2009 (11) TMI 627 - HC - Service Tax

Levy of service tax on services rendered by goods transport operators - According to the petitioner, prior to the introduction of Sections 116 and 117, petitioner had not been served with any demand notice during the period between 16-7-1997 and 15-10-1998 and therefore in respect of that period, the petitioner could not have been mulcted with liability to pay service charges based on the validating provisions introduced by Finance Act, 2000, issue is squarely covered by the decision of the Supreme Court in J.K. Spinning and Weaving Mills s (1987 -TMI - 42012 - SUPREME COURT OF INDIA) case in favour of the petitioner, That being so, to that extent, the petitioner is entitled to the reliefs prayed for, petitioner is not liable to pay service charges as demanded therein. The original petition is allowed as above.

Summary

Issues:
Challenge to the constitutional validity of Sections 116 and 117 of the Finance Act, 2000; Interpretation of Sections 116 and 117 regarding liability to pay service tax for engaging goods transport operators; Validity of demand notices issued under the struck-down provisions; Relief sought by the petitioner.

Analysis:
The petitioner, a company engaged in manufacturing cotton yarn, challenged the constitutional validity of Sections 116 and 117 of the Finance Act, 2000. These sections redefined provisions related to goods transport operators and imposed liability on customers engaging their services to pay service tax for a specific period. The petitioner contended that prior to the introduction of these sections, no notices were served regarding service tax payment for availing transport services. The petitioner sought various reliefs, including quashing demand notices and declaring the retrospective amendments illegal.

Regarding the first contention, the petitioner accepted adverse precedent from the Supreme Court in a similar case. However, the petitioner argued that the Supreme Court precedent in another case supported their position. They contended that without receiving demand notices during the relevant period, they could not be held liable under the amended provisions introduced by the Finance Act, 2000 to pay service charges. The petitioner's argument relied on the principle that fresh actions cannot be initiated retrospectively without prior notice during the original provision's enforcement.

The court, after hearing both parties, found merit in the petitioner's second contention based on the Supreme Court's decision in J.K. Spinning and Weaving Mills' case. The court held in favor of the petitioner, concluding that since no demand notices were served during the period in question, the petitioner could not be held liable for service charges under the validating provisions introduced by the Finance Act, 2000. Consequently, the court quashed the demand notice (Ext. P2) and declared that the petitioner was not obligated to pay the service charges as demanded. The original petition was allowed in favor of the petitioner based on the legal arguments presented and the applicable precedents.

This detailed analysis of the judgment highlights the legal issues, arguments presented by the parties, relevant legal principles, and the court's decision, providing a comprehensive understanding of the case and its implications.