9911796707
TMI Blog2013 (4) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... B of the said Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the said Table, of the amount charged by such service provider for providing the said taxable service, unless specified otherwise, subject to the relevant conditions specified in the corresponding entry in column (4) of the said Table, namely: - Sl. No. Description of taxable service Percentage Conditions (1) (2) (3) (4) 8 Services provided in relation to chit 70 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. 3. The petitioner prays that the notification should be quashed in so far as it seeks to subject the activities of a business chit fund companies to service tax to the extent of 70% of the consideration received for the services. The contention of the petitioner is that there is no question of exempting a part of the consideration received for the services in chit fund business when the law provides that such services are not taxable at all in the first place. 3. In order to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, transaction in money shall not include any activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency or denomination for which a separate consideration is charged. Explanation 3.- For the purposes of this Chapter,- (a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Explanation 4.- A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory; 4. Section 66B provided for the charge of service tax on and after the Finance Act, 2012. That section is as follows: - "66B. Charge of service tax on and after Finance Act, 2012 - There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent on the value of all services, other than those services specified in the negative list, provided or agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Rs. 2,500/- (5% of Rs. 50,000/-, the chit amount) the balance of Rs. 12,500/- would be distributed among all the 50 subscribers so that each would get Rs. 250/-. This amount of Rs. 250/- can be set off by the subscribers against the second month's installment of Rs. 1,000/- payable by him and he can give only Rs. 750/-. The auction would be repeated in the subsequent months and the same procedure is followed. Any subscriber who delays the bidding or does not bid at all stands to gain the maximum discount. The chit is thus somewhat like a recurring deposit with the bank. There is no bar on the foreman of the chit fund also participating as a subscriber. 7. The business of chit funds is strictly regulated by the Chit Funds Act, 1982. It contains detailed provisions relating to registration of chits, commencement and conduct of chit business. Rights and duties of foreman, rights and duties of the subscribers, termination of chits, meetings of general body of subscribers, provisions relating to winding up, disputes and arbitration and other miscellaneous provisions. Suffice to note that section 11 recognises that a chit business can be known by several names such as chit, chit fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax and by holding so it seeks to put at rest any ambiguity that may arise in the interpretation of the definition of "service". The only service in relation to a transaction in money or actionable claim, which is taxable, according to the Explanation, being the activity relating to the use of money or its conversion from one form, currency or denomination to another form currency or denomination for which a separate consideration is charged, it clearly implies that all other services rendered in connection with a transaction in money or actionable claim, including the services rendered by the foreman of a chit business, stand excluded from the definition. It is accordingly submitted that the commission received by the foreman or any other person conducting the chit business is not subject to service tax. These contentions are stoutly controverted on behalf of the respondents. 9. We shall first address the argument that what is excluded is only a service in relation to an activity which constitutes merely a transaction in money or actionable claim. The basis of this argument is the principle that a provision cannot exclude something from the definition, unless it is included in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutes a transaction in money and contains no reference to any service rendered in connection therewith. The possible answer to this conundrum is that the legislature deemed it fit, ex abundanti cautela, to exclude an activity which constitutes merely a transaction in money, which even otherwise could not have been considered as a service in any sense of the word. This however appears to us to be a far-fetched answer. A clue to a proper interpretation of the exclusionary part of the definition is embedded in Explanation 2. This Explanation carves out an exception to the exclusionary part of the definition by providing that any activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency or denomination for which a separate consideration is charged shall not be considered as a transaction in money. Therefore, if the only activity, for which a separate consideration is charged, and which cannot be considered as a transaction in money is the activity mentioned in the Explanation, and service tax would accordingly be charged on the consideration received in respect of such an activity, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject matter", as held in Canada Sugar Refining Company Vs. R. (1898) A.C. 375, a principle that is frequently applied in case of difficulty in construing a statute. In N. T. Veluswami's case (AIR 1959 SC 422), a three-judge Bench of the Supreme Court speaking through T.L. Venkatarama Aiyar, J, held as follows : "......... It is no doubt true that if on its true construction, a statute leads to anamolous result, the courts have no option but to give effect to it and leave it to the legislators to amend and alter the law. But when on a construction of a statute, two views are possible, one which results in an anamoly and the other, not, it is our duty to adopt the latter and not the former, seeking consolation in the thought that the law bristles with anamolies". 12. If these rules of interpretation are applied, it appears to us that even if it is assumed that there is an ambiguity or doubt in the interpretation of the exclusionary part of the definition of the word service and as to what types of activities in relation to a transaction or money or actionable claim are exempted from the levy of service tax, that doubt or ambiguity gets cleared up on a careful examination of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not being an activity of the nature explained in the said Explanation, would be out of the clutches of the definition. Either way, there can be no levy of service tax on the footing that the services of a foreman of a chit business constitute a taxable service. 14. Our attention was drawn on behalf of the petitioner to the Education Guide issued by the Central Board of Excise and Customs and particularly to paragraph 2.8 under the heading "transactions only in money or actionable claims do not constitute service". Paragraph 2.8.2 is in the following terms: - "2.8.2 Would a business chit fund comes under transaction only in money' In business chit fund since certain commission received from members is retained by the promoters as consideration for providing services in relation to the chit fund it is not a transaction only in money. The consideration received for such services is therefore chargeable to service tax." 15. The argument is that the answer given in the Education Guide is not correct having regard to the proper interpretation of the statutory provision. We have come to the conclusion that no service tax is chargeable on the services rendered by the foreman in a busine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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