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TMI Blog2020 (1) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable to pay the consideration of such service. Hence, the writ-applicant is not the 'recipient' of the transportation of goods in a vessel service as per Section 2(93) of the CGST Act. The principle of construction in tax statutes is that if the person sought to be taxed comes within the letter of the law he must be taxed. In a taxing Act one has to merely look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. In our opinion, the writ-applicant cannot be made liable to pay tax on some supposed theory that the importer is directly or indirectly recipient of the service. The term 'recipient' has to be read in the sense in which it has been defined under the Act. There is no room for any interference or logic in the tax laws. The impugned notifications levying tax on supply of service of transportation of goods by a person in a non-taxable territory to a person in a non-taxable territory from a place outside India upto the customs station of clearance in India and making the petitioner, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and collection of tax of such ocean freight under the impugned Notifications is not permissible in law. The impugned Notification No.8/2017 Integrated Tax (Rate) dated 28th June 2017 and the Entry 10 of the N/N.10/2017 Integrated Tax (Rate) dated 28th June 2017 are declared as ultra vires the Integrated Goods and Services Tax Act, 2017, as they lack legislative competency. Both the Notifications are hereby declared to be unconstitutional - Application allowed. - R/SPECIAL CIVIL APPLICATION NO. 726 of 2018 With R/SPECIAL CIVIL APPLICATION NO. 4857 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 1984 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 1988 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 6875 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 4420 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 7330 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 6220 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 6117 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8087 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 7402 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 820 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 9284 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 9282 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transportation of the goods by the foreign seller as sought to be levied and collected from the writ-applicants as the importer of the goods. 3. The Central Government has introduced the Notification No.8 of 2017 Integrated Tax (Rate) dated 28th June 2017, wherein vide Entry No.9, the Central Government has notified that the IGST at the rate of 5% will be leviable on the service of transport of goods in a vessel including the services provided or agreed to be provided by a person located in a non-taxable territory to a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India upto the customs stations of clearance in India. 4. The Central Government, thereafter, issued the Notification No.10 of 2017 Integrated Tax (Rate) dated 28th June 2017, by which the Central Government has notified that for the said category of service provided at Serial No.10 to the said Notification, the importer as defined in clause 2(26) of the Customs Act located in the taxable territory shall be the recipient of service. 5. We had the benefit of hearing the learned senior counsel appearing in various writ-applications. We heard Mr.Vikram Nankan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egrated Tax (Rate), dated 28.6.2017 and/or; ii. stay the levy and collection of integrated tax Ocean Freight on transport of goods in a vessel from a place outside India upto the customs station of clearance in India by a person located in non-taxable territory; and/or; iii. Restrain the Respondent No.1 and all its officers, agents to take any coercive measure against the petitioner and its officers during the pendency of writ petition; and/or; (E) issue such other writ/order/direction and further orders as the Hon'ble Court may deem just and proper in the facts and circumstances of the case. 9. The facts as stated in the writ-application giving rise to this litigation are as under : 10. The writ-applicant company is engaged in importing non-cooking coal from Indonesia, South Africa and U.S.A. and supplying it to various domestic industries including power, steel, etc. It has business based at various parts of the country, however, the main business place is in Gujarat and most of the imported coal comes at the port located at Gujarat. The writ-applicant company is registered under the GST laws for payments of GST/IGST besides being paying the customs duty on import of coal. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competency, ultra vires to the Integrated Goods and Services Tax Act, 2017, and hence unconstitutional. The writ-applicant also seeks declaration that the levy of the integrated tax again on the Ocean Freight under the impugned Notifications is not permissible and amounts to double taxation, as the 'Integrated Tax' (under IGST Act, 2017) has been paid on the imported coal at the time of importation (the value which includes Ocean Freight also). 15. The writ-applicant is importing coal from various countries on FOB (Free on Board) and CIF (sum of Cost, Insurance and Freight) basis. The writ-applicant also has the High Sea sale and purchase transactions. (a) In case of purchases made on CIF basis, the freight invoice is issued by the foreign shipping line to the foreign exporter, the writ-applicant neither has any invoice of such freight and nor has any idea of payments and the amount of such freight; (b) In case of purchases made on FOB basis, the writ-applicant engages foreign shipping line and pays the Ocean Freight to the foreign shipping line; (c) In case of the High Sea purchase, the coal is purchased before landing it in Indian port, from the original buyer who purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x under this Act. As per Section 2(109) of the CGST Act, the 'taxable territory' means the territory to which the provisions of the Act applies, i.e. the whole of India. It is submitted that the combined reading of the aforesaid provisions indicates that the supply made within the 'taxable territory' is leviable to tax. 21. Strong reliance is placed upon the judgment in the case of Indian Association of Tour Operators v. Union of India and others, reported in 2017(5) GSTL 4 (Del.) (paras 5, 18, 19, 26, 48), which is under the Finance Act, 1994, which also had the similar provisions under Section 64 of the said Act, where the Act was applied to the whole of India except the State of Jammu Kashmir and the taxable territory was defined as the territory to which the provisions of the said Act was applicable. In this context, reliance is also placed on a decision of the Delhi High Court, wherein it is held that the services rendered outside India cannot be brought to tax by a delegated legislation by fixing a deeming provision without amending Section 64 of the Finance Act, 1994. It is an essential legislative function. The same analogy is sought to be extended in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply' under the Act. In Section 2(30) of the CGST Act, the term 'composite supply' has been defined, wherein an illustration has been given, where the goods are supplied with transportation, insurance, etc. will be a composite supply and the supply of goods is a principal supply. As per Section 8 of the CGST Act, the tax liability in case of the composite supply shall be determined by treating it as a supply of such principal supply. In other words, the tax will be levied on the principal supply. Therefore, when the goods are imported and integrated tax is levied and collected on the value of goods (coal), which includes the Ocean Freight, the Ocean Freight cannot be taxed as a separate supply under the impugned Notification, which is ultra vires to the provisions of Section 2(30) read with Section 8 of the CGST Act, also. 