Fort City Chits Pvt Ltd vs Commissioner Of Central Tax And Central Excise, Cochin

The present appeal is directed against the impugned order dt. 13/07/2020 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) has rejected the appeal of the appellant and upheld the Order-in-Original.

Briefly the facts of the present case are that the appellant is registered as private limited company under the Companies Act, 1956 engaged in the business of chit funds and in return the assessee receive consideration in the name of foreman commission. The appellant has filed three refund applications dt. 09/07/2015 for Rs.95,270/- paid towards service tax for the period from July 2012 to March 2013, Rs.18,316/- paid as service tax for the period from April 2013 to May 2013 and Rs.49,397/- (including interest of Rs.1131/-) paid for the period from April 2014 to September 2014 on the ground that levy of service tax on foreman commission of chit has come into effect only from 01/04/2015 as per the Finance Act, 2015 and there was no liability for payment of service tax till 31/03/2015. After following due process, the adjudicating authority rejected the claim relying upon the decision of the Kerala High Court reported in 2013(29) STR 557 (Ker.) and in the case of KSFE Vs. UOI in W.P(C) No.2795/2014 dt. 19/02/2014. Aggrieved by the said order, appellant filed appeal before the Commissioner (Appeals). Learned Commissioner (Appeals) rejected the appeal. Hence the present appeal.

Heard both sides and perused the records.

Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the documentary evidence on records. He further submitted that the taxability of foreman commission was considered by the Delhi High Court in the case of Delhi Chit Fund Association Vs. UOI [2013(30) STR 347 (Del.)] and it was held that in a chit business, the subscription is tendered in any one of the money forms and the service rendered by the foreman of the chit business for which a separate consideration is charged is out of the clutches of the service definition; hence there cannot be any levy of service tax on the footing that service of a foreman of a chit business constitute taxable service. He further submitted that the Board's circular dt. 28/02/2015 referred to by the adjudicating authority in its order clearly support the claim of the appellant as only by this Explanation inserted in the Finance Act, 2015, the levy of service tax on chit foreman activities was made absolute and prior to it was not subject to service tax. He further submitted that in the impugned order, the Commissioner (Appeals) has observed that the assessee could not prove with the documentary evidence that the incidence of tax was borne by the appellant and the burden of tax was not passed on to its customers. He further submitted that the assessee has produced a certificate from Chartered Accountant being the statutory auditor to the effect that service tax has not been collected from its customers which has not been accepted by the appellate authority on the basis of decision in the case of Mamirex and Co. Vs. CCE, Allahabad [2004(174) ELT 216 (Tri. Del.). He further submitted that the Commissioner (Appeals) has never asked the assessee to produce the books of accounts at the time of hearing and has also not sent any notice to produce the evidence. If asked from the assessee, the assessee would have easily produced the books of accounts which is already audited and filed in the Income Tax Department and Registrar of Companies which the auditor has clearly mentioned in the audit report.

On the other hand, the learned AR reiterated the findings of the impugned order.

After hearing both sides and considering the material on record, I find that the levy of service tax on foreman commission was introduced in the Finance Act, 2015 and there was no liability for payment of service tax on foreman commission till 31/03/2015. Further I find that the matter has been settled by the Apex Court which has been admitted by both the authorities below but the only ground on which refund has been denied is that the appellant has not produced books of accounts to show that the service tax has not been passed on to its customers. Further I find that the appellant has produced Chartered Accountant certificate even before the authorities below but the learned Commissioner (Appeals) rejected the same without any legal basis. The certificate issues by the Chartered Accountant certifies that the incidence of service tax claimed has not been passed on directly or indirectly to any other person and the said amount of tax claim as refund was actually paid by the service provider. Along with the certificate, the appellant has produced the books of accounts of the company viz. Profit & Loss account and the balance sheet. After perusal of the Chartered Accountant certificate, I am of the opinion that the appellant has proved that the incidence of service tax has not been passed on to anyone. In view of this, I am of the opinion that the denial of refund for the period prior to 31/03/2015 is not sustainable in law and therefore I set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any.

(Order was pronounced in Open Court on 23/03/2021)