Punjab-Haryana High Court
Kiran House And Ors. vs Union Of India (Uoi) And Ors. on 10 February, 1999
Equivalent citations: (1999)122PLR695
Author: N.K. Agarwal
Bench: N.K. Agarwal
JUDGMENT Jawahar Lal Gupta, J.
1. The petitioners complaint that the show cause notices issued to them (which are in similar terms) regarding the levy of service tax are illegal. They pray that the notices be quashed.
2. We have heard Mr. S.P. Jain, learned Counsel for the petitioners. He contends that the Parliament had no legislative competence to levy the service tax. He further contends that the petitioners are covered by the exemption granted by the Government of India vide notification dated June 2, 1998. Despite the exemption, the respondents have issued show cause notices. Lastly, it is contended that the action of the respondents is violative of Article 14 of the Constitution. On this basis, the counsel prays that the show cause notices, a copy of one of which has been produced as Annexure P.2, be quashed.
3. The concept of 'service tax' was introduced by the Finance Act of 1994. Initially, the service tax was imposed in regard to the telephone, insurance and stock brokerage services. With the passing of years, the levy of service tax has been extended to various other services. The provisions as enacted after the Finance Act of 1998 are contained in Chapter V of "Nabhi's Service Tax Guidelines." The levy extends to the whole of India except the State of Jammu and Kashmir. Section 65 defines various expressions used in the Chapter. Clauses 10, 22 and 23 define a 'caterer', a 'mandap' and a 'Mandap-keeper. These read as under:-
10. "Caterer" means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or account rements for any purpose or occasions;"
22. " mandap means any immovable property as defined in section 3 of the Transfer of Property Act, 1882 (4 of 1882) and includes any furniture, fixture, light fittings and floor coverings therein let out for consideration for organising any official, social or business function;
23. "mandap keeper' means a person who allows temporary occupation of a mandap for consideration for organising any official, social or business function.
4. Clause 41 defines a service tax as a tax "leviable under the provisions of this Chapter". Taxable services have been defined in clause 48. These include the services:-
(m) to a client, by a mandap keeper in relation to the use of a mandap in any manner including the facilities provided to the client in relation to such use and also the services, if any, rendered as a caterer.
5. Section 66 provides for the levy of the service tax and Section 67 lays down the method of valuation. In relation to the services provided by the goods transport operators, outdoor caterers, a pandal or shamiana contractor and a mandap keeper, the provisions are contained in Clauses (L), (m) and (n). These reads as under :-
"(L) 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 good carriage and includes the freight charges but does not include any insurance charges;
(m) in relation to service provided by an outdoor caterer to a client, shall be the gross amount charged by such caterer from the client for services in relation to such catering including the charges for food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements provided to such client for any purpose or on any occasion;
(n) in relation to service provided by a pandal or shamiana contractor to a client, shall be the gross amount charged by such contractor from the client for services in relation to the setting up of a pandal or shamiana including the supply of furniture, fixtures, lights and lighting fittings, floor coverings and similar articles used therein and also the charges for catering, if any."
6. Section 69 provides for registration. It is compulsory for every person providing the relevant service to be registered with the Central Excise Officer. Section 71 provides for assessment.
7. Mr. Jain contends that the legislation is beyond the legislative competence of Parliament. The argument is based on Entry 54 in List II. This Entry is in the following terms:-
"Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I."
8. A perusal of the above entry would show that the State Legislatures are competent to provide for the levy of taxes on "the sale or purchase of goods...." However, in the present case, no tax is being levied either on the sale or purchase of any goods. The levy is on the providing of services. Architects, Stock Brokers, Insurance Agents, Caterers etc. do not really sell any goods. They provide services. The law as at present enacted, provides for tax on the services. Learned Counsel has not been able to show or refer to any entry in List II which may provide for the levy of tax on service. In the absence of any entry in List II which may specifically cover the filed of service tax, it cannot be said that the Parliament is not competent to legislate with regard to the particular matter. It is only when a particular subject is included in List II that it may be possible to contend that the jurisdiction of the Central Legislature has been ousted. However, in the absence of a provision in List II or even in List III (in pursuance to which the State Legislature may have promulgated a legislation), the Parliament shall have the undoubted power to legislate. In fact, under the Constitution, the power of the Parliament to exclusively legislate in respect of the matters covered in List II in the national interest is duly recognised under Article 246 and 249 of the Constitution. As the law stands, the Parliament shall have the power to legislate in respect of every matter which is not covered by List II. Since there is no entry with regard to the levy of service tax in List II, the jurisdiction of the Parliament to legislate shall be presumed. That being so, the argument that the legislation is beyond the legislative competence of the Parliament, cannot be sustained. It is, consequently, rejected.