'Deeming fiction of value' in the Notification is illegal and there is no concept of 'value of taxable service' in the Act : 26. It is submitted that para-4 inserted by the Corrigendum dated 30.6.2017 has a deeming fiction for the 'value of taxable service' as 10% of the CIF value of the imported goods. In case of import on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain the Integrated Tax is sought to be levied under the misconception that a separate tax could be levied on the services components (freight), which is impermissible under the scheme of the GST legislation made under the Constitutional (101st) Amendment Act, 2016. Therefore, the impugned Notifications are beyond the legislative competency and liable to be quashed. The impugned Entry 10 of the Notification No.10/2017 is ultra vires to the Act : 31. It has been argued that as per Section 5(3) of the Act, the tax liability could be shifted on the 'recipient' on reverse charge basis by issuing the Notification. However, as per the impugned Entry 10 of the Notification No.10/2017 Integrated Tax (Rate), dated 28.6.2017, the liability has been shifted on the 'importer' and not on the 'recipient'; that too, the transaction not exigible to tax under the Act. 32. It is contended that in the first place the supply itself has to be made taxable and then only such provisions of shifting of the liability on the recipient can be made applicable. Therefore, when the activity takes place outside the taxable territory, the provisions of the Act itself could not be made appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;description of services' at all, as done in the impugned Notification No.8/2017 Integrated Tax (Rate), dated 28.6.2017 read with Notification No.11/2017 Central Tax (Rate), dated 28.6.2017. The Respondents have also not disputed the contentions of the writ-applicant that specifying the 'scheme of classification of services' or 'description of services' etc. are essential functions of the Parliament, which are neither delegated nor could have been delegated but assumed by the Respondents while issuing the impugned Notification. 37. It is submitted that in Vasu Dev Singh and others v. UOI and others (2006)12 SCC 753 (para 118) it has been held that 'It is impermissible for the legislature to abdicate its essential legislative functions'. 38. It is pointed out that in Municipal Corporation v. Birla Cotton, Spinning and Weaving Mills, AIR 1968 SC 1232 (para 89), the Supreme Court, by majority decision, took the view that '(ii) Essential legislative function cannot be delegated by the legislature'. 39. The Respondents have not disputed that in the impugned Notification also the given chapter, section and heading in respect of different services, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued that the respondents have wrongly assumed as if such functions have been delegated to them and given in the the impugned Notification No.8/2017 Integrated Tax (Rate), dated 28.6.2017, artificial classification of services or description of services as well as to specify the rates, which has no basis at all. Thus, the Respondents have acted arbitrarily while issuing the impugned notification, therefore, it is also hit by Article 14 of the Constitution of India and liable to be quashed. Various provisions are cited for exercising the power for issuing the impugned Notification No.8/2017, whereas no power can be traced under the said provisions which are for different purposes : 46. The impugned Notification No.8/2017 Integrated Tax (Rate), dated 28.6.2017, has been issued by referring as the power conferred under the various provisions of the Integrated Goods and Services Tax Act, 2017, as well as the Central Goods and Services Tax Act, 2017, all such provisions are for different purposes. (a) the said Notification No.8/2017 has also been issued under sub-section (1) of Section 6 of the IGST Act, 2017, under which the power of exemption has been granted, but the impugned Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned senior counsel placed strong reliance on the following decisions : (i) Indian Association of Tour Operators v. Union of India and others, reported in 2017(5) GSTL 4 (Del.) (paras 5, 18, 19, 26, 48), wherein it was held that the legal fiction treating the service rendered outside India to be a service rendered in India cannot be introduced by way of Rules as it is an essential legislative function which cannot be delegated to the Central Government. (ii) The Supreme Court, in GVK Industries Ltd. v. ITO (2011)4 SCC 36 (para 124), clearly stated that the Parliament may exercise its legislative powers with respect to the extra-territorial aspect, that too when they have an impact on or nexus with India. Therefore, it does not empower the delegated legislation to exercise such power and nor such power can be delegated by the Parliament. (iii) Ishikawajma-Harima Heavy Industries Ltd. v. Director of Income Tax, Mumbai, AIR 2007 SC 929, held that the 'entire services having been rendered outside India, the income arising therefrom cannot be attributable to the permanent establishment so as to bring within the charge of tax'. The Court further held that the taxation liability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution to the legislature;' Therefore, the legislature can delegate non-essential legislative functions, but while delegating such functions, there must be a clear legislative policy which serves as guidance for the authority on which the function is delegated. (viii) In Hukam Chand v. Union of India, AIR 1972 SC 2427 (para 13) it has been held that : '13... The fact that the rules framed under the Act have to be laid before each House of Parliament would not confer validity on a rule if it is made not in conformity with Section 40 of the Act'. (ix) The Delhi High Court in the case of Intercontinental Consultants and Technologies Pvt. Ltd. v. Union of India 2013(29) S.T.R. 9 (Del.) while declaring Rule as ultra vires observed that : 'It is no answer to say that under sub-section (4) of Section 94 of the Act, every rule framed by the Central Government shall be laid before each House of Parliament and that the House has the power to modify the rule'. (x) In General Officer Commanding-in-Chief v. Subhash Chandra Yadav (1988)2 SCC 351, it has been held as follows : '14... before a rule can have the effect of a statutory provision, two conditions must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asy. But where the contention is that the inconsistency or non- conformity of the Rule is not with reference to any specific provision of the enabling Act, but with the object and scheme of the Parent Act, the court should proceed with caution before declaring invalidity. 52. The aforesaid ratio was considered and followed by the Supreme Court once again in the case of Cellular Operators Association of India and others v. Telecom Regulatory Authority of India and others, reported in 2016(7) SCC 703 and reference to the same has been made in para 34 of the aforesaid judgment and, therefore, this Court may consider the challenge to the impugned Notifications No.8/2017 and 10/2017 in light of the aforesaid ratio. Why Ocean Freight was necessitated 53. Prior to 1.6.2016 (Budget 2016-17), the services of transportation of goods in a vessel from a place outside India upto the customs station of clearance in India was exempted from service tax. As a result, the Indian shipping lines were unable to avail input tax credit paid on the input goods and services and such tax formed a part of their transportation costs. So they were rendered uncompetitive vis-a-vis foreign shipping lines. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid circumstances the Ocean Freight was decided to be levied. 56. In reply to the argument canvassed on behalf of the writ-applicant that the levy of the IGST on the Ocean Freight in respect of transport of goods in a vessel from a place outside India to the customs station of clearance in India is illegal and ultra vires the Constitution and the IGST Act, it is submitted that in the 'transport of goods' which is carried out by a person other than the importer himself is an activity which gives rise to the aspect of providing transportation services of the said imported goods and as such gives rise to a taxing incident distinct from the tax on import of goods. 