2011 (8) TMI 608 - HC - Service Tax

Court rules on service tax liability, rejecting retrospective application, upholding liability from 13.5.2005 onwards.

The Court upheld the Single Judge's decision, ruling that the respondents were only liable to pay service tax from 13.5.2005 onwards due to the lack of ... Asseessee recipient of Service of Good Transport Agency - Amendment to Sec 70 from 13.5.05 receiver liable to pay tax - ST3 in rule 7 prescribed on 21.10.2005 - Tax paid from 13.5.2005 - Revenue seek to tax the assessee with retrospective effect from the date of introduction of tax on the transport service i.e. from 1.1.2005 - Held That:- When the charging section requires payment of tax in the manner prescribed, the levy so introduced should be in the manner and in accordance with the procedure prescribed. We do not think the provisions on levy and collection are complete unless provision is introduced requiring assessees to file return and forms are prescribed for filing the return for payment of tax. Liability declared only with effect from 13.5.05. Issues:Challenge to liability on respondents to pay service tax on payments to transport agencies, compatibility of Rule 2(l)(d)(v) with statutory provisions, applicability of amendments to levy service tax on respondents, requirement of filing return and payment of tax.Analysis:1. The judgment involves the challenge to the liability of respondents to pay service tax on payments made to transport agencies for the transport of goods by road. The Central Government and Commissioner of Service Tax filed appeals against the judgment declaring the liability. The Single Judge's decision was based on the conflict between statutory provisions and Rule 2(l)(d)(v), following the Supreme Court's ruling in Laghu Udyog Bharati v. Union of India. The respondents started remitting service tax from 13.5.2005 onwards, following the introduction of Section 70(2) of the Finance Act, 1994.2. The main issue for consideration was whether the amendments introduced were sufficient to levy and demand service tax on the respondents for the services availed from transport agencies for the transport of goods by road from 1.1.2005. The amendments included the introduction of sub-section (50b) to Section 65, Section 66 for levy of service tax, Section 68(2) for payment of service tax, and Section 70 for filing returns. The respondents argued that the introduction of Section 70(2) was necessary for them to be liable to furnish returns and pay tax.3. The Court analyzed the amendments made prior to the introduction of Section 70(2) to determine if they were sufficient to levy service tax on the respondents. It was noted that Section 68(2) required payment of service tax in the prescribed manner, and Section 70(2) introduced the requirement for recipients of service to furnish returns and remit tax. The Form ST-3 for filing returns was prescribed under Rule 7, notified by the Government on 21.10.2005. The Court highlighted the lack of retrospectivity for Section 70(2) and the Form prescribed under Rule 7, leading to the conclusion that the respondents were not liable to pay tax before 13.5.2005.4. The Court rejected the department's argument that the amendments were sufficient to bring the respondents within the scope of the levy from 1.1.2005. It emphasized the importance of introducing provisions requiring assessees to file returns and prescribed forms for payment of tax. The Court upheld the Single Judge's findings, stating that the respondents were only liable to pay tax with effect from 13.5.2005. The Writ Appeals were dismissed, and the liability of the petitioners was declared from the specified date.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Court's reasoning behind its decision.