Holding

The liability to pay service tax and the statutory interest thereon rests on the service recipient authorized by the non‑resident provider, as per the proviso to Rule 6 of the Service Tax Rules, 1994 and Section 75 of the Finance Act, 1994.

Summary

The Kerala State Electricity Board (KSEB) entered into a contract with the foreign consultancy SNC Lavalin for engineering services, agreeing to pay the service tax on the foreign company's behalf. KSEB failed to make the payments and argued that, under the Finance Act, 1994, the tax liability rested on the service provider. The High Court held that, because the foreign company had no office in India and the contract expressly placed the tax burden on KSEB, the liability fell on the service recipient, including statutory interest under Section 75. On appeal, the Supreme Court affirmed this view, interpreting the proviso to Rule 6 of the Service Tax Rules, 1994, and the relevant provisions of the Finance Act, 1994, to mean that the person authorized by the non‑resident provider (KSEB) is liable for both tax and interest. Consequently, the appeal was dismissed, leaving the lower court’s decision intact.

Issues considered

Whether the service tax liability under the Finance Act, 1994, falls on a non‑resident service provider with no office in India or on the service recipient authorized to pay on its behalf.
Whether statutory interest under Section 75 of the Finance Act, 1994, is payable by the service recipient when the tax is not deposited within the prescribed time.

Legislation cited

Finance Act, 1994s. 65, s. 66, s. 68, s. 68(2), s. 69(1), s. 71, s. 73, s. 75
Finance Act, 2000s. 116, s. 117
Service Tax Rules, 1994s. Proviso to Rule 6(1), s. Rule 6(1)

Subjects

service taxnon‑resident service providertax liabilitystatutory interestFinance Act 1994Service Tax Rulesconsultancy servicescontractual allocation

Judgment

L

A MIS. KERALA STATE ELECTRICITY BOARD
v. •
COMMR. OF CENTRAL EXCISE, THIRUV ANANTHAPURAM

DECEMBER 12, 2007
B
[S.B. SINHA AND HARJIT SINGH BEDI, JJ.]

Service Tax Rules, 1994-r. 6 (1)-Service tax-On Consultancy
Engineering Services-Payment of interest on the tax due-Whether
c on service recipient or service provider-Contract between service
recipient and service provider (a foreign company) fixing the liability
on the recipient-Service provider not having its office in Jndia~Held:
In view ofthe agreement and provisions oflaw, liability to pay the tax
was on the service recipient-Consequently liability to pay statutory
D interest on the due tax was also on the service recipient-Finance Act,
1994-s. 75.

Appellant entered into an agreement with a foreign company for
obtaining consultancy services from them. Under the agreement, the
E liability to pay the service tax on behalf of the foreign company was fixed
on the appellant. Despite the agreement, appellant neglected to pay
service tax on behalf of the foreign company. It raised a dispute that in
view of the statutory obligations of service provider as contained in
Finance Act, 1994, it was not liable to pay the same. High Court by its
F impugned order held that in view of the provisions of the Act and the
terms of the contract, appellant was liable and notthe foreign company.
Hence the present appeal.
Dismissing the appeal, the Court
G HELD: 1. In terms of the proviso appended to sub-rule (1) of Rule
6 of Service Tax Rules, it is provided that in case ofa person who was
a non-resident or was from outside India and who did not have any office
in India, the service tax due on the service rendered by him should be

H 420
KERALA STATE ELECTRICITY BOARD v. COMMR. OF 421
CENTRAL EXCISE, THIRUV ANANTHAPURAM

i
· paid by such person or on his behalf by another person authorized by A
him who should submit to the Commissioner ofCentral Excise in whose
jurisdiction the taxable services had been rendered, a return containing
specific details with necessary enclosures. The High Court has arrived
at a finding of fact that the foreign company did not have any office in
India. The terms of the agreement entered into by and between the B
appellant and foreign company at all material time, show that the
responsibility of meeting the service tax liability was on the service
recipient and despite the amendment of Rule 6 (1) of the Rules w.e.f.
16.8.2002, agreement still held good as the service recipient being the
appellant had taken up the responsibility of meeting the liability of the C
foreign company. [Paras 13and14) [426-G,H; 427-A-B]

