M/S.United Spirits LTD. vs. Union Of INDIA
Held
The Court noted that a letter dated July 31, 2018, issued by the Technical Officer (TRU-II), Government of India, Department of Revenue, was presented. This letter indicated that the GST Council, in its 26th meeting, decided that GST/Service Tax was not leviable on license fees and application fees for alcoholic liquor for human consumption. This decision was accepted by the Central Government for implementation, and field formations were requested to keep show cause notices issued for such levies in abeyance. The Court also took note of a Delhi High Court order dated August 10, 2018, which disposed of a similar writ petition in light of this letter. Placing reliance on this letter and the Delhi High Court's judgment, the petitioner's counsel submitted that the challenge to the relevant provisions of law had become moot. Consequently, the Court held that the writ petition stood disposed of.
Facts
The petitioner filed a writ petition challenging a notice dated March 16, 2017, seeking to impose service tax on the petitioner. The petitioner also challenged Paragraph 5 of Circular No. 192/02/2016-ST dated April 13, 2016, and certain provisions of the Service Tax Rules, 1994, and the Finance Act, 1994, arguing they were arbitrary and violative of constitutional provisions. The core of the dispute involved the levy of service tax on license fees paid for liquor licenses. During the pendency of the petition, a letter dated July 31, 2018, from the Government of India, Department of Revenue, was brought to the court's attention. This letter referenced a decision from the 26th GST Council Meeting, which stated that GST/Service Tax was not leviable on license fees and application fees for alcoholic liquor for human consumption.
Key Issues
1. Whether the notice dated March 16, 2017, imposing service tax on the petitioner is incorrect and arbitrary, particularly concerning regulatory activities performed by the State in discharging its sovereign functions related to liquor trade regulation? (Question of law) 2. Whether Paragraph 5 of Circular No. 192/02/2016-ST dated April 13, 2016, is incorrect, arbitrary, and violative of Article 265 of the Constitution of India by seeking to validate the imposition of service tax on mere regulatory activities? 3. Whether Rules 2(1)(d) and 2(1)(i)(E) of the Service Tax Rules, 1994, are ultra vires Section 94 and Section 68(2) of the Finance Act, 1994? 4. Whether Section 68(2) and its proviso are ultra vires the Constitution of India due to excessive delegation? Petitioner's arguments: The petitioner contended that the notice and circular were arbitrary and sought to impose service tax on sovereign functions. They argued that the challenged rules and provisions of the Finance Act were ultra vires and suffered from excessive delegation. The petitioner relied on the subsequent government letter and a Delhi High Court order that disposed of a similar writ petition based on that letter. Revenue's arguments: The judgment does not record any specific arguments made by the revenue or the State.
Sections Cited
Section 94, Section 68(2)
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28.08.2018
Heard learned counsel for the parties.
By way of this writ petition, the petitioner has prayed for following relief: (i) To set aside the notice No. F. DGCEI/BRU/INV/55/S.Tax/2015/434 dated 16.3.2017 as incorrect and arbitrary in as much as it seeks to impose service tax on the petitioner. (ii) To declare Para 5 of Circular No. 192/02/2016-ST dated 13.04.2016 as incorrect and arbitrary and violative of Article 265 of the Constitution of India in as much as it seeks to validate the imposition of service tax on mere regulatory activities performed by the State to regulate and administer the liquor trade in the discharge of its sovereign function. (iii) To declare Rules 2(1)(d) and 2(1)(i)(E) of the Service Tax Rules 1994 as ultra vires Section 94 and Section 68(2) of the Finance Act, 1994. (iv) To declare Section 68(2) and the proviso thereto as ultra-vires the Constitution of India since the said provision suffers from the vice of excessive delegation. (v) To restrain the opposite party No.1,2 and 3 their servants, agents and subordinates from imposing and recovering service tax from t
The judgment continues below.
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