57. It is submitted that in Gujarat Ambuja Cements vs. U.O.I. Anr. (2005) 4 SCC 214, the petitioners had challenged the legislative competence of the Centre to impose service tax on transport of goods as the same could only be imposed by the States under Entry 56 of List II, which reads as taxes on goods and passengers carried by roads or inland waterways . The Supreme Court held that the legislative competence must be determined in accordance with the object of the tax. 58. It is further submitted that the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia shall be the location of the importer. As per Section 13(9) of IGST Act, the place of supply of services of transportation of goods other than by way of mail or courier, shall be the place of destination of such goods. Thus, with respect to goods destined for India, services by way of transportation of such goods by a vessel are taxable in India. 62. In Gujarat Ambuja Cements Vs UOI 2005 (182) ELT33 (SC): 2005(182) ELT 33 SC, the Supreme Court has stated that the legislative competence is to be determined with reference to the object of the levy and not with reference to its incidence or machinery and that there is a distinction between the object of tax, the incidence of tax and the machinery for collection of the tax. 63. In A.H. Wadia v. CIT [AIR 1949 PC 18], the Supreme Court stated that : 'In the case of a sovereign Legislature, the question of extra-territoriality of any enactment can never be raised in the municipal courts as a ground for challenging its validity.' 64. In GVK Industries Limited v. Income Tax Officer [(2011) 4 SCC 36], the Supreme Court examined the limitation of the Parliament in enacting the legislations with respect to the extraterritorial aspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; any territory, other than the territory of India or any part of it ? The answer to the above would be no. It is obvious that the Parliament is empowered to make laws with respect to aspects or causes that occur, arise or exist, or may be expected to do so, within the territory of India, and also with respect to the extra-territorial aspects or causes that have an impact on or nexus with India as explained above in the answer to Question 1 above. Such laws would fall within the meaning, purport and ambit of the grant of powers to the Parliament to make laws 'for the whole or any part of the territory of India', and they may not be invalidated on the ground that they may require extra-territorial operation. Any laws enacted by the Parliament with respect to the extra-territorial aspects or causes that have no impact on or nexus with India would be ultra vires, as answered in response to the Question 1 above, and would he laws made 'for' a foreign territory. 65. It is submitted that the levy which is introduced by way of the impugned notifications on import freight service does not result in additional cost to the importer as the GST paid by the importer on the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is submitted that the column no.4 of the said notification is only explanatory in nature and does not widen the definition of 'recipient'. In fact, column no. 4 only explains as to who can be said to be a recipient in respect of that particular service mentioned in column no. 2 mentioned in the category of supply of service. This explanation is given to ensure that a person who is liable to pay the tax may not shift the burden of paying the tax on the ground that he is not the one who is the recipient of the service and it is actually the end user for whom the goods are imported is the recipient of service. To clear this confusion, the explanation is given in column no. 4 which is strictly in accordance with and within the meaning of definition of 'recipient' as defined in Section 2(93) of the GST Act which reads as under: Section 2(93): recipient of supply of goods or services or both means- (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73. It is submitted that the term composite supply is defined in Section 2(30) of the GST Act as under : Section 2(30): Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. 74. The composite supply is defined in the GST Act. In Section 8, it is specifically mentioned as to how the tax liability on composite and mix supplies are to be determined. Section 8 of the GST Act reads as under : 8. Tax liability of composite and mixed supplies - The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. (5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed. Explanation.- For the purposes of this Act, (a) persons shall be deemed to be related persons if (i) such persons are officers or directors of one another s businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family; (b) the term person also includes legal persons; (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of such person [Section 12(8), IGST Act The transaction is liable for tax, and the tax amount paid by the importer can be claimed back as input tax credit. Export Indian The transaction is liable for tax, and the exporter can get refund of input tax credit used for export. Import Foreign The place of supply of services of transportation of goods, other than by way of mail or courier, shall be place of destination of such goods. [Section 13(9), IGST Act] The transaction will be liable for tax, as the place of supply will be in India. Tax will be paid under reverse charge and can be claimed back as input tax credit. Export Foreign Since the place of supply will be outside India, transaction will not be liable for tax 79. Referring to the aforesaid table, it is pointed out that the service of transportation of goods is taxable both in case of imports as well as exports for the domestic shipping line and for import for the foreign shipping line. Since the exports by the domestic shipping line are already zero rated, the ITC will not be available to Indian shipping lines if the service of inward transportation of goods is not made taxable in India. The domestic shipping lines woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods along with the service element involved in the transportation of goods. 83. It was pointed out that in the 18th GST Council Meeting held on 30.06.2017, it was decided to clarify by way of a circular that when goods sold on high sea sales basis are imported for the first time, the IGST would be levied at the time of importation and the value addition due to high sea sales shall be the part of the value on which the IGST is collected. Vide Circular No.33/2017-Cus dated 01.08.2017, it has been clarified that the High Sea Sales' is a common trade practice whereby the original importer sells the goods to a third person before the goods are entered for customs clearance. After the high sea sale of the goods, the customs declarations, i.e. Bill of Entry, etc., is filed by the person who buys the goods from the original importer during the said sale. In the past, the CBIC had issued various instructions regarding the high sea sales appropriating the contract price paid by the last high sea sales buyer into the customs valuation [see Circular No. 32/2004-Cus., dated 11.5.2004]. Further, in the Circular dated 01.08.2017, it has been stated that 'The council has decided that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sification. 86. Similarly, merely because of the imposition of the levy if the business become uneconomical or may cause any hardship, the same cannot be a ground for striking down the said levy. 87. Reliance has been placed on the decision of the Supreme Court in the case of Malwa Bus Service (Private) Ltd. and others v. State of Punjab and others, reported in 1983(3) SCC 237, wherein the Supreme Court in paras 21 and 22 observed as under : 21. The next submission urged on behalf of the petitioners is based on Article 14 of the Constitution. It is contended by the petitioners that the Act by levying ₹ 35,000/- as the annual tax on a motor vehicle used as a stage carriage but only ₹ 1,500/- per year on a motor vehicle used as a goods carrier suffers from the vice of hostile discrimination and is, therefore, liable to be struck down. There is no dispute that even a fiscal legislation is subject to Art. 14 of the Constitution. But it is well settled that a legislature in order to tax some need not tax all. It can adopt a reasonable classification of persons and things in imposing tax liabilities. A law of taxation cannot be termed as being discriminatory because different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween stage carriages which carry passengers and public carriers which transport goods. The petitioners have not placed before the Court sufficient material to hold that the impugned levy suffers from the vice of discrimination on the above ground. 