LexLAGHU UDYOG BHARATI AND ANR. versus UNION OF INDIA AND ORS.
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--· LAG HU UDYOG BHARA TI AND ANR. A ll. UNION OF INDIA AND ORS. JULY 27, 1999 [B.N. KIRPAL ANDS. RAJENDRA BABU, JJ.] B Service Tax Rules, 1994: Rules 2(d)(xii)and(xvii) (as amended in 1997)-Made customers or clients responsible for collecting service tax and not goods transport operators C or clearing and forwarding agents-Held: Rules ultra vires the Act itself- Finance Act, 1994 (as amended in 1997), Ss. 65(5), (17), (28),34 and 4l(d), lj),(m), 66, 67(i),(l) & (c), 68(1-A) & (1), 70, 71 and 93. Rules 2(d)(i) to(ixFand (xiii) to (xvi)-Validity-Held: Ultra vires S.65 of the Finance Act, 1994. D Finance Act, 1994: Section 93. Service tax-Notification No. 2011998 C.E. dated 2-6-1998-Exemption under-Heid: Prospective in nature-Tax paid by customers. or clients to be refunded within twelve weeks on their making a demand for refund E The petitioners were persons who utilised the services of goods transport Oferators and clearing and forwarding agents. The petitioner impugned the validity of Rules 2(d)(xii) and (xvii) of the Service Tax Rules, 1994 (as amended in 1997), on the ground that the said sub-rules were contrary to the provisions of Sections 65 and 66 of the Finance Act, 1994 F (as amended in 1997), The taxable services provided by goods transport and certain other category of persons were exempted from the levy of service tax under an amendment Notification No.20/98-Central Excise (NT) dated 2-6-1998 issued G under Section 93 of the Act. Allowing the petition, this.Court HELD: 1.1. Sections 67,68,70 and 71 of the Finance Act, 1994 (as amended in 1997) relating to the machinery and collection of service tax H 1199 1200 SUPREME COURT REPORTS [1999] 3 S.C.R A clearly show that any action which is required to be taken is qua the assessee, namely, the person responsible for collecting the service tax which includes his agents. (1207-H] 1.2. Section 66 of the Act is a charging section. Insofar as the clearing agents and the transporters are concerned, Section 66 has to be read with B Section 65(5)(41), (j), and (m), according to which the taxable service is what, in the case of clearing and forwarding agents, is rendered to their clients and in the case of goods transporter is what is rendered to its customer. The "person responsible for collecting the service tax", referred to in Section 66 has to be read with Section 65(28) which defines this expression to mean C the person who is required to collect the service tax or to pay the same. Therefore, the charge of tax is on the person who is responsible for collecting the service tax. It is he, who by virtue of the provisions of Section 65(5) is regarded as assessee. He is the person who provides the services. (1208-B-C] D 1.3. Section 68 does not in any way seek to alter or change the charge of service tax levied under Section 66, which is the person responsible for collecting the service tax. It also does not in any way amend any of the sub- sections of Section 65, which contains the definitions of different expressions. Section 68(1-A) cannot be so_interpreted as to make a person as an assessee even though he may not be responsible for collecting the service tax. The E service tax is levied by reason of the services, which are offered.[1208-E-G] 2.1. In relation to the services provided by other and referred to in Rules 2(d)(i)to(xi) and (xiii) to(xvi) of the Service Tax Rules, 1994 (as amended in 1997), the definition of the person responsible is in consonace with the F definition of that expression occurring in Section 65 of the Act. However, with regard to the services rendered by clearing and forwarding agents and the goods transport operator, the definitions contained in Rule 2(d)(xii) and (xvii), which seeks to make the customers or the clients as the assessee, is clearly in conflict with Section 65 and 66 of the Act. [1209-C] G 2.2. Section 68-(1-A) cannot regard a customer or a client of the clearing and forwarding agent or of the goods transport operator being treated as an assessee who will become liable to file a return and be subjected to the levy of service tax and if he does not file the return, would render himself to penalty and other proceedings. [1209-D] H 2.3. Sections 70 and 71 clearly show that the return which bas to be ,. . LAGHU UDYOG BHARTI v. U.0.1. 1201 filed pertains to the payment which are received by the person rendering the A service in respect of the value
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