LAGHU UDYOG BHARATI AND ANR. versus UNION OF INDIA AND ORS.

LAGHU UDYOG BHARATI AND ANR. versus UNION OF INDIA AND ORS.

Rules 2(d)(xii) and (xvii), which made persons other than service providers responsible for collecting service tax, are ultra vires the Finance Act, 1994, as the Act imposes the liability solely on the provider of services.

Parties
Petitioner: Laghu Udyog Bharti; Respondent: Union of India
Jurisdiction
India
Judgment Date
27 July 1999
Procedural Posture
Writ Petition (civil) Under Article 32 / Final Judgment
Outcome
Petitions allowed (except WP(C) Nos. 5199, 228 and 262/98, which were dismissed/withdrawn)
Legal Topics
Service Tax, Ultra Vires, Rules and Notifications
Taxation Administrative Law Service Tax Ultra Vires Rules and Notifications

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Parties

Laghu Udyog Bharti

Petitioner

Union of India

Respondent

Procedural Posture

Writ Petition (civil) Under Article 32 / Final Judgment

Legal Issues

  1. 1 Whether Rules 2(d)(xii) and (xvii) of the Service Tax Rules, 1994 (as amended in 1997), making customers or clients responsible for collecting service tax instead of service providers, are contrary to Sections 65 and 66 of the Finance Act, 1994
  2. 2 Validity of certain sub-rules of Service Tax Rules vis-à-vis the Act
  3. 3 Refund of tax collected under invalidated rules

Ratio Decidendi

Rules 2(d)(xii) and (xvii), which made persons other than service providers responsible for collecting service tax, are ultra vires the Finance Act, 1994, as the Act imposes the liability solely on the provider of services.

Court Disposition

Petitions allowed (except WP(C) Nos. 5199, 228 and 262/98, which were dismissed/withdrawn)

Orders

  • Rules 2(d)(xii) and (xvii) of the Service Tax Rules, 1994, amended in 1997, are quashed as ultra vires the Act.
  • Any tax paid by customers or clients to clearing and forwarding agents or goods transport operators shall be refunded within twelve weeks upon demand.