Supreme Court of India
LAGHU UDYOG BHARATI AND ANR.versusUNION OF INDIA AND ORS.
- Citation
- 1999 INSC 293
- Decided
- 27 July 1999
- Disposal
- Case Allowed
- Bench
- B N KIRPAL
Holding
Rules 2(d)(xii) and 2(d)(xvii) of the Service Tax Rules, 1994 are ultra vires the Finance Act, 1994 and are struck down.
Summary
The petitioners, who use the services of goods transport operators and clearing‑and‑forwarding agents, challenged the validity of Service Tax Rules 2(d)(xii) and 2(d)(xvii) (as amended 1997) which made the customers or clients the “person responsible for collecting service tax”. They contended that the rules conflicted with Sections 65 and 66 of the Finance Act, 1994 (as amended 1997) which define the assessee as the service provider. The Supreme Court examined the statutory scheme, held that the charge of tax falls on the person who provides the service and is responsible for collecting the tax, and that the impugned rules were inconsistent with the Finance Act and therefore ultra vires. Consequently, Rules 2(d)(xii) and 2(d)(xvii) were struck down, while the remaining sub‑rules of Rule 2(d) were upheld. The Court also held that the exemption under Notification No. 20/98 dated 2‑June‑1998 was prospective and did not cover clearing‑and‑forwarding agents, and ordered that any tax paid by customers be refunded within twelve weeks on demand. The writ petitions were allowed and the challenged rules were quashed.
Issues considered
- Whether Service Tax Rules 2(d)(xii) and 2(d)(xvii) are ultra vires the Finance Act, 1994.
- Whether the definition of “person responsible for collecting service tax” in the Rules conflicts with Sections 65 and 66 of the Finance Act.
- Whether Section 68(1‑A) can make a customer or client the assessee for service tax.
- Validity of the other sub‑rules of Rule 2(d) (i‑xi, xiii‑xvi) under the Finance Act.
- Whether the exemption under Notification No. 20/98 is prospective and applicable to clearing‑and‑forwarding agents.
- Whether tax paid by customers/clients is refundable and the period for such refund.
Legislation cited
- Service Tax Rules, 1994s. Rule 2(d)(i), s. Rule 2(d)(ix), s. Rule 2(d)(xii), s. Rule 2(d)(xiii), s. Rule 2(d)(xvi), s. Rule 2(d)(xvii)
Subjects
service taxultra viresFinance Act 1994Service Tax Rules 1994assessmentexemptionrefundgoods transport operatorclearing and forwarding agentrule validity
Judgment
--·
LAG HU UDYOG BHARA TI AND ANR. A
ll.
UNION OF INDIA AND ORS.
JULY 27, 1999
[B.N. KIRPAL ANDS. RAJENDRA BABU, JJ.] B
Service Tax Rules, 1994:
Rules 2(d)(xii)and(xvii) (as amended in 1997)-Made customers or
clients responsible for collecting service tax and not goods transport operators C
or clearing and forwarding agents-Held: Rules ultra vires the Act itself-
Finance Act, 1994 (as amended in 1997), Ss. 65(5), (17), (28),34 and 4l(d),
lj),(m), 66, 67(i),(l) & (c), 68(1-A) & (1), 70, 71 and 93.
Rules 2(d)(i) to(ixFand (xiii) to (xvi)-Validity-Held: Ultra vires S.65
of the Finance Act, 1994. D
Finance Act, 1994: Section 93.
Service tax-Notification No. 2011998 C.E. dated 2-6-1998-Exemption
under-Heid: Prospective in nature-Tax paid by customers. or clients to be
refunded within twelve weeks on their making a demand for refund E
The petitioners were persons who utilised the services of goods
transport Oferators and clearing and forwarding agents. The petitioner
impugned the validity of Rules 2(d)(xii) and (xvii) of the Service Tax Rules,
1994 (as amended in 1997), on the ground that the said sub-rules were
contrary to the provisions of Sections 65 and 66 of the Finance Act, 1994 F
(as amended in 1997),
The taxable services provided by goods transport and certain other
category of persons were exempted from the levy of service tax under an
amendment Notification No.20/98-Central Excise (NT) dated 2-6-1998 issued G
under Section 93 of the Act.
