IN THE CONSUMER DISPUTES REDRESSAL FORUM, KOLLAM

DATED THIS THE   31^ST     DAY OF JANUARY 2018

Present: -    Sri. E.M.Muhammed Ibrahim, B.A, LLM. President

        Sri. M.Praveen Kumar,Bsc, LLB ,Member

       CC.No.239/2015

N.R.Roy                                                     :                  Complainant

S/o N.Ramakrishnan

Kizhakkadathu Veedu, Peroor

Kollam – 691005

[By Adv.Tijo Vijayan, Kollam]

V/S

1.       The Kerala State Financial    :                  Opposite parties

Enterprises Ltd.

Anandavallesworam Branch

Kollam, Represented by its

Branch Manager

          2.       The Branch Manager

The Kerala State Financial Enterprises Ltd.

Anandavallesworam Branch

Kollam

[By Adv.B.K.Jayamohan, Kollam]

ORDER

 M. Praveen Kumar,  Member

Complainant’s case is that being attracted with the advertisement of the opposite parties the complainant subscribed a chit conducted by the opposite parties from its Anandavalleswaram branch as 72^nd  chital in chitty No.45/2012 for a sala of Rs.5,00,000/-.  The 23^rd chit was prized in the name of the complainant in the 11^th month of 2014 and on account of the same the complainant had placed the required documents to deposit the chit amount in the term

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deposit scheme of the opposite parties themselves and had requested to adjust the interest towards the payment of the chit subscriptions monthly.  Opposite parties collected Rs.2163/- by way of Service Tax vide receipt No.80788 from the complainant in total violation to the terms and conditions in the variola of the chit.  As the foreman of the chit the opposite parties are deducting their commission from the chit subscriptions for the service rendered by the opposite parties to the complainant, the opposite parties are benefited from the above service rendered by the m in the business, they are liable to pay service tax to the government and not by the complainant.  Collection of service charge from the complainant and also from other chittals is an unfair trade practice, gross deficiency of service and negligence and it warranted immediate action.  Complainant issued a notice to the opposite parties on 21.01.2014 demanding them to refund the amount to the complainant.  The opposite parties accepted the notice and issued a reply stating that they are deducting the service tax as per the norms of the management and the notice issued by the complainant is forwarded to the head office for favourable action.  It was further stated that decision taken in the demand notice will be intimated to the complainant as and when they get a clarification from the head office.  Complainant sustained loss of money and also sustained much mental agony due to the deficiency of service and unfair trade practice on the side of the opposite parties, which cannot be compensated in any manner.  The mental agony and the damages sustained to the complainant cannot be compensated in terms of money but for an

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amicable settlement the complainant limit his claim for mental agony as Rs.25,000/- and also claiming another Rs.25,000/- as damages for un fair trade practice and deficiency of service of the opposite parties.  Hence the complaint approached the Forum for the above reliefs.

Opposite party 1&2 filed version contending that service tax of Rs.2163/- has been levied from the complainant as per the terms and conditions of variola which the complainant has already been signed and handed over to the opposite party at the time of joining the chitty. No.45/12, chital No.72.  As per Finance Act, 2007, Cash management Services are included in the list of services which are liable to service tax.  The Ministry of finance, Government of India has clarified Vide Circular No.96/7/2007-ST New Delhi dated 23.08.2007 that is the case of ‘Business Chit funds’, Cash management service is provided for a consideration and therefore, leviable to tax under Banking and other financial services @ 12.36% as the amount of  foreman commission.  As per cl.21(A) of the chitty variola which has already been signed and handed over to the opposite parties by the complainant.  The entitlement of the opposite parties to collect tax amounts from the complainant would involve an interpretation of the contractual document and in that sense, it is an issue that concerned the interpretation  of a contract document and hence this Forum lacks jurisdiction to entertain this complaint in respect of a contractual matter.  The opposite parties have not committed any unfair trade practice or deficiency in service as alleged and the service tax which has been collected by the opposite parties from the complainant is as

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per the terms and conditions stipulated in the chitty variola and hence the complaint is liable to be dismissed.

Points for Consideration:-

1. Whether the service tax levied by opposite party from complaint is legally enforceable?
2. Whether there is any deficiency in service and unfair trade practice on the part of opposite parties?
3. Whether the complainant is entitled to get back the service tax collected from him along with interest ?
4. Whether the complainant is entitled to get compensation  if so what would be the quantum of compensation to be awarded?
5. Reliefs and costs?

In order to prove the case, the complainant himself has been examined as PW1 and got marked P1 to P3 documents. The opposite parties have not adduced any oral evidence but got marked Ext.D1 series documents.

Opposite party sides have not filed any notes of argument. Heard the learned counsel for the complainant. . The opposite party’s counsel has not appeared and argued the merit of their contentions, though sufficient opportunity has been granted right from 13/03/2017.

