Ramesh Kumar Patodia Vs Citibank N.A.

Case snapshot

Sections / provisions: See packaged judgment

Questions before the Court / Tribunal

• GST on credit-card loan interest: interaction of IGST exemption for interest and lending/credit-card services.
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

Petitioner Ramesh Kumar Patodia Respondent Citi Bank NA 1. The expression “other than interest involved in credit card services” appearing under Serial No. 28 of the said notification carves out an exception by excluding the interest on credit card services from the purview of the said exemption notification.

2. Since this Court has already held that the services rendered by the bank by way of Summary 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.

1. The borrower has filed this Writ petition praying for a declaration that the interest component of the Equated Monthly Instalments (for short “EMI”) of the loan granted by the respondent Bank is exempted from levy of Integrated Goods and Service Tax (for short “IGST”) and for a direction upon the Bank and the IGST authorities to refund the IGST collected from the petitioner.

2. The facts leading to the filing of the writ petition are as follows-Petitioner is holder of a valid Citi Bank Credit Card issued by the respondent no. 1/Bank. He received an email communication on 21.02.2019 from the Bank offering an instant loan of Rs. 6,50,000/- at 13% interest above the credit limit. A similar email communication was also received on 28.02.2019. Petitioner expressed his willingness to the said offer by a SMS communication on 28.02.2019. On 02.03.2019, petitioner received an email communication from the Bank that a loan on his credit card has been disbursed and is repayable in EMIs along with an additional initial interest amount. Thereafter a demand draft of Rs. 6,50,000/- was dispatched to the home address of the petitioner and he encashed the said draft. Upon receipt of the credit card statements of two successive periods, the petitioner detected that IGST @ 18% was charged on the initial interest as well as interest component of EMI. Petitioner by several letters protested against charging of IGST on the interest component of the EMI and requested the Bank to reverse the said IGST charges.

3. The learned advocate for the petitioner contended that grant of loan by the bank to the petitioner squarely comes within the meaning of “supply” as provided in Section 7 of the Central Goods and Services Tax Act, 2017 (for short CGST Act) and the interest component of the loan which is included in the EMI is the value of such supply of service of granting the loan. Such consideration for supply of service by way of granting loan cannot be said to be a credit card service merely because the EMI is indicated in the credit card statement. Learned Advocate for the petitioner contended that the interstate supply of services by way of extending loans for the consideration of payment of interest is exempted from levy of Integrated Tax as per Serial No. 28 of the Notification No. 9/2017- Integrated Tax (Rate) dated June 28, 2017 issued by the Government of India, Ministry of Finance, Department of Revenue. He contended that the respondent authorities acted de hors the said notification by charging IGST on the interest component of EMI.

Appellant / assessee submissions

3. The learned advocate for the petitioner contended that grant of loan by the bank to the petitioner squarely comes within the meaning of “supply” as provided in Section 7 of the Central Goods and Services Tax Act, 2017 (for short CGST Act) and the interest component of the loan which is included in the EMI is the value of such supply of service of granting the loan. Such consideration for supply of service by way of granting loan cannot be said to be a credit card service merely because the EMI is indicated in the credit card statement. Learned Advocate for the petitioner contended that the interstate supply of services by way of extending loans for the consideration of payment of interest is exempted from levy of Integrated Tax as per Serial No. 28 of the Notification No. 9/2017- Integrated Tax (Rate) dated June 28, 2017 issued by the Government of India, Ministry of Finance, Department of Revenue. He contended that the respondent authorities acted de hors the said notification by charging IGST on the interest component of EMI.

4. The learned advocate for the petitioner submitted that while interpreting the exemption notification the Court has to give it the meaning which clearly and plainly flows from the said notification. In support of such contention he relied upon a decision of the Hon’ble Supreme Court of India in the case of Collector of Central Excise and ors. vs. Himalayan Co-operative Milk Product Union Ltd. and Ors. reported at (2000) 8 SCC 642.

5. K.K. Maiti, learned Counsel representing the respondent no. 4 namely Principal Chief Commissioner of Central Tax raised the point of maintainability of this writ petition on two fold grounds. Firstly, that the reliefs claimed against the respondent no. 1/Bank, not being a nationalized Bank, is not maintainable under Article 226 of the Constitution of India. Secondly, the registered office of the respondent Bank is situated outside the State of West Bengal and as such this Hon’ble Court lacks territorial jurisdiction to entertain and try this writ petition. With regard to the applicability of the Exemption Notification dated June 28, 2017, Mr. Maiti submitted that the loan was extended to the petitioner on the basis of the credit card issued by the Bank and the interest component of EMI is on account of Credit Card services which is not exempted as per the said notification.

6. The learned advocate for the Bank also raised similar objections with regard to the maintainability of the writ petition. On merits, he submitted that the said Exemption Notification is not applicable in the instant case as the interest component of EMI was for credit card services.

Revenue / respondent submissions

5. K.K. Maiti, learned Counsel representing the respondent no. 4 namely Principal Chief Commissioner of Central Tax raised the point of maintainability of this writ petition on two fold grounds. Firstly, that the reliefs claimed against the respondent no. 1/Bank, not being a nationalized Bank, is not maintainable under Article 226 of the Constitution of India. Secondly, the registered office of the respondent Bank is situated outside the State of West Bengal and as such this Hon’ble Court lacks territorial jurisdiction to entertain and try this writ petition. With regard to the applicability of the Exemption Notification dated June 28, 2017, Mr. Maiti submitted that the loan was extended to the petitioner on the basis of the credit card issued by the Bank and the interest component of EMI is on account of Credit Card services which is not exempted as per the said notification.

Court / Tribunal analysis and reasoning

22. The Hon’ble Supreme Court in the case of Om Prakash Srivastava (supra) held that the High Court can exercise power to issue direction, order or writs if the cause of action arises in part within its jurisdiction. In paragraph 8 of the said reported judgment, the Hon’ble Supreme Court held thus-

Operative decision and relief

35. The writ petition accordingly fails and the same is dismissed without, however, any order as to costs.

Ratio and legal principle

• The packaged judgment addresses GST on credit-card loan interest: interaction of IGST exemption for interest and lending/credit-card services. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with gst on credit-card loan interest: interaction of igst exemption for interest and lending/credit-card services. Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• See the statutory provisions identified in the packaged judgment.

Case network

Similar issue / useful comparison

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• Commissioner of Central Excise and Service Tax , Kanpur Vs AR Polymers Pvt ltd - Calcutta High Court

Different outcome / possible distinction

• Ambaradi Seva Sahkari Mandali Ltd. & Others - Allowed
• RADHEYSHYAM MANDIR TRUST Vs. COMMISSIONER OF INCOME TAX (EXEMPTION) - Remanded / restored

Full judgment and source control

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Source class: Sanitized local full-judgment copy; official primary replacement pending · Repository status: Later-history status: verification on hold pending source confirmation