2015 (10) TMI 1582 - HC - Service Tax

Challenge the SCN issued for Levy of Service Tax service tax under section 65(105)(zzze) of the Finance Act 1994 - Club and Association Service - Sale of space or time for advertisement Held That - Provisions of Section 65(105) (zzze) stand ultra vires and unconstitutional as decided in the case of Ranchi Club Ltd. v. Chief Commissioner of C.Ex. & S.T. Ranchi Zone 2012 (6) TMI 636 - Jharkhand High Court the petition partly succeeds and is accordingly allowed to the following extent. The impugned show-cause notice dated 3rd August 2010 issued under section 73(1) of the Finance Act 1994 is hereby quashed and set aside to the extent the same seeks to invoke the provisions of section 65(105)(zzze) of the Finance Act qua the noticee therein. Decided in partly in favour of assessee.

Summary

Issues:
Challenge to show-cause notices seeking to levy service tax under section 65(105)(zzze) of the Finance Act, 1994 on the members of the petitioner Federation.

Analysis:
The petitioners, an association of textile markets, challenged show-cause notices seeking to levy service tax under section 65(105)(zzze) of the Finance Act, 1994 on their members. The association comprises about 100 members managing buildings and premises of textile market associations. The show-cause notice dated August 3, 2010, aimed to recover service tax for maintenance activities of a specific textile market. The petition disputed the liability of members to pay service tax under this provision. The petitioner's advocate referred to a previous court decision declaring similar provisions ultra vires, arguing that the show-cause notice should be quashed.

The court was presented with conflicting arguments. The petitioners relied on a court decision declaring certain provisions of the Finance Act, 1994 ultra vires concerning levying service tax on services provided by clubs or associations to members. On the other hand, the respondents highlighted an explanation to section 65 of the Finance Act, stating that taxable service includes services provided to members by an association for valuable consideration. They argued that previous court decisions did not consider this provision and that appeals against those decisions were pending before the Supreme Court.

The court noted that the controversy in this case focused on challenging the show-cause notice concerning a specific textile market association under section 65(105)(zzze) of the Finance Act. Referring to previous decisions, the court found that the provisions in question were declared ultra vires and unconstitutional by the court, rendering the show-cause notice unauthorized and unsustainable. Consequently, the court partially allowed the petition, quashing the show-cause notice to the extent it invoked section 65(105)(zzze) of the Finance Act for the concerned association.

In conclusion, the court upheld the petition partly, quashing the show-cause notice issued under the Finance Act, 1994, to levy service tax under section 65(105)(zzze) on the members of the petitioner Federation. The decision was based on previous court rulings declaring similar provisions ultra vires and beyond legislative competence, rendering the show-cause notice without legal authority and unsustainable.