Allowing the petition, this.Court
HELD: 1.1. Sections 67,68,70 and 71 of the Finance Act, 1994 (as
amended in 1997) relating to the machinery and collection of service tax H
1199
1200 SUPREME COURT REPORTS [1999] 3 S.C.R
A clearly show that any action which is required to be taken is qua the
assessee, namely, the person responsible for collecting the service tax which
includes his agents. (1207-H]
,.
1.2. Section 66 of the Act is a charging section. Insofar as the clearing
agents and the transporters are concerned, Section 66 has to be read with
B Section 65(5)(41), (j), and (m), according to which the taxable service is what,
in the case of clearing and forwarding agents, is rendered to their clients
and in the case of goods transporter is what is rendered to its customer. The
"person responsible for collecting the service tax", referred to in Section
66 has to be read with Section 65(28) which defines this expression to mean
C the person who is required to collect the service tax or to pay the same.
Therefore, the charge of tax is on the person who is responsible for collecting
the service tax. It is he, who by virtue of the provisions of Section 65(5) is
regarded as assessee. He is the person who provides the services.
(1208-B-C]
D 1.3. Section 68 does not in any way seek to alter or change the charge
of service tax levied under Section 66, which is the person responsible for
collecting the service tax. It also does not in any way amend any of the sub-
sections of Section 65, which contains the definitions of different expressions.
Section 68(1-A) cannot be so_interpreted as to make a person as an assessee
even though he may not be responsible for collecting the service tax. The
E service tax is levied by reason of the services, which are offered.[1208-E-G]
2.1. In relation to the services provided by other and referred to in
Rules 2(d)(i)to(xi) and (xiii) to(xvi) of the Service Tax Rules, 1994 (as amended
in 1997), the definition of the person responsible is in consonace with the
F definition of that expression occurring in Section 65 of the Act. However,
with regard to the services rendered by clearing and forwarding agents and
the goods transport operator, the definitions contained in Rule 2(d)(xii) and
(xvii), which seeks to make the customers or the clients as the assessee, is
clearly in conflict with Section 65 and 66 of the Act. [1209-C]
G 2.2. Section 68-(1-A) cannot regard a customer or a client of the
clearing and forwarding agent or of the goods transport operator being
treated as an assessee who will become liable to file a return and be subjected
to the levy of service tax and if he does not file the return, would render
himself to penalty and other proceedings. [1209-D]
H 2.3. Sections 70 and 71 clearly show that the return which bas to be
.
LAGHU UDYOG BHARTI v. U.0.1. 1201
filed pertains to the payment which are received by the person rendering the A
service in respect of the value of the taxable services. This is a type of
information, which cannot under any circumstances, be supplied by the
customer. Moreover, the operative part of Section 70(1) clearly stipulates
that it is the person responsible for collecting the service tax who is to
furnish the return. By rules, which are framed, the person who is receiving B
· the services cannot be made responsible for filing the return and paying the
tax. Such a position is certainly not contemplated by the Act. [1210-G-H)
3.1. Section 94 gives the Central Government power to make rules for
carrying out the provisions of the chapter. The chapter relates to taxing the
services, which are provided. The tax is on the value of the services and it C
is only the person who is providing the service can be regarded as an
assessee. The rules, therefore, cannot be so framed which do not carry out
the purpose of the chapter and cannot be in conflict with the same.
