Swadeshi Chitties PVT LTD. vs. Union Of INDIA
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The petitioner, Swadeshi Chitties Pvt Ltd., approached the High Court of Kerala seeking to quash an order (Ext.P1) and to declare that they are not liable to pay service tax for the period prior to a 2015 amendment to the Finance Act. They also sought permission to file refund applications for service tax already paid for that period and to prevent coercive steps based on Ext.P1. The petitioner relied on judgments from the Supreme Court in Union Of India v. M/s.Margadarshi Chit Funds (P) Ltd. and the High Court of Kerala in All Kerala Association of Chit Funds v. Union of India. The respondents, in their counter-affidavit, acknowledged that based on the aforementioned judgments, the services related to chit fund business for the period 01.07.2012 to 14.06.2015 are not taxable, and therefore, the recovery of amounts based on the Order-in-Original No.77/2015-16 ST dated 22.03.2016 is not enforceable. No recovery action has been initiated.
Held
The Court held that the Order-in-Original (Ext.P1) is contrary to the judgments in M/s.Margadarshi Chit Funds' case and All Kerala Association of Chit Funds' case, and therefore, it has no legal standing. Consequently, Ext.P1 was set aside. Regarding the petitioner's submission about deposits made towards service tax, the Court directed that if any deposit of service tax was made for the period covered under Ext.P1, the petitioner is at liberty to file appropriate applications seeking a refund. These refund applications are to be considered and appropriate orders passed by the competent authority in a time-bound manner. The Court did not expressly leave any issue undecided, as the primary issue regarding the enforceability of Ext.P1 was resolved based on the conceded position of the respondents.
Key Issues
1. Whether the respondents are entitled to demand service tax from the petitioner for the period prior to the 2015 amendment in the Finance Act, in light of the judgments in Union Of India v. M/s.Margadarshi Chit Funds (P) Ltd. and All Kerala Association of Chit Funds v. Union of India? (Question of law) Petitioner's arguments: The petitioner contended that they are not liable to pay service tax for the period in dispute, citing the aforementioned judgments which held that services relating to chit fund business for the period 01.07.2012 to 14.06.2015 are not taxable. They argued that Ext.P1 order is unsustainable and contrary to these binding precedents. Respondents' arguments: The respondents, through their counter-affidavit, conceded that based on the Supreme Court and High Court judgments, the services provided relating to chit fund business for the period 01.07.2012 to 14.06.2015 are not taxable. They further stated that the recovery of amounts based on Order-in-Original No.77/2015-16 ST dated 22.03.2016 is not enforceable and no recovery action has been initiated.
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Cause title — parties, addresses and appearances
JUDGMENT Petitioner has approached this Court with the following reliefs: i) to issue a writ of certiorari or any other appropriate writ, order or direction, quashing Ext.P1 order as unjust illegal and unsustainable. ii) to declare that the respondents are not entitled to demand service tax for the period prior to the Amendment in 2015 in Finance Act from the petitioner, in the light of Ext.P2 judgment passed by the Hon'ble High Court of Kerala. iii) to issue a writ of mandamus or any other appropriate writ, order or direction commanding the respondents to permit the petitioner to file refund applications for the service tax paid towards period prior to the amendment of 2015 in Finance Act and allow the refund on such applications. iv) A writ of mandamus or any other appropriate writ, order or direction commanding the respondents to not to take coercive steps against the petitioner on the basis of Ext.P1 order;
Petitioner has based its contentions on the decision in Union Of India v. M/s.Margadarshi Chit Funds (P) Ltd. [AIR 2017 SC 3730] as well as the decision in WP(C) NO. 1253 OF 2019 3 All Kerala Association of Chit Funds v. Union of India [(2018) 55 GSTR 389]. It is submitted that for the period involved in this dispute, as per Ext.P1 order in original, petitioner is not liable to pay any service tax.
A counter affidavit has been filed on behalf of the respondents, in which paragraph No.5 reads as follows: 5.In this connection, it is humbly submitted that as per the judgment of the Hon'ble Supreme Court in the Case of M/s.Margadarshi Chit Funds (P) Ltd. dated 04.07.2017 (2017 (3) G.S.T.L.3(S.C.)) and the judgment dated 14.03.2018 of Hon'ble High Court of Kerala in the Writ Appeals/Writ petitions moved by All Kerala Association of Chit Funds, Kaloor, Cochin (2018(12)G.S.T.L 142(Ker)), it is held that the service provided relating to chit fund business for the period 01.07.2012 to 14.06.2015 are not taxable. In view of the above judgment of the apex court, the recovery of amount on account of the Order-in-Original No.77/2015-16 ST dated 22.03.2016 is not enforceable. Therefore, no action has been initiated by the respondent to recover these amounts so far. It is also submitted that no action shall be initiated as a part of recovery proceedings against the party.
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I have heard Sri.Lindson C.Davis, the learned counsel for the petitioner as well as Sri.Thomas Mathew Nellimoottil, the learned Standing Counsel for the respondents.
In the light of the statement in the counter-affidavit that Ext.P1 order in original shall not be enforced, I am of the view that the order in original being contrary to the judgment in M/s.Margadarshi Chit Funds' case (Supra) as well as that in All Kerala Association of Chit Funds case (Supra); the said order has no legs to stand in the eye of law. Therefore, Ext.P1 is liable to be set aside and I do so.
While dictating the judgment, the learned counsel for the petitioner submitted that during the proceedings before the assessing officer, petitioner had made deposits towards the service tax and the same is liable to be refunded.
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If any deposit of service tax that governs the period covered under Ext.P1 was made, the petitioner will be at liberty to file appropriate applications seeking refund of the said amounts in accordance with law. If such an application is filed, the same shall be considered and appropriate orders thereon shall be passed by the competent authority in a time bound manner. BECHU KURIAN THOMAS JUDGE AMV/16/02//2022
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Appendix — schedule of exhibits
Reproduced from the public record of the Kerala High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.