22. It was lastly urged that the levy is almost confiscatory in character and the petitioners would have to close down their business as stage carriage operators. It is stated that the passenger fares were permitted to be raised by about 43 per cent just before the levy was increased in this case and it is even now open to the operators to move the State Government to increase the rates if they feel that there is a case for doing so. But on the facts and in the circumstances of the case, we feel that it is not possible to hold that the impugned levy imposes an unreasonable restriction on the freedom of the petitioners to carry on business. The considerations similar to those which weighed with this Court in upholding the Mustard Oil Price Control Order, 1977, in Prag Ice and Oil Mills v. Union of India, (1978) 3 SCR 293(AIR 1978 SC 1296), ought to be applied in this case also. Though patent injustice to the operators of stage carriages in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested with purchase of the goods and is not concerned with the arrangement of transportation and insurance; and secondly, there is no decipherable component of transportation charges in the price negotiated between the purchaser/importer and the seller in the hands of the purchaser/importer. Thus, in such cases, the only transaction between the foreign seller and the purchaser/importer is of purchase of goods and there is no service element involved as regards the purchaser/importer. As an importer of the goods, the writ-applicant declares the entire CIF value for the purpose of customs Act and pays the appropriate amount towards the customs duty and the integrated tax. Reference was, thereafter, made to Section 2(102) of the CGST Act which defines the term 'services' to mean anything other than goods, money and security for which a separate consideration is charged. It is an admitted fact that there no separate consideration is charged. It is an admitted fact that there is no separate component paid by the purchaser/ importers for transportation of the goods and hence the demand of the department based on the premise that there was service rendered attracting the levy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder an annual contract. Moreover, the consideration for such services is a matter exclusively between the foreign seller and the shipping line and it is the foreign seller who pays the consideration to the shipping line. In such circumstances, it is clear that there is no import of service and the writ-applicant is not the service recipient to attract any IGST liability on the said component. 92. During the course of hearing of these matters, a query was raised by us as to the scope of the definition of 'recipient of service' provided under Section 2(93) of the CGST Act and a question was put to the learned counsel as to whether the beneficiary of service can be considered as a recipient of service. In reply, the reference was made to the definition of 'recipient' provided under Section 2(93) of the Act and it was highlighted that a person would step into the shoes of the recipient only when he is liable to pay consideration for such services. In the CIF cases, the purchaser/importer of goods does not have any contract or arrangement with the shipping line and therefore, the purchaser/importer can never be said to be the person who has paid the consideration for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 2(56) of the CGST Act to show that the provisions of the Act were applicable only to the territories of India. Reference was thereafter made to the fact that the contract for supply of service of transportation whether on case to case basis, vessel basis or annual basis was between the foreign seller and the foreign shipping line. It was submitted that once it is clear that the service transaction did not amount to import of service, as submitted herein above, it would be clear that the service transaction was beyond the purview of the Act and no levy could be imposed on such foreign transaction. 94. A perusal of the Act shows that the liability to pay for supply of goods or services is on the supplier. Departure to the said rule is however, made in sub-section 3 of Section 5 which provides that the Government may, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. In the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dination, is the guiding spirit. The States and the Union as the constituents have demarcated spheres of legislation and governance. With clearly delineated legislative fields, neither can trespass upon the other s legislative territory-the residuary powers lying with the Union, though. The division of powers is zealously guarded in no other sphere than fiscal. Taxation as the backbone of a welfare nation, which India is; the legislative fields are as distinct, yet interconnected, as the spinal segments do. 101. That said, 101st Constitutional Amendment is the epoch-making federal feat unparalleled in constitutional democracies-almost. It is, I may say, a constitutional coup de grace delivered against the fiscal confusion compounded by conflicting taxation regimes. This amendment, perhaps, marks the crest of cooperative federalism. It has created even a constitutional institution - GST Council. 102. As constitutional democracies have gained experience, Utopian vision of justice has given way to utilitarian view. Material comfort or upliftment has become the hallmark of good governance. So economic analysis of law substitutes the notion of simple justice with that of economic effici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in fact, explained the rationale for a constitutional amendment to introduce GST. It noted that while the Centre is empowered to tax services and goods up to the production stage, the States have the power to tax sale of goods. The States do not have the powers to levy a tax on the supply of services while the Centre does not have the power to levy a tax on the sale. Thus, it suggested for a constitutional amendment that would contain a mechanism for a harmonious structure of GST that would not affect the federal fabric. 109. Then, with the deliberations between the Centre and States, aided by the Empowered Committee, the constitutional amendment process to usher in GST began. It resulted in the Constitution (One Hundred and Fifteenth Amendment) Bill, 2011 After that one got lapsed, came the 2014 Amendment Bill (as passed by Parliament). Passed on 8 September 2016, this Bill became the Constitution (One Hundred and First Amendment) Act, 2016 . 110. The GST Council, constituted in September 2016, is a constitutional institution comprising as its members the Finance Ministers of the Union and the States including Union Territories with Legislatures. It has the authority to recommen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the GST Council has decided that GST would be levied at four rates viz. 5%, 12%, 18% and 28%. The schedule or list of items that would fall under each slab has been worked out. Besides these rates, a cess would be imposed on demerit goods to raise resources for compensating States as States may lose revenue owing to implementing GST. (vii) GST will apply to all goods and services except Alcohol for human consumption. (viii) GST on five specified petroleum products (Crude, Petrol, Diesel, ATF Natural Gas) be applicable from a date to be recommended by the GSTC. (ix) Tobacco and tobacco products would be subject to GST. Besides, the Centre will have the power to levy Central Excise duty on these products. (x) A common threshold exemption would apply to both CGST and SGST. Taxpayers with an annual turnover not exceeding ₹ 20 lakh (₹ 10 Lakh for special category States) would be exempted from GST. For small taxpayers with an aggregate turnover in a financial year up to 50 lakhs, a composition scheme is available. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover in a State during the year without the benefit of Input Tax Credit. This scheme will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Network (GSTN). It will provide front end services and will also develop back end IT modules for States who chose the same. Constitutional Amendment Act, An Overview: 116. As we shall see, the CA Act inserts, repeals, and amends certain parts of the Constitution. Inserted are the Articles 246A, 269A, and 279A; repealed is the Article 268A; amended are Articles 248, 249, 250, 268, 269, 270, 271, 286, 366, and 279A. Besides that the Sixth and the Seventh Schedules, too, have been amended. 117. Article 246A, inserted through Section 2 of the Amendment Act, is a marvel of the federal fiscal mechanism. By this Article, the State Legislatures now have the power to make laws regarding GST tax imposed by the Union or by that State and to implement them in intra-state trade. The Centre, of course, continues to have exclusive power to make GST laws regarding inter-state trade. Both the Union and States in India now have simultaneous powers to make law on the goods and services. 118. Article 269A, inserted through Section 9 of the Act, deals with levy and collection of goods and services tax in the course of inter-State trade or commerce. That is, in case of inter-state trade, the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been removed from the ambit of GST and have been subjected to Union jurisdiction. Newspapers advertisements, and Service Tax have been brought under GST (entries 84, 92, 92C). Similarly, in the State List, petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel, and alcoholic liquor for the human consumption have been included, unless the sale is in the course of inter-State or International trade and commerce. Entry tax and Advertisement taxes have been removed. Taxes on entertainment are only to be included to the extent of that imposed by local bodies. (entries 52, 54, 55, 62). 122. To be explicit, in Article 366 of the Constitution, after clause (12), clause (12A) was inserted: Goods and Services Tax means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. After clause (26), clauses (26A) and (26B) were inserted: 'Services' means anything other than goods; 'State' with reference to Articles 246A, 268, 269, 269A and Article 279A includes a Union territory with Legislature. 123. Section 18 of the Amendment Act provides for compensation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Amended It has a similar impact as does the amended Article 249. 268 Duties levied by the Union but collected and appropriated by the States Amended Additional Duties of Excise (Medicinal and toilet preparations) Stand subsumed into GST. 268A Service tax levied by Union and Collected and appropriated by the Union and the States: Omitted Service tax has been subsumed into GST. So Entry No. 92C of List-I too stands omitted. 269 Taxes levied and Amended The arrangement under collected by the Union but assigned to the States Article 269 is subjected to Article 269A, a new provision. 269A Not existing Inserted Levy and collection of goods and services tax during inter-State trade or commerce. The power to levy and collect GST during inter-State trade or commerce is vested with the Government of India. The taxes so collected will be apportioned between the Union the States in manner prescribed. 270 Taxes levied and distributed between the Union and the States. Amended Now Article 268A an Entry No. 92C of List-I stand omitted; so service tax is subsumed under GST. So in Article 270, a reference to Article 268A has been omitted, and a new reference to Article 269A for levy of GST for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax has also been subsumed into GST. List II Entry 52 Taxes on the Entry of goods into a local area for consumption, use or sale therein. Omitted Purchase tax, too, has been subsumed into GST. Entry 54 Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of Entry 92A of List I. (Entry 92A of List I concern inter-State trade or commerce.) Amended Now the taxes are confined to the sale of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel, and alcoholic liquor for human consumption. But excluded is the sale in the course of inter-State trade or commerce. (Now the sale or purchase of goods stands subsume by GST) Entry 55 Taxes on advertisements other than advertisements Omitted Taxes on advertisements other than advertisements broadcast by radio or published in the newspapers and advertisements broadcast by radio or television. television has also been subsumed into GST. Entry 62 Taxes on luxuries, including taxes on entertainments, amusements, betting, and gambling. Amended Taxes on Luxury betting, and gambling have been subsumed into GST. Right to levy Tax on entertainments and amusements has been rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes and provide for a common national market for the goods and services. The Central and State Goods and Services Tax is being levied on all the transactions involving the supply of goods and services, except on the supply of alcoholic liquor for human consumption those which are kept out of the purview of the goods and services tax. However, the GST on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council and in the mean time the taxes on the same shall be governed by the pre-GST regime. The provision related to the GST Council (Article 279A) was made applicable w.e.f. 12th September 2016 vide Notification No.S.O. 2915(E) dated 10th September 2016, and the other provisions of such amendment to the Constitution were made applicable from 16th September 2016 vide the Notification No.S.O. 2986(E) dated 16th September 2016. The Goods and Services Tax Council (GSTC) is a constitutional body constituted under Article 279A of the Constitution of India and plays a pivot role under the GST, which b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and voting. What has led to the present day problems in the implementation of the GST : 132. The GST is implemented by subsuming various indirect taxes. The difficulty which is being experienced today in proper implementation of the GST is because of the erroneous misconception of law, or rather, erroneous assumption on the part of the delegated legislation that service tax is an independent levy as it was prior to the GST and it go vivisect the transaction of supply to levy more taxes on certain components completely overlooking or forgetting the basic concept of composite supply introduced in the GST legislation and the very idea of levying the GST. Prima facie, it appears that while issuing the impugned notification, the delegated legislature had in mind the provision of the Finance Act, 1994, rather than keeping in mind the object of bringing the GST by making the Constitutional (101st) Amendment Act, 2016 to merge all taxes levied on the goods and services to one tax known as the GST. 133. It appears that despite having levied and collected the integrated tax under the IGST Act, 2017, on import of goods on the entire value which includes the Ocean Freight through the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth, the tax on which shall be made on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. 139. Further, sub-section (4) of Section 5 provides for collection of tax, on certain specified supplies, under reverse charge basis from the recipient of supply, where the supplier is not registered under the Act. Sub-section (5) of Section 5 provides for collection of tax, on certain specified supplies, from electronic commerce operator. We are also not concerned with sub-sections (4) and (5) of Section 5 for the present purposes. 140. Thus, the scheme of the Act is that generally the tax shall be payable by the person who is making the supply of goods or services, i.e. supplier. However, in case of certain specified supplies, the recipient of supply can be made liable to pay tax. Thus, a meaningful reading of the charging section would entail that the person who is neither the supplier nor the recipient of the supply cannot be made liable to pay tax under the IGST Act (except for the provisions und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the foreign exporter, the shipping line cannot recover the consideration from the writ-applicant. 