2018 (10) TMI 902 - HC - Service Tax

Liability of service tax - Chit transaction - Amendment to sub-section (44) of Section 65B of the Finance Act in 2015 - Revenue contends that the amendment is merely clarificatory in nature and would be applicable from 2012 onwards - Held that - The amendment made in 2015 cannot be said to be clarificatory and there can be no retrospective operation given to such amendment. The legislature felt the need for inclusion of the transactions within the fold of service and hence amended the Finance Act, 1994 by Finance Act, 2015. As a corollary it has to be understood that it was not taxable prior to the amendment. The assessees claim refund of the amount already paid on demand made by the authorities - The matter will have to be considered, especially, looking into whether the tax was collected from individual subscribers and if so collected, whether there could be any refund effected - appeal allowed by way of remand.

Summary

Issues:
Liability of chit transactions to service tax under the Finance Act, 1994 for three periods: pre-2012, between 2012 to 2015, and post-2015.

Analysis:

1. Pre-2012 Period:
The issue arose when chit fund businesses were sought to be levied with service tax. Initially, the Andhra Pradesh High Court held that chit fund business would not be covered under the Finance Act, 1994. However, the Kerala High Court later differed and held in favor of the Revenue. The Supreme Court eventually negated the liability of chit transactions to service tax, specifically overruling the decision of the Kerala High Court.

2. Between 2012 to 2015:
In this period, the definition of services was revised, and a negative list was introduced under Section 65B(44) of the Finance Act, 1994. The contention was whether chit transactions could be taxed during this period. The Supreme Court clarified that chit fund businesses were not exigible to service tax during this period, as the definition of banking and financial services did not include chit transactions.

3. Post-2015 Period:
An amendment in 2015 specifically excluded chit transactions from the definition of transaction in money or actionable claim, making chit transactions liable to tax under the Finance Act, 1994 from 2015 onwards. The Revenue argued that this amendment was clarificatory and applicable from 2012 onwards, but the Court disagreed. The Court held that the amendment was not retrospective and that chit transactions were not taxable prior to the 2015 amendment.

4. Refund Claims:
The judgment did not make any positive orders on refund claims but directed the assessees to file applications based on the Supreme Court's decision. The authorities were instructed to consider refund applications based on evidence provided by the assessees, especially regarding whether the tax was collected from individual subscribers and if refunds could be made to them. The Court set the limitation for filing refund applications from the date of the judgment.