GUJARAT AMBUJA CEMENTS LTD. AND ANR. versus UNION OF INDIA AND ANR.

Citation: [2005] 2 S.C.R. 1038 · Decided: 17-03-2005 · Supreme Court of India · Bench: RUMA PAL · Disposal: Dismissed

Cited by 1 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

A 
GUJARAT AMBUJA CEMENTS LTD. AND ANR. 
v. 
UNION OF INDIA AND ANR. 
MARCH 17, 2005 
B 
[MRS. RUMA PAL AND ARUN KUMAR, JJ.] 
Constitution of India, 1950 : 
Seventh Schedule, List I, Entry 97, List JI, Entry 56-lmposition of service 
C tax under provisions of Chapter V of Finance Act, 1994 on users of services 
rendered by goods transport operators and clearing and forwarding agents-
Held, valid-Subject matter of tax is not goods or passengers but the services 
of transportation itself-It is a levy distinct from the levy envisaged under 
Entry 56 of List 11---:-Chapter V of Finance Act, 1994 was enacted with reference 
D to residuary power of Parliament as defined in Entry 97 of List I-Finance 
Act, 1994-ss. 65,66 and 68- Finance Act, 2000-s~. 116 and 117-Finance 
Act, 2003-s.158-Service Tax Rules, 1994-Rules 2(l)(d)(xii) and (xvii). 
Finance Act, 1994/Service Tax Rules, 1994 : 
E 
ss. 65(5), 66(3) and 68(/A)/Rules 2(l)(d), (xii) and (xvii) (as amended 
by ss. 116 and 117 of Finance Act, 2000 and by s. 158 of Finance Act, 
2003)-'Service tax '-On users of services rendered by transporters of goods 
by roads and clearing and forwarding agefits-Held, valid-By the amendments 
the statutory foundation for decision in Laghu Udyog Bharati's case has l::een 
replaced a.nd the decision has ceased to be relevant for the purpose of 
F construing the present provisions-Validating enactment-Finance Act,2000 -
ss. 116 and 117-Finance Act,2003-s. l 58-Constitution of India-Seventh 
Schedule-List 1, Entry 97. 
Imposition of service tax under the provisions of Chapter V of 
Finance Act, 1994 on the users of services rendered by transporters of 
G goods by road and the clearing and forwarding agents, was challenged 
and, ultimately, Rules 2(l}(d), (xii) and (xvii) of Service Tax Rules, 1994 
were struck down by the Supreme Court in Laghu Udyog Bharati's case*. 
Consequently, by Sections 116 and 117 of Fh1ance Act, 2000 and Section 
158 of Finance Act, 2003, the relevant provisions of the Finance Act, 1994 
H 
1ros 
GUJARAT AMBUJA CEMENTS LTD. v. U.0.1. 
1039 
and the Service Tax Rules, 1994 were amended and the taxes earlier A 
collected were retrospectively validated. The customers or clients of goods 
transport operators and those of cleaing and forwarding agents filed the 
present writ petitions challenging the amendments. 
On the questions: (i) whether by enacting Sections 116 and 117 of 
the Finance Act, 2000 and Section 158 of the Finance Act, 2003, the basis B 
on which the Supreme Court had struck down Rules 2(1)(d), (xii) and (xvii) 
of the Service Tax Rules, 1994 has been displaced or removed; and (ii) 
whether the levy of service tax on carriage of goods by transport operators 
was legislatively competent, 
Dismissing the writ petitions, the Court 
HELD: 1.1. Validation of a tax declared illegal may be done only if 
the grounds of illegality or invalidity are capable of being removed and 
are in fact removed and the tax thus made legal. A legislature is competent 
c 
to remove infirmities retrospectively and make any imposition of tax 
declared invalid, valid. Such exercise in validation must of course also be D 
legislatively competent and legally sustaina.ble. [1052-E; 1053-F) 
Prithvi Cotton Mills Ltd v. Broach Borough Municipality. [1970) 1 SCR 
388; Indian Aluminum Co. and Ors. v. State of Kera/a, [1996) 7 SCC 637; 
K. Sankaran Nair v. Devaki, [1996) 11 SCC 428; R.Krishna Bhat v. State of 
Karnataka, [2001) 4 SCC 227 and N.A. Cooperative Mkg. Federation v. Union E 
of India, AIR (2003) SC 1329, relied on. 
1.2. As is apparent from Section 116 of the Finance Act, 2000, all 
the material portions of Sections 65 and 66 of Finance Act; 1994, which 
were found to be incompatible with the Service Tax Rules*, were 
themselves amended so that now in the body of the Act (Finance Act, 1994) F 
by virtue of the amendment to the word "assessee" in Section 65(5) and 
the amendment to Section 66(3), the liability to pay the tax is not on the 
person providing the taxable service but, as far as the services provided 
by clearing and forwarding agents and goods transport operators are 
concerned, on the person who pays for the services. As far as Section G 
68(IA) is concerned, by virtue of the proviso added in 2003,.the persons 
availing of the services of goods transport operators or clearing and 
forwarding agents have explicitly been made liable to pay the service tax. 
[1053-C-D) 
*Laghu Udyog Bharati and Anr. v. Union of India 

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