No Service Tax on ‘Services in Relation to Chit-Funds’ : Revisiting Delhi High Court Decision in ‘Delhi Chit Fund Association’

In a recent decision and the first of its kind in the context of levy of service tax under the ‘negative list regime', the Delhi High Court in ‘Delhi Chit Fund Association v. Union of India' has declared as invalid the levy of service tax on ‘services in relation to chit-fund'. While such declaration of a levy as invalid is not unprecedented, the reasoning employed in the decision to conclude such invites a closer scrutiny in as much as the decision effectively restates the otherwise clear statutory provision. The decision also does not dwell in detail upon the defense put for by the tax-administration in support of their stand, in particular the principle of ‘ex abundanti cautela', which in the view of this author provides a firm answer to the conundrum sought to be addressed by the decision. In the light of this and other factors this article makes a critical analysis of this recent decision