2. Ifappellant itselfwas liable for payment of tax, it was also liable
for payment of statutory interest thereupon, if the same had not been
deposited within the time stipulated by the statute. Proviso appended D
-1 to Rule 6 of the Rules which has been inserted w.e.f. 28.2.1999 cast a
liability upon a person authorized by the foreign company to do it in that
behalf. The details were to be furnished by a person who was authorized.
Clause (2) of the proviso provides for submission of the demand draft
within30 days from the date ofraising the bill Appellant being the person E
authorized to make payment of the service tax, Section 75 of Finance
Act, 1994 would come into operation in the event ofits failure to do
so. [Paras 16and17) (427-E; G-H)
Gujarat Ambuja Cements Ltd andAnr. v. Union ofIndia andAnr.,
(2005) 4 SCC 214, relied on. F
Commissioner ofCentral Excise, Meerut -11v. L.H Sugar Factories
Ltd and Ors., (2005) 13 SCC 245, distinguished.
Laghu Udyog Bharati andAnr. v. Union ofIndia and Ors., [1999) 6
SCC 418, held inapplicable. G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5832 of
2007.
From the Judgment and Order dated 25.07.2006 of the High Court
H
422 SUPREME COURT REPORTS [2007] 13 (Addl.) S.C.R.

A ofKerala at Emakulam in C.E. Appeal No. 26 of2005.
T.L.V. Iyer, M.T. George for the Appellant.
R.G. Padia, Navin Prakash and B. Krishna Prasad for the
Respondent.
B
The Judgment of the Court was delivered by
S.B. SINHA, J. Leave granted.
1. A limited notice was issued to the effect as to whether the
C appellant-Kerala State Electricity Board, the service recipient, within the
meaning of provisions of Finance Act, 1994, levying service tax, is liable
to pay any interest on the amount of tax due to the respondent.
2. The question involved in this appeal arises out of a judgment and
order dated 25. 7.2006 passed by a Division Bench of the High Court of
D Kerala at Emakulam whereby the appeal filed by the respondent herein
from the judgment and order of the Customs Excise & Service Tax
Appellate Tribunal, Circuit Bench at Cochin in Final Order No. 477 of
2005, Appeal No.ST/36/2004 was allowed.

E 3. TI1e basic fact of the matter is not in dispute. Appellant herein
entered into an agreement with Mis. SNC Lavlin Inc. Montreal, Canada
(Foreign company) in relation to various projects for obtaining consultancy
services from them.
The relevant clauses of the said agreement are as under:-
F
"16.l - SNC Lavaline and all its expatriate personnel shall be
responsible for timely and prompt filing of all returns, estimates,
accounts, information and details complete and accurate in all
respects as may be required under the applicable laws/regulations
G in India before the appropriate authorities in India. In case SNC
Lavaline or any of its expatriate personnel do not comply with the
above tax requirements, which results in any penalty, interest or
additional liability, the same shall be borne by SNC Lavaline.
16.2 - SNC Lavaline shall provide KSE Board the relevant orders/
H
KERALA STATE ELECTRICITY BOARD v. COMMR. OF 423
CENTRAL EXCISE, THIRUV ANANTHAPURAM [SINHA, J.]
notices of demand, invoices, appellate orders and o!her relevant A
i information as the proof of the actual tax liability to be borne by
KSE Board, sufficiently in advance to enable KSEB to tak~
appropriate action in this connection.
16.3 - SNC Lavaline and its expatriate personnel, ifrequired by
B
KSEB, shall contest appeals against any assessment/demand of an
appropriate authority before such authority at the request of and
~-
cost expenses ofKSEB".