[1211-A-BJ
3.2. Therefore, Rule 2(d)(xii) and (xvii) of the Rules, insofar as they D
made persons other than the clearing and forwarding agents or the persons
other than the goods transport operators as being responsible for collecting
the service tax, are ultra vires the Act itself. [1211-C)
4. The amendment Notification No.20/CJS-Central Ew:cise (N.T.) dated 2-
6-1998 issued under Section 93 of the Finance Act, which provided ror E
exemption from service tax, is prospecitve. Therefore, it does not grant
exemption in regard to clearing and forwarding agents. It is for this reason
that the petitioners have continued to persue with these petitions.[1211-D)
5. Any Tax, which has been paid by custome.-s or clients of the clearing
and forwarding agents or of the goods transport operators, shall be refunded p
within twelve weeks on their making a demand for refund. [1211-E)
CIVIL ORIGINAL JURISDICTION : Wdt Petition (C) No. 53 of
1998 Etc. Etc.
Under Article 32 of the Constitution of India.
G
V.A. Bobde, R.C. Venna, C. Siddharth, Ravi Prakash Gupta, Kavin Gulati,
C.N. Sreekumar, L.K.Pandey, Kailash Vasdev, Mrs. Rukman Menon, Satvir
Venna, R. Santhanam, Ashok k Singh, Ravinder Singh, (Santha K. Mahale) for
P.Mahale, (Dr. Arvind Gupta) in person for applicant in IA. No.6 in W.P.No.53/
98) (U.A. Rana, Ms Arshi Suhail,) Mis. Gagrat & Co., Yashank Adhyaru, (D.K. H
1202 SUPREME COURT REPORTS (1999] 3 S.C.R. ·
I
A Garg) (NP) N.K. Bajpai, Hemant Sharma T.A. Khan and P. Parmeswaran for the
appearing parties.
The Judgment of the Court was delivered by
KIRPAL, J. The petitioners in these cases are the persons who are
B utilising the services of goods transport operators and of clearing and
forwarding agents and are seeking to impugn the validity of Rule2(xii) and
(xvii) of the Service Tax Rules, as amended in 1997, on the ground that the
said sub rules are contrary to the provisions of Sections 65 and 66 of the
Finance Act, l 994, whereby service tax was sought to be levied by the
parliament.
c
A brief legislative history is that service tax was, for the first time,
imposed by the Finance Act, 1994. This tax was proposed on three type of
services which were rendered. By the Finance Act, 1997 the Legislature
sought to cast the net much wider. It amended certain provisions in the Act
and, thereafter rules which had originally been framed in 1994 were also
D amended.
By chapter V of the finance Act, as amended by the Finance Act, 1997
service tax is imposed in relation to the taxable services which are provided.
Section 65 is the definition section. Some of the sub-clauses which are
relevant for our purpose read as under :
E
"65 (5). "Assessee" means a person responsible for collecting the
Service tax and includes his agent;"
(17). "goods transport operator" means any commercial concern
engaged in the transportation of goods but does not include a courier
p agency;
(28). "person responsible for collecitng the service tax" means a
person who is required to collect service tax under this chapter or is
required to pay any other sum of money under this Chapter and
includes every person in respect of whom any proceedings under this
G Chapter have been taken;
(34). "service tax" means tax chargeable under the provisions of
this Chapter;
(41) "taxable service" means any service provided,
H (a) to an investor, by a stock-broker in connection with the
LAGHU UDYOG BHARTI v. U.0.1. [KIRPAL, J.] 1203
sale or purchase of securities listed on a rerngnised stock exchange; A
(b) to a subscriber, by the telegraph authority in relation to a telephone
connection;
(c) to a subscriber, by the telegraph authority in relation to a pager;
(d) to a policy holder, by, an insurer carrying on general insurance B
business in relation to general insurance business;
(e) to a client, by an advertising agency in relation to advertisment in
any manner;
(f) to a customer, by a courier agency in relation to door-to-door C
transportation of time-sensitive documents, goods or articles;
(g) to a client, by an consulting engineer in relation to advice,
consultancy or technical (assistance in any manner in one or more)
disciplines of engineering;
D
(h) to a client, by a custom house agent in relation to the entry or
departure of conveyances or the import or export of goods;
(i) to a shipping line, by a steamer agent in relation to a ship's
husbandry or dispatch or any administrative work related thereto as
well as the booking, advertising or canvassing of cargo, including E
container feeder services;
G) to a client, by a clearing and forwarding agent in relation to a
clearing and forwarding operations in any manner;
(k) to a client, by manpower recruitment agency in relation to the F
recruitment of manpower in any manner;
(I) to a customer, by an air travel agent in relation to the booking of
passage for travel by air;
(m) to a customer, by a goods transport operat()r in relation to carriage
of goods by road in a goods carriage; G
(n) to a client, by an outdoor caterer;
