2018 (4) TMI 545 - AT - Service Tax

Liability of service tax - Foreman Commission - Department was of the view that such commission is liable to payment of service tax under the category of Financial Service falling under Section 65(12) (v) of the Finance Act 1994 - Held that - the Hon ble Apex Court in the case of Union of India and others Vs, M/S Margadarshi Chit Funds Pvt. Ltd. 2017 (7) TMI 224 - SUPREME COURT OF INDIA , concluded that term cash management in its common parlance will not include chit fund business. The Supreme Court set aside the demand for service tax on the foreman commission for the disputed period - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether foreman commission in chit fund business is liable for service tax under Section 65(12)(v) of the Finance Act 1994.
2. Whether chit fund business can be considered as a form of fund management.

Analysis:
1. The dispute in the appeals revolved around the liability of foreman commission in chit fund businesses for service tax under Section 65(12)(v) of the Finance Act 1994. The appellants, engaged in chit fund businesses, were contending against the service tax demands made by the Department. The Hon'ble Supreme Court, in a previous case, clarified that chit fund business does not fall under the purview of "cash management," which was the basis for the service tax demand. The Supreme Court's decision set aside the demand for service tax on foreman commission for the disputed period, providing clarity on the taxation aspect concerning chit fund businesses.

2. The second issue involved determining whether chit fund business could be categorized as a form of fund management. The Revenue argued that chit fund amounted to cash management, which is considered a form of fund management. However, the Supreme Court, after analyzing the definitions of fund and fund management, concluded that chit fund business did not align with the concept of fund management as commonly understood in business terms. The Court highlighted that fund management involves the allocation and utilization of funds for specific purposes, which did not correspond to the operations of chit fund businesses. The decision affirmed that chit fund business was not covered under Section 65(12)(v) of the Finance Act 1994, even after its amendment in 2007.

3. In light of the consistent interpretation provided by the Apex Court on the issues at hand, the Tribunal followed the Supreme Court's decision and allowed all the appeals before them. The orders demanding service tax on foreman commission in chit fund businesses were set aside, aligning with the Supreme Court's clarification on the nature of chit fund operations and their differentiation from cash management or fund management activities. The Tribunal's decision, based on the Apex Court's ruling, provided a conclusive resolution to the disputes surrounding the taxation aspects of chit fund businesses.