Point No.1 to 3

          Admitted case of the parties is that the complainant had joined in chitty no.45/12 Chital no.72 with opposite parties for a sala of Rs.5 lakhs(Rs.5000×100) and the chitty has prized on 17.12.2013 and the prize money of Rs.3,50,000/- is transferred to fixed deposit in the

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name of the complainant. Service tax of Rs.2163/- has been levied by 2^nd opposite party from the complainant.

          Crucial question arise for consideration is whether opposite parties have any legal right to levy service tax from the complainant.

Opposite parties claimed that as per the finance Act 2007 , cash management service are included in the list of service which are liable to service tax. Counsel for the complainant argued that the chitty is under the category of cash management service as the Department of Revenue, Ministry of Finance, Government of  India has clarified vide its circular  that in the case of Business chit funds if the cash management service is provided for consideration and therefore, leviable to service tax under the  banking and other financial service and is liable to pay service tax from 01/06/2007 onwards @12.36% on the amount of foreman commission and other charges collected by the company by providing service as foreman. The above stipulation in Ext.D1 satisfies the  contention of complainant.

          Opposite parties claimed that complainant signed the variyola wherein under clause 21 A would contain that “Nn«n-bpsS ap³]³ I½o-j\n tI{µ kÀ¡mÀ Npa-¯n-bn-«pÅ tkh\ \nIpXn AXmXp Ime-§fnse \nc-¡-\p-k-cn¨v hcn-¡m-cn \n¶pw ]ncn-s¨-Sp-¡p-hm³ A[n-Im-c-ap­m-bn-cn-¡p-¶-XmWv ”. Hence complainant is liable to pay service tax. It is true that there is such a clause in the variyola but the same is inconsistent with the provisions of Finance Act 2007 where in it is clearly stated that the service tax should be paid by the foreman

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from out of the commission amount collected from the chittal (subscriber of the chitty)

Counsel for the complainant has further  argued that Section 21 A of Kerala Chitties Act 1975 would clearly state “ Notwithstanding anything contained in this Act, any class or classes of foreman , as may be notified by the Government Gazette shall beliable to pay service charges on the “foreman commission” and other charges realised them, at such rate and in such manner as may be prescribed”. In view of the above provisions under Section 21 A of Kerala Chitties Act  1975 and Ext.D1 series  circular, the direction contained in the provision to 1^st para the circular is not legal and proper. A chitty company (opposite parties ) are not expected to make provision in the form of a circular or by law against the provision of Kerala Chitties Act 1975 and Finance Act 2007 by stating that it is a market practice.

          In view of the materials available on record we are of the view that the demand and collection of service tax from the complainant is not legal and proper and collection of the same from the complainant who subscribed chitty is nothing but deficiency in service and unfair trade practice on the part of opposite parties. Hence the complainant is entitled to get back the service tax collected from him along with its interest and costs of the proceedings. The Points answered accordingly

Point.No.4:- Levying service tax from the subscriber of chitty instead of paying service tax from the Foreman Commission amounts

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to deficiency in service and also unfair trade practice . It is also clear from the available materials that due to the demand and collection of service tax from the complainant he has suffered mental agony. In the circumstance the complainant is entitled to get compensation from the opposite parties.

In view of the facts and circumstance available on record we are of the view that Rs.7500/- will be reasonable and sufficient compensation to the complainant. Point answered accordingly.

Point.No.5

          In the result, complaint stands allowed in the following terms complainant is entitled to recover Rs.2163/- along with interest at the rate of 9% per annum from the opposite parties No.1 &2 jointly and severally. The complainant is also allowed to realise Rs.7500/- as compensation for deficiency in service and unfair trade practice committed by the opposite parties.

          Opposite parties are directed to refund Rs.2163/- with 9% interest from 17/01/2014 to the complainant. Opposite parties are further directed to pay Rs.7500/- as compensation and Rs.2500/- as costs of the proceedings to the complainant.  The order must be complied with within one month from the date of receipt of this order, failing which the amount of Rs.9663 will carry interest at the rate of  12%   till realization.

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Dictated to the  Confidential Assistant Smt.Vijimole.G transcribed and typed by her corrected by me and pronounced in the  Open Forum on this the 31^st  day of January 2018.

                                                                        E.M .MUHAMMED IBRAHIM:Sd/-                                                                                                                                                                    M.PRAVEENKUMAR:Sd/-

                                                                        Forwarded/by Order

                                                                        Senior Superintendent

I N D E X

Witness examined for the Complainant

PW.1:-N.R.Roy

Documents marked for the complainant

1. Ext.P.1:-Receipt
2. Ext.P.2:-Office copy of advocate notice  dated 21/01/2014

3.Ext.P.3:-Reply notice  dated 24/01/2014

Witness examined for the Opposite parties

 Nil

Documents marked for the opposite parties  

1. Ext.D.1:- Circular from The Kerala State Financial Enterprises Limited 

E.M .MUHAMMED IBRAHIM:                                                                                                      M.PRAVEENKUMAR: