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2024 (10) TMI 1549 - SC - Service TaxService tax on Merchant Discount Rate (MDR) and interchange fee - As per revenue Acquiring bank should have paid service tax on the Merchant Discount Rate MDR minus the interchange fee and the issuing bank should have paid service tax on the interchange fee - use of the word and in conjuncture - HELD THAT - We are of the view that the judgment and reasoning given by S. Ravindra Bhat J. is acceptable and it is in accordance with the provisions of Clause (iii) of Section 65 (33a) of the Finance Act 1994 S. Ravindra Bhat J. rightly observes that as per Section 65 (33a) of the Act seven distinct heads of credit card services were sought to be taxed the idea being to broaden the coverage of the species of services into taxation net. Clause (iii) thereof applies to service by any person which includes service by the issuing bank and the acquiring bank. The use of the word and in conjuncture is indicative of the legislative intent. MDR is charged/levied by the acquiring bank at the first point in time and subsumes both the acquiring bank fee and the interchange fee of the issuing bank as well as the platform fee. It is the sum total of the three. The aforesaid charge occurs first in point of time and deduction and payment of service tax at this stage is beneficial to the Revenue. It is not the case of the Revenue that payment by the acquiring bank to the issuing bank known as interchange fee is separately chargeable in addition to the service tax on the MDR. We wonder whether the Revenue would have accepted the bifurcation as argued by them in case the acquiring bank and the issuing bank had taken the stand which is now taken by them. While interpreting a tax provision one must keep in mind that the legislature ennobles the ease of collection of tax and payment of tax. These principles especially when there is no loss of revenue can be taken into consideration for interpreting a provision in case of doubt or debate. Entire data and details are available with the Service Tax Department and could have been easily ascertained before issuance of the show cause notice. Interestingly the show cause notice proceeds on the basis that regardless of the service tax paid by the acquiring bank on the full MDR the issuing bank would be liable to pay service tax on the proportion of its share in the MDR which is the interchange fee. We find that the entire amount of the service tax payable on the MDR has been paid to the Government and there is no loss of revenue. Recording the aforesaid the Reference and appeals are disposed of holding that service tax is not separately payable on the interchange fee as service tax has been paid on the MDR.
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