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2017 (8) TMI 401 - HC - Service TaxLevy of tax - chit fund business - sub- clause (V) of Sub-section 12 of Section 65 - Held that - matter is remanded to the respondent No.1- Additional Commissioner of Service Tax, and the said respondent-Authority shall consider the said legal position and relevant provisions of the Act and pass appropriate orders in accordance with law and decide whether the chit fund business is cash management or fund management or falls in taxable services in other Clauses of Section 65(12) of the Act or not - petition allowed by way of remand.
Issues:
1. Challenge against Show Cause Notices dated 08.10.2015 and 07.10.2015 issued by the Additional Commissioner of Service Tax. 2. Imposition of Service Tax on chit fund business. Analysis: Issue 1: Challenge against Show Cause Notices The writ petitions were filed challenging the impugned Show Cause Notices issued by the respondent-Additional Commissioner of Service Tax. The petitions sought relief against these notices dated 08.10.2015 and 07.10.2015, raising concerns regarding the imposition of Service Tax on the chit fund business conducted by the petitioners. Issue 2: Imposition of Service Tax on Chit Fund Business The main issue revolved around the imposition of Service Tax on the chit fund business of the petitioners. The counsel for the petitioners referred to a recent decision by the Hon'ble Supreme Court in the case of Union of India and Others vs. M/s. Margadarshi Chit Funds (P) Ltd. The Supreme Court held that chit fund business did not fall under the category of 'cash management' or 'fund management' as per the relevant provisions of the Finance Act, 2007. The Court analyzed various definitions related to fund management and concluded that chit fund business could not be considered as fund management in the business sense. The judgment affirmed the conclusion of the Andhra Pradesh High Court while overruling the decision of the Kerala High Court on this matter. The counsel for the petitioners also highlighted a previous judgment by the Hon'ble Delhi High Court in favor of chit fund associations, emphasizing that the legal position was in favor of the assessees even before the issuance of the impugned Show Cause Notices. The Supreme Court had dismissed the Special Leave Petition and review petition filed against the Delhi High Court's decision, further supporting the petitioners' position. In light of the submissions made by both parties, the Court opined that the writ petitions were premature. It directed the petitioners to present their case laws and objections to the Additional Commissioner of Service Tax for consideration along with the representation against the Show Cause Notices. The Authority was instructed to review the legal position, relevant provisions of the Act, and make a decision on whether the chit fund business of the petitioners was taxable under Section 65(12) of the Act. The petitioners were granted liberty to appear before the Authority and present their case, with the expectation that the Authority would decide on the matter within three months while providing a reasonable opportunity to the petitioners. In conclusion, the petitions were disposed of with the direction for the petitioners to engage with the Authority, present their case laws, and await a decision on the taxability of their chit fund business based on the legal provisions and judgments cited before the Court.
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