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TMI Blog2013 (2) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... th Schedule. As observed in T.N. Kalyana Mandapam Assn. v. Union of India and Others[2004 (4) TMI 1 - SUPREME COURT OF INDIA] it is well settled that the ‘measure of taxation’ cannot affect the nature of taxation and therefore, the fact that service tax is levied as a percentage of the gross charges for catering, cannot alter or affect the legislative competence of the Parliament in the matter. Further Man Power Recruiting Agency service is a separate entity which was brought within the Service Tax Net w.e.f. 7-7-1997 as per the Finance Act, 1997, whereas the Security Agency Service was brought in for the first time only w.e.f. 16-10-1998, as per the Finance Act, 1998. Both the above terms have been separately defined under Section 65 – In the case of the latter, the Security Agency is the ‘Employer’ of the security personnel deployed to cater to the requirements of the service receivers, for which the service receivers effect the payment to the service providers, as per the terms of the contract – The ‘Master and Servant relationship is between the Security Agency and the Security Personnel engaged and not between the Service Receivers and the Security Personnel. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, the agencies who provide the security personnel to the service receivers, are getting only a meagre amount as commission and bulk of the amounts received is spent towards the salary and other statutory personnel engaged. It is also contended that in several cases, salary is being paid directly by the service receivers. 3. With regard to the challenge as to the constitutional validity of the provisions, it is stated that there is absolutely no rhyme or reason in including the said items in the Gross amount , as Section 67 only provides for valuation of the taxable service and that it is violative of Articles 14 and 19(1)(g) of the Constitution of India. It is stated that an element of hostile discrimination is shown towards the Security Agencies , unlike several other cases, where a specific provision for exemption is provided. The gist of the contention is that the salary and other statutory payments have to be segregated from the Gross amount and only the balance amount is liable to be reckoned for the purpose of taxation. 4. The respondents have filed separate counter affidavits in all the cases. Some documents have also been produced in respect of the indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CESTAT, Bangalore and CESTAT, Delhi. The learned Senior Counsel submits that in most of the cases herein, salary is being paid directly by the service receivers and as such, there is no justification, on the part of the respondents in compelling the petitioners/service providers to pay the tax on the Gross amount. The learned Sr. Counsel further submits that Service tax is destination based computation of tax and it is not a charge on the business, but on the service component as discernible from the decision rendered by the Apex Court reported in (2007) 7 SCC 527 = 2007 (7) S.T.R. 625 (S.C.) (All India Federation of Tax Practitioners and Others v. Union of India and Others). 6. Mr. John Varghese, the learned Standing Counsel appearing for the respondents submits with reference to the question of law and the documents produced, that the liability to satisfy the Service tax is in terms of the statute and that the scope and extent of the Taxable Net has been provided by the Parliament, in tune with the Policy of the Govt.; which is not liable to be questioned by the petitioners. The validity of the statutory prescription has already been upheld by the Madras High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners cannot be stated as aggrieved in any manner, submits the learned Central Government Counsel. So also, it is stated that there is no dispute as to the legislative competence, with regard to the enactment of Finance Act, 1994 providing for fixation of tax in respect of Security Agents reckoning the Gross amount , it is asserted by the respondents, with reference to the law declared by the Apex Court and also the Madras High Court, that sustainability of the provision cannot be questioned or established with reference to the measure of taxation . 9. After hearing both the sides, and also on going through the specific grounds raised in the writ petitions, this Court finds that, but for the vague challenge as to the constitutional validity of the statutory prescription, no concrete attempt has been made to establish the same. There is no case for the petitioners that the Parliament which enacted the statute does not have the legislative competence to enact the law. So also, no violation of any fundamental right is established with regard to the nature of the business that is being pursued by the petitioners. The sum and substance of the case argued before the Court is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in Division with another learned Judge in GDA Security Private Limited v. Union of India, 2002 (140) E.L.T. 332 (Mad.) = 2006 (2) S.T.R. 542 (Mad.) which was in respect of service tax to be satisfied by the Security Agencies. There also, the legislative competence was under challenge, referring to the fixation of liability based on the Gross income without segregating the expenditure part and also on the ground of discrimination. After an exhaustive analysis of the relevant aspects, the learned Judges observed that the challenge raised was not sustainable, holding that, it was for the State to decide as to which agency was to be taxed and which was not to be taxed. The Legislature had a discretion in levying tax on a particular class and such discretion has always been recognised and approved by the Apex Court. The Bench also referred to the observations of the Constitution Bench of the Supreme Court in Federation of Hotels and Restaurant v. Union of India, AIR 1990 SC 1637 which is extracted below : It is now well settled that though taxing laws are not outside Art. 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounter affidavits and documents produced in the concerned cases, that the service providers/security agencies have raised bills on the prospective customers/service receivers, also including the service tax component. Ext. R2 bill produced in W.P. (C) No. 9591 of 2005 shows realisation of service tax at the rate of 5% to be paid by the service receivers. Ext. R1 in W.P. (C) 9591/2005 is the income and expenditure account of the said writ petitioner showing the salary and other benefits paid to the security personnel and Ext. P3 is the relevant agreement with the service receiver. There is no master and servant relationship between the security personnel and the clients/service receivers. The respondents have specifically averred in paragraph 9 of the counter affidavit in the said case that the petitioner in the said writ petition had earlier approached this Court by filing W.P. (C) 20017 of 2004 and 17045 of 2004 for a direction to reimburse the service tax, which they failed to collect from their clients, due to non-inclusion of such provision for realising service tax in the agreement with the clients. The aforesaid writ petitions were disposed of, directing the respondents to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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