TMI Blog2013 (4) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... ices of a foreman of a chit business constitute a taxable service. No Service Tax - Sr. No. 8 of the Abatement notification no.26/2012 dated 20.6.2012 quashed. - Decided in favor of assessee. - W. P. (C) 4512/2012 - - - Dated:- 23-4-2013 - Badar Durrez Ahmed And R. V. Easwar,JJ. For the Petitioner : Mr Venkatraman, Sr. Adv. with Mr Ravi Sikri, Mr Hari Shankar, Mr Ayush Kumar, Advocates. For the Respondent : Mr Rajeeve Mehra, ASG with Mr Mukesh Anand, Mr Aditya Malhotra, Advcoates for R-1. Mr Kamal Nijhawan, Sr. Standing Counsel for R-2. JUDGMENT 1. The short question which arises in this writ petition is whether the provision of services in relation to conducting a chit business is a taxable service for the purposes of section 65B(44) of the Finance Act, 1994 inserted w. e. f. 1st July, 2012. 2. The petitioner is an association of chit fund companies based in Delhi. By a notification No.26/2012 issued on 20th June, 2012, the Department of Revenue, Ministry of Finance of the Government of India exempted: - the taxable service of the description specified in column (2) of the Table below, from so much of the service tax leviable thereon under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red service, but shall not include (a) an activity which constitutes merely, (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or. (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1. For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to, (A) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (C) the duties performed by any person as a Chairperson or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntribute ₹ 1,000/-. The total chit amount would be ₹ 50,000/-. Let us further suppose that the fund would operate for a period of 50 months. Thus the member subscribers and the number of months for which the chit would operate would be the same. In this example at the end of each month, an amount of ₹ 50,000/- (Rs.1,000/- x 50) would be available in the kitty of the chit fund. The said amount would be put to auction and those subscribers who are interested in drawing the money early because of their needs may participate in the auction. The successful bidder who is normally the person who offers the highest discount is given the chit amount. For example if there are three bidders offering to take the chit of ₹ 50,000/- for ₹ 40,000/-, ₹ 37,500/- and ₹ 35,000/- respectively, the chit would be given to that subscriber who is willing to take it for ₹ 35,000/- since he has offered a discount of ₹ 15,000/-. This leave a balance of ₹ 15,000/- (Rs.15,000 ₹ 50,000) in the kitty. The amount of ₹ 15,000/- which represents the discount which the successful bidder has foregone becomes the dividend which is to be distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribers from any mischief or fraud committed by him by using the position; (f) Commission is payable to the foreman for the service rendered by him as he does not lend money belonging to him. 8. The precise question that arises for consideration in this writ petition is whether the services rendered in connection with a chit business are taxable services or not. The contention advanced on behalf of the petitioner is based on the definition of the word service in section 65B(44). The contention is that the definition excludes an activity which constitutes ―merely a transaction in money or actionable claim ; a chit business is a transaction in money and it is obvious that a transaction in money by itself cannot be a service in the sense of being an activity carried out by any person for consideration. Therefore, there can be no question of excluding what is not a service from the definition and that being so, what stands excluded is a service rendered in relation to a transaction in money and chit business being a transaction in money, the services rendered in connection with the said business is excluded from the definition. This argument is sought to be supported by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action in money or actionable claim, no service is involved; there is just the payment and receipt of the money. The word ―money is defined in section 65B(33) in the following manner: - (33) money means legal tender, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveler cheque, money order, postal or electronic remittance or any similar instrument but shall not include any currency that is held for its numismatic value; 10. A mere transaction in money represents the gross value of the transaction. But what is chargeable to service tax is not the transaction in money itself since it can by no means be considered as a service. The exclusionary part of the definition of the word service however refers to an activity which constitutes merely a transaction in money or actionable claim . Since a mere transaction in money or actionable claim cannot under the common notions of a service be considered as a service by any stretch of imagination, it is necessary to examine what could have been the intention of the legislature in excluding it from the definition. The obvious answer is that it is not the mere transaction in money or actionable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vind Mahajan Ors. vs. State of Maharashtra Anr. : (1977) 2 SCC 548. In S. Sundaram Pillai, etc. v. P. Lakshminarayana Charya and Ors. : AIR 1985 SC 582, a three-Judge Bench of the Supreme Court considered the object of an Explanation and observed as follows: - 52. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this clause also. In these circumstances we are constrained to hold that Explanation 2, when it says for the purpose of this clause , the reference can only be to clause (a) and more precisely to sub-clause (iii) which refers to a transaction in money or actionable claim . Be that as it may, if the exclusionary part of the definition [i.e., clause (a)(iii)] is construed on its own terms there would be an anamoly in as much as what was not a service in the first place within the opening words of Section 65B (44) would fall to be excluded a construction that would be aimless or futile; but if that part is construed in the light of or with the aid of Explanation 2 and what it signifies or implies, then the anamoly gets ironed out or removed, as we have explained earlier. Obviously, we have to prefer the latter interpretation and not the former. 13. In a chit business, the subscription is tendered in any one of the forms of money as defined in section 65B(33). It would, therefore, be a transaction in money. So considered, the transaction would fall within the exclusionary part of the definition of the word service as being merely a transaction in money. This would be the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