145. Thus, the writ-applicant could be said to have neither availed the services of transportation of goods in a vessel nor he is liable to pay the consideration of such service. Hence, the writ-applicant is not the 'recipient' of the transportation of goods in a vessel service as per Section 2(93) of the CGST Act. 146. We are construing the provisions of taxing statute and that too the charging section of a taxing statute. It is a settled principle of construction of tax laws that there is no room for any intendment or presumption in tax statutes and one has to look only at the language used. 147. The principle of construction in tax statutes is that if the person sought to be taxed comes within the letter of the law he must be taxed. In a taxing Act one has to merely look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. 148. In our opinion, the writ-applicant cannot be made liable to pay tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner, i.e. the importer, liable for paying such tax, are ultra vires the provisions of the IGST Act. 153. The supply of service of transportation of goods by a person in a non-taxable territory to another person in a non-taxable territory from a place outside India upto the customs station of clerance in India, is neither an inter-state supply nor an intra-state supply. Thus, no tax can be levied and collected from the writ-applicant. 154. We now proceed to deal with the second part of the submission canvassed on behalf of the writ-applicants that the supply of service of transportation of goods by a person in a non-taxable territory to another person in a non-taxable territory from a place outside India upto the customs station of clearance in India is neither inter-state supply nor an intra-state supply. In such circumstances, no tax can be levied and collected from the writ-applicants. 155. As stated above, Section 5 of the IGST Act is the charging section and it levies tax on all the inter-state supplies of goods or services or both. Section 7 of the IGST Act defines what is an inter-state supply. The said section is extracted as under : 7. Inter-State supply.- (1) Subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de supply of services to or by a Special Economic Zone developer or a Special Economic Zone unit. 157. At the outset, sub-section (1) of Section 8 states when a supply of goods is an intra-state supply and sub-section (2) of Section 8 states when a supply of services is an intra-state supply. Both sub-sections apply only where the location of the supplier and the place of supply are in the same State or Union Territory. Here, the State or the Union Territory means a State or Union Territory in India. Thus, for Section 8 to apply, both the location of the supplier and the place of supply should be in India. In the present case, the location of the supplier, i.e. the foreign shipping line is outside India. Thus, the impugned transaction is not an intra-state supply under Section 8 of the IGST Act. 158. The third submission canvassed on behalf of the writ-applicants is that sub-sections (1), (2) and (3) of Section 7 are not applicable to the cases on hand. 159. Now, Section 7 provides for what is an inter-state supply. Sub-sections (1) and (2) of section 7 deal with the supply of goods and are not relevant for the present purpose. Sub-section (3) provides that where the location of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable in the present case as it only applies to supplies made to or by a Special Economic Zone developer or a Special Economic Zone unit. 166. Now, clause (c) provides that the 'supply of goods or services or both in the taxable territory', not being an intra-state supply and not covered elsewhere in Section 7, shall be treated as inter-state supply. The phrase 'supply of goods at services or both in the taxable territory' is nowhere defined in the Act. 167. At the outset, the phrase 'supply of goods or services or both in the taxable territory' cannot be equated with 'place of supply' in India. If the intention of the legislature was to cover all the supplies where the 'place of supply' is in India within the ambit of the IGST Act by virtue of clause (c) of sub-section (5) of Section 7, nothing prevented the legislature from expressing its intention in clear words as used elsewhere in Section 7 and Section 8. Further, it is submitted that the provisions relating to the 'place of supply' under Sections 10 to 13 of the IGST Act does not determine where the supply takes place in its ordinary sense. They are artificial provisions e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny service, where (i) The supplier of service is located outside India, (ii) The recipient of service is located in India; (iii) The place of supply of service is in India. 172. The term 'place of supply' is used in clause (a) of sub-section (5) of Section 7 of the IGST Act. As per the said clause, when the supplier is located in India and the place of supply is outside India, such supply is an inter-state supply. This is to enable exports of goods and service so that they can be made zero-rated, i.e. practically no tax on outward supply and refund of taxes paid at input stage. Section 2(6) of the IGST Act defines the term export of service' and the following conditions are required to be fulfilled inter alia for a supply of service to be an export of service: (i) The supplier of service is located in India; (ii) The recipient of service is located outside India; (iii) The place of supply of service is outside India. 173. As seen above, Section 13 is applicable to sub-sections (4) and (5) of Section 7, where either the supplier of service or the recipient of service has to be in India. If both the supplier and the recipient are outside India, Section 13 does not apply. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected only from the supplier or the recipient of supply under the IGST Act. It is administratively difficult to collect the tax from a person located outside India and as such cases would be minimum, the Government has granted exemption to such supplies. However, the exemption entry provides that the 'services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India received by persons specified in the entry' will not be covered by the exemption. 181. It is submitted that the said exception has been carved out under mis-belief that the ocean freight services would be otherwise taxable. It is submitted that the supply of ocean freight service is not covered either by Section 7 (inter-state supply) or Section 8 (intra-state supply) of the IGST and thus not leviable to tax. Hence, since the supply is not leviable to tax under the Act, the granting of exemption from payment of tax does not arise. 182. Thus, the impugned notifications are liable to be struck down as ultra vires the IGST Act. 183. The sixth submission we need to deal is that the scheme of the IGST does not contemplate levy and collection of tax f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try in the books of account of the recipient of supply or the date of payment, whichever is earlier. 187. Thus, the time of supply of services in case where the tax is payable under the reverse charge basis is the earliest of the date of payment entered in the books of accounts of the recipient or the date of debit in the bank account or sixty days from the date of issue of invoice by the supplier. Thus, a person other than a recipient of supply cannot determine the time of supply as per the provisions of Section 13(3) of the IGST Act. 188. The seventh submission canvassed on behalf of the writ-applicant is that the value of the ocean freight service cannot be determined by the importer of goods. 189. Section 15 of the CGST Act provides for the determination of the value of supply. Sub-section (1) of Section 15 reads as under : 15(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. 190. Thus, the value of supply is the price actually pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifications. Thus, the impugned notifications are not in conformity with the object of laws relating to the Goods and Services Tax, i.e. credit shall be available at each stage and the burden of tax shall only be on the customer. 