BINDING PRECEDENTS IN SERVICE TAX MATTERS

[Mr. M. GOVINDARAJAN]

The Constitution of India gives powers to the Central Government as well as State Governments to enact laws on the subjects enumerated in Union List and State list respectively. The Governments can enact laws on concurrent list. Even though the Central Government and Statement Governments are empowered to frame laws on the subjects contained in the concurrent list the law enacted by the Central Government will prevail when there is dispute between the provisions of laws enacted by the Central Government and a State Government. The Parliament and State Legislatives enact law. The enacted law will come into force on the assent given by the President in respect of Central laws and by the Governor of the respective State in respect of State laws.

The laws enacted may not be static. Amendments are carried out whenever requires. The provisions of enacted laws will not give solutions to all the problems raised. The High Courts and Supreme Court give their helping hands in such cases by giving ruling on the subjects. The decisions of the higher courts will be binding on the lower courts. The lower courts, while delivering order/judgment it has to consider the rulings of the higher courts. The same is the position in respect of quasi judicial bodies such as tax tribunals. However high courts are having power to supervise the Tribunals. 

This article will discuss the same with reference to service tax provisions with the decided case laws as given below:

CASE LAWS:

1. L.G. Electronics India Pvt. Ltd V. Commissioner of Central Excise - 2009 -TMI - 34062 - ALLAHABAD HIGH COURT

The impugned judgment disposing the stay/waiver applications requiring the appellant to deposit a sum of Rs. 1 crore in a mechanical manner without considering the question whether the case is covered by precedents holding the field and binding upon the Tribunal and whether the appellant has prima facie case and is likely to succeed on merit and direction to make any pre deposit would cause undue hardship or not, and returning a finding on the issues accordingly, is not liable to be sustained.

2. A.C. Nealsen Arg. Marg Pvt. Ltd., V. Union of India - 2009 (16) STR 259 (Bom)

The High Court held that once the High Court lays down the law that the recipient of the service is not liable for paying service tax that law is binding on all the Tribunals and Authorities functioning with in the jurisdiction of this Court.

3. Deccan Mechanical & Chemical Industry Pvt. Ltd., V. Commissioner of Central Excise, Pune - 2009 (16) STR 263 (Tri. Mumbai)

In this case the assessee paid the service tax with interest there on before issuance of the show cause notice.   The department contended that the penalty cannot be avoided by the mere reason of the fact that service tax with interest was paid before the issuance of the show cause notice. In this connection the department relied on the judgment of Supreme Court in 'Union of India V. Dharmendra Textiles Processors & Others' - 2008 (231) ELT 3 (SC).

The Tribunal held that the law cited is the effect that a penalty under Sec. 11AC of the Central Excise Act cannot be avoided by mere reason of the fact that duty with interest was paid before issuance of show cause notice. Prima facie Sec. 76 of the Finance Act, 1994, which provides penalty for service tax for delayed payment of service tax, is not comparable to one imposable under Sec. 11AC of the Central Excise Act, which provides for penalty on defaulter of Central Excise duty whose default arises on account of fraud, suppression of facts, or contravention of the provisions of law with instant to evade payment of duty. The case law, cited by the department is not applicable to the facts of the present case.

4. Ghanshyam Lodhwal V. Commissioner of Central Excise, Jaipur - I - 2010 -TMI - 35141 - CESTAT, NEW DELHI

So far as the penalty is concerned, the appellant appears to be innocent but came to the fold of law. There is nothing on record to show that the appellant has deliberately avoided registration. Looking to the perfect manner of filing of documents by the appellants, the appellants appear to have co-operated to the department for completion of adjudication. Therefore in the fitness of circumstances, we do not consider levy of penalty on this appellant is desirable when the appellant has filed all the facts and figures before authority below. Therefore the Tribunal modified the first appellate order and waived the penalty imposed under Sec. 76 and 78 of the Finance Act, 1994 finding the case to be reasonable to do so. The Tribunal made it clear that the penalty having been waived in the circumstances of the case, this decision shall not be cited as a precedent one in view of its own distinct features.

5. Vijaykumar Goenka V. Union of India - 2008 -TMI - 4290 - HIGH COURT BOMBAY

Once the law was declared and the judgment of High Court was upheld by the Supreme Court it is the duty of the department in every matter which came up before it and to which the judgment applied to have suo motu applied the same without driving the party to move High Court.

6. Sharma Terry Products Ltd., V. Commissioner of Central Excise, Salem - 2009 (16) STR 605 (Tri. Chennai)

There is no dispute that in the present case, the services were rendered outside India. The judgment of the High Court, Rajasthan in 'Union of India V. Aditya Cements' - 2008 -TMI - 3946 - HIGH COURT RAJASTHAN upholding the tribunal's order that service recipient in India was liable to service tax from 01.01.05 is not applicable to the present case for the reason that Aditya Cement received services in India from its service provider.

The Department raised a plea that the judgment of Bombay High Court cited by the appellant in 'Indian National Ship owners Association V. Union of India' - 2009 -TMI - 32013 - HIGH COURT OF BOMBAY is not required to be followed as the issue to the relevant date has been referred to the Larger Bench of the Tribunals in the case of 'Molex India V. Commissioner of Central Excise(Appeals), Bangalore' - 2008 -TMI - 3423 - CESTAT, BANGALORE, the Tribunal held that the issue in this case stands settled by the above said decision of High Court and the contrary decision on identical facts has been brought to the notice of Tribunal. The Tribunal set aside the order.