GUJARAT AMBUJA CEMENT LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) These writ petitions have been filed challenging the constitutional validity of Sections 116 and 117 of the Finance Act, 2000 and Section 158 of the Finance Act, 2003 by which the decision of this Court in Laghu Udyog Bharati and another vs. Union of India and others (1999) 6 SCC 418, striking down Rule 2(1)(d), (xii) and (xvii) of the Service Tax Rules, 1994 (as amended in 1997) was sought to be overcome.

(2.) The writ petitioners are the customers or clients of goods transport operators and forwarding and clearing agents. There are three main grounds on which they have based their challenge. They contend that the basis of the decision rendered in Laghu Udyog Bharati had not been removed or displaced by the impugned sections and could not therefore, overrule, replace or override this Courts decision. The second ground of challenge is that Parliament was legislatively incompetent to enact the law. It is stated that the imposition of the impugned levy encroaches upon the State Governments power as defined in Entry 56 of List II of the Seventh Schedule to the Constitution which pertains to Taxes on goods and passengers covered by road or on inland waterways. The submission is that Parliament could not by resorting to the residuary Entry 97 of List 1 of the Seventh Schedule circumvent Entry 56 of List II and in the guise of levying service tax in fact levy a tax on the transport of goods. The constitutional validity of the imposition has also been challenged on the ground that it operated in discriminatory manner by singling out only the customers of goods transport operators and clearing and forwarding agents to pay tax whereas the recipients of other kinds of similar services were not subjected to such imposition.

(3.) Service tax was introduced for the first time under Chapter V of the Finance Act, 1994. Section 66 of the Act was the charging section and provided for the levy of service tax at the rate of five per cent of the value of the taxable services provided to any person by the person responsible for collecting the service tax. In other words, the levy was on the provider of the taxable services. "Taxable service" was defined in Section 65 to include only three services namely any service provided to an investor by a stock broker, to a subscriber by the telegraph authority and to a policy holder by an insurer carrying on general insurance business. Section 68 required every person providing taxable service to collect the service tax at specified rates. Section 69 of the Finance Act, 1994 provided for the registration of the persons responsible for collecting service tax. Sub-sections (2) and (5) indicated that it was the provider of the service who was responsible for collecting the tax and obliged to get registered. These Sections viz., 65, 66 and 68 and 69 are pivotal to the present issue. They were amended thrice. The remaining sections of the 1994 Act substantially continued as originally enacted with minor changes. Under Section 70 of the Finance Act, 1994, every person responsible for collecting the service tax must furnish or cause to be furnished to the Central Excise Officer in the prescribed form and verified in the prescribed manner, a quarterly return. Sections 71, 72, 73 and 74 deal with the filing of returns, provisions for assessment, reopening of the assessments and rectification of mistakes of assessment orders. Section 75 provides for payment of interest at the rate of one-half per cent for every month or part of a month by which the person responsible for collecting the service tax, delays in paying the tax to the credit of the Central Government. Section 76 deals with the imposition of penalty for failure to collect the service tax. Section 77 deals with the penalty for failure to furnish the prescribed return. Section 78 deals with the penalty for suppressing the value of taxable service and Section 79 for penalty for failure to comply with notices. No other section is required to be noted except Section 94 of the Act which empowers the Central Government to make rules for carrying out the provisions of Chapter V of the Act. Pursuant to such power, the Service Tax Rules, 1994 were framed.