Karnataka High Court
M/S Trade Worth Chits Pvt Ltd., vs Additional Commissioner Of on 18 July, 2017
Author: Vineet Kothari
Bench: Vineet Kothari
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 18TH DAY OF JULY, 2017
BEFORE
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
WP No.2891/2016
C/w.
WP Nos.2885/2016, 2886/2016 & 5483/2016
& 8481-8492/2016 (T - RES)
IN W.P. NO.2891/2016
BETWEEN
M/S. TRADE WORTH CHITS PVT LTD.,
NO.253/A, KANAKAPURA ROAD
7TH BLOCK, JAYANAGAR
BENGALURU - 560 070
(REPRESENTED BY
MR.K.G.VENKATA RAJA GUPTA
S/O LATE K.GARUDACHELAMIAH SHETTY
AGED ABOUT 65 YEARS
DIRECTOR OF
M/S. TRADE WORTH CHITS PVT. LTD) ...PETITIONER
(BY SRI V. RAGHURAMAN, ADVOCATE)
AND
1. ADDITIONAL COMMISSIONER OF
SERVICE TAX
SERVICE TAX COMMISSIONERATE - I
TTMC, BMTC BUILDING
DOMLUR, OLD AIRPORT ROAD
BANGALORE - 560 071
Date of order :18.07.2017 in WP No.2891/2016
C/w. WP Nos.2885/2016, 2886/2016
& 5483/2016 & 8481-8492/2016
M/s. Trade Worth Chits Pvt. Ltd and others
vs.
Additional Commissioner of Service Tax and others
2/12
2. COMMISSIONER OF SERVICE TAX
TTMC, BMTC BUILDING
DOMLUR, OLD AIRPORT ROAD
BANGALORE - 560 071
3. UNION OF INDIA
REPRESENTED BY UNDER SECRETARY
CENTRAL EXCISE WING
OSD (CX-6)
CENTRAL BOARD OF
CUSTOMS AND EXCISE
NORTH BLOCK
NEW DELHI - 110 001 ...RESPONDENTS
(BY SRI JEEVAN J NEERALGI, ADVOCATE FOR R1 & R2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE IMPUGNED SHOW CAUSE NOTICE DATED 08.10.2015
ISSUED BY R-1 AT ANNEXURE - A AND ETC.
IN W.P. NO.2885/2016
BETWEEN
M/S. SOUHARDHA CHITS PVT LTD.,
2ND FLOOR, BHAGAVATHI TOWER
NO.52, 33RD CROSS, 4TH BLOCK
JAYANAGAR, BENGALURU - 560 011
(REPRESENTED BY
MR.MAHESH A.P.
S/O A.S. PUTTAIAH
AGED ABOUT 43 YEARS
EXECUTIVE DIRECTOR
M/S. SOUHARDHA CHITS PVT. LTD) ...PETITIONER
(BY SRI V. RAGHURAMAN, ADVOCATE)
Date of order :18.07.2017 in WP No.2891/2016
C/w. WP Nos.2885/2016, 2886/2016
& 5483/2016 & 8481-8492/2016
M/s. Trade Worth Chits Pvt. Ltd and others
vs.
Additional Commissioner of Service Tax and others
3/12
AND
1. COMMISSIONER OF SERVICE TAX
TTMC, BMTC BUILDING
DOMLUR, OLD AIRPORT ROAD
BANGALORE - 560 071
2. UNION OF INDIA
REPRESENTED BY UNDER SECRETARY
CENTRAL EXCISE WING, OSD (CX-6)
CENTRAL BOARD OF
CUSTOMS AND EXCISE
NORTH BLOCK
NEW DELHI - 110 001 ...RESPONDENTS
(BY SRI JEEVAN J NEERALGI, ADVOCATE FOR R1)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE IMPUGNED SHOW CAUSE NOTICE DATED 07.10.2015
ISSUED BY THE R1 VIDE ANNEXURE - A AND ETC.,
IN W.P. NO.2886/2016 &
5483/2016 & 8481-8492/2016
BETWEEN
M/S. MONARCH CHITS PVT LTD.,
NO.253/A, KANAKAPURA ROAD
7TH BLOCK, JAYANAGAR
BENGALURU - 560 070
(REPRESENTED BY
MR.K.G.VENKATA RAJA GUPTA
S/O LATE K.GARUDACHELAMIAH SHETTY
AGED ABOUT 65 YEARS
Date of order :18.07.2017 in WP No.2891/2016
C/w. WP Nos.2885/2016, 2886/2016
& 5483/2016 & 8481-8492/2016
M/s. Trade Worth Chits Pvt. Ltd and others
vs.
Additional Commissioner of Service Tax and others
4/12
DIRECTOR OF
M/S. TRADE WORTH CHITS PVT. LTD) ...PETITIONER
(BY SRI V. RAGHURAMAN, ADVOCATE)
AND
1. ADDITIONAL COMMISSIONER OF
SERVICE TAX
SERVICE TAX COMMISSIONERATE - I
TTMC, BMTC BUILDING
DOMLUR, OLD AIRPORT ROAD
BANGALORE - 560 071
2. COMMISSIONER OF SERVICE TAX
TTMC, BMTC BUILDING
DOMLUR, OLD AIRPORT ROAD
BANGALORE - 560 071
3. UNION OF INDIA
REPRESENTED BY UNDER SECRETARY
CENTRAL EXCISE WING, OSD (CX-6)
CENTRAL BOARD OF
CUSTOMS AND EXCISE
NORTH BLOCK
NEW DELHI - 110 001 ...RESPONDENTS
(BY SRI JEEVAN J NEERALGI, ADVOCATE FOR R1 & R2)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLES
226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO
QUASH THE IMPUGNED SHOW CAUSE NOTICE DATED
07.10.2015 ISSUED BY THE R-1 ENCLOSED IN ANNEXURE - A
AND ETC.
THESE PETITIONS COMING ON FOR ORDERS THIS DAY,
THE COURT MADE THE FOLLOWING:
Date of order :18.07.2017 in WP No.2891/2016
C/w. WP Nos.2885/2016, 2886/2016
& 5483/2016 & 8481-8492/2016
M/s. Trade Worth Chits Pvt. Ltd and others
vs.
Additional Commissioner of Service Tax and others
5/12
ORDER
Mr. V. Raghuraman, Adv. for petitioners Mr. Jeevan J. Neeralgi, Adv. for R1 & R2
1. The present writ petitions are directed against the impugned Show Cause Notices, Annexure-A dated 08.10.2015 and 07.10.2015 issued by the respondent-Additional Commissioner of Service Tax.
2. The issue is with regard to imposition of Service Tax on the chit fund business of the present petitioners.
3. Mr.Raghuraman, learned counsel for the petitioners submitted before the Court that, in the recent decision of the Hon'ble Supreme Court in the case of Union of India and Others -vs- M/s. Margadarshi Chit Funds (P) Ltd.
Etc. in Civil Appeal Nos.5724-5725/2011 decided on 04.07.2017, the Hon'ble Supreme Court has decided the said issue and has held that, the said chit fund business is neither 'cash management' nor 'fund management' and Date of order :18.07.2017 in WP No.2891/2016 C/w. WP Nos.2885/2016, 2886/2016 & 5483/2016 & 8481-8492/2016 M/s. Trade Worth Chits Pvt. Ltd and others vs. Additional Commissioner of Service Tax and others 6/12 therefore, chit fund business was not covered by sub-
clause (V) of Sub-section 12 of Section 65 even after its amendment by Finance Act, 2007.
4. The relevant portion of the said decision is quoted below for ready reference:
"35) We, therefore, hold that the term 'cash management' as understood in common parlance would not embrace chit fund business.
Question No.2 - Whether chit fund can be treated as a form of fund management?
36) We may mention that the entire case of the Revenue was that chit fund amounts to cash management and cash management is one of the forms of fund management. Once we have held that chit fund business is not cash management or a business of managing cash, no further discussion on this issue is even required. However, dehors the issue of cash management, we are of the view that Date of order :18.07.2017 in WP No.2891/2016 C/w. WP Nos.2885/2016, 2886/2016 & 5483/2016 & 8481-8492/2016 M/s. Trade Worth Chits Pvt. Ltd and others vs. Additional Commissioner of Service Tax and others 7/12 activity of managing chit fund does not amount to management of any type of fund. Even as per the definition from dictionary relied upon by the Revenue, fund is an aggregation or deposit of resources from which supplies are or may be drawn for carrying on any work, or for maintaining existence. Mr.Radhakrishnan has relied upon the following dictionary meanings of fund management and asset management:
"(a) Fund - A fund is a source of money that will be allocated to a specific purpose. A fund can be established for any purpose whatsoever, whether it is a city government setting aside money to build a new civic center, a college setting aside money to award a scholarship, or an insurance company setting aside money to pay its customer's claims.
(Ref.http://www.investopedia.com/terms/f/fun d/asp)
(b) Funds - All the financial resources of a firm, such as cash in hand, bank balance, accounts receivable. Any change in these resources is reflected in the firm's financial position. (Ref.http://www.businessdictionary.com/defini tion/funds.html)
(d) Fund
(i) Sum of money set aside and earmarked for a specified purpose.