9. Learned counsel has also referred to the provisions of Clause 29-A of the Article 366 to contend that a tax on the sale or purchase of goods also includes "a tax on the supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration."
10. The argument cannot be accepted. Clause 29-A deals with the tax on the sale or purchase of goods. It is only when a tax is being levied on sale or purchase of goods that the fiction as contemplated under sub clause (f) shall be deemed to be included in the expression. Still further, whenever there is a tax on the supply of goods which forms a part of a service, it shall be deemed to be a tax on the sale or purchase of goods. Even the goods have been specified to mean food or other article for human consumption. In the present case, there is nothing before us to indicate that any goods being food etc. are being supplied by the petitioners on which a service tax is being levied.
11. It was then contended that the service provided by the petitioners has in fact been exempted vide notification dated June 2, 1998. If that be so, one fails to understand as to what is the cause of action which has compelled the petitioners to approach the court. All that the petitioners needed to do was to raise the argument before the competent authority. For reasons best known to them, they have chosen not to do so and have approached the Court. It is in this situation that the question needs to be examined by the Court.
12. The notification issued by the Government is in the following terms:-
"Notification No. 49/98-Service Tax New Delhi, dated the 2nd June, 1998, 12 Jayishtha, 1920 (Saka).
GSR(E)-In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994) the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided:-
(a) to a customer, by a goods transport operator in relation to carriage of goods by road in a good carriage;
(b) to a client, by an outdoor caterer; and
(c) to a client, by a pandal or shamiana contractor in relation to a pandal or shamiana in any manner and also includes the services, if any, rendered as a caterer.
From the whole of service tax leviable thereon under v Section 66 of the said Act.
(T.R. RASTOGI) Joint Secretary to the Government of India."
13. On a perusal of the above, it appears that the Central Government has granted exemption in respect of the taxable services provided by a goods transport operator, by an outdoor caterer and by a pandal or shamiana contractor to a client "in relation to a pandal or shamiana in any manner and also includes the services if any rendered as a caterer." As at present, nothing has been produced on the record to show as to what services are being actually provided by the petitioners. Still further, it has not even been specified as to whether or not the petitioners are providing any services in respect of transport of goods or any catering services in relation to the pandals or shamianas. There is no averment in the petition which may specifically indicate the factual position. In the absence of facts, it is totally impossible to accept the contention of the petitioners that they are converted by the exemption contained in the notification.
14. Faced with this situation, learned counsel has contended that the action suffers from the vice of discrimination inasmuch as the mandap-keepers are being burdened with the levy of service tax while those who provide shamiana services are being exempted.
The contention is misconceived. We are unable to accept it.
15. Firstly, it is well settled that the presumption is in favour of constitutionally. The burden of proving discrimination lies on the persons who levels this charge. The petitioners have produced nothing on record to show that they are similarly situated as the persons providing shamiana services.
16. Secondly, it has not been shown as to what exactly are the activities of the petitioners. In paragraph 1, the averments made by the petitioners are that they are "engaged in the business of supplying Mandap-keeper (marriage places) etc." In paragraph 2, it has been stated that they are "engaged in the business of tent house". Are the petitioners providing both kinds of services? Are they engaged in only one of the two? Nothing is clear on the record. In this situation, it is clear that complete facts are not available. Thus, it cannot be said that two persons who are similarly situate are being differently treated.
17. Lastly, it also deserves mention that the petitioners have rushed to the Court at a stage when only show cause notices have been issued. By the impugned show cause notice, one of the petitioners has been given an opportunity to explain the factual position. It appears that similar notices may have been given to even the other petitioners. That being so, the facts have yet to be found. The petitioners are only being called upon to disclose facts whereupon the authority has to consider the matter and record a finding. They have rushed to impugn the show cause notices with all kinds of allegations in the petition. Unless facts are really established, the charge of discrimination cannot even be appropriately examined.
No other point has been raised.
In view of the above, we find no merit in this writ petition. It is consequently dismissed in limine.