Madras High Court
All India Tax Payers Welfare ... vs Union Of India (Uoi) on 17 February, 2006
Equivalent citations: (2006)205CTR(MAD)360, 2006[4]S.T.R.14
Author: A. Kulasekaran
Bench: A. Kulasekaran
JUDGMENT A. Kulasekaran, J.
1. This writ petition has been filed by the Petitioners Association as a pro Bono Publico issuance of writ of Mandamus forbearing the respondents from in any way demanding service tax from the telephone subscribers under the second respondent.
2. The learned Counsel appearing for the petitioners submits as follows:-
The petitioners association represents tax payers and consumers which renders service to safeguard the interests of all tax payers and consumers in general that every person providing taxable service to any person shall pay service tax at the rates specified in Section 68(1) of the Finance Act in such manner and within such period as may be prescribed under the said section; that a person or firm, who renders taxable service has to pay service tax but in practice the second respondent has simply shifted the burden of liability of paying the a tax to customers or the consumers of service, which is a gross violation of the provisions of Finance Act, 1994 and its Rules, that in other words, only the service provider are liable to party tax not the service beneficiary; that the second respondent's various agents or departments ever since the time of introduction of service tax are collection the prescribed rate of service tax from its customers only instead of paying it from its own packet; that serveral representations were made by the petitioners to the second respondent, but no tangible action has been taken that the first respondent, which is the law enforcing authority in India watching the said collection of tax by the second respondent as a silent spectator and prayed for allowing the writ petition.
3. Mr. Pon Muthuramalingam, learned Additional Central Government Standing Counsel appearing for the respondents submits that service tax is an indirect tax, which are being collected by the assessee from the customers, clients, users, consumers and subscribers for the service rendered by them; that similarly the second respondent has been collecting service tax from the consumers of telephone subscriber, which is included in the list of services as notified in the Finance Act and it is in force from 1st July 1994; that the service tax is collected from the customers at the rate of 10.2% (10% service tax + 0.2% educational cess) and this percentage of tax collection is found mentioned in every telephone bill herever BSNL collects service tax; that Section 83 of the Finance Act permits application of certain provisions of Act 1 of 1994 namely Central Excise Act so far as may be in relation to service tax as they apply in relation to a duty of Excise (9C, 9D, 11, 1B, (11BB), 11C, 11D, 12, 12A, 12B, 12C, 12D, 12E,, 14, 15, 35F, to 35D, 35E, 36, 36A, 36B, 37A, 37B, 37C, 37O, and 40 of the Central Excise Act; that Section 12A and 12B of Central Excise Act 1994, deals with the amount of duty and the incidents of duty passing on to the buyer respectively; that on reading of these two provisions, it clearly establish the fact that incident of Service Tax falls on the user, consumer, customer or subscriber as the case may be; that the legal duty is cast upon the provider of service namely BSNL to collect 10.2% of service tax from the customers and pay the service tax amount with the Central Excise department; that Section 12B clearly speaks about the presumption that the incidence of duty has been passed on the user, consumer or subscriber; that the Honourable Supreme Court in the decision reported in Laghu Udyog Bharathi v. Union of India struck down the service tax as amended in 1997 (Rule 2(d)(XII) and (XVII) which are in conflict with Section 65 and 66; that the defects pointed out by the Apex Court was also rectified by subsequent amendment made in the Act; that the assumption and presumptions of the petitioners association regarding the definitions for Sections 65, 66 and 68 of Finance Act 1994 as amended are not legally correct; that the provider of service only assesses according to Section 65 of Finance Act and as such the provider is to collect service tax from the customer as contemplated Under Section 12A and 12B of the Central Excise Act; that the petitioners laid their case without taking note of Section 83 of Finance Act, 1944 and presented the case as if the second respondent is collecting the service tax in contravention of Sections 65, 66, 68, and 70 of Finance Act without being aware of the subsequent amendments made to the said Section namely Section 71A; that the provider of service as assessee Under Section 65 of the Finance Act is to collect service tax from the user of service as contemplated Under Sections 12A and 12B of the Central Excise Act, hence, the action of the second respondent is legally correct and prayed for dismissal of the writ petition.
4. Now, let us look into the relevant provisions of the Act for disposal of this writ petition:
Section 68 of Finance Act, 2003 : Every person providing taxable service to any person shall pay Service Tax at the rate specified in Section 66 in such manner and within such period as may be prescribed.
