IMPORTANT POINTS
Chit fund is neither `cash management' nor ‘fund management’. Hence not covered by section 65(12)(v).
When goods fall within the domain of uncertainty, it would be difficult to lean in favour of the Revenue.

JUDGMENT

A.K. Sikri, J.

1. In these appeals, the appellant is Union of India, which has assailed the common judgment and order dated July 14, 2008, passed by High Court of Judicature at Andhra Pradesh, in a batch of writ petitions. Those writ petitions were filed by some chit fund companies (hereinafter referred to as the `assessees') assailing the validity of Circular No. 96/7/2007-ST (Circular No. 034-04) dated August 23, 2007 and Proceedings No. HAST 141/2007 dated December 18, 2007 which were issued by the Central Board of Excise & Customs, Ministry of Finance, Department of Revenue (Tax Research Unit), Government of India (hereinafter referred to as the `Revenue'). By the aforesaid Circular and Proceedings, the Revenue had called upon the assessees to pay the service tax on the running of chit funds as according to the Revenue, it was a service provided by the assessees which was covered under `banking and other financial services', a taxable service under sub-section 12 of Section 65 of the Finance Act, 1994. Plea of the assessees was that the chit fund business does not amount to any service covered by the definition of `banking and other financial services' as per the said term as defined in that provision, prevalent during the relevant period. The High Court has accepted the plea of the assessees and thereby quashed the Circular dated August 23, 2007 and consequently Proceedings dated December 18, 2007.

It may be mentioned at this stage that we are concerned with the issue as to whether service tax is leviable on chit fund or not w.e.f. June 1, 2007, the date on which the Finance Act, 2007 came into effect.

2. In order to appreciate the controversy and resolution thereof, it would be apposite to first take note of the relevant statutory provisions of the Act. It would also be necessary to take into account the nature of operations performed by the assessees which are governed and regulated by the Chit Fund Act, 1982.

3. With the enactment of the Finance Act, 1974, for the first time the Parliament imposed the levy of service tax on rendition of `services' by the service providers to the service receivers. It is covered by Chapter V of the Act. Section 65 thereof as it stood prior to June 1, 2007[This Section stands repealed w.e.f. July 1, 2012], contains certain definitions. Sub-section (12) defines `banking and other financial services' which reads as under:

"banking and other financial services" means -

"(a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or any commercial concern, namely:

(i) (ii) (iii)

(iv)

(v) asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services, but does not include cash management;

(vi)

(vii)

(viii)

(ix)"

4. Though, the definition of `banking and other financial services' as contained in sub-section (12) is very wide, we are concerned only with sub-clause (v) thereof which mentions that asset management is also to be treated as banking and financial services. However, the aforesaid definition would disclose that from asset management, `cash management' was specifically excluded. The aforesaid definition of `banking and other financial services' was incorporated in the Finance Act, 1994 vide the Finance Act, 2001 in consultation with the Reserve Bank of India (RBI). However, RBI had suggested to consider exemption from levy of service tax for cash management services. Accordingly, cash management was specifically excluded from the definition of `banking and other financial services'. Therefore, service tax was not leviable on cash management services. The aforesaid definition was amended vide Finance Act, 2007, which came into force w.e.f. June 1, 2007. Thereby, the words `but does not include cash management' were deleted. It is in the aforesaid backdrop, with the amendment of definition in the manner stated above, bec