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2013 (6) TMI 53 - HC - Service TaxLevy of service tax on Chit Fund - cash management - constitutional validity - held that - no provision of law is under challenge in any of these writ petitions; particularly the amendment brought about to Section 65(12)(a)(v) of the Finance Act, 1994, in the year 2007. This being the position, the decisions cited from the part of the respondents, as to the way in which Constitutional validity of a provision is to be examined and interpreted and on such other incidental aspects are not necessary, to be considered or dealt with. However, having cited the above decisions, it is worthwhile to have a reference to some of them as well in a different context. It has been made clear by the Apex Court in paragraph 21 of the judgment reported in Kasinka Trading and Another v. Union of India and Another (1994 (10) TMI 64 - SUPREME COURT OF INDIA) that the power to exempt includes the power to modify or withdraw the, same . Public Interest - held that - It has been further observed in paragraph 23, that withdrawal of exemption in Public Interest is a matter of policy and Courts would not bind the Government to its policy decisions for all times to come, irrespective of the satisfaction of the Government, that a change in the policy was necessary in Public Interest . As observed, Courts do not interfere with the fiscal policy where the Government acts in Public Interest . The scope of interference especially with regard to taxing laws has been explained by another Constitution Bench of the Apex Court in Federation of Hotel & Restaurant v. Union of India 1989 (5) TMI 50 - SUPREME Court more particularly in paragraphs 46, 47 and 48. In Karnataka Bank Ltd. v. Stale of Andhra Pradesh and Others 2008 (1) TMI 605 - SUPREME COURT OF INDIA , it has been held that, any interpretation which renders a legislation unconstitutional, is to be avoided. It difficult to agree with the proposition mooted by the petitioners in these writ petitions and most respectfully disagrees with the view expressed by the Division Bench of the High Court of Andhra Pradesh 2008 (7) TMI 227 - HIGH COURT ANDHRA PRADESH . This Court holds that the writ petitions are devoid of any merit - Decided against the assessee.
Issues Involved:
1. Consequence of the amendment to Section 65(12)(a)(v) of the Finance Act, 1994. 2. Effect of Circular No. 96/7/2007-S.T., dated 23-8-2007 issued by the Central Board of Excise and Customs (C.B.E. & C.). 3. Applicability of the Kerala Chitties Act, 1975 and the Chit Funds Act, 1982. 4. Tax liability of chitty businesses under the Finance Act, 1994. 5. Validity of Circulars in imposing tax liability. Issue-wise Detailed Analysis: 1. Consequence of the amendment to Section 65(12)(a)(v) of the Finance Act, 1994: The amendment in 2007 deleted the words "but does not include cash management," thus widening the scope of the term "all forms of fund management" to include cash management. This change brought chitty businesses within the purview of the Service Tax Net. The court noted that the deletion of the exclusion clause revitalized the provision, making all forms of fund management taxable, including chitty transactions. 2. Effect of Circular No. 96/7/2007-S.T., dated 23-8-2007: The petitioners argued that the Circular imposed a new tax liability, which should be done through a statutory provision and not a circular. The court clarified that the Circular was only clarificatory and did not introduce a new tax liability. The tax liability emanated from the statutory amendment in 2007. The court emphasized that Circulars cannot override statutory provisions and must be read in conjunction with the law. 3. Applicability of the Kerala Chitties Act, 1975 and the Chit Funds Act, 1982: The court discussed the applicability of these Acts, noting that the Kerala Chitties Act, 1975, was declared unconstitutional by a Division Bench in Dharmodayam Company v. Union of India. The Chit Funds Act, 1982, was made applicable in Kerala only from 30-4-2012. The court highlighted that chitty businesses were not covered by the Kerala Chitties Act, 1975, due to the Full Bench decision in Oommen Panicker v. Muthoot Mini Chit Fund. 4. Tax liability of chitty businesses under the Finance Act, 1994: The court examined whether chitty businesses fell under "banking and other financial services" as defined in Section 65(12) and "taxable services" under Section 65(105)(zm). The court concluded that chitty businesses involve fund management, which became taxable after the 2007 amendment. The court rejected the petitioners' argument that they were not rendering any service and thus should not be taxed. 5. Validity of Circulars in imposing tax liability: The court reiterated that Circulars cannot impose tax liability independently; they can only clarify existing statutory provisions. The court found that the Circular in question did not introduce a new tax but clarified the effect of the statutory amendment. The court disagreed with the Andhra Pradesh High Court's decision that set aside the Circular, stating that the tax liability arose from the statutory amendment, not the Circular. Conclusion: The court dismissed the writ petitions, holding that the tax liability on chitty businesses was a result of the statutory amendment in 2007, which included cash management within the scope of taxable services. The Circular was deemed clarificatory and did not impose a new tax liability. The court emphasized that statutory provisions must be strictly interpreted, and the amendment brought chitty transactions within the taxable net.
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