4. Despite the said contractual commitments, the appellant failed and/
or neglected to pay service tax on behalf of foreign company. It, on the c
other hand, raised a dispute that having regard to the purported statutory
obligations of the service provider as contained in the Act and the Rules
framed, it was not liable to pay any service tax.
5. By reason of the impugned judgment, the Division Bench of the
D
-/
Kerala High Court construing the provisions of the Act in the light of the
terms of the contract entered into by and between the appellant and the
foreign company opined that the liability in that regard was on the appellant
and not on the foreign company.
6. Mr. T.L.V. Iyer, learned senior counsel, in support of this appeal, E
inter alia, urged that the liability to pay interest and penalty being statutory
one, the service provider was responsible therefor and not the service
recipient.
7. Mr. R.G. Padia, learned senior counsel appearing on behalf of F
the respondent, on the other hand, would support the impugned judgment.
8. The period for which the service tax was due is August 1998 to
September 2002. Under the agreement, indisputably, the appellant was
responsible to make payment of the service tax on behalf of the foreign
company. G
't 9. Section 65 of the Finance Act, 1994 provides for levy of service
tax on the services specified therein. Section 66 of the Act provides that
the rate of tax shall be twelve per cent of the value of taxable services
specified therein and collected in such manner as may be prescribed. H
424 SUPREME COURT REPORTS [2007] 13 (Add!.) S.C.R.

A Section 68 of the Act puts the burden of payment of tax on the service
provider.
Sections 68(2), 69( 1), 71 and relevant parts of Sections 73 and 75
of the Finance Act, 1994 which are material for the purposes of this case,
read as under :
B
"68.(2) Notwithstanding anything contained in sub-section (1 ), in
respect of any taxable service notified by the Central Government
in the Official Gazette, the service tax thereon shall be paid by such
person and in such manner as may be prescribed at the rate
c specified in section 66 and all the provisions of this Chapter shall
apply to such person as if he is the person liable for paying the
service tax in relation to such service.
69. Registration. --( 1) Every person liable to pay the service tax
under this Chapter or the rules made thereunder shall, within such
D
time and in such manner and in such form as may be prescribed,
make an application for registration to the Superintendent of Central
Excise.
71. Verification of tax assessed by the assessee, etc.-
E
(1) The Superintendent of Central Excise may, on the basis of
information contained in the return filed by the assessee under
section 70, verify the correctness of the tax assessed by the
assessee on the services provided.
F (2) The Superintendent of Central Excise may require the assessee
to produce any accounts, documents or other evidence as he may
deem necessary for such verification as and when required.
(3) If on verification under sub-section (2), the Superintendent of
G Central Excise is of the opinion that service tax on any service
provided has escaped assessment or has been under-assessed, he
may refer the matter to the Assistant Commissioner of Central
Excise or, as the case may be, the Deputy Commissioner of Central
Excise, who may pass such order of assessment as he thinks fit.
H
KERALA STATE ELECTRICITY BOARD v. COMMR. OF 425
CENTRAL EXCISE, THIRUVANANTHAPURAM [SINHA, J.]
73. Recovery ofService Tax Not Levied or Paid or Short lived A
or Short-paid or Erroneously Refunded.
(I) Where any service tax has not been levied or paid or has been
short-levied or short-paid or erroneously refunded, the Central
Excise Officer may, within one year from the relevant date, serve
B
notice on the person chargeable with the service tax which has not
been levied or paid or which has been short-levied or short-paid
or the person to whom such tax refund has erroneously been made,
requiring him to show cause why he should not pay the amount
specified in the notice:
c
xxx xxx xxx
{IA) Where any service tax has not been levied or paid or has
been short-levied or short-paid or erroneously refunded, by reason
of fraud, collusion or any wilful mis-statement or suppression of D
facts, or contravention of any of the provisions of this Chapter or
the rules made thereunder, with intent to evade payment of service
tax, by such person or his agent, to whom a notice is served under
the proviso to sub-section (I) by the Central Excise Officer, such
person or agent may pay service tax in full or in part as may be E
accepted by him, and the interest payable thereon under section
75 and penalty equal to twenty-five per cent. of the service tax
specified in the notice or the service tax so accepted by such
person within thirty days of the receipt of the notice.;
75. Interest on delayed payment of service tax F

Every person, liable to pay the tax in accordance with the provisions
of section 68 or rules made thereunder, who fails to credit the tax
or any part thereof to the account of the Central Government within
the period prescribed, shall pay simple interest at such rate not G
below ten per cent and not exceeding thirty-six per cent. per
annum, as is for the time being fixed by the Central Government,
by notification in the Official Gazette, for the period by which such
crediting of the tax or any part thereof is delayed."
H
426 SUPREME COURT REPORTS [2007] 13 (Addi.) S.C.R.

