No service tax can be levied on chit fund business – HC

Issue- The short question which arises in this writ petition is whether the provision of services in relation to conducting a chit business is a taxable service for the purposes of section 65B(44) of the Finance Act, 1994 inserted w. e. f. 1 st July, 2012.

The petitioner prays that the notification No.26/2012-ST dated 20.06.2012 should be quashed in so far as it seeks to subject the activities of a business chit fund companies to service tax to the extent of 70% of the consideration received for the services. The contention of the petitioner is that there is no question of exempting a part of the consideration received for the services in chit fund business when the law provides that such services are not taxable at all in the first place.

In a chit business, the subscription is tendered in any one of the forms of ―money‖as defined in section 65B(33). It would, therefore, be a transaction in money. So considered, the transaction would fall within the exclusionary part of the definition of the word ―service‖as being merely a transaction in money. This would be the result if the argument that the exclusionary part of the definition in clause (a) is considered to have been enacted ex abundant cautela; if the argument based on Explanation 2 read with the exclusionary part of the definition is accepted as correct, even then the services rendered by the foreman of the chit business for which a separate consideration is charged, not being an activity of the nature explained in the said Explanation, would be out of the clutches of the definition. Either way, there can be no levy of service tax on the footing that the services of a foreman of a chit business constitute a taxable service.

In the result the writ petition succeeds and prayer (i) is The notification No.26/2012-ST dated 20.06.2012 issued Government of India, Ministry of Finance (Department of Revenue) quashed to the extent of the entry in serial No.8 thereof. The writ is allowed with no order as to costs.

HIGH COURT OF DELHI AT NEW DELHI

Judgment delivered on: 23.04.2013

W.P. (C) 4512/2012

DELHI CHIT FUND ASSOCIATION

versus

UNION OF INDIA & ANR.

JUDGMENT

R.V. Easwar, J.

The short question which arises in this writ petition is whether the provision of services in relation to conducting a chit business is a taxable service for the purposes of section 65B(44) of the Finance Act, 1994 inserted w. e. f. 1st July, 2012.

2. The petitioner is an association of chit fund companies based in Delhi. By a notification No.26/2012 issued on 20th June, 2012, the Department of Revenue, Ministry of Finance of the Government of India exempted: –

“the taxable service of the description specified in column (2) of the Table below, from so much of the service tax leviable thereon under section 66B of the said Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the said Table, of the amount charged by such service provider for providing the said taxable service, unless specified otherwise, subject to the relevant conditions specified in the corresponding entry in column (4) of the said Table, namely: –