Co-operative bank services can attract service tax, and the constitutional challenge fails under the Finance Act.

A co-operative bank carrying on deposit-taking, lending and other banking activities was treated as providing taxable banking and financial services under the Finance Act, 1994, because its objects, bye-laws and conduct fell within the wide statutory definitions of taxable service. The court also rejected the constitutional challenge, holding that service tax was within Parliament's residuary legislative competence and was not invalid merely because the assessee was registered as a co-operative society. The levy was therefore upheld and the writ petition failed.

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Issues: Whether the petitioner co-operative bank, though registered under the West Bengal Co-operative Societies Act, 1983, was engaged in taxable banking and financial services under the Finance Act, 1994 and therefore liable to service tax; and whether Chapter V of the Finance Act, 1994 was unconstitutional for trenching upon the legislative field relating to co-operative societies.

Analysis: The objects and bye-laws of the petitioner showed that it carried on banking business, received deposits, advanced loans, and transacted with members and others in a manner consistent with banking and other financial services. The Court found that the petitioner itself had obtained service tax registration, filed returns, and acted on the footing that its activity fell within the taxable service category. It held that the definitions in Section 65 of the Finance Act, 1994, particularly clauses relating to banking and other financial services and taxable services, were wide enough to cover the petitioner's activities. The constitutional challenge was also rejected, as service tax was treated as a levy within Parliament's residuary legislative competence and no infirmity was found merely because the assessee was a co-operative society.

Conclusion: The petitioner was held liable to pay service tax under the Finance Act, 1994, and the challenge to the levy failed.

Final Conclusion: The writ petition was dismissed because the petitioner's activities fell within the statutory service tax net and the impugned levy was upheld.

Ratio Decidendi: A co-operative bank carrying on banking business and rendering banking and financial services is liable to service tax under the Finance Act, 1994, and such levy does not become unconstitutional merely because the entity is registered as a co-operative society.

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