 (14) STR 593 (SC); the issue was whether sale, promotion and marketing of lottery tickets was exigible to service tax under the Act. The assessees were agents of the State of Sikkim and purchased lottery tickets in bulk form on all sold basis on payment of about 70% of the face value of each ticket. The tickets are then sold to pre-stockists on outright and all sold basis and make a profit on the margin, of the difference between amounts received from pre-stockists and those paid to the State Government. Proceedings were initiated for levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t card services, assessees rely on the decision of the Judicial Committee of the Privy Council in Commissioner of Inland Revenue vs. Databank Systems Limited . Under an agreement with specified clearing banks, Databank undertook four major activities viz (a) providing a financial clearing system covering various types of transactions forming part of the settlement process; (b) posting of transactions to customer accounts and maintenance of computer files; (c) network management; and (d) software support and development. Financial services were exempt from GST but other activities involving the supply of goods and services for a consideration were subject to GST. Privy Council dismissed an appeal preferred by Revenue and concluded that services performed by Databank as agents for trading banks are part of the exempt financial services provided by those banks to their customers. Privy Council agreed with the Court of Appeal and quoted with approval the following analyses set out in a concurring opinion of the Court below: In these circumstances there are three separate activities, three (at least) separate contracts and three separate supplies for three separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cludes is generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. The Tribunal however cautioned that in a context however, the word Include is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined and in such context it would mean mean and include . Shri Tandon also referred to the decisions, of the Patna High Court in Ashiq Hasan Khan and Ors. vs. Sub Divisional Office and Ors . AIR 1965 Pat 446; and the decision in Raj Kumar Shivhare vs. Asstt. Director, Directorate of Enforcement 2010 (253) ELT 3 (SC); to support the contention that the expression any connotes all , in certain contexts. These decisions are cited to support Revenue s contention that all services provided in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces provided in relation to credit card services is a taxable service. Thus settlement of payments undertaken by an issuing bank in favour of an acquiring bank and by an acquiring bank in favour of the ME being services in relation to credit card services fall within the purview of the taxable service in BOFS. On the basis of Revenue s normative assertions, predicated on the phrase in relation to , the several services enumerated in sub-clauses (i) to (iii) and (vi) and (vii) of Section 66(33a) would also fall within the purview of credit card services. Per contra assessees contend that the scope of this taxable service is confined to services provided by an acquiring bank to its card holders, notwithstanding the phrase in relation to . 37. We earlier noticed that several decisions including Doypack Systems (Pvt.) Limited explain in relation to as indicative of wide import but as subject to contextual limitations. Decisions in Naveen Chemicals Manufacturing and Trading Company Limited vs. Collector of Customs (1993) 4 SCC 320; Commissioner of Central Excise, Chennai vs. MRF Limited 2005 (179) ELT 475 (Tri. Chenn); Glaxo Smithkline Pharmaceuticals Limited vs. CC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the plain meaning of a statute cannot be relied upon where it results in absurdity, injustice or uncertainty (emphasis) and in such circumstances, the Court must construe the text having regard to the object and purpose which the legislature had in view in enacting the provision, the context in which it occurs and with a view to suppress the mischief sought to be remedied by the legislation. Contemporaneous administrative exposition of the meaning of the statutory text in the speech by the Minister introducing the bill for enactment of the legislation in question is considered a legitimate aid to construction of a statute when the text is grammatically or contextually ambiguous. It is also a settled principle that a subsequent legislation on the same subject may in certain circumstances serve as a Parliamentary exposition of the former provision vide Precedents referred to in paragraph 29 (supra). 40. On the basis of the principles and guidance derived from aforementioned authority we are compelled to the conclusion that in the context of BOFS, credit card services cover only such services as are provided by an issuing bank to a card holder. This conclusion is fortifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant was not consideration received for providing credit facility; that the appellant did not serve any customer and it was the acquiring bank which met payment claims by the ME; that Revenue was bound by the Board Circular dated 09.07.2001; and that decisions of the Bombay and Chennai Commissionerates which dropped demands in respect of identical services support appellant s interpretation of the scope of credit card services. Revenue contended that credit card service was not introduced as a taxable service only w.e.f. 01.05.2006 but was a taxable service since 2001 under BOFS; that credit card services was merely deleted from BOFS and relocated as a component of card services w.e.f. 01.05.2006; that appellant misconceived the correct legal position by assuming that credit card services became taxable only w.e.f. 01.05.2006; that since 2001 upto 01.05.2006 and thereafter as well, credit card services was taxable; that since the account of the ME is settled either directly by the issuing bank or through an acquiring bank, the ultimate services are necessarily provided to the card holder who is a customer in relation to credit card services and thus all intermediary and anci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the fold of taxation. Paras 18 to 21 of the judgment do not relate to analysis relevant for our purposes; and in para 22 the conclusion is recorded, confirming the impugned adjudication order except to the extent of granting cum-tax benefit. 