2016 (2) TMI 173 - HC - Service Tax

Import of services - receipt of service charges relating to the export proceeds - SEZ unit - learned single Judge had dismissed the Writ Petitions filed by the appellants making it clear that it would be open to the appellants to avail the alternative remedies available to them, under the relevant provisions of the Finance Act. As such, we are of the considered view that the appellants have not shown sufficient cause or reason for this court to interfere in the common order passed by the learned single judge - Writ petition dismissed.

Summary

Issues:
1. Jurisdiction of the respondent to levy service tax on export proceeds.
2. Discretionary powers of the learned single Judge under Article 226 of the Constitution.
3. Violation of Article 366(29A) of the Constitution.
4. Failure to provide sufficient opportunity of hearing to the appellants.
5. Contravention of Section 67 of the Finance Act.
6. Incorrect invocation of Sections 66A, 68, 69, 70, 77, and 78 of the Act.
7. Double taxation and illegal levy of penalty and interest.
8. Interpretation of Rules 3, 4(a), and 9 of the relevant provisions.
9. Applicability of Notification No.29/2004-ST and No.19/2006.

Analysis:

1. The primary issue in the case was the jurisdiction of the respondent to levy service tax on export proceeds. The appellants, manufacturers and exporters of garments, challenged the imposition of service tax by the respondent based on Reverse Charge Mechanism. They argued that the export proceeds were exempt from tax under various government schemes and that the respondent had no authority to levy service tax on these transactions.

2. The appellants contended that the learned single Judge failed to exercise discretionary powers under Article 226 of the Constitution in their favor. They cited relevant legal precedents to support their argument that alternative remedies under the Finance Act should not preclude the court from examining the legality of the impugned orders.

3. Another crucial point raised was the violation of Article 366(29A) of the Constitution, which defines the taxation on the sale or purchase of goods. The appellants argued that the export transactions should be treated as sales to foreign buyers and not as independent taxable services subject to service tax.

4. The appellants further alleged that the impugned proceedings were conducted without providing them with a sufficient opportunity to present their case. They claimed that the respondent's actions were in contravention of Section 67 of the Finance Act regarding the valuation of taxable services.

5. The incorrect invocation of various sections of the Act, including 66A, 68, 69, 70, 77, and 78, was highlighted by the appellants as constituting double taxation and an illegal levy of penalty and interest. They argued that the respondent misinterpreted the relevant provisions and failed to consider the specific circumstances of the case.

6. The interpretation of Rules 3, 4(a), and 9 of the relevant provisions was also contested by the appellants. They argued that the respondent wrongly categorized them as both service providers and receivers, leading to an improper application of the rules and the imposition of penalties.

7. The appellants also raised the issue of the applicability of Notification No.29/2004-ST and No.19/2006, emphasizing that the respondent's actions were not in line with the exemptions and provisions outlined in these notifications.

8. Ultimately, the Court found that the respondent had considered all issues raised by the appellants and that statutory remedies were available to challenge the impugned proceedings. The Court upheld the dismissal of the Writ Petitions by the learned single Judge, concluding that there was no sufficient cause to interfere with the lower court's decision.