Senthilkumar.S.D vs. The Government Of INDIA

Held

The Court held that the challenge to Notification No. 6/2015-Service Tax, dated March 1, 2015, fails. The Court reasoned that the Finance Act, 1994, grants the Central Government the power to issue exemptions under Section 93, and the withdrawal of an exemption is within this power. The argument that the withdrawal leads to a circular payment of tax from the government to itself was not found persuasive. The Court also held that a Writ of Mandamus directing the PWD to pay the service tax on behalf of the petitioners could not be countenanced, as there is no corresponding duty cast upon the PWD to collect the tax from the service providers. Furthermore, the prayer for a refund of tax already paid was rejected as the petitioners were liable to pay the tax. The Court directed petitioners who had received assessment orders to file statutory appeals within 30 days, subject to pre-deposit requirements, with the Appellate Authority to entertain them without reference to limitation. For those who received show cause notices, they were directed to file detailed replies within 60 days, after which appropriate orders would be passed. Pending investigations were to be completed within six months, followed by show cause notices and adjudication.

Facts

The petitioners, registered contractors with the Public Works Department (PWD) of the Government of Tamil Nadu, challenged Notification No. 6/2015-Service Tax dated March 1, 2015, which withdrew an earlier exemption for service tax on works contract services provided to government entities. The petitioners argued that this withdrawal was unconstitutional and discriminatory. The revenue authorities had issued assessment orders and demand notices for service tax, interest, and penalty for periods ranging from October 1, 2014, to June 30, 2017, and other periods up to March 31, 2017, totaling significant amounts. The petitioners sought to quash the notification and consequential proceedings, or alternatively, to direct the PWD to pay the service tax liability.

Key Issues

1. Whether Notification No. 6/2015-Service Tax, dated March 1, 2015, which withdrew the exemption for works contract service provided to the Government, is unconstitutional and violative of Article 14 of the Constitution of India, particularly concerning its impact on public contractors? (Petitioner's contention: Yes, the withdrawal is discriminatory and against public interest, leading to a circular payment of tax from the government to itself. Revenue's contention: Not recorded). 2. Whether the Court can issue a Writ of Mandamus directing the Public Works Department (PWD) to pay the service tax liability of the petitioners, given that the PWD is the recipient of the service and not the service provider? (Petitioner's contention: Yes, as an alternative relief. Revenue's contention: Not recorded). 3. Whether the petitioners are entitled to a refund of service tax already paid, considering the challenge to the notification? (Petitioner's contention: Yes, if the notification is found invalid. Revenue's contention: Not recorded).