(o) 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; H
1204 SUPREME COURT REPORTS [1999) 3 S.C.R.
A (p) to a client, by a mandap keeper in relation to the use of the 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;
(q) to any person, by a tour-operator is relation to a tour;
B (r) to any person, by a rent a cab scheme operator in relation to the
renting of a cab;
Section 66 is the charging section which, after its amendment in 1997,
reads as under :
"66. Charge of service tax : -
c
(1) On and from the commencement of this Chapter, there shall be
charged a tax (hereinafter referred to as the service tax), at the rate of
five per cent of the value of the taxable services referred to in sub-
clauses (a),(b) and (d) of clause (41) of Section 65 which are provided
to any person by the person ,responsible for collecting the service tax.
D
.(2) With effect from the date notified under section 85 of the Finance
(No.2).Act, 1996 (33 of 1996), there shall be charged a service tax at
the rate of five per cent of the value of the taxable services referred
to in sub-clauses (c), (e) and (f) of clause 41 of Section 65 which are
provided to any person by the person responsible for collecting the
E
service tax.
(3) With effect from the date notified under section 84 of the Finance
Act, 1997, there shall be charged a service· tax at the rate of five per
c~nt of the value of the taxable services referred to in sub clauses _(g),
F (h), (i), G),(k), (m), (n), (o), (p), (q) and (r) ofdause (41) of section 65
which are provided to any person by the person responsible for
collecting the service tax.
Sections 67 and 68 contain the method in which the taxable services are
to be valued, collection and recovery of service tax, are as under :
G
67. Valuation of taxable services/or charging tax:-For the purposes
of this Chapter, the value of taxable services,-
(a) in relation to service provided by stock broker, shall be aggregate
of the commission or brokerage charged by him on the sale or purchase
H of securities from the investors and includes t~e commission or
LAGHU UDYOG BHARTI v. U.0.I. [KIRPAL, J.] 1205
brokerage paid by the stock-brobr to any sub-broker; A
..
(b) in relation to telephone connections or pagers provided to the
subscribers, shall be the gross total amount (including adjustments
made by the telegraph) authority from any deposits made by the
subscribers at the time of applications for telephone connections or
pagers) received by the telegraph authority from the subscribers. B
Explanation-For the removal of doubts, it is hereby declared that
the value of taxable service in this clause shall not include the initial
deposits made by the subscribers at the time of applications for
telephone connections;
(c) in relation to services of general insurance business provided to
c
the policy holders, shall be the total amount of the premium received
by the insurer from the policy holder;
(d) in relation to service provided by an advertising agency to a client
shall be the gross amount charged by such agency from the client for
services in relation to advertisement.
D
(e) in relation to service provided by a courier agency to a customer
shall be the gross amount charged by such agency from the customer
for services in relation to door-to-door transportation of time sensitive
documents, goods and articles;
E
(t) in relation to service provided by a consulting engineer to a client,
shall be the gross amount charged by such engineer from the client
--- for advice, consultancy or technical assistance in any manner in one
or more disciplines of engineering;
(g) in relation to service provided by a custom house agent to a client, E
'..- shall be the gross amount charged by such agent from the client for
service rendered in any manner in relation to the entry or departure·
g,
of conveyances or in relation to the import or export of goods;
(h) in relation to service provided by a steamer agent tD a shipping
line, shall be the gross amount charged by such agent from the G
shipping line for services in relation to a ship's husbandry or dispatch
or any administrative work related thereto or in relation to the booking,
advertising or canvassing of cargo, container feeder services, including
the commission paid to such agent;
