Karnataka High Court
Shriram Properties Ltd. Rep. By Its ... vs The Commissioner Of Service Tax And ... on 11 December, 2006
Equivalent citations: (2007)208CTR(KAR)141, [2007]8STJ415(KARNATAKA), 2007[7]S.T.R.3, [2007]7STT131, (2007)5VST228(KARN)
Author: D.V. Shylendra Kumar
Bench: D.V. Shylendra Kumar
ORDER D.V. Shylendra Kumar, J.
Page 0195
1. Petitioner is an assessee liable to tax under the provisions of the Finance Act 32 of 1994 [for short 'the Act'] as amended from time to time and the activity which is subjected to tax in so far as petitioner is concerned is construction of complexes in terms of the charging section of the Act i.e., 5% of the value of services is subjected to tax on this kind of service.
2. The present writ petition is in the context of the issuance of the exemption notification No. 1/2006 -Service Tax dated 1-3-2006 [copy at Annexure-C] under which certain concession is extended to various classes of service providers including the service provider in construction of complex activities. But, unfortunately for the petitioner, the concession/exemption comes with a condition. A particular condition with which the petitioner is aggrieved with is the proviso to the Notification which reads as under:
Provided that this notification shall not apply in cases, where -
(i) the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has been taken under the provisions of the CENVAT Credit Rules, 2004; or
(ii) the service provider has availed the benefit under the notification of the Government of India in the Ministry of Finance [Department of Revenue] No. 12/2003-Service Tax, dated the 20th June, 2003[G.S.R. 503 (E), dated the 20th June, 2003] Page 0196
3. The effect of this condition, to put it simply is that those persons who have to pay service tax in respect of the service of construction of complex who have availed of what is known as CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services used for providing such taxable service are excluded from the benefit of this Notification and this is what hurts the petitioner. Though the notification, in one sense, dangles a carrot before the petitioner, unfortunately for the petitioner though it has remained a carrot at a distance and is not useful for the petitioner because of the condition!
4. The petitioner has approached this Court seeking relief on various grounds, inter alia, that it is one which has the effect of enhancing the tax liability of the petitioner; that the notification cannot create an artificial liability on the petitioner to create a liability even in respect of value of goods involved in the activity by not confining to the service component of the value of the construction; that it also brings about an artificial classification, in the sense that whereas those who have not availed of the CENVAT credit facilities are given the benefit of this Notification, those who have availed of the CENVAT credit facilities are deprived of the benefit of this notification and therefore the notification is discriminatory, bad in law, unconstitutional and therefore the proviso which brings about such an effect on persons like the petitioner should be declared to be so and only the proviso should be struck down etc.,.
5. Notices had been issued to the respondents and the respondents have entered appearance through Sri. C. Shashikanth, learned Standing Counsel for the Central Government and also filed statement of objections. It is urged that the proviso imposing the condition subject to which the concession under the Notification can be availed of is well within the powers of the Central Government under Section 93 of the Act; that though the earlier notification No. 18/2005-ST did provide a larger benefit to persons like the petitioner, it has been superseded by the present notification No. 1/2006-ST; that the present notification expressly denies the benefit under it to those who are availing the CENVAT credit on services also; that it is not incumbent, on the respondents to continue to extend a particular benefit which had been extended as under Notification No. 18/2005-ST; that the principle of promissory estoppel cannot be invoked in matters of taxation particularly issue of exemption notification under Section 93 of the Act being in the nature of exercise of the power of delegated legislation; that the writ petition is without merit and is liable to be dismissed.
6. What is essentially urged by Sri. Sarangan, learned Senior Counsel appearing for the petitioner is that the condition imposed is one which really deprives the benefits to persons like the petitioner; that, in fact, the present notification is only a successor to a similar earlier notification No. 18/2005 dated 7-6-2005 [copy at Annexure-A] which the petitioner was availing and was getting some real benefit, but the present notification which has come in place of the earlier notification, having been followed with another notification rescinding the earlier notification, the petitioner is compelled to seek refuge only under the present notification which is not necessarily one extending any benefit to the petitioner as in fact the benefit is expressly Page 0197 denied to persons like the petitioner who have opted for claiming benefit of CENVAT credit of service tax on input services; that therefore the petitioner is virtually discriminated in the matter of extending concession under the present notification.
7. The notification under Annexure-C which is one in exercise of the powers conferred under Sub-section (1) of Section 93 of the Finance Act, 1994 [32 of 1994] is one for the purpose of granting certain concessions to certain class of service providers. Section 93 of the Act reads as under:
93. Power to grant exemption from service-tax:- The Central Government may, if it is satisfied that it is necessary so to do in the public interest, by notification in the Official Gazette, exempt generally or subject to such conditions as may be specified in the notification, taxable service of any specified description from the whole or any part of service tax leviable thereon.
8. The exemption itself in terms of this section can be one which is granted generally or subject to such conditions as may be specified in the Notification. In the present case, the particular condition which the petitioner is aggrieved with is the condition of option given to a person like the petitioner to seek benefit of either the CENVAT credit of duty on service tax input services or to avail benefit under the present notification.
9. In fact, it may be noticed that the notification is one which provides for a different manner of arriving at the liability and after so quantifying, if it is found that the tax payable by a person is higher under the normal provisions of the Act, then to the extent of difference of liability as between the tax liability determined in terms of the notification and the liability actually payable, the person is provided the benefit of concession/exemption. Therefore, the concession of this nature in the first instance comes only if the method of determination of liability as suggested in the notification is less than the actual liability. In a given case, if the liability is much more or equal to the liability under the provisions of the Act as otherwise determined, then there is no benefit to a person under the present notification. In a notification of this nature, if the person is put to election that either he can opt for CENVAT credit of duty on service tax input services or to avail benefit under the present notification which is an option which is extended to a person which he can seek for, avail of or ignore, no grievance can be made that putting a person to such option is bad.
10. The notification has never the effect of either enhancing the tax liability of the petitioner nor does it per se discriminate against the petitioner as a concession which is subject to a condition as under the present notification, in the sense that, a person claiming benefit under one particular provision is not entitled for benefit under the other, cannot be said to be a discriminatory provision.
11. I do not find any scope for striking down a notification of this nature which if at all, has to be examined and understood as a whole and not in piecemeal. The exemption notification always come subject to the condition to which the exemption is granted and there is no question of courts dissecting the notification of this nature to extend the benefit but not to Page 0198 insist compliance of the condition for a particular assessee. It is for the legislature to take care of what class of persons certain benefits are extended and in what manner etc.,.
12. As of now, I do not find any act of discrimination under the present notification which necessitates the notification itself to be quashed.
13. However, it is open to the petitioner to avail of such other remedies as are open to it under the statutory provisions.
14. Reserving such liberty, this writ petition is dismissed.