A 10. The Central Government in exercise of its power conferred upon
it by sub-section (1) of Section 69 of the Finance Act, 1994 made Service •
Tax Rules, 1994 for the purpose of assessment and collection of service
tax. Service tax was imposed on Consultancy Engineering Services w.e.£
07.07.1997 by a Notification No.23 of 1997 dated 02.07.1997.
B Consulting Engineer as defined in Section 65(31) of the Finance Act, 1994
is a professionally qualified or any body corporate or any other firm but
that directly or indirectly render any advice, consultancy or technical
assistance in any manner to a client in one or more disciplines of
engmeenng.
c 11. Clause (g) of sub-section 105 of Section 65 of the Finance Act,
1994, as amended, provides for the definition of taxable services rendered
by a consulting engineer to mean 'any service provided to a client by
consulting engineer in relation to advice, consultancy or technical service
in any manner to client in one or more disciplines of engineering'.
D
12. Sub-rule (l) of Rule 6 of Service Tax Rules, as applicable at
the relevant time, stipulated that in case of a person who was from outside
India and did not have any office in India, the service tax due on the service
rendered by him should be paid by such person or on his behalf by any
E other person authorized by him should submit to the Commissioner of
Central Excise in whose jurisdiction the taxable services have been
rendered by him a return containing specific details with necessary
enclosures. Such returns along with a demand draft have to be submitted
within a period of30 days from the date ofraising the bill on the client
F for the taxable services rendered.
13. We may furthermore notice that in terms of the proviso appended
to sub-rule (1) of Rule 6 of Service Tax Rules, it is provided that in case
of a person who was a non-resident or was from outside India and who
G did not have any office in India, the service tax due on the service rendered
by him should be paid by such person or on his behalf by another person
authorized by him who should submit to the Commissioner of Central
Excise in whose jurisdiction the taxable services had been rendered, a
return containing specific details with necessary enclosures.
H
KERALA STATE ELECTRICITY BOARD v. COMMR. OF 427
CENTRAL EXCISE, THIRUV ANANTHAPURAM [SINHA, J.]
14. The High Court has arrived at a finding of fact that the foreign A
company did not have any office in India. It is not in dispute that the terms
of the agreement entered into by and between the appellant and foreign
company at all material time, show that the responsibility of meeting the
service tax liability was on the service recipient and despite the amendment
of Rule 6 (1) w.e.f. 16.8.2002 agreement still held good as the service B
recipient being the appellant had taken up the responsibility of meeting
t the liability of the foreign company.
15. Clause 16.l of the contract obligated the foreign company
responsible only for filing of returns, estimates, accounts, information and
details complete and accurate in all respects as may be required by any C
law or regulation. Only in the event the foreign company did not comply
with the said requirements resulting in imposition of any penalty, interest
or additional liability, the same shall be borne by it. Clause 16.1 did not
cast any obligation upon the foreign company to make the payment of
tax; the same is being the liability of the appellant. D
16. Submissions of Mr. Iyer that the payment of interest was the
statutory liability of the service provider must be considered in the
aforementioned context. If Appellant itself was liable for payment of tax,
it was also liable for payment of statutory interest thereupon, if the same E
had not been deposited within the time stipulated by the statute. The
liability to pay tax was not on the foreign company. Only on default on
the part of the appellant the interest was leviable. Appellant was clearly
liable therefor. In other words, the liability being that of the appellant, it
must accept the liability of payment of interest leviable thereupon in terms F
of statute occasioned by the breach on its part to deposit the amount of
tax within the prescribed time.
17. Proviso appended to Rule 6 which has been inserted w.e.f.
28.2.1999 cast a liability upon a person authorized by the foreign company G
to do it in that behalf. The details were to be furnished by a person who
was authorized. Clause (2) of the proviso provides for submission of the
demand draft within 30 days from the date of raising the bill. Appellant
being the person authorized to make payment of the service tax, Section
75 would come into operation in the event of its failure to do so.
H
428 SUPREME COURT REPORTS [2007] 13 (Addi.) S.C.R.

A 18. We may further notice that it was the appellant who had provided
space and accommodation to the persQnnel of Mis SNC Lavalin in their
office ·premises and borne expenditure related thereto. The service
provider did not have anyindependent office.
19. We may at this juncture notice the decisions cited by Mr. Iyer.
B
In Laghu Udyog Bharati and Anr. v. Union of India and Ors., [1999] r

6 SCC 418 this Court held that keeping in view the statutory scheme as
they existed in the amended .rules providing for payment of tax on the •
service recipient was illegal. The said provision, however, were amended
with retrospective effect. Challenge of the constitution~ validity of the said
c amendment, came up for consideration in Gujarat imbuja Cements
Ltd. and Anr. v. Union ofIndia and Anr., [2005] 4 SCC 214 wherein
· a Division Bench categorically held that the ba5is of reconsideration of
the decisions in Laghu Udyog Bharati's case was.taken away stating:
D "22. As we have said, Rules 2(1)(d)(xii) and (xvii) had been held
to be illegal in Laghu Udyog Bharati only because the charging )

provisions of the Act provided otherwise. Now that the charging
section itself has been amended so as to make the provisions of·
the Act and the Rules compatible, the criticism of the earlier law
E upheld by this Court can no longer be availed of. There is thus no
question of the Finance Act, 2000 overruling the decision of this
Court in Laghu Udyog Bharati as th~ law itself has been changed.
A legislature is competent to remove infirmities retrospectively and
make any imposition of tax declared invalid, valid. This has been
F the uniform approach of this Court. Such exercise in validation must .
. of course also be legislatively competent and legally sustainable.
·ll10se issues are considered separately. On the first question, we
h0ld that the law must be taken as having always been as is no.w
brought about by the Finance Act, 2000. The statutory foundation
.G for the decision in Laghu Udyog Bharati has been replaced and
the decision has thereby ceased to be relevant for the purposes of
construing the present provisions [vide Ujagar Prints (II) v. Union
ofIndia]. Therefore subject to our decision on the question of the
legislative competence of Parliament to enact the law, and assuming · l
H the amendments in 2003 to be legal for the time being, we reject
KERALA STATE ELECTRICITY BOARD v. COMMR. OF 429.
CENTRAL EXCISE, THIRUVANANTHAPURAM (SINHA, J.]
the submission of the writ petitioners that by the amendments A
brought about by Sections 116 and 117 of the Finance Act, 2.000,
the decision in Laghu Udyog Bharati has been legislatively
overruled.
23. The next question is wh~ther the levy of service tax on carriage B
of goods by transport operators was legislatively competent. Laghu
Udyog Bharati did not consider the question of legislative
competency. Before we consider the scope of the impugned Act,
it is necessary to determine the scope of the two legislative entries
namely Entry 97 of List I and Entry 56 of List II. It has been C
recognised in Godfrey f!hillips that there is a complete and careful
demarcation of taxes in the Constitution and there is no overlapping
as far as the fields of taxation are concerned. This mutual exclusivity
.which has been reflected in Article 246(1) means that taxing entries
must be co~ed so as to maintain exclusivity. Although generally D
speaking, a liberal interpretation must be given to taxing entries,
this would not bring within its purview a tax on subject-matter which
a fair reading of the entry does not cover. If in substance, the statute
is not referable to a field given to the State, the court will not by
any principle of interpretation allow a statute not co~ered by it to E
intrude upon this field. · ·
24. Undisputedly, Chapter V of the Finance Act, 1994 was
enacted with reference to the residuary power defmed in Entry 97
of List I. But as has been.held in International Tourist Corpn. v.
State of Haryana : (SCC pp. 325-26, para 6-A) F
"Before exclusive legislative competence can be claimed for
Parliament by resort to the residuary power, the legislative
incompetence of the Strite Legislature must be clearly established.
Entry 97 itself is specific in that a matter can be brought under that G
entry only if it is not. enumerated in List II or List III and in the
case ofa tax ifit is not mentioned in either of those lists."
25. Iri that case Section 3(3) of the Punjab Passengers and Goods
Taxation Act, 1952 was challenged by transport operators. The
H
430 SUPREME COURT REPORTS [2007] 13 (Addi.) S.C.R.

