Service tax levy by notification failed for lack of machinery provision; consequential recovery notices could not survive.

Notifications issued under Section 68(2) of the Finance Act, 1994 for levy of service tax on transportation of goods by vessel from outside India to customs stations in India were found unsustainable for want of a proper machinery provision and for being inconsistent with constitutional constraints invoked under Articles 14, 19(1)(g), 245 and 269A. On that basis, the consequential show cause notices for recovery of service tax also could not survive and were quashed.

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Issues: (i) Whether Notification Nos. 14/2017, 15/2017 and 16/2017 dated 13.04.2017, issued under Section 68(2) of the Finance Act, 1994, were liable to be struck down as ultra vires and unconstitutional; (ii) Whether the consequential show cause notices issued for recovery of service tax could be sustained.

Issue (i): Whether Notification Nos. 14/2017, 15/2017 and 16/2017 dated 13.04.2017, issued under Section 68(2) of the Finance Act, 1994, were liable to be struck down as ultra vires and unconstitutional.

Analysis: The impugned notifications were assailed as travelling beyond the scope of Section 68(2) of the Finance Act, 1994 and as offending Articles 14, 19(1)(g), 245 and 269A of the Constitution of India. The Court noted that the issue had already been decided in favour of the assessee in earlier decisions, and that the impugned notifications suffered from the absence of a proper machinery provision to fasten the tax burden on the petitioners in the context of transportation of goods by vessel from a place outside India up to the customs stations of clearance in India.

Conclusion: The notifications were quashed and held unsustainable.

Issue (ii): Whether the consequential show cause notices issued for recovery of service tax could be sustained.

Analysis: Once the notifications forming the basis for levy and recovery were quashed, the proceedings founded on those notifications could not survive.

Conclusion: The show cause notices were quashed.

Final Conclusion: The writ petitions succeeded and the impugned notifications and consequential proceedings were set aside, leaving no surviving demand against the petitioners.

Ratio Decidendi: A levy attempt made through notifications under Section 68(2) of the Finance Act, 1994 cannot be sustained where the statutory framework does not provide the necessary machinery to fasten the tax liability on the persons sought to be taxed.

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