Date of order :18.07.2017 in WP No.2891/2016 C/w. WP Nos.2885/2016, 2886/2016 & 5483/2016 & 8481-8492/2016 M/s. Trade Worth Chits Pvt. Ltd and others vs. Additional Commissioner of Service Tax and others 8/12
(ii) Accounting entity (similar to a bank account) for recording expenditures and revenues associated with a specific activity.
(iii) To finance or underwrite a business, program, or project.
(iv) Popular term for mutual fund.
(Ref.http://www.businessdictionary.com/defini tion/fund.html)
(d) Fund Management - Management of the investment fund of an institution such as an insurance company or a pension scheme. It is sometimes known as investment management. (Ref.Advanced Law Lexicon, Book I, P. Ramanatha Aiyar, 3rd edition Reprint 2009 @
370).
(e) Fund management The business of Dealing with the investment of sums of money on behalf of clients (Ref.38 http://www.investorguide.com/ definition fund-management.html)
(f) Asset Management - The function of managing assets on behalf of a customer, usually for a fee. Management of assets of a customer, usually for a fee. Broadly, the efficient control and exploitation of a company's assets, most commonly used to Date of order :18.07.2017 in WP No.2891/2016 C/w. WP Nos.2885/2016, 2886/2016 & 5483/2016 & 8481-8492/2016 M/s. Trade Worth Chits Pvt. Ltd and others vs. Additional Commissioner of Service Tax and others 9/12 describe the management of any fund by a fund manager.
(Ref. Advanced Law Lexicon, Book I, P. Ramanatha Aiyar, 3rd edition Reprint 2009 @ 1948)."
37) Again, it refers to a fund which is normally created by a business or an organisation for a specific purpose and then utilised for the said purpose. A bare look at the aforesaid definitions compels us to hold that chit fund cannot be treated as fund management as understood in the sense the term is known in business parlance. We, therefore, hold that the chit fund business was not covered by sub-clause (v) of sub-section 12 of Section 65 even after its amendment by Finance Act, 2007.
38) For our reasons given above, we affirm the conclusion in the impugned judgment of the Andhra Pradesh High Court. We also hold that Kerala High Court has taken erroneous view and its judgment stands overruled. As a result, these appeals are dismissed. No costs."
Date of order :18.07.2017 in WP No.2891/2016 C/w. WP Nos.2885/2016, 2886/2016 & 5483/2016 & 8481-8492/2016 M/s. Trade Worth Chits Pvt. Ltd and others vs. Additional Commissioner of Service Tax and others 10/12
5. Learned counsel for the petitioners also submitted that, even at the time of issuing the impugned Show Cause Notice on 08.10.2015, the matter was covered in favour of the assessees by the decision of the Hon'ble Delhi High Court reported in 2013 (30) S.T.R. 347 (Del.) in the case of Delhi Chit Fund Association -vs- Union of India, against which the Special Leave Petition was dismissed by the Hon'ble Supreme Court on 07.01.2014 which is reported in 2015 (38) S.T.R. J202 [S.C.] and the review petition filed by the Union of India also came to be dismissed on 16.10.2014.
6. Learned counsel for the respondent-Department, however prayed for sometime in the matter to study these case laws.
7. Considering the submissions made at the bar, this Court is of the opinion that, the writ petitions are premature. If during the course of time, the aforesaid legal Date of order :18.07.2017 in WP No.2891/2016 C/w. WP Nos.2885/2016, 2886/2016 & 5483/2016 & 8481-8492/2016 M/s. Trade Worth Chits Pvt. Ltd and others vs. Additional Commissioner of Service Tax and others 11/12 position has emerged, the assessees can very well bring these judgments to the notice of respondent No.1- Additional Commissioner of Service Tax along with the representation and objections to the said Show Cause Notices impugned in the present writ petitions and the said respondent-Authority shall consider the said legal position and relevant provisions of the Act and pass appropriate orders in accordance with law and decide whether the 'chit fund business' is 'cash management' or 'fund management' or falls in taxable services in other Clauses of Section 65(12) of the Act or not.
8. The petitions are accordingly disposed of with the liberty and direction to the petitioners to make its representation and raise the objections along with the case laws cited before this Court as aforesaid, before the said Authority and may appear before the said Authority in the first instance on 09.08.2017 and the said Authority is Date of order :18.07.2017 in WP No.2891/2016 C/w. WP Nos.2885/2016, 2886/2016 & 5483/2016 & 8481-8492/2016 M/s. Trade Worth Chits Pvt. Ltd and others vs. Additional Commissioner of Service Tax and others 12/12 expected to decide the said Show Cause Notices after giving reasonable opportunity to the petitioners within a period of three months thereafter and decide the question whether 'chit fund business' of the petitioners-assessees is a taxable service under Section 65(12) of the Act or not and whether these cases cover the case of the present petitioners or not. No costs.
Sd/-
JUDGE ST