(i) in relation to service provided by clearing and forwarding agent H
1206 SUPREME COURT REPORTS [1999) 3 SfR.
A to a client, shall be the gross amount charged by such agent from the
client for services of cleaning and forwarding operations in any manner;
B
G) id relation to service provided by a manpower recruitment agency
to a client, shall be the gross amount charged by such agency from
the client in relation to the recruitment of manpower in any manner;
-
(k) in relation to service provided by an air travel agent to a customer,
shall be the gross amount charged by such agent from the customer
for services in relation to the booking of from the customer for services
in relation to the booking of passage for travel by air excluding the
air fare but including the commission, if any, received from the airline
c in relation to such booking;
(1) 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
D 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
E 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
E the client for services ·in relation to the setting up of a panda! 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;
(o) in ..-elation to service provided by a mandap keeper to a client shall
G be the gross amount charged by such keeper from the client for the
use of mandap including the facilities provided to the client in relation
to such use and also the charges for catering, if any;
(p) in relation to service provided by a tour operator to a client shall
be the gross amount charged by such operator from the client for
H services in relation to a tour and includes the charges for any
...
LAGHU UDYOG BHAR.TI v. U.0.1. [KIRPAL, J.) 1207
.... accommodation, food or any other facilities provided in relation to
such tour;
A
(q) in relation to the service provided by a rent a cab scheme operator
to any person, shall be the gross amount charged by such operator
from such person for services. in relation to the renting of a cab and
includes such rental. B
68. Collection and recovery of service tax:-
(1) Every person providing taxable service to any person shall collect
the service tax at the rate specified in section 66.
~
(I A) Notwithstanding anything contained in sub-section (I) of section c
68, in respect of the taxable service referred to in items (g) to (r) of
sub-clause (41) of section 65, the service tax for such service shall be
collected from such person and in such manner as may be prescribed
at the rate specified in section 66 and aU the provisions of this
Chapter shall apply to such person as if he is the person responsible D
for collecting the service tax in relation to such service.
(2) The service tax collected during any calendar month in accordance
with the provisions of sub-section (I) or sub-section (IA), as the case
may be, shall be paid to the credit of the Central Government by the
15th of the month immediately following the said calendar month. E
.... (3) Any person, responsible for collecting the service tax, who fails
to collect the tax in accordance with the provisions of sub-section
(1) or sub-section (IA), as the case may be, shall, notwithstanding
such failure, be liable to pay such tax to the credit of the Central
,_
Government within seventy-five days from the end of the month in E
which the service was rendered."
The procedure which has to be followed for collecting the service tax
is prescribed by Section 70 which, inter alia, requires the person responsible
for collecting the service tax to file the return in the prescribed form.
Assessment is made under Section 71 and there are other sections in the said G
Chapter which deal with levy and collection of this tax and also provide for
.,,_ imposition of penalty etc. in relation thereto.
A perusal of these provisions relating to the machinery of the levy and
collection of service tax clearly shows that any action which is required to
be taken is qua the assessee, namely, the person responsible for collecting H
1208 SUPREME COURT REPORTS (1999] 3 S.C.R:
I I
A the service tax which includes his agents.
Section 66, which is a charging section provides that the charge of taX
at the rate of 5% is on the value of the taxable services which are provided
to any person by the persons responsible for collecting the service tax.
Insofar as the clearing agents and the transporters are concerned Section 66
B has to be read with Section 65(d) (41), (J) and (M), according to which the
taxable service is what, in the case of clearing and forwarding agents, rendered
to his client and in the case of goods transporter is rendered to its customer.
The "person responsible for collecting the service tax", referred to in Section
66 has to be read with Section 65(28) which defines this expression to mean
C the person who is required to collect the service tax or to pay the same. It
is clear from the reading of these provisions that according to the Finance
Act the charge of tax is on the person who is responsible for collecting the
service tax. It is he, who by virtue of the provisions of Section 65(5) is
regarded as assessee. He is the person who provides the service.
D Section 68(1A) is a special provisions which has been inserted by the
Finance Act, 1997. According to Section 68(1) "every person who was
providing the taxable service is the one who is required to collect the service
tax at the rate specified in Section 66." With respect to the taxable services
referred in item G to R of sub-clause (41) of Section 65, Section 68(1-A) ..
E provides that the service tax for such service shall be collected from such
person and in such manner as may be prescribed and to such person all the
provisions shall apply as if he is the Person responsible for collecting the
service tax in relation to such service. As we read Section 68 it does not in
any way seek to alter or change the charge of service tax levied under Section
66, which is on the person responsible for collecting the service tax. It also
E does not to our mind, in any way, amend any of the sub-sections of Section
65 which contains the definitions of different expressions. All that Section
68(1-A) enables to be done is that with regard to the assessees or the persons
who are responsible for collecting th~ service tax, the individual or the officer
~,
concerned can be identiffod and it is that person who would be a person
G responsible for collecting the service tax. In other words this provision,
namely, Section 68(1-A) cannot be so interpreted as to make a person as an
assessee even though he may not be responsible for collecting the service .
tax. The service tax is levied by reason of the services which are offered. The
imposition is on the person rendering the service. Of course, it may be an
indirect tax, it may be possible that the same is passed on to the customer
H but as far as the levy and assessment is concerned it is the person rendering
LAGHU UDYOG BHARTI v. U.0.1. [KIRPAL, J.] 1209
... the service who along can be regarded as an assessee and not the customer. A
This is the only way in which the provisions can be read harmoniously.
By amending the definition of "person responsible for collecting of
service tax" in the impugned rules with regard to services provided by the
clearing and forwarding agents and the goods transport operator a person
responsible is said to be the client or the customer of the clearing and B
forwarding agents and the goods transporter. In relation to the services
provided by others and referred to in sub-rule (i) to (xi) and (xiii) to (xvi) of
Rule 2(d), the definition of the person responsible is in consonance with the
definition of that expression occurring in Section 65 of the Act. However, with
regard to the service rendered by clearing and forwarding agents and the C
goods transport operator the definitions contained in Rule 2(d)(xii) and (xvii),
which seeks to make the customers or the clients as the assessee, is clearly
in conflict with Sections 65 and 66 of the Act.
Section 68(1-A) cannot, to our mind, regard a customer or a client of the
clearir:ig and forwarding agent or of the goods transport operator being D
treated as an assessee who will become liable to file a return and be subjected
to the levy of service ~ax and if he does not file the return, would render
himself to penalty and other proceedings. In this connection we may refer to
Sections 70 and 71 which read as under :
70. Person responsible for collecting service tax to furnish prescrib~d E
return:-
( l) Every person responsible for collecting the service tax shall furnish
or cause to be furnished to the Central Excise Officer in the prescribed
form and verified in the prescribed manner, a quarterly return, within
fifteen days of the end of the preceding· quarter, showing - E
(a) the aggregate of payments received in respect of the value of
taxable services;
(b) the amount of service tax collected;
( c) the amount of service tax paid to the credit of the Central G
Government; and
( d) such other particulars as may be prescribed;
(2) In the case of any person who, in the opinion of the Central Excise
Officer, is responsible for collecting service tax under this Chapter but H
1210• SUPREME COURT REPORTS [1999] 3 S.C.R.
A who has not furnished a return under sub-section (1), the Central
Excise Officer, may before the expiry ·of the quarter in which the return
is to be furnished, issue a notice to such person and serve it upon
him, requiring him to furnish within thirty days from the date of "-_.·
service of the notice the return in the prescribed form and verified in
the prescribed manner setting forth the prescribed particulars.
B
(3) Any person responsible for collecting the service tax wh() has not
furnished the return within the time allowed under sub-section (1) or
sub-section (2) or having furnished a return under sub-section (1) or
sub-section (2), discovers any omission or wrong statement therein,
may furnish a return or a revised return, as the case may be, at any
c time before the assessment is made.
71. Assessment :
(I) For the purposes of making an assessment under this Chapter, the
Central Excise Officer may serve on any person, who has furnished
D a return under section 70 or upon whom a notice has been served
under sub-section (2) of Section 70 (whether a return has been furnished
or not), a notice requiring him on a date therein to be specified , to
produce or cause to be produced such accounts or documents or
other evidence as the Central Excise Officer may require for the notice
requiring the production of such further accounts or documents or
E other evidence as he may require.
(2) The Central Excise Officer, after considering such accounts
documents or other evidence, if any, as he has obtained under sub-
section (1) and after taking into account any relevant material which
he has gathered, shall by an order irr writing, assess the value of
F taxable service arid the amount of service tax payable on the basis of
such assessment."
These sections clearly show that the return which has to be filed
pertains to the payment which are received by the person rendering the
G service in respect of the value of the taxable services. Surely, this is a tYJ>e
of information which cannot under any circumstances, be supplied by the
customer. Moreover the operative part of sub-section (1) of Section 70 clearly
stipulates that it is a person responsible for collecting the ·service tax who is
to furnish the return. By rules which are framed, the person who is receiving
-
the services cannot be made responsible for filing the return and paying the
H tax. Such a position is certainly not contemplated by the Act.
LAGHU UDYOG BHARTI v. U.O.l. [KIRPAL, J.] 1211
~ Section 94 gives the Central Government power to make the rules. These A
rules are to be made for carrying out the provisions of the chapter. The
chapter relates to taxing the services which are provided. The tax is on the
value of the services and it is only the person who is providing the service
can be regarded as an assessee. The rules, therefore, cannot be so framed
which do not carry out the purpose of the chapter and cannot be in conflict B
with the same.
We have no hesitation in holding that the provisions of Rule 2(d)(xii)
and (xvii), insofar 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. The C
said sub-rules are accordingly quashed.
At this juncture it is pertinent to notice that by an amendment
Notification No. 20/98-Central Excise (N.T.) dated 2nd June, 1998 issued under
Section 93 of the Finance Act taxable services provided by goods transport
operators, outdoor caterers, pandal and shamiana contractors were exempted D
from the levy of the said tax. This exemption was, however, prospective and
it does not grant exemption in regard to clearing and forwarding agents. It is
for this reason that the petitioners have continued to persue with these
petitions.
For the aforesaid reasons the transferred cases and the writ petitions E
except WP(C) Nos. 5199, 228 and 262/98 are allowed and any tax which has
been paid by customers or clients of the clearing and forwarding agents or
of the goods transport operators shall be refunded within twelve weeks on
their making a demand for refund.
All the intervention applications are dismissed except those which were F
allowed earlier.
WP. (C) No. 262of1998
The writ petition is dismissed as withdrawn.
G
WP. (C) Nos. 228 of 1998 and 5 of 1999
Learned counsel for the petitioners wishes to withdraw both these writ
petitions with liberty to raise the contentions before the authorities under the
Act if and when an appeal is filed by the members of the petitioner-Association.
The writ petitions are, accordingly, dismissed as withdrawn. H
1212 SUPREME COURT REPORTS [1999] 3 S.C.R.
'
I.A.No. 6199 in W.P. {C) No. 53 of 1998
"
This is an application for intervention in W.P.(C) No. 53 of 1998. The
said writ petition s~ds disposed of. As far as the applicant is concerned,
he is seeking to raise questions and contentions which were raised in W.P.
(C) No. 53 of 1998. The writ petition of the applicant is still pending in the
High Court which the applicant is at liberty to proceed with. As far as this
application for intervention is concerned, no further orders are called for.
v.s.s. Petitions allowed.
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