Provided that:
(i) In relation to services by a clearing and forwarding agent, every person who engages a clearing and forwarding agent and by whom remuneration or commission (by whatever name called) is paid for such service to the said agent for the period commencing on and from the 16th day of July, 1997 and ending with the 16th day of October 1998; or
(ii) In relation to services provided by goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage for the period commencing on and from the 16th day of November 1997 and ending with 2nd day of June 1998.
shall be deemed to be a person liable to pay service tax, for such services provided to him, to the credit of the Central Government.
(2) Notwithstanding anything contained in Sub-section (1), in pespect of any taxable service notified by the Central Government in the Official Gazette the service tax thereon shall be paid by such person and inis such manner as may be prescribed at the rate specified in Section 66 and all the provisions of this chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
Section 83 of Finance Act, 2004 : Application of certain provisions of Act 1 of 1944. The provisions of the following sections of the Central Excises and Salt Act, 1944, as in force from time to time shall apply, so far as may be, in relation to service tax as they apply in Excise:- 9C, 9D, 11, 11B, 11BB, 11C, 11D, 12, 12A, 12E, 12C, 12D, 12B, 14, 15, 35F, to 35O (both inclusive) 35Q, 36, 36A, 36B, 37A, 37B, 37C, 37D and 40.
Section 12-A. Price of goods to indicate the amount of duty paid thereon - Notwithstanding anything contained in this Act or any other law for the time being in force, every person who is liable to pay duty of excise on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold.
12.5. Presumption that the incidence of duty has been passed on to the buyer - Every person who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods.
5. The case of the writ petitioner is that a person or a firm, who renders taxable service has to pay service tax prescribed at the rate fixed from time to time, but the second respondent has simply shifted the burden of liability of paying tax to the customers or the consumers of services, which is a gross violation of the provisions of Finance Act 1994 and its Rules; the first respondent/Union of India not bothering about the of consequence shifting the burden of service tax on the shoulders of the consumers. In support of this contention, the learned Counsel relied on the decision rendered by the Honourable Supreme Court reported in (Laghu Udyog Bharati and Anr. v. Union of India and Ors.) . In the said case, the petitioners are the persons, who are utilising the services of goods transport operators and of clearing and forwarding agents and are seeking to impugn the validity of Rule 2(d), (xii) and (xvii) of the Service Tax Rules, as amended in 1997, on the ground the said sub-rule are contrary to the provisions of Sections 65 and 66 of the Finance Act, 1994 whereby service tax was sought to be levied by the Parliament. The Honourable Supreme Court held that the provisions of Rule 2(d), (xii) and (xvii) in so far as it makes persons other than the clearing and forwarding agents or the persons other than the goods transport operator as being responsible for collecting the service tax, are ultra vires, the Act itself and consequently the sub rules are quashed.
6. It is submitted on behalf of the respondents that the defects pointed out by the Honourable Supreme Court in the above said judgment was rectified by retrospective amendments made in Section 68 of Finance Act 2003, giving effect for the period from 16-07-1997 to 16-11-1998. The amended portion of the said Section was also extracted in the counter of the respondent, which is extracted above.
7. It is an admitted fact that pursuant to the judgment rendered by the Honourable Supreme Court in Laghu Udyog Bharati's case stated supra, amendment to Section 68 was made and also the defects and lacunas pointed out by the Honourable Supreme Court were rectified by the parliament by subsequent amendments.
8. The case of the petitioner is that the first respondent, instead of paying the service tax from their pocket passing on the incidence to the consumer or beneficiary, hence, the judgment rendered by the Honourable Supreme Court in laghu Udyog Bharati's case no way useful to the respondents.
9. The provider of service is an assessee Under Section 65 of the Finance Act and he has to collect service tax from the users of service as contemplated Under Section 12-A and 12-B of the Central Excise Act. In this context, it is necessary to refer that Section 12-A of the Central Excise Act contemplates that Notwithstanding anything contained in this Act or any other law for the time being in force, every person who is liable to pay duty of excise on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold. Section 12-B of the Central Excise Act contemplates that every person who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods. Thus, the provider of service only assessee according to Section 65 of Finance Act is to collect service tax from the users of service as contemplated Under Sections 12A and 12B of Central Excise Act, 1944. The second respondent rightly mentioned in all bills the details including service tax which is payable by the users.
10. In view of the discussions made above, the plea of the petitioner that provider of service shall pay tax from his income without collecting service tax from the user of services is unsustainable.
11. In the result, the writ petition is dismissed. No costs. Connected WPMP is closed.