Interest Received by Foreman on Defaulting Subscriptions Cannot Be Considered as Consideration for Managing the Chit Fund | HC

Case Details: Kerala State Financial Enterprises Ltd. v. Union of India - [2024] 168 taxmann.com 435 (Kerala)

Judiciary and Counsel Details

• Gopinath P., J.
• V. Raghuraman (Sr.), Bhanumurthy J.S., K.S. Bharathan Alphin Antony, Aadithyan S. Mannali, Christine Mathew & Rance R., Advs. for the Petitioner.
• Sreelal N. Warrier, SC, GST Intelligence (Directorate General -DGGI) for the Respondent.

Facts of the Case

In the instant case, the petitioner was engaged in the business of conducting chits. The petitioner challenged the show cause notice issued by the revenue department, calling upon the petitioner to show cause as to why the amount of interest received from defaulting subscribers should not be subject to a charge of GST under the Central Goods and Services Tax/State Goods and Services Tax Acts, 2017.Thereafter, the matter was brought before the High Court.

High Court Held

The High Court held that the interest received by the foreman of a chit on defaulting subscriptions cannot be said to be amounts received as consideration for the supply of services. The High Court further held that the payment of subscription by a chit fund subscriber is not payment for services rendered by the foreman. Any interest charged by the foreman on account of delayed payment of subscription i.e., on defaulting subscriptions, cannot partake the nature of consideration for the supply of services.

List of Cases Reviewed

• • Pratibha Processors and Ors. v. Union of India and Ors: (1996) 11 SCC 101 (para 10)
  • Girdhari Lal Nannelal v. Sales Tax Commissioner, M.P. (1976) 3 SCC 701 (para 10)
  • Haleema Zubair, Tropical Traders v. State of Kerala; (2008) 16 SCC 504 (para 10)
  • Collector of Central Excise, Madras v. M/s. Indian Oxygen Ltd; (1988) 4 SCC 139 (para 10)
  • Baroda Electric Meters Ltd. v. Collector of Central Excise; (1997) 11 SCC 697 (para 10) followed.

List of Cases Referred to

• Girdhari Lal Nannelal v. Sales Tax Commissioner, M.P (1976) 3 SCC 701 (para 3)
• Zubair, Tropical Traders v. State of Kerala; (2008) 16 SCC 504 (para 3)
• CST and Others v. Bhayana Builders (Pvt) Ltd. and Others (2018) 3 SCC 782 (para 3)
• Pratibha Processors and Ors v. Union of India and Ors (1996) 11 SCC 101 (para 5), CCE v. M/s. Indian Oxygen Ltd; (1988) 4 SCC 139 (para 5)
• Baroda Electric Meters Ltd v. CCE; (1997) 11 SCC 697 (para 5)
• Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) (para 7).