Service tax on chit funds upheld after amendment removed the exclusion and clarified liability followed the statute.

Service tax on chit fund transactions was brought within the taxable net after the 2007 amendment removed the earlier exclusion for cash management. The amended statutory text, not the departmental circular, supplied the tax liability, because a clarificatory circular cannot create or enlarge a levy without statutory backing. Chit fund activity was treated as fund management and therefore as a service within the Finance Act, 1994 framework. The writ challenges were rejected, with the levy sustained on the basis of the amended provision.

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Issues: Whether service tax could be levied on chit fund transactions after the 2007 amendment deleting the exclusion for cash management, and whether the departmental circular could itself create the tax liability.

Analysis: The taxable entry under the Finance Act, 1994 covered banking and other financial services, including forms of fund management, and the earlier exclusion for cash management had kept chit fund activity outside the tax net. The amendment in 2007 removed that exclusion, thereby widening the scope of the charging provision. The circular issued by the Board was only clarificatory and expressly stated that it did not override the statute. A circular cannot create a levy in the absence of statutory support, but here the liability flowed from the amended statutory text, not from the circular. The Court also held that chit fund activity involves fund management and constitutes a service within the statutory framework.

Conclusion: The levy of service tax on chit fund business after the 2007 amendment was upheld, and the challenge to the circular failed.

Final Conclusion: The writ petitions were rejected because the amended statutory provision, and not the circular, brought chit fund transactions within the service tax net.

Ratio Decidendi: Where a taxing statute is amended to remove an exclusion, the taxable incidence arises from the amended provision itself, and a clarificatory circular cannot create or expand the levy beyond the statute.

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