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TMI Blog2008 (7) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... Since all these writ petitions involve common questions, they are being taken up together for disposal. The petitioners herein include many of the chit fund companies and a registered Federation of Chit Funds, of which those companies are members. In the writ petitions, the petitioners sought for a mandamus and assailing the correctness of circular No. 96/7/2007-ST (Circular No. 034-04) dated 23.8.2007 and proceedings No. HAST 141/2007 dated 18.12.2007 issued by the second respondent as being violative of Article 14, 19 (1) (g) and 265 of the Constitution of India and Section 65 (12) read with section 65 (105) (zm) of the Finance Act, 1994 and to set aside the same. The case of the petitioners is that they are doing business in chit funds, the transactions of which are clearly covered by the provisions of the A.P. Chit Funds Act, 1971 and the Rules made thereunder. According to them, very nature of transaction stands quite apart. In support, the petitioners referred to various provisions of the said Act. Under Chapter V of the Finance Act, 1994, the first respondent for the first time, imposed the levy of service tax on rendition of service by the provider of service to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression 'cash management' in the normal parlance and as per the various dictionaries referred to including Vrnimmen Finance Dictionary, the Farlex Dictionary and Investorwords.com, the chit transaction squarely falls within its ambit and therefore it was contended that even culling out from the definition of the chit under the Chit Funds Act, 1982, there being an element of finance involved, it attracts cash management and asset management. Further, it has been pointed out that as per Section 41 (I) of the Reserve Bank of India Act, 1934, chit funds are categorized as Financial Institutions and therefore sub clause 12 of Section 65 of the Finance Act, 2007 by deletion of expression 'cash management' attracts the levy of service on chit fund transactions. It is also pointed out that the Reserve Bank of India clarified in this regard and it is only on the guidelines and advise of the Reserve Bank, the impugned circulars have been issued and therefore there is absolutely no illegality in the entire action of the respondents. Further it is pointed out that the petitioners have an alternative remedy of appeal and adjudication at various stages to raise these objections and without avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Having considered the submissions made and on perusal of the material, the crux of the matter for consideration is as to whether the petitioners' business i.e., chit fund fall within the mischief of expression "cash management", as amended under sub section 12 of section 65 of the Finance Act, 2007 and consequently under the impugned circular issued by the respondents is valid? At the outset, for convenience sake, instead of referring to all the provisions under the Chit Fund Act, 1982 it would suffice to refer to the definition of Chit under Section 2 (b) thereof, which reads as under; "2(b) Chit means a transaction whether called chit, chit fund, chitty, kury or by any other name or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical insalments over a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount." The nature of chit transaction has come up for consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a non-banking financial company or any other body corporate, namely: i) financial leasing services including equipment leasing and hire purchase by a body corporate ii) Credit card services iii) Merchant banking services iv) Securities and foreign exchange (forex) broking; v) Asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services, but does not include cash management; vi) Advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy; and vii) provision and transfer of information and date processing; b) foreign exchange broking provided by a foreign exchange broker other than those covered under subclause (a). It has been the agreement of the respondents that since the nature of chit transactions falls within the expression of cash management and the sub-clause V of the above provision excludes the same. Therefore, there was no levy of service tax on the said transactions. The aforesaid provision had undergone a change by way of an amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h management, both expressions strictly speaking did not find place in the definition clauses under any of the Finance Acts. It does not include or exclude the chit transaction or business specifically. There cannot be any dispute that the very nature of business and transaction under the chits as can be culled out from the provisions of the Chit Fund Act and as explained to by the Apex Court in M/s. SHRIRAM CHITS INVESTMENTS (P) LTD., UNION OF INDIA (Supra) , it stands on its own as a class. It does not have any parlance or similarity to that of normal transactions as one understood under the law or commercially. Admittedly, there is no provision whatsoever by including specifically the chits within the meaning of either 'cash management' or 'asset management'. Therefore, irrespective of such amendment either by earlier inclusion or later exclusion of those expressions, it will not have bearing on the chit transaction. The respondents placed reliance on the online dictionary meaning in support of their contention that the nature of chit transactions falls within the meaning of 'cash management, which are as under: "http://ardictionary.com/Fund/6980 FUND: Definition: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxing statutes which are to be construed strictly. As often said, there is no equity in a tax vide Commissioner of Income tax v. Firm Murar (AIR 1966 Sc 1216). If the words used in a taxing statute are clear, one cannot try to find out the intention and the object of the statute." Therefore in the absence of a specific statutory definition of 'cash management' or even 'asset management', the question of its wider interpretation either by seeking to include or exclude any other transactions or business does not arise and is not permissible and any such act on the part of the executive would certainly be in the teeth of Article 265 of the Constitution of India. Even the arguments to rope in the definition of the financial institution under the RBI Act, which has been mentioned above, could not come to the rescue of the respondents herein to extend the levy of service tax on the chit business, since, as per the said definition such business is included. However, it is to be noticed that the said provision has been in vogue all along, and it is not the case of the respondents that by borrowing the same, the service tax could have been levied even much earlier irrespective of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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