2008 (1) TMI 915 - SC - Service Tax

Jurisdiction - power for levying tax or cess - adjudication or assessment order - It is inconceivable that the levy is valid but collection can be held to be impermissible. This is an irreconcilable situation.

Summary

Issues:
Interpretation of the Validation Act regarding collection of cess prior to a certain date.

Analysis:
The High Court, in the impugned order, relied on a previous case to determine that while levy of cess was permissible until a specific date, collection of cess could not be made. The Supreme Court referred to the Validation Act and noted that it did not authorize any fresh levy or collection for liabilities accrued before a certain date, although it prohibited refunds for collections made before that date. The Court highlighted the distinction between "levy" and "collect" in tax statutes, emphasizing that collection is a natural consequence of levy, making impermissibility of collection after a valid levy logically inconsistent.

The Court disagreed with the previous case's conclusion that collection was impermissible for amounts not already collected, stating that it is unfair to treat those who have paid taxes differently from those who have not. Consequently, the Court decided to refer the matter to a Larger Bench to review the correctness of the previous conclusions regarding the permissibility of levy under the Validation Act and the prohibition on collecting amounts not already collected. The records were to be placed before the Chief Justice of India for further directions.