198. The ninth submission we need to deal with is that the provisions relating to the filing of returns apply only to the outward and inward supplies. 199. The provisions relating to the filing of returns apply only to the inward and outward supplies made by a registered person. Section 2(67) of the CGST Act defines the term 'inward supply' as 'inward supply in relation to a person, shall mean recipient of goods or services or both whether by purchase, acquisition or any other means with or without consideration'. Section 2(83) of the CGST Act defines the term 'outward supply' as 'outward supply in relation to a taxable person means supply of goods or services or both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business'. The supply in the present case is neither an inward supply nor an outward supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the import of goods as the person liable for paying the tax are also unconstitutional as there is no statutory sanction for levy and collection of such tax. 207. The next submission we need to deal with is that the IGST is leviable on a transaction treated as an import of goods under the IGST Act read with the Customs Tariff Act, 1975. Once the freight has already suffered the IGST as a part of the value of the goods being imported, the dual levy of the IGST cannot be imposed on the same freight amount by treating it as supply of service. 208. Section 5 of the IGST Act provides for levy and collection of integrated tax on inter-state supply of goods or services or both. The proviso to sub-section (1) of Section 5 provides that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975, on the value as determined under the said Act at the point when the duties of customs are levied on the said goods under Section 12 of the Customs Act, 1962. The relevant portion of Section 5 of the IGST Act is extracted as under : 5(1) Subject to the provisions of sub-section (2), there shall be levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be avoided by adopting another construction which may reasonably be open. Further, double taxation, by way of delegated legislation, when the statute does not expressly provide, is not permissible. 214. In the case of United Shippers Ltd. v. CCE, 2015(37) STR 1043(T), the Tribunal held that there can be no levy of service tax on barge charges and the handling charges which is part of the import transaction into India and form an integral part of the transaction value on which the customs duty is leviable. The judgment of the Tribunal has been affirmed by the Supreme Court in the case of CCE v. United Shippers, 2015(39) STR J369 (SC). 215. Thus, having paid the IGST on the amount of freight which is included in the value of the imported goods, the impugned notifications levying tax again as a supply of service, without any express sanction by the statute, are illegal and liable to be struck down. 216. It was also argued that the purpose/object for which the tax is levied will not validate an ultra vires or unconstitutional tax. 217. Prior to 01.06.2016, the services of transportation of goods in a vessel from a place outside India up to the customs station of clearance in India wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional waterways or inland waterways was made taxable. The service of international transportation was not leviable to service tax. 220. With effect from 1.7.2012, the negative list regime was introduced for levy of service tax and all services were made taxable except those provided under the negative list of service. Section 66D of the Finance Act, 1994, provided such negative list of services. The relevant extract of clause (p) of Section 66D (before its amendment by the Finance Act, 2016) is reproduced hereunder for ready reference: 66D. The negative list shall comprise of the following services, namely: (p) services by way of transportation of goods-- ii) by an aircraft or a vessel from a place outside India up to the customs station of clearance; 221. Thus, the service of inward international transportation was put under the negative list and thus it was not leviable to service tax. The place of provision of transportation of goods (other than by way of mail or courier) is the place of destination of goods as per Rule 10 of the Place of Provision of Service Rules, 2012. Thus, even though the place of such service was in India, the same was expressly made not leviable to tax by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who may not have a presence in Australia. 225. In the United Kingdom, the Value Added Tax Act, 1994 provides that the services of transportation relating to the import and export is zero-rated (i.e. no tax is payable on the outward supply and the tax paid on the inward supplies can be claimed as refund). The relevant extract from VAT Notice 744B - Freight transport and associated services is as under: 5.3 VAT liability of import, export and non-EU freight transport Where the place of supply is the UK, zero rating applies to: the supply of transport of goods from a place within to a place outside the EU and vice versa. 226. Thus, the services of transportation relating to export and import are governed by the international considerations and all countries treat the same as zero-rated or GST-free. Amendment vide Finance Act, 2016 and thereafter. 227. Vide Finance Act, 2016, the sub-clause (ii) of clause (p) of Section 66D of the Finance Act, 1994, which provided that the service of transportation of goods from a place outside India upto the customs station of clearance is not leviable to service tax, was omitted. 228. Notification No.9/2016-ST dated 1.3.2016 effective from 1.4.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.2017, an alternative mechanism for paying the service tax at the rate of 1.4% of the CIF (Cost, Insurance and Freight) value of the goods. 235. Further, vide Notification No.10/2017-C.E. (N.T.) dated 13.4.2017 effective from 23.4.2017, the importer of the goods has been allowed to avail the Cenvat Credit on the basis of the challan of payment of service tax by the said importer. Power to levy tax on the ocean freight service by the sub-ordinate legislation under the erstwhile service tax regime and under the present GST regime. 236. Under the erstwhile service tax regime, Section 66B of the Finance Act, 1994 was the charging section which levied the tax on the value of all the services, other than those specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another. Section 68 provided for collection of tax. Sub-section (1) of Section 68 provided that every person providing taxable service shall pay the service tax. Further, sub-section (2) of Section 68 provided that, in respect of such taxable services as may be notified by the Central Government, the service tax shall be payable by such person and in such manner as may be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been the object to introduce it. 241. The legislature, while enacting the IGST Act, was aware of the wide provisions under the Finance Act, 1994, which provide the Government the power to collect tax under the reverse charge basis only from the recipient of the service but from any other person as may be prescribed. However, while enacting the IGST Act, the legislature consciously curtailed the power of the Government to collect tax under the reverse charge basis from any person and restricted it only to the recipient of the supply. 242. If the intention of the Government was to allow the credit of the taxes paid on the goods and services used for providing the supply of the inward transportation, the same could have been made a zero-rated supply. A zero-rated supply is provided under Section 16 of the IGST Act, wherein it is provided that zero-rated supply can be made either without the payment of tax or with payment of tax along with an option to claim refund of tax later. Further, the person making the zero-rated supply will be eligible to avail the input tax credit and claim refund if the same remains unutilized. The same approach has been adopted even internationally. 243. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that taxing entries must be construed so as to maintain exclusivity. Although generally speaking a liberal interpretation must be given to taxing entries, this would not bring within its purview a tax on subject-matter which a fair reading of the entry does not cover. If in substance, the statute is not referable to a field given to the State, the Court will not by any principle of interpretation allow a statute not covered by it to intrude upon this field. 24. Undisputedly, Chapter V of the Finance Tax Act, 1994 was enacted with reference to the residuary power defined in Entry 97 of List I. But as has been held in International Tourist Corporation v. State of Haryana (1981) 2 SCC 319: Before exclusive legislative competence can be claimed for Parliament by resort to the residuary power, the legislative incompetence of the State legislature must be clearly established. Entry 97 itself is specific in that a matter can be brought under that Entry only if it is not enumerated in List II or List III and in the case of a tax if it is not mentioned in either of those Lists. 25. In that case Section 3(3) of the Punjab Passengers and Goods Taxation Act, 1952 was challenged by transport op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entry has been dealt with in Rai Ramakrishna and others v. State of Bihar 1963 (1) SCR 897) where it was said in language which we cannot better:- Entry 56 of the Second List refers to taxes on goods and passengers carried by road or on inland waterways. It is clear that the State Legislatures are authorized to levy taxes on goods and passengers by this entry. It is not on all goods and passengers that taxes can be imposed under this entry; it is on goods and passengers carried by road or on inland waterways that taxes can be imposed. The expression carried by road or on inland waterways is an adjectival clause qualifying goods and passengers, that is to say, it is goods and passengers of the said description that have to be taxed under this entry. Nevertheless, it is obvious that the goods as such cannot pay taxes, and so taxes levied on goods have to be recovered from some persons, and these persons must have an intimate or direct connection or nexus with the goods before they can be called upon to pay the taxes in respect of the carried goods. Similarly, passengers who are carried are taxed under the entry. But, usually, it would be inexpedient, if not impossible, to recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides for service rendered to a client by a consulting engineer, Section 65(41)(k) refers to service to a client by a manpower recruitment agency, Section 65(41)(o) refers to service by pandal or shamiana contractors and so on. The rate of service tax has been fixed under Section 66. Section 67 provides for valuation of taxable service for the purposes of charging tax. The provision for valuation of service rendered by collecting and forwarding agents has been dealt with under sub-clause (j) and service provided by goods transport operators has been provided under clause (j). (subsequently renumbered as clause (m-a). These clauses read respectively as under :- 67.(j) in relation to service provided by a clearing and forwarding agent to a client, shall be the gross amount charged by such agent from the client for services of clearing and forwarding operations in any manner. 67.(m-a) in relation to service provided by goods transport operator to a customer, shall be the gross amount charged by such operator for services in relation to carrying goods by road in a goods carriage and includes the freight charges but does not include any insurance charges. 30. As far as clause (j) is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was a case where the levy of service tax was challenged by owners of Kalayan Mandapam/Mandap Keepers. By virtue of the 1997 amendment service provided to a client by Mandap keepers including the services if any rendered as a caterer was treated as a taxable service. The challenge, inter alia, was that service tax on Mandap Keepers was colourable legislation as the said tax was not on service but was in pith and substance only a tax on the sale of goods and/or a tax on land. The writ petition filed before the Madras High Court was rejected and the constitutionality of the levy was upheld. It was then urged before this Court by the appellants that Entries 18, 14 and 54 of List II covered the levy in question and, therefore, resort could not be had to Entry 97 in List I of the Seventh Schedule of the Constitution. It was held by this Court that although certain items of the service might have been referable to any other entry, the service element was the more weighty, visible and predominant . Therefore, the nature and character of the levy of the service tax was distinct from a tax on the sale or hire purchase of goods and from a tax on land. 34. The point at which the collection o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that as the body of the section did not cover the subject matter, there was no question of creating an exception in respect thereto by a proviso. According to the writ petitioners, the proviso cannot expand the body by creating a separate charge. It is submitted that by merely amending the definition of the word assessee it could not be understood to mean that thereby all customers of the services in question were liable. 38. The submission is misconceived for several reasons. Section 68 is a machinery section in that it provides for the incidence of taxation and is not the charging section which is Section 66. The amendments to Section 66 brought about in 2000 changed the point of collection of tax from the provider of the service to 'such manner as may be prescribed'. Section 68(1A) as it stood in 1997 provided for the collection and recovery of service tax in respect of the services referred in clauses (g) to (r) of Section 65(41), which included both the services with which we are concerned, from such person and in such manner as may be prescribed. The 1998 Finance Act maintained this. Now the Service Tax Rules, 1994 provided for the collection and recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of its provisions. A legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory . Decisions of this Court on the matter have permitted the legislatures to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes. 42. In the case before us the discrimination is not, even according to the writ petitioners, by reason of the subject matter of tax. It is also not the writ petitioners' case that within the separate classes of services covered by the different clauses in Section 65(41), there is any discrimination or that the law operates unequally within the classes. According to them the discrimination lies in the method of collection of the tax followed. But as we have said this is not of the essence of the tax and the mere difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax vide the Finance Act, 1994, and the Finance Act, 1998. The Bombay High Court took the view that the service tax would fall in Entry 97 of List I of the 7th Schedule to the Constitution. The issue before the Supreme Court was one concerning the constitutional status of levy of service tax and the legislative competence of the Parliament to impose service tax under Article 246(1) read with Entry 97 of List I of the 7th Schedule to the Constitution. 250. The issue that arose in the appeal before the Supreme Court questioned the competence of the Parliament to levy service tax on the practicing Chartered Accountants and Architects having regard to Entry 56 of List II of the 7th Schedule to the Constitution and Article 276 of the Constitution of India. The challenge was rejected by the Supreme Court relying upon the aspect theory and it was held that the Parliament has the competence to impose tax on the services rendered by the professionals. The ratio of this decision is also of no avail to the respondents as the pivotal issue in the case on hand is, whether the delegated legislation can travel beyond the scope of the powers conferred by the parent legislation. 251. In Phulchand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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