2015 (4) TMI 290 - HC - Service Tax

Court dismisses writ petition on exemption notification amendment, deems it remedial, not clarificatory.

The court dismissed the writ petition, ruling that the amendment to the exemption notification is remedial and not clarificatory, with prospective effect ... Writ of prohibition - clarificatory (declaratory) amendment - retrospective effect of statutory amendment - remedial (prospective) amendment - exemption under mega exemption Notification No.25/2012 ST - health care services exemptionWrit of prohibition - jurisdiction to entertain challenge to exemption - Maintainability of the writ petition under Article 226 seeking prohibition against collection of service tax. - HELD THAT: - The Court examined whether the petition, which challenges the validity and retrospective operation of an amendment to the mega exemption notification, raises a determination of rate of duty falling exclusively within the jurisdictional scheme referred to in Section 35G(1) of the Central Excise Act/Section 83 of the Finance Act. The Court held that the relief prayed is one of prohibition to restrain respondents from collecting service tax on the basis that the amendment is clarificatory and should operate retrospectively; accordingly the central question is characterization of the amendment and not determination of rate of duty. Therefore the petition is maintainable under Article 226 and the bar under the cited provisions does not preclude the High Court from examining the pleaded contention as to retrospective/clarificatory effect of the amendment (court's reasoning and conclusion recorded). [Paras 15]Writ petition is maintainable.Clarificatory (declaratory) amendment - retrospective effect of statutory amendment - remedial (prospective) amendment - Whether the insertion of Entry No.2A by Notification No.4/2014 ST is clarificatory/declaratory (and hence retrospective) or remedial (and hence prospective). - HELD THAT: - Applying the established presumption that amendatory provisions are prima facie prospective unless an express or necessarily implied intention for retrospectivity exists, the Court analysed the nature and language of the amendment inserting Entry 2A to the mega exemption notification. The Court found no express provision or clear implication making the amendment retrospective to 20.6.2012. The amendment, which for the first time granted exemption specifically to services provided by cord blood banks for preservation of stem cells, operates to relieve such establishments from levy from the date the amendment came into effect. The factual position that the petitioner had paid tax for the period prior to the amendment and that the amendment took effect on 17.2.2014 led the Court to conclude the amendment is remedial/prospective in nature rather than merely clarificatory; had retrospective effect been intended the legislature would have said so. The Court distinguished precedents relied on by the petitioner where the subsequent instrument was merely declaratory or merely clarified an antecedent exemption. [Paras 22, 24, 25, 26, 27]The amendment by Notification No.4/2014 ST is not clarificatory/declaratory and does not have retrospective effect; it is remedial and operates prospectively from 17.2.2014.Health care services exemption - administrative determination of applicability - Whether the Court determines on merits that the petitioner's activities fall within the exemption (i.e., whether Entry 2A applies to the petitioner). - HELD THAT: - The Court expressly refrained from adjudicating whether the petitioner's activities fall within the ambit of 'health care services' or whether the amendment applies to the petitioner. Given that departmental scrutiny and investigation/assessment proceedings were pending, the Court left the question of applicability to the competent authorities/adjudicating forum to determine after evidence and investigation. The Court clarified that no finding on that substantive issue is being made and the authorities remain at liberty to decide the matter in accordance with law. [Paras 16, 24, 27]No adjudication on whether the petitioner's activities are covered by the exemption; that question is left to the authorities for determination.Final Conclusion: The writ petition is maintainable but is dismissed on merits insofar as the petitioner sought retrospective operation of the amendment. The Court holds that insertion of Entry No.2A is not a clarificatory/declaratory amendment and does not have retrospective effect, and leaves the question whether the petitioner's activities fall within the exemption to be decided by the competent authorities. Issues Involved:1. Maintainability of the writ petition.2. Whether the amendment to the exemption notification is clarificatory and should be given retrospective effect.3. Determination of whether the services provided by the petitioner fall within the ambit of 'health care services.'Issue-wise Detailed Analysis:1. Maintainability of the Writ Petition:The respondents argued that the writ petition is not maintainable because it involves the determination of the rate of duty, which falls under the exclusive jurisdiction of the Hon'ble Supreme Court. However, the court held that the issue in the writ petition is whether the amendment is clarificatory and should be given retrospective effect. Therefore, the writ petition is maintainable as it does not involve the determination of the rate of duty.2. Whether the Amendment to the Exemption Notification is Clarificatory and Should be Given Retrospective Effect:The petitioner argued that the amendment to the exemption notification by inserting Entry No.2A should be considered clarificatory and given retrospective effect from 01.07.2012. The court examined whether the amendment is declaratory/clarificatory or remedial. It was held that usually, an amendment takes effect from the date of its enactment unless expressly stated otherwise. The court referred to several Supreme Court decisions to support this principle. The court concluded that the amendment is remedial in nature and can only have a prospective effect from 17.02.2014. The court noted that if the legislature intended retrospective effect, it would have explicitly mentioned it. Therefore, the amendment cannot be given retrospective effect.3. Determination of Whether the Services Provided by the Petitioner Fall Within the Ambit of 'Health Care Services':The court clarified that it would not render any finding on whether the petitioner's activities fall within the ambit of 'health care services.' This determination is to be made by the authorities based on scrutiny of documents and thorough investigation. The court emphasized that the authorities are at liberty to decide this aspect in accordance with the law.Conclusion:The writ petition was dismissed, and the court held that the amendment to the exemption notification is remedial and not clarificatory, thus having only a prospective effect from 17.02.2014. The court did not make any determination on whether the petitioner's services fall within 'health care services,' leaving this to be decided by the appropriate authorities.