You are on page 1of 30

CONSTITUTIONAL VALIDITY

OF SERVICE TAX, EXCISE


AND CUSTOMS
A PRESENTATION BY
KARUMBAIAH .K (0921216) , JANE DSOUZA (0921238) AND SAMSON
SUJINDER (0921229)
SERVICE TAX
INTRODUCTION

• Service Tax is a form of indirect tax imposed on specified


services called "taxable services". Service tax cannot be
levied on any service which is not included in the list of
taxable services
• Service Tax was first brought into force with effect from 1
July 1994 by Chapter V of the Finance Act, 1994
• The objective behind levying service tax is to reduce the
degree of intensity of taxation on manufacturing and
trade without forcing the government to compromise on
the revenue needs
• For the purpose of levying service tax, the value of any
taxable service should be the gross amount charged by
the service provider for the service rendered by him
• On February 24, 2009 in order to give relief to the industry
reeling under the impact of economic recession, The rate
of Service Tax was reduced from 12 per cent to 10 per
CONSTITUTIONAL VALIDITY

 Article 265 of the Constitution lays down


that no tax shall be levied or collected except
by the authority of law

Schedule VII divides this subject into three


categories :
Ø Union list (only Central Government has
power of legislation)
Ø State list (only State Government has power
of legislation)
Ø Concurrent list (both Central and State
Government can pass legislation)         
CASES

• The validity of Service tax has been challenged in


various courts of India, who have  in their various
decisions have upheld the legality of the levy
• The Gujarat High Court in the case of Addition
Advertising vs. Union of India (1998 (98) ELT
14) has held that levy of tax on advertising
service is not unconstitutional
 It was held that this is not a tax on any profession,
trade, calling or employment, but in respect of
service rendered. If there is no service, there is no
tax. It was further held that 'the tax is not on
advertisement' but on the services rendered with
reference to the advertisement and there is a clear
distinction between the advertisement service and
The Supreme Court while deciding the case, observed

as follows :
•  "The service tax levied by reason of services which
are offered. The imposition is on the person
rendering the service. Of course, it may be
indirect tax, it may be possible that the same is
passed on to the customer but as far as the levy
and assessment is concerned, it is the person
rendering the service who alone can be
regarded as an assessee and not the
customer. This is the only way in which the
provision can be read harmoniously”
• "The charge of tax is on the value of services and it
is only the person who is providing service can be
Constitutional validity upheld –
Advertising Services

 Constitutional validity of service tax on Advertising


Services – Service tax on advertising is not violative of
Articles 14 and 19(1) of Constitution of India –
Classification of commercial or non-commercial
advertising is neither vague nor arbitrary and not it is
violative of Article of Constitution – The argument that
it is a tax on profession also set aside- Also held that
tax on advertising services can not by any stretch of
imagination, be brought into an Entry “sale or
purchase of goods” – It is not beyond the legislation
competence of Parliament - Service tax is not on
advertisement but on advertising services provided in
connection with advertisement – Petition challenging
of service tax on advertisement services dismissed.
Levy of service tax on this category of service was
held to be constitutionally valid -Addition Advertising
Vs Union of India [1998] 98 ELT 14 (Guj.).
Constitution Validity Upheld –
Photography services

 Service tax on Photographic Services –


Constitutional validity of service tax on services
provided by photography studio or agency held to
be valid and within the competence of the
Government – Also held that the double taxation
can not be a ground for invalidating a fiscal
statute – No discrimination by not imposing
service tax on free lancers – Appellant’s
contention that it violