Chit Funds cannot be subject to service tax
Facts and Issue of the case
The petitioners who are engaged in Chitty business are exigible to service tax was considered by the Hon’ble Supreme Court in Union of India and others v. M/s.Margadarshi Chit Funds (P) Ltd. etc (AIR 2017 SC 3730). It was laid down in the said decision that after the amendment brought about to the definition of the word ‘service’ from 15.06.2015 onwards, service tax is payable on Chit Fund. Relying on the aforesaid decision, a Division Bench of this Court, in its judgment in Writ Appeal held that the amendment brought about to the definition of service cannot be said to be clarificatory and there can be no retrospective operation given to such amendment. As a corollary it has to be understood that service tax cannot be levied on Chit Funds prior to the amendment.
Observation by the court
In the light of the undisputed fact that the demand takes in demands for the period 2012-13 and 2013-14 and is hence unsustainable in law. In the circumstances, it is only appropriate to remand the matter to the adjudicating authority for fresh adjudication in the light of the law as laid down by the Hon’ble Supreme Court and followed by the Division Bench of this Hon’ble Court. For the purpose of such adjudication, necessarily an opportunity of hearing should be offered to the petitioner.
In view of the above shall stand set aside and the 4th and 5th respondents are directed to pass fresh orders, in the light of the judgment in Margadarshi Chit Fund case, after granting an opportunity of hearing to the petitioners. It is also clarified, that, if any application for refund is filed by the petitioners, in view of the proposition of law laid down in Margadarshi Chit Fund’s case, necessarily, the same shall be considered without further delay in accordance with law.
The writ petition is allowed by the court.Dhanamithra-Kuries-Pvt.-Ltd-Vs-Union-of-India-Kerala-High-Court