Chit fund service tax demand cannot stand where Supreme Court has held the activity outside the taxable entry.

Services rendered in relation to chit fund business were treated as outside the relevant service tax entry after the Supreme Court conclusively held that chit fund services were not taxable even after amendment. The Tribunal followed that binding ruling, treated the contrary High Court view as erroneous, and held that the service tax demand and penalties could not survive. The demands were therefore unsustainable, with consequential relief granted to the assessees.

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Issues: Whether the service tax demand confirmed on commission received in relation to chit fund business was sustainable in law in view of the Supreme Court ruling on taxability of chit fund services.

Analysis: The appeals turned on the taxability of services rendered in relation to chit funds. The Tribunal noted that the Supreme Court had already held that chit fund business was not covered by the relevant service tax entry even after amendment and had affirmed the earlier High Court view relied upon by the appellants. The contrary High Court view was treated as erroneous and overruled. In that situation, the impugned demands and penalties could not survive.

Conclusion: The service tax demand was unsustainable and the appeals were allowed in favour of the assessees, with consequential relief.

Ratio Decidendi: When the Supreme Court has conclusively held that chit fund services do not fall within the taxable service entry relied upon by the department, any contrary demand based on that entry cannot be sustained.

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