Natarajan Muniasamy.M vs. The Government Of INDIA

Held

The Court dismissed the writ petition, following the order of a Division Bench of the same High Court in a batch of similar writ petitions (W.P.Nos.24996 of 2019 and batch), which was decided on November 30, 2022. The Division Bench had held that the challenge to Notification No. 6/2015-Service Tax, dated March 1, 2015, fails. Consequently, the challenges to the show cause notices, demand notices, and orders-in-original also failed. The Division Bench ruled that it is open for the petitioners to pay the service tax and recover it from their clients (Government Departments) by applying the principles contained in the Sale of Goods Act, 1930, specifically Section 64A. The prayer for a writ of Mandamus to direct authorities to collect tax from the recipients of service was also not countenanced as there was no corresponding duty on the respondents. The Court also observed that petitioners could file statutory appeals before the Appellate Authority, subject to pre-deposit requirements, and were given liberty to file replies to show cause notices. This Court, therefore, dismissed the present writ petition, directing the petitioner to pay the service tax and recover it from the Government Departments, and to follow the directions issued by the Division Bench.

Facts

The petitioner, a first-class contractor with the PWD Department, filed a writ petition challenging Notification No. 6/2015 - Service Tax, dated March 1, 2015, which withdrew an earlier exemption for service tax on works contract services provided to the government for public utility. The petitioner also challenged the consequent service tax assessment order passed by the Deputy Commissioner of CGST and Central Excise for the period April 1, 2015, to June 30, 2017, demanding Rs. 40,87,464/- with interest and penalty. The petitioner argued that the withdrawal of exemption was unconstitutional and discriminatory, and that the service tax liability should be borne by the government departments, not the contractors. The petitioner sought quashing of the notification and assessment order, or alternatively, a direction for the government departments to pay the service tax.

Key Issues

1. Whether the withdrawal of exemption for service tax on works contract service provided to the Government for public utility by Notification No. 6/2015 - Service Tax, dated March 1, 2015, is unconstitutional, discriminatory, and violative of Article 14 of the Constitution, as argued by the petitioner. 2. Whether the service tax liability for works contract service rendered to the Government of Tamil Nadu should be borne by the Government departments or the contractors, and if imposing it on contractors violates Article 300A of the Constitution, as contended by the petitioner. Petitioner's arguments: The petitioner contended that the withdrawal of exemption was against the principles of levying taxes and that the service tax on public works contracts should have remained exempted. They argued that assessing service tax on works contract service is unconstitutional and highly discriminatory, violating Article 14, especially for services like construction of hospitals and schools. The petitioner also argued that since the contract terms did not mandate inclusion of service tax, the respondent Government should be liable, not the contractors, and that making contractors liable violates Article 300A. The petitioner relied on the principles of the Sale of Goods Act, 1930, and Section 64A of the Act for reimbursement. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue or state respondents. However, it refers to a previous Division Bench order that addressed similar challenges.