2022 (12) TMI 1336 - HC - Service Tax

Exemption from Service Tax - work contract service other than those which are commercial in nature rendered to the Central / State Government, Local Statutory Authorities etc. - Entry 12(a), (c) (f) in Mega Exemption Notification No.25/2012-Service Tax, dated 20.06.2012 - validity of Notification No.6/2015-Service Tax, dated 01.03.2015 - HELD THAT - Chapter-V of the Finance Act, 1994 contains the provisions for levy and collection of service tax on services. There was no standalone enactment for levy of service tax all through of its period of existence. Since its introduction, it was under Chapter V of the Finance Act, 1994 - Service Tax was chargeable at the rates prescribed under Section 66 of the Finance Act, 1994 on the taxable value under Section 67 of the Finance Act, 1994. Upto 30.06.2012, there were specific definitions for various services and taxable services in Chapter V of the Finance Act, 1994. Service tax on Works Contract Service was introduced in the Finance Act, 1994 with effect from 11.05.2007 and made liable to tax with effect from 01.06.2007 vide Notification No.23/2007-ST dated 22.05.2007 after Section 65(105)(zzzza) came to be introduced in the Finance Act, 1994 vide the Finance Act of 2007. Thus, for the period starting from 01.06.2007 to 30.06.2012, the respective petitioners may have been liable to service tax for the services rendered by them in relation to works contract - In fact, prior to that, a confusion existed in view of levy of service tax on construction service vide Finance (No.2) Act, 2004 with effect from 10.09.2004 as in Section 65(105)(zzzza) read with Section 65(25b) 65(30a) and Section 65(105)(zzzh) read with Section 65(91a) of the Finance Act, 1994 (Chapter V of the Finance Act, 1994). The Hon ble Supreme Court has clarified the position in its judgment in M/S. KONE ELEVATOR INDIA PVT. LTD. VERSUS STATE OF TAMIL NADU AND OTHERS 2014 (5) TMI 265 - SUPREME COURT that the services provided under works contracts was liable to service tax only with effect from 01.06.2007. Services provided by these petitioners were declared services . Thus, the services provided by these petitioners would have been liable tax at 12% on the taxable value and later at 14% vide Notification No.14/2015-ST, dated 19.05.2015 with effect from 01.06.2015 but for the exemption vide Entry 12(a), (c) (f) to Mega Exemption Notification No.25/2012-ST, dated 20.06.2012 - services provided by these petitioners were exempted from payment of service tax vide Entry 12(a), (c) (f) to the Mega Exemption Notification No.25/2012-ST dated 20.06.2012. The exemption under the Mega Exemption Notification No.25/2012-Service Tax, dated 20.06.2012 which was granted in the exercise of power under Section 93(1) (2) of the Finance Act, 1994 (Chapter V of the Finance Act, 1994) was withdrawn vide the impugned Notification No.6/2015-Service Tax, dated 01.03.2015 with effect from 01.04.2015. The exemption which was earlier granted in the public interest was withdrawn in the public interest - Whether public interest existed or not in withdrawing the exemption is not justiciable unless it is found that such withdrawal was vitiated on account of malafide, extraneous consideration or arbitration. High Court while exercising its jurisdiction under Article 226 of the Constitution of India does not sit in appeal over the decision of the Government to withdraw a Notification or an exemption. It is further a policy decision of the Government to withdraw the exemption. The prayer for a direction to refund of tax already paid by the petitioner also cannot be countenanced as these petitioners are liable to tax. Therefore, wherever the Orders-in-Original have been passed, the respective petitioners are given liberty to file statutory appeal before the Appellate Authority subject to the compliance of the other requirements of pre-deposit the amount as is contemplated under Section 35F of the Central Excise Act, 1944 as made applicable to the Finance Act, 1994, within a period of thirty (30) days from the date of receipt of a copy of this order. Petition dismissed.

Issues Involved:
1. Challenge to Notification No.6/2015-ST, dated 01.03.2015.
2. Challenge to Show Cause Notices.
3. Challenge to Orders-In-Original.
4. Challenge to both Notification No.6/2015-ST and Show Cause Notices.
5. Challenge to both Notification No.6/2015-ST and Orders-In-Original.
6. Challenge to Letters.
7. Prayer for Writ of Mandamus.

Detailed Analysis:

1. Challenge to Notification No.6/2015-ST, dated 01.03.2015:
The petitioners, who are contractors engaged by the Public Works Departments of both State and Central Government, challenged the withdrawal of exemptions under Notification No.6/2015-ST, dated 01.03.2015, which amended Entry 12(a), (c), and (f) of the Mega Exemption Notification No.25/2012-ST, dated 20.06.2012. The exemption was reintroduced only for contracts entered into prior to 01.03.2015, with a caveat that the exemption was confined to services provided to the Government, Local Authorities, or Governmental Authorities. The Court held that the withdrawal of the exemption was a policy decision taken in public interest and was not justiciable unless it was vitiated by malafide, extraneous consideration, or arbitrariness.

2. Challenge to Show Cause Notices:
The petitioners challenged the Show Cause Notices issued to them, arguing that they were exempt from service tax under the Mega Exemption Notification No.25/2012-ST. The Court held that the correctness of the Show Cause Notices could not be decided under Article 226 of the Constitution of India as they related to the appreciation of facts and settlement of disputed questions of facts, which should be decided by the appropriate Authority under the Finance Act, 1994.

3. Challenge to Orders-In-Original:
The petitioners also challenged the Orders-In-Original issued against them. The Court directed the petitioners to file statutory appeals before the Appellate Authority, subject to compliance with the requirements of pre-deposit under Section 35F of the Central Excise Act, 1944, as made applicable to the Finance Act, 1994, within thirty (30) days from the date of receipt of the order.

4. Challenge to both Notification No.6/2015-ST and Show Cause Notices:
For petitioners challenging both the Notification and the Show Cause Notices, the Court reiterated that the challenge to the Notification failed and directed the petitioners to reply to the Show Cause Notices and participate in the adjudicatory mechanism under the Finance Act, 1994.

5. Challenge to both Notification No.6/2015-ST and Orders-In-Original:
The Court dismissed the challenge to the Notification and directed the petitioners to file statutory appeals against the Orders-In-Original. The appeals should be filed within thirty (30) days, and the Appellate Authority should pass orders on merits without reference to the limitation.

6. Challenge to Letters:
The petitioners challenged letters/communications issued to them. The Court held that these challenges were premature and directed the petitioners to cooperate with the Department and furnish the required documents, information, and statements.

7. Prayer for Writ of Mandamus:
The petitioners sought a Writ of Mandamus directing the authorities to collect tax payable by them from the recipients of the service, namely, the State Public Works Department. The Court held that a Mandamus would lie only if there was a corresponding duty cast upon the respondent to collect the same from the State Public Works Department, which was not the case here.

Conclusion:
The Court dismissed all the Writ Petitions, holding that the challenge to the impugned Notification No.6/2015-ST, dated 01.03.2015, failed. The petitioners were directed to file statutory appeals or reply to Show Cause Notices as applicable and participate in the adjudicatory mechanism under the Finance Act, 1994. The Court also clarified that the petitioners could seek reimbursement of the tax from their clients (Government Departments) by invoking principles contained in Section 64A of the Sale of Goods Act, 1930.

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