Retrospective service tax validation upheld after statutory amendment cured the defect in the earlier Supreme Court ruling.

Retrospective amendments in sections 116 and 117 of the Finance Act, 2000 were upheld as valid because they removed the statutory basis of the earlier Supreme Court ruling by altering the charging, machinery and assessee provisions with retrospective effect. The Legislature could cure the defect identified in the prior decision by changing the law, and the amended scheme validly fastened service tax liability on the person engaging the service or paying freight. The constitutional challenge under Articles 14, 19(1)(g) and 265 failed, as the levy remained within Parliament's competence and the classification introduced by the amendment was not unconstitutional.

---

---

Issues: Whether sections 116 and 117 of the Finance Act, 2000 validly removed the basis of the earlier Supreme Court ruling and constitutionally authorized levy and recovery of service tax from customers of goods transport operators and clearing and forwarding agents.

Analysis: The statutory amendment retrospectively altered the charging and machinery provisions and substituted the definition of assessee so as to fasten liability upon the person engaging the service or paying freight, thereby curing the defect noticed earlier. The validating provisions were held to be within legislative power because the Legislature may remove the foundation of a judicial decision by retrospectively changing the law, though it cannot merely overrule a decision by declaration. The amended scheme was found to have diluted the earlier ruling and to make the levy workable by aligning liability, collection and valuation with the statutory framework. The constitutional challenge under Articles 14, 19(1)(g) and 265 failed because the levy remained a tax on services within Parliament's competence and the classification adopted by the amendment was not unconstitutional.

Conclusion: The amended and validating provisions were upheld as valid and constitutional, and the petitioners were held liable to the extent contemplated by the retrospective amendment.

---