A Act provided forthe levy of the tax on passengers and goods plying
in the State ofHaryana. According to the transport operators, the
State could not levy tax on passengers and goods carried by
vehicles plying entirely along the national highways. According to
them this was solely within the power of the Centre under Entry
B 23 read with Entry 97 of List I. The submission was held to be
patently fallacious by this Court. It was held that Entry 56 of List
II did not exclude national highways so that the passengers and
goods carried on national highways would fall directly and squarely
within Entry 56 of List II. It was said that the State played a role
c in the maintenance of the national highway and there was sufficient
nexus between the tax and passengers and goods carried on the
national highway to justify the imposition.
26. The writ petitioners in this case have, relying on this judgment,
argued that the Act falls squarely within Entry 56 of List II and
D
therefore could not be referred to Entry 97 of List I. We do not
agree.
27. There is a distinction between the object oftax, the incidence
of tax and the machinery for the collection of the tax. The distinction
E is important but is apt to be confused. Legislative competence is
to be determined with reference to the object of the levy and not
with reference to its incidence or machinery. There is a further
distinction between the objects of taxation in our constitutional
scheme. The object of tax may be an article or substance such as
F a tax on land and buildings under Entry 49 ofLi~i II, or a tax on
animals and boats under Entry 58 List II or on a taxable event
such as manufacture of goods under Entry 84 of List I, import or
export of goods under Entry 83 of List I, entry of goods under
Entry 52 of List II or sale of goods under Entry 54 List II to name
G a few. Theoretically, ofcourse, as we have held in Godfrey Phillips
India Ltd. v. State of UP. ultimately even a tax on goods will be
on the taxable event of ownership or possession. We need not go
into this question except to emphasise that, broadly speaking the
subject-matter of taxation under Entry 56 of List II are goods and
H passengers. The phrase "carried by roads or natural waterways"
KERALA STATE ELECTRICITY BOARD v. COMMR. OF 431
CENTRAL EXCISE, THIRUVANANTHAPURAM [SINHA, J.]
carves out the kind of goods or passengers which or who can be A
\ subjected to tax under the entry. The ambit and purport of the entry
has been dealt with in Rai Ramkrishna v. State ofBihar where it
was said in language which we cannot better: (SCR p. 908)
"Entry 56 of the Second List refers to taxes on goods and B
passengers carried by road or on inland waterways. It is clear that
the State Legislatures are authorised to levy taxes on goods and
passengers by this entry. It is not on all goods and passengers that
taxes can be imposed under this entry; it is on goods and
passengers carried by road or on inland waterways that taxes can C
be imposed. The expression 'carried by road or on inland
waterways' is an adjectival clause qualifying goods and passengers,
that is to say, it is goods and passengers of the said description
that have to be taxed under this entry. Nevertheless, it is obvious
that the goods as such cannot pay taxes, and so taxes levied on D
goods have to be recovered from some persons, and these persons
must have an intimate or direct connection or nexus with the goods
before they can be called upon to pay the taxes in respect of the
carried goods. Similarly, passengers who are carried are taxed
under the entry. But, usually, it would be inexpedient, if not E
impossible, to recover the tax directly from the passengers and so,
it would be expedient and convenient to provide for the recovery
of the said tax from the owners of the vehicles themselves."
(See also Sainik Motors v. State of Rajasthan)
F
34. The point at which the collection of the tax is to be made is a
question of legislative convenience and part of the machinery for
realisation and recovery of the tax. The manner of the collection
has been described as "an accident of administration; it is not of
the essence of the duty". It will not change and does not affect the G
essential nature of the tax. Subject to the legislative competence
