TaxTMI 
TaxTMI 
2016 (6) TMI 1203
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....tional in view of trenching upon Entry 32 of List II of the constitution providing for constitution, regulation and winding up of co-operative societies. (IV) Whether Chapter V of the Finance Act, 1994 is violative of federalism which is one of the basic structure of the constitution? 2. That the petitioner is a co-operative society constituted under the West Bengal Co-operative Societies Act, 1983 (hereinafter referred to the as the said Act). 3. Section 5 of the said Act provides that the provisions of the Companies Act, 1956 shall not apply to Co-operative Societies, now Section 8 of Act 2006 which is pari materia provision to Section 5 of the Act 1983 and Section 6 of the Act 1983 provides that no person other than a co-operative society shall trade or carry on business under any name of title of which the word co-operative or its equivalent in any language is a part thereof. 4. Section 11 of the Act provides that a co-operative society established with the object of promoting the common interest of its members in accordance with the co-operative principles and facilitated in the operation of such co-operative society may be registered under this....
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....ble on demand or otherwise and withdrawable by cheque, draft, order or otherwise. 11. Accordingly, learned counsel for the petitioner fortifies his argument with further submissions that Contai Co-operative Societies Bank Ltd. does not come within the meaning of Clause (b) of Section 5 of Banking Regulation Act, 1949. The distinguishing feature of a Co-operative bank from an ordinary bank is the key-word public. So far as co-operative banks are concerned as per the Co-operative Societies Act, their functions are confined to their members and not open to the public. 12. Section 56(a)(i) provides that reference to a banking company or the company or such company shall be construed as reference to a co-operative bank. 13. Section 56(c) provides that in Section 5 after clause (cc) following clauses shall be inserted, namely, (cci) co-operative bank means a state co-operative bank, a central co-operative bank or a primary co-operative bank and under (cci) co-operative credit society means a co-operative society, the primary object of which is to provide financial accommodation ' with its members' includes co-operative land mortgaged bank. 14. Accordingly,....
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....e Supreme Court has made it abundantly clear that though the Parliament has right to pass laws under its residuary power under Entry No. 97 of List I cannot trench upon the field of legislature which falls in List II. Accordingly, the Parliament in the garb of exercise of residuary power under Entry No. 97 of List I cannot enter into the field of legislation under List II of the 7th Schedule of the Constitution. 19. Ergo it is contended that the service rendered by the petitioner co-operative bank to its members is not taxable service under sub-clause (zm) of Clause 105 of Section 65 as sub-clause (zm) uses the term "customer" and as the petitioner co-operative bank is not covered by sub-sections (1), (11) and (12) of Section 65 of the Service Tax under the Finance Act, 1994. 20. I have respectfully gone through the decision, ratio of which is not well-nigh within the facts and circumstances of the case as reflected from the bye-laws of the petition which clearly provides that wherever word 'Society' appears, that has to be read as 'Bank'. 21. In this case, the writ petitioner has prayed for a declaration that the petitioner co-operative Society is not cover....
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.... Bank Limited to carry on banking business which is depicted from Annexure R1 to the affidavit-in-opposition. It reflects that Contai Co-operative Bank Limited was granted a licence to carry on banking business in exercise of powers conferred on the Reserve Bank of India by Section 22(1) read with Section 56(o) of the Banking Regulation Act, 1949. 25. As I have already discussed that the petitioner Contai Co-operative Bank Limited has already obtained the service tax registration on November 25, 2004 under the category of banking and other financial services which fact will appear at page 48 of the writ petition and it has been clarified by the Additional Director of Directorate General Service Tax that the service tax is required to be paid by the co-operative bank under banking and other financial services. The petitioner of their own communication with the various authorities appears to be well aware of their liability to pay service tax and has obtained service registration and paid service tax under the category of banking and other financial service. This is what has been submitted by the learned advocate appearing for the respondents that the Contai Co-operative Bank....
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....nder :- "(a) To do all kinds of Banking Business on Co-operative principle, consistent with commercial banking system. (b) To receive by way of loans, deposits or otherwise from members, non-members or any other source or sources, repayable on demand or upon such terms and conditions as may from time to time be deemed necessary, and withdrawable by cheque, draft, order or otherwise, for the purpose of lending or investment. (c) The drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hoondies, promissory notes, coupons, drafts, bills of lading, railway receipts debentures, certificates, scripts and other instruments and securities whether transferable or negotiable or not." 30. It also provides for provision of borrowing loan and advance, terms of loans, period of repayment, interest of loans, credit of members, purpose of loans, security of loans, instalments for repayment, recalling loan in special case, renewal and extension of loans. It also provides that that the bank shall maintain a reserve fund in respect of the profit, if any, derivable from its transaction. 31. Having given careful c....
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....rative bank can be held to be liable for service tax in respect of its activity. For deciding the taxability the relevant sub-sections are 65(105) and 65(12) of Finance Act, 1994. These provisions as it stood after amendment by the Finance Act, 2006 with effect from 18-4-2006 till the end of the disputed fact at the relevant time. 36. It was observed in Paragraph 10 as under :- "Now, the issue to be examined is whether co-operative society could be covered by 'any other person'. Here the argument is that co-operative society is not of the same genus as a company. This is not correct. The very fact that Section 2(7) of the Companies Act specifically excluded co-operative society shows that in many respects co-operative society is of the same genus as a company. It was necessary to keep the co-operative society out of the many controls of the Companies Act. So it is specifically excluded though both are of the same genus. The fact that co-operative societies are not controlled by the elaborate procedure of Companies Act but by similar simplified controls through different amendments does not mean that for taxing the services rendered by co-operatives, such societies would ....
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....hat these transactions resembled sales in substance and suggested three drafting devices for conferring the power of taxing these transactions on the States, viz. : (a) amending the State List, Entry 54, or (b) adding a fresh entry in the State List, or (c) inserting in Article 366 a wide definition of "sale" so as to include works contracts. The commission preferred the last alternative." 40. The decision in BSNL case (supra) is not apposite to the facts and circumstances of the case and read as entirety recognises the power of Union of India to levy service tax and the issue in the present case is with respect to banking and financial services. 41. It would appear from the concluding part of the decision of the Hon'ble Supreme Court in Association of Leasing & Financial Service Companies case (supra) that the writ petitioner had challenged the validity of Section 66 of Finance Act, 1994 on the value of taxable services referred to in Sections 65(1) and (5)(zm) read with Section 65(12)(A)(I) without exhausting the statutory remedies. 42. It was observed that there has been no adjudication on the Act in most of these cases and acco....