42. The ABN Amro Bank analyses reveals a factual misconception that the appellant had contended that credit card services was not taxable prior to 01.05.2006. This assumption is clearly contrary to pleadings of the appellant set out in para 6. The appellant s challenge and the demand confirmed by the impugned adjudication order was in respect of interchange fee received from acquiring banks (para 2). It was not the appellant s contention that credit card services was taxable only w.e.f. 01.05.2006. The appellant clearly asserted that services provided by it to the acquiring bank fall outside the purview of credit card services during the relevant period and prior to 01.05.2006 since these are specifically enumerated in the definition of card services, only in Section 65(33a), w.e.f. 01.05.2006. The conclusion in ABN Amro Bank that the express statutory grant [in Section 65(10) read with Section 65(72), 65(105)(zzw)] takes wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ples, in particular principles of statutory interpretation, it would be necessary to use far more words than is practicable in order to convey the meaning intended, observes Bennion. Almost invariably, authorities on statutory interpretation caution against dangers of the first glance approach and advise that the informed interpretation rule must be applied no matter how plain the statutory words may seem at first glance; and that the plainer the words seem, the more one must be on guard. It is for this reason that inter-alia , in the construction of an enactment, due attention should be paid to relevant aspects of the state of the law before its enactment, the history of its passing and the events and legislative developments subsequent to its passing as well; thus the pre-enacting, the enacting, and the post enacting history are all relevant indicia to proper construction. 44. Board circular dated 09.07.2001, a contemporaneous executive guidance issued to clarify the scope of credit card services proposed in Finance Bill, 2001 clearly explained the reach of this provision as services whereby credit facility is provided by banks; and no other services are mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . At para 153 of the speech, the Hon ble Minister states: I also propose to expand the coverage on certain services now subject to service tax. I do not wish to burden the house with the details which are available in the Budget paper. The following is clear from Section 65(33a) read with Section 65(105)(zzzw) of the Act. The scope of service tax levy is extended to services provided in respect of other cards such as debit card, charge card or other payment card, apart from credit card; The several and intervening services which occur in the use of cards are enumerated in sub-clauses (i) to (vii) of the definition, clearly conveying the intention to cover these expressly enumerated services as taxable events under the provisions; In Section 65(105)(zzzw) while retaining the phrase in relation to , the phrase in any manner is added. The precision and clarity of the detailed drafting methodology employed in the Finance Act, 2006, compels the inference that Parliament not only expressed the intention to expand the scope of the taxable service to cover services provided in relation to other cards as well but has further and expressly expanded the reach of taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for adjournment and now record our reasons for doing so. The ABN Amro Bank Limited decision by a Division Bench was doubted in the order of reference which referred specified issues for resolution of the Larger Bench. Mere filing or pendency of an appeal against the decision in ABN Amro Bank Limited , neither eclipses this decision nor operates as a fetter on another Division Bench, which would be free to either follow the ABN Amro Bank Limited decision or could doubt its correctness and seek interpretation, by a Larger Bench. There is also no purpose served in adjourning the reference to await the decision of the Hon ble Supreme Court. In case the ABN Amro Bank Limited decision is confirmed by the Supreme Court, that would be the governing law and the reference would not survive. The same would be the position if ABN Amro Bank Limited decision is reversed in appeal. Till a final pronouncement by the Supreme Court emerges, there exist diametrically contrary views in the Tribunal; one the final order in ABN Amro Bank Limited and the other which is expressed in the order of reference and in respect of the same subject matter, namely identification of the scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Revenue in support of its contentions in the miscellaneous application including the decision in Union of India vs. Jaiswal Coal Company Limited (1992) 5 SCC 733 are irrelevant and do not provide any guidance on this aspect of the matter. For the foregoing reasons, Miscellaneous application No. ST/MA(ORS)/ 93629/15-Mum. is rejected. 47. CONCLUSIONS : We answer the reference dated 16.08.2013 as under: On point No. (i) in the order of reference, we hold that 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; On point No. (ii) we hold that 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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