of the taxing authority a duty can be imposed at the stage which
the authority finds to be convenient and the most effective, whatever
stage it may be. The Central Government is therefore legally
competent to evolve a suitable machinery for collection of the H
432· SUPREME COURT REPORTS '[2007] 13 (Addi.) S.C.R.
l
A service tax subject to the maintenance of a rational connection·
between the tax and the person on whom it is imposed. By Sections
116 and 117 of the Finance Act, 2000, the tax is sought to be
levied on the recipients ofthe services. They cannot claim that they
are not connected with the service since the service is rendered to .
B them.
. 35. In a similar fact situation under an Ordinance the Central
Gov~rnment was authorised to levy and collect a duty of excise
· on all coal and coke dispatched from collieries. Rules framed under
the Ordinance provided for collection of the excise duty by the
c railway administration by means of a surcharge on freight
recoverable either from the consignor or the consignee. The
imposition of excise duty on the consignee was challenged on the
ground that the consignee had nothing to do with the manufacture
or production of the coal. Negativing this.submission this Court in
D
R. C. Jail v. Union of India, AIR at p. 1286 said :
"The argument confuses the incidence of taxation with the
machinery provided for the collection thereof"
36. In Rai Ramkrishna the tax under Entry 56 of List II was held
E
to be competently levied on the bus operators or bus owners even
though the object oflevy was passengers (which they were not)
because there was a direct-connection between the object of the
tax viz. goods and passengers and the owners of the transport
carrying the goods or passengers. There is thus nothing inherently
F
illegal or unconstitutional to provide for service tax to be paid by
the availer or user. ·
37. The writ petitioners have relying upon the decision in Dwarka
Prasad v. Dwarka Das Saraf contended that the amendment to
G Section 68 by the introduction of a proviso in 2003, was invalid.
It is submitted that as the body of the section did not cover the
subject-matter, there was no question of creating an exception in
respect thereto by a proviso. According to the. writ petitioners, the
proviso cannot expand the body by creating a separate charge. It
H is submitted that by merely amending the definition of the word
KERALA STATE ELECTRICITY. BOARD v. COMMR. OF 433
CENTRAL EXCISE, THIRUV ANANTHAPURAM [SINHA, J.]
"assessee" it could not be understood to mean that thereby all A
customers of the services in question were liable.
38. The submission is misconceived for several reasons. Section
68 is a machinery section in that it provides for the incidence of
taxation and is not the charging section which is Section 66. The B
amendments to Section 66 brought about in 2000 changed the point
of collection of tax from the provider of the service to "such manner
as may be prescribed". Section 68(1-A) as it stood iri 1997
provided for the collection and recovery of service tax in respect .
of the services referred in sub-clauses (g) to (r) of Section 65(41), C
which included both the services with which we are concerned,
from such person and in such manner as may be prescribed. The
1998 Finance Act maintained this. Now the Service Tax Rules,
1994 provided for the collection and recovery of tax from the users
or payers for the services. This was the prescribed method. All D
y that the proviso to Section 68(1-A) did was to prescribe the
procedure for· collection with reference to services of goods
transport operators and clearing agents which services had already
been expressly included under the Finance Act, 2000 in the
definition of taxable service."
E
20. Reliance placed by Mr. Iyer on Commissioner of Central
Excise, Meerut- !Tv. L.H Sugar Factories Ltd. and Ors., (2005] lJ
sec 245 is also not of much assistance as the decision was rendered in
relation to the provisions oflncome Tax Act holding that the said Act
also must be construed having regard to the charging provision. .F
21. We, therefore, are of the opinion that no case has been made
out for interference with the impugned judgment.
22. The appeal is dismissed with costs. Counsel's fee assessed at
~.25,0001- (Rupees twenty five thousand only). G
j.
K.K.T. Appeal dismissed.