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TMI Blog2024 (11) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled law that where the proceedings are challenged as being without jurisdiction, the availability of an alternate mechanism for resolution of disputes (here through adjudication of the show cause notice) is no ground for the Court to refuse to exercise jurisdiction. The judgment of a Constitution Bench of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO and Anr, [ 1960 (11) TMI 8 - SUPREME COURT] is the authority for this proposition. When faced with an argument that the question as to whether re-assessment notices were properly issued under the provisions of Section 34 of the erstwhile Indian Income Tax Act, 1922 should not be investigated in a writ petition under Article 226 of the Constitution of India it was held ' We have therefore come to the conclusion that the Company was entitled to an order directing the Income Tax Officer not to take any action on the basis of the three impugned notices.' In the facts of the present case, it is clear on the authority of the judgment of the Supreme Court in Oriental Kuries Limited [ 2019 (11) TMI 1818 - SUPREME COURT] and the provisions of Notification No.12 of 2017 that the issuance of a show cause notice alleging that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is presently not pressed. There is a further challenge to Ext.P9 notification which relates to the rate of GST for commission received in terms of the provisions contained in Section 21(1)(b) of the Chit Funds Act, 1982 (hereinafter referred to as the '1982 Act'). It is submitted that the said challenge also need not be considered now and can be left open for consideration. 3. Sri. V Raghuraman, the learned Senior Counsel appearing for the petitioner, on the instructions of Adv. K. S. Bharathan would submit that Ext.P1 show cause notice has been issued on the sole basis that interest received/interest collected by the petitioner from defaulting subscribers to a chit should also be the subject matter of a charge of GST under the CGST/SGST Acts. It is submitted that the provisions of the 1982 Act which permits a company engaged in the business of conducting chits to collect interest were the subject matter of the decision of the Supreme Court in Oriental Kuries Limited. v. Lissa and Others; (2019) 19 SCC 732, where it was categorically held that the relationship between a chit subscriber and a chit foreman is a contractual obligation which creates a debt on the day of subscr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he service tax regime transactions in money were outside the scope of service . The learned Senior Counsel referred to the decisions of the Supreme Court in Girdhari Lal Nannelal v. Sales Tax Commissioner, M.P; (1976) 3 SCC 701, and Haleema Zubair, Tropical Traders v. State of Kerala; (2008) 16 SCC 504, to contend that even if a certain amount is received by a person and that would fall within the definition of income for the purposes of Income Tax Law, the same cannot be automatically treated as amounts received for supply of goods or supply of services unless it were to be proved that such amount is received for the purposes of supply of goods or services. The learned Senior Counsel referred to the judgment of the Supreme Court in Commissioner of Service Tax and Others v. Bhayana Builders (Pvt) Ltd. and Others; (2018) 3 SCC 782, to contend that it is not that any amount received can become part of the value of services rendered unless there is a nexus between the amount charged and the service rendered such amount cannot be the subject matter of any tax under the CGST/SGST Acts. The learned Senior Counsel would conclude by stating that Ext.P1 show cause notice is therefore clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they cannot be held as defining every aspect of the relationship between the foreman and the subscriber. It is submitted that the provisions of Notification No.12/2017 also do not apply to the petitioner, as the transaction of the petitioner with its subscribers cannot fall within the scope of extending deposits, loans or advances where consideration is represented by way of interest or discount. In other words, it is submitted that a chit transaction is not a transaction of the nature referred to in Sl.No.27 of Notification No.12/2017 and the petitioner cannot rely on the observations of the Supreme Court in Oriental Kuries Limited (Supra) to establish that by virtue of the notification there can be no charge of GST on the services rendered by the foreman to the subscriber. 5. The learned Senior Counsel appearing for the petitioner, in reply, submits that the observation of the Supreme Court in Oriental Kuries Limited (Supra) clearly defines the nature of the relationship between the foreman and the chit subscriber and the contention of the learned Senior Standing Counsel that those observations are to be read solely with reference to the provisions authorising recovery in the 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 34 of the erstwhile Indian Income Tax Act, 1922 should not be investigated in a writ petition under Article 226 of the Constitution of India it was held:- 25. Mr Sastri argued that the question whether the Income Tax Officer had reason to believe that underassessment had occurred by reason of nondisclosure of material facts should not be investigated by the courts in an application under Article 226. learned counsel seems to suggest that as soon as the Income Tax Officer has reason to believe that there has been underassessment in any year he has jurisdiction to start proceedings under Section 34 by issuing a notice provided 8 years have not elapsed from the end of the year in question, but whether the notices should have been issued within a period of 4 years or not is only a question of limitation which could and should properly be raised in assessment proceedings. It is wholly incorrect however to suppose that this is a question of limitation only not touching the question of jurisdiction. The scheme of the law clearly is that where the Income Tax Officer has reason to believe that an underassessment has resulted from non-disclosure he shall have jurisdiction to start procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the earliest opportunity. There is nothing in its conduct which would justify the refusal of proper relief under Article 226. When the Constitution confers on the High Courts the power to give relief it becomes the duty of the courts to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. In the present case we can find no reason for which relief should be refused. 29. We have therefore come to the conclusion that the Company was entitled to an order directing the Income Tax Officer not to take any action on the basis of the three impugned notices. This question was recently considered by a Division Bench of this Court in Prodair Air Products India Private Limited v. State of Kerala; 2023 (3) KHC 1. It was held:- 10. Under our Constitution, the power of judicial review is traceable to Art.32 and Art.226 that confer on the Supreme Court and the High Courts the power to issue prerogative and like writs to protect the citizens from state action that infringes upon their rights. The Constitution being the supreme law of our land, and the rule of law being one of its basic features, the exercise of statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of the principles of natural justice, (iii) where the order or the proceedings are wholly without jurisdiction or (iv) where the vires of an Act is challenged (Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others, 1998 KHC 1225 : 1998 (8) SCC 1 : AIR 1999 SC 22). That apart, as observed in State of UP and Others v. Indian Hume Pipe Co. Ltd., 1977 KHC 585 : 1977 (2) SCC 724 : AIR 1977 SC 1132 : 1977 (39) STC 355 : 1977 (3) SCR 120 and UOI v. State of Haryana, 2000 KHC 1655 : 2000 (10) SCC 482, and re - iterated most recently in M/s Godrej Sara Lee Ltd v. Excise Taxation Officer - cum - Assessing Authority, JT (2023) 2 SC 32, where the controversy is a purely legal one and it does not involve disputed questions of fact but only questions of law, then it should ideally be decided by the High Court instead of dismissing the writ petition on the ground of an alternate remedy being available. The need for upholding the rule of law would also mandate that the High Court decide the matter in situations where the exercise of statutory power does not conform, inter alia, to the requirements of fairness, non - arbitrariness and reasonableness and therefore falls fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o obtain the gross chit amount at the first instalment without deduction of the discount specified in the chit agreement, subject to the condition that he shall subscribe to a ticket in the chit: Provided that in a case where the foreman has subscribed to more than one ticket, he shall not be eligible to obtain more than one gross chit amount in a chit without discount; (b) to such amount not exceeding seven per cent of the gross chit amount as may be fixed in the chit agreement, by way of commission, remuneration or for meeting the expenses of running the chit; (c) to interest and penalty, if any, payable on any default in the payment of instalments and to such other amounts as may be payable to him under the provisions of the chit agreement; (d) to receive and realise all subscriptions from the subscribers and to distribute the net chit amount to the prized subscribers; (e) to demand sufficient security from any prized subscriber for the due payment of future subscriptions payable by him. Explanation. A security shall be deemed to be sufficient for the purposes of this clause if its value exceeds by one-third, or of it consists of immovable properties, the value of which exceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of such amount there is a debtor-creditor relationship. The chitty variola embodies a promise to pay on future dates. It is not a promise to repay an existing debt, but in discharge of a contractual obligation. The prize amount is not received as a loan, but by virtue of the terms of the contract between the parties. xxxx xxxx xxxx 9. The Division Bench in the impugned judgment dated 15-1-2009, held that by entering into a chitty agreement, a debt is not created at once by the subscriber with respect to the amount of all the future instalments. The chitty agreement embodies a promise to pay and discharge a contractual obligation, and not a promise to repay an existing debt. 10. We do not agree with the view expressed by the Division Bench. When a prized subscriber is allowed to draw the chit amount, which is in the nature of a grant of a loan to him from the common fund in the hands of the foreman, with the concessional facility of effecting repayment in instalments; this is subject to the stipulation that the concession is liable to be withdrawn in the event of default being committed in payment of any of the instalments. The chit subscriber at the time of subscription ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is entitled to recover the consolidated amount of future subscriptions from the defaulting subscriber in a lump sum. The learned Senior Standing Counsel appearing for the Revenue may be right in contending that the observations of the Supreme Court were in relation to the right of the foreman to recover amounts from a defaulting subscriber. However, it is not possible to read the finding of the Supreme Court which defines and explains the relationship between the foreman and the subscriber, referring to the statutory provisions as being confined to the provisions relating to recovery in the 1982 Act. 9. When the observations of the Supreme Court are taken to clearly define the relationship between the foreman and the subscriber, the transaction clearly falls within the terms of Notification No.12 of 2017, which at Sl.No.27 reads thus:- Sl. No. Chapter, Section, Heading, Group for Service Code (Tariff) Description of Services Rate (percent) Condition 27 Heading 9971 Services by way of- (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount(other than interest involved in credit card services); (b) inter se sale or pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time. Section 61(1) prescribes the period during which the goods imported may remain in the warehouse. The normal period in different cases are provided therein. Extension of time in special cases is also provided. If the goods imported remain in warehouse beyond the period provided or extended under Section 61(1), the consequences are specified in Section 61(2) of the Act. As per the provisions of the Act duty is payable (only) when the goods are cleared. If the goods are not cleared within the time granted under Section 61(1) of the Act, and the goods are cleared later, the payment of duty exigible on the goods gets automatically delayed. It is to meet the said contingency. Section 61(2) provides that if the goods warehoused are cleared beyond the lime specified or granted under Section 61(1) of the Act, interest not exceeding 18% per annum shall be payable on the amount of duty on the warehoused goods. It is implicit from the language of Section 61(2) of the Act that the interest shall be payable on the amount of duty payable or due on the warehoused goods for the period from the expiry of period specified or granted till the date of clearance of the goods from the warehouse. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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