2017 (4) TMI 280 - AT - Service Tax

Refund claim - Chit Fund Business - During the relevant period there was confusion whether Chit Fund activities are taxable services or not. Therefore, the appellants applied for registration and also paid service tax, and thereafter refund claim was filed - Held that - The appellant has paid the tax on the belief that Chit Fund business-activities is a taxable service. They have obtained registration for all taxable services other than in the negative list, because the appellants were not sure under which category the said services would fall - it would be proper to have verification whether the appellant was engaged in any activities other than Chit Fund business during the relevant period which would fall under taxable services. The matter is therefore remanded - appeal allowed by way of remand.

Summary

Issues:
1. Rejection of refund claim for service tax paid by a Chit Fund business.
2. Interpretation of the taxability of Chit Fund activities under the service tax regime.
3. Verification of the appellant's engagement in taxable services other than Chit Fund business.

Analysis:
The appellant, a Chit Fund business, filed an appeal against the rejection of their refund claim for service tax paid. The appellant applied for service tax registration under all taxable services other than those in the negative list. The issue of whether Chit Fund business is a taxable activity was contentious, with litigations before the High Court. A judgment by the Delhi High Court clarified that Chit Fund activity is not a taxable service, a decision upheld by the Apex Court. The appellant paid service tax but later sought a refund, arguing that Chit Fund activities are not taxable services. The Adjudicating authority and the Commissioner (Appeals) rejected the refund claim, leading to this appeal.

The appellant's counsel argued that due to confusion regarding the taxability of Chit Fund activities during the relevant period, the appellant applied for registration and paid service tax. After the legal clarity provided by the court decisions, the appellant sought a refund, contending that the amount paid was not a tax but a deposit. The counsel requested verification by the adjudicating authority to confirm if the appellant was engaged in any other taxable services besides Chit Fund business.

The Assistant Commissioner, representing the respondent, acknowledged that Chit Fund business is not a taxable service. However, he highlighted that the appellant did not provide evidence to show they were not involved in other taxable services. He suggested remanding the matter for verification of the appellant's engagement in taxable services beyond Chit Fund business.

In the judgment, it was noted that the appellant paid tax under the belief that Chit Fund activities were taxable services, although they were not sure under which category these services fell. The registration obtained covered all taxable services except those in the negative list. The tribunal emphasized that Chit Fund business does not fall under Banking and Financial Services, and the accounting code used for tax payment was a procedural matter. The tribunal decided to remand the case to the adjudicating authority to verify if the appellant was engaged in any other taxable services apart from Chit Fund business during the relevant period. If the appellant was solely involved in Chit Fund business, the refund claim should be considered. The impugned order was set aside, and the appeal was allowed by way of remand for further verification.