2019 (3) TMI 117 - HC - Service Tax

Constitutional validity of rule 3 of the Place of Provision of Services Rules, 2012 - Vires of Serial No.10 of Notification No.30/2012-ST - Held that - Issue Notice returnable on 20th March, 2019.

Summary

Issues:
Challenge to the constitutional validity of rule 3 of the Place of Provision of Services Rules, 2012 and Serial No.10 of Notification No.30/2012-ST.

Analysis:
The petitioners have challenged the constitutional validity of rule 3 of the Place of Provision of Services Rules, 2012 and Serial No.10 of Notification No.30/2012-ST, asserting that they are ultra vires sections 64(1), 66B, 65B(44) and (52), 66C, and 94(2) (hhh) of the Finance Act, 1994, as well as ultra vires Articles 14, 19(1)(g), and 265 of the Constitution of India. The petitioners contend that service tax can only be levied and collected by the Union of India when a service is provided within the territory of India, except Jammu & Kashmir. They argue that service tax should not be imposed if the service is rendered and used in a foreign country, even if both the service provider and receiver are in India. However, they highlight that service tax can be levied if the service is received and consumed in India, even if the provider and receiver are outside India. The petitioners challenge the collection of service tax from individuals in India for services received and consumed in foreign territories, citing rule 3 and Notification No.30/2012-ST as contradictory to the legal position. They argue that the clarifications and guidelines issued by the CBEC are against the legal interpretation of the rules and, therefore, illegal and ultra vires the Finance Act, 1994.

The petitioners argue that the provisions of the rules and Notification No.30/2012-ST should only apply when a service is received and used in India, not in cases where the service receiver is in India but the service is consumed in a foreign territory. They claim that the clarifications and guidelines issued by the CBEC for these provisions contradict this legal stance, rendering them illegal and ultra vires the Finance Act, 1994. Additionally, the petitioners rely on a decision by the Delhi High Court in the case of Orients Crafts Ltd. v. Union of India, 2006 (4) S.T.R. 81 (Del.) to support their argument.

In response to the submissions made by the petitioners, the court issued a notice returnable on 20th March 2019. As an ad-interim relief measure, the respondents were restrained from making any coercive recovery against the petitioners following the order-in-original dated 8.1.2019. Direct service was permitted concerning respondents No.2 and 3.