2020 (2) TMI 410 - HC - Service Tax

Import of services - reverse charge mechanism (RCM) - Vires of Section 66C (2) of the Finance Act, 1994 read with Rule 10 of the POPS Rules - levy of Service tax on services provided by a person in a non-taxable territory to a person in a non-taxable territory - HELD THAT - It is not necessary to adjudicate this petition in view of the decision of this Court in case of MESSRS SAL STEEL LTD. 1 OTHER (S) VERSUS UNION OF INDIA 2019 (9) TMI 1315 - GUJARAT HIGH COURT where it was held that N/N. 15/2017- ST and 16/2017-ST making Rule 2(1)(d)(EEC) and Rule 6(7CA) of the Service Tax Rules and inserting Explanation-V to reverse charge N/N.30/2012-ST is struck down as ultra vires Sections 64, 66B, 67 and 94 of the Finance Act, 1994; and consequently the proceedings initiated against the writ applicants by way of show cause notice and enquiries for collecting service tax from them as importers on sea transportation service in CIF contracts are hereby quashed and set aside with all consequential reliefs and benefits. Petition disposed off.

Summary

Issues involved:
Challenge to the validity of certain provisions of the Finance Act and related rules regarding the levy of service tax on services provided in a non-taxable territory, seeking declarations, orders, and reliefs under Article 226 of the Constitution of India.

Analysis:
1. Validity of Section 66C(2) of the Finance Act and Rule 10 of the POPS Rules:
The petitioner sought a declaration that Section 66C(2) of the Finance Act, 1994, along with Rule 10 of the POPS Rules, empowering the Central Government to levy service tax on services provided in a non-taxable territory, is ultra vires to the Finance Act and Article 245 of the Constitution of India. However, the Court referenced a previous decision where Notification Nos. 15/2017-ST and 16/2017-ST were struck down as ultra vires certain sections of the Finance Act, leading to the quashing of proceedings for collecting service tax on sea transportation services in CIF contracts. Consequently, the petition was disposed of based on the earlier decision.

2. Validity of Section 68(2) of the Finance Act and Rule 2(1)(d) of the Service Tax Rules:
The petitioner also challenged the validity of Section 68(2) of the Finance Act, read with Rule 2(1)(d) of the Service Tax Rules, regarding the levy of service tax on services provided in a non-taxable territory. The Court's reference to the previous decision, which declared certain notifications ultra vires, indirectly addressed this issue as well. The earlier decision's impact on the legality of levying service tax on imported goods' freight payments was crucial in disposing of the present petition.

3. Validity of Specific Notifications and Circulars:
The petitioner further sought declarations regarding the validity of specific notifications and circulars, including Notification Nos. 01/2017-ST, 14/2017-ST, 15/2017-ST, and 16/2017-ST, dated 13th April 2017, and Circular No. 206/4/2017-ST. The Court's decision in the previous case, where certain notifications were struck down as ultra vires, indirectly addressed the validity of these notifications and circulars as well. The disposal of the petition was based on the precedent set by the earlier judgment, which had broader implications on the legality of service tax collection related to imported goods.

4. Refund of Service Tax Amount:
The petitioner requested a writ of mandamus for the refund of the service tax amount already paid under the impugned service tax notifications. While the specific outcome of this refund request was not explicitly mentioned in the judgment, the disposal of the petition based on the earlier decision implied that the refund claim would be impacted by the overarching declaration of certain notifications as ultra vires.

In conclusion, the High Court disposed of the petition challenging the validity of provisions related to the levy of service tax on services provided in non-taxable territories based on a previous judgment that had already addressed similar issues and declared certain notifications ultra vires. The disposal of the present petition was influenced by the precedent set by the earlier decision, which had wider implications on the legality of service tax collection in specific scenarios.