Bihar State Beverages Corporation LTD. vs. The Union Of INDIA

Held

The High Court, in its prima facie view, held that the case did not involve an inherent lack of jurisdiction warranting interference through a writ petition under Article 226 of the Constitution. The Court noted that disputed questions of fact were involved. Consequently, the Court disposed of the writ petition, deeming it not a case for writ jurisdiction due to the availability of an equally efficacious alternative remedy. The petitioner was advised to pursue remedies by way of appeal before the Tribunal in accordance with the law. The period spent by the petitioner in pursuing the writ petition before the High Court was to be excluded for the purpose of limitation.

Facts

The petitioner, Bihar State Beverages Corporation Ltd., filed a writ petition challenging an order dated May 9, 2019, passed by the Commissioner, Central GST and Central Excise, Patna. The impugned order levied service tax on license fees and privilege fees charged by the Bihar State Government for granting exclusive wholesale business in liquor to the petitioner, as well as on demurrage charges collected by the petitioner from suppliers. The petitioner argued that these levies were not for services provided by the State but for granting rights and parting with exclusive privileges. They contended that the imposition of service tax encroached upon the State's exclusive domain under the Constitution and violated Article 289(1) by taxing the income of a State. The petitioner also argued that demurrage charges were penalties, not services.

Key Issues

1. Whether the imposition of service tax by the respondent no.3 on license fees and privilege fees charged by the State Government for granting exclusive wholesale business in liquor is ultra vires the Constitution of India, the Finance Act, 1994, and the Bihar Excise Act, 1915? 2. Whether the imposition of service tax by the respondent no.3 on demurrage charges collected by the petitioner from suppliers is legally sustainable? Petitioner's Arguments: The petitioner contended that the license and privilege fees were not for services rendered by the State but for granting the right to exclusive wholesale business and parting with exclusive privilege. They argued that the levy of service tax encroached upon the State's legislative and taxation powers under Entry 8 and Entry 66 of List II of the Seventh Schedule of the Constitution. Furthermore, the petitioner asserted that the levy violated Article 289(1) of the Constitution, which exempts the income of a State from Union taxation. Regarding demurrage charges, the petitioner argued they were penalties for supplier defaults and not services provided to manufacturers/suppliers. Revenue's Arguments: The judgment does not record specific arguments made by the respondents.