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2016 (10) TMI 190 - HC - Service TaxConstitutionality of proviso to Section 68 of the Finance Act, 1994, as amended in 2003 and Rule 7A of the Service Tax Rules, 1994 - GTA services - Held that - the Hon ble Apex Court has considered the submission that as body of the Section 68 did not cover the subject matter, there was no question of creating an exception in respect thereto by any proviso. The contention was thus by adding proviso (i) and (ii), the scope of original Section 68 could not have been enlarged. In Paragraph 38, the Hon ble Apex Court has held that Section 68 is a machinery section which provides for incidence of tax while charging section is Section 66. 2000 Amendment to Section 66 changed the point of collection of tax from provider of service to such manner as may be prescribed . It has been found that the Service Tax Rules, 1994 provided for collection and recovery of tax from users or payers for the services and proviso to Section 68 prescribes the procedure for collection with reference to services of goods transport operators and clearing agents. In Para 39 the Hon ble Apex Court has concluded that the proviso do not in any manner expand the sub section and in fact it gives effect to it. In the light of this later judgment delivered by the Hon ble Apex Court, it is apparent that the communication dated 7-11-2003 is in consonance with the amended provisions after the Finance Act, 2003. The validity of this procedure is already upheld by the later judgment of the Hon ble Apex i.e. Gujarat Ambuja Cements Ltd. & Anr. v. Union of India & Anr. 2005 (3) TMI 492 - SUPREME COURT . - Decided against the appellant
Issues involved: Challenge to constitutionality of proviso to Section 68 of the Finance Act, 1994, as amended in 2003 and Rule 7A of the Service Tax Rules, 1994.
Analysis: 1. Challenge to Proviso to Section 68 and Rule 7A: The petitioner sought a declaration that the proviso to Section 68 of the Finance Act, 1994, as amended in 2003, and Rule 7A of the Service Tax Rules, 1994, are unconstitutional. The challenge was based on the interpretation of law as per the judgment of the Hon'ble Apex Court in the case of Laghu Udyog Bharati & Anr. v. Union of India & Ors. The petitioner argued that service tax should be levied on the person rendering the service, not on the one availing it. 2. Legal Provisions and Amendments: Section 158 of the Finance Act, 2003, introduced provisos making a person engaging Clearing and Forwarding Agents or availing services of goods transport operators responsible for collecting tax. The amended Section 7A of the Service Tax Rules, 1994, mandated the petitioner to collect tax and file returns for specific periods based on the services rendered. The statutory framework shifted the liability to pay service tax to the persons availing of the services, as explicitly stated in the amendments. 3. Judicial Precedents: The judgment in Gujarat Ambuja Cements Ltd. & Anr. v. Union of India & Anr. by the Hon'ble Apex Court was cited, emphasizing that the statutory foundation for earlier decisions had been replaced. The Court noted that the provisos did not expand the original section but provided a procedure for tax collection in relation to services of goods transport operators and clearing agents. The later judgment clarified that the communication dated 7-11-2003 aligns with the amended provisions post the Finance Act, 2003, and upheld the validity of the procedure. 4. Court's Decision: After considering the legal provisions, amendments, and judicial precedents, the Court found no merit in the challenge raised by the petitioner. The Writ Petition was dismissed, and the Rule discharged. The Court decided not to award any costs in the case, given the circumstances. The judgment highlighted the alignment of the communication with the amended provisions post the Finance Act, 2003, as validated by the later judgment of the Hon'ble Apex Court in Gujarat Ambuja Cements Ltd. & Anr. v. Union of India & Anr. By thoroughly analyzing the legal provisions, amendments, judicial precedents, and the Court's decision, the judgment clarified the responsibilities of collecting service tax on persons availing services and upheld the constitutionality of the proviso to Section 68 and Rule 7A challenged by the petitioner.
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