M/S.Tvs Srichakra LTD vs. Union Of INDIA

Facts

The petitioners, M/s. TVS Srichakra Limited and M/s. Hitech Arai Private Limited, filed writ petitions before the Madurai Bench of the Madras High Court. In W.P.(MD)Nos.1139 of 2021 and 14856 of 2022, they sought a declaration that Notifications No.14/2017, 15/2017, and 16/2017 dated 13.04.2017, issued by the Ministry of Finance, were ultra vires. They contended these notifications exceeded the scope of Section 68(2) of the Finance Act, 1994, and violated Articles 14, 19(1)(g), 245, and 269A of the Constitution. Consequently, in W.P.(MD)Nos.1143 of 2021 and 14857 of 2022, they challenged show cause notices dated 10.12.2020 and 26.04.2022, respectively, pertaining to the period April 2017 to June 2017.

Held

The Court held that the relief sought by the petitioners was liable to be granted, as the issue had been decided in favour of assessees by the Madras, Gujarat, and Bombay High Courts. Specifically referencing the decision in Sal Steels Limited, the Court noted that the Gujarat High Court had struck down Notification Nos.15/2017-ST and 16/2017-ST, along with related rules, as ultra vires Sections 64, 66B, 67, and 94 of the Finance Act, 1994. Consequently, proceedings initiated based on these notifications were quashed. The Madras High Court, in Chennai and Ennore Ports Streamer Agents Association, had also arrived at the same conclusion, albeit through a slightly different approach, finding that no proper machinery was provided under the notifications to shift the burden of service tax on the petitioners, who were not recipients of the taxable service. Following these pronouncements, the Court quashed the impugned notifications and the consequential show cause notices. The petitions were allowed.

Key Issues

1. Whether Notifications No.14/2017, 15/2017, and 16/2017 dated 13.04.2017, issued under Section 68(2) of the Finance Act, 1994, are ultra vires the said provision and consequently offend Articles 14, 19(1)(g), 245, and 269A of the Constitution of India. Petitioner's arguments: The petitioners argued that the impugned notifications traversed beyond the scope of Section 68(2) of the Finance Act, 1994. They contended that these notifications were ultra vires and violated fundamental constitutional rights. Revenue's arguments: The judgment records that all learned counsels were 'ad idem' on the position that the relief sought was liable to be granted, indicating no specific arguments were made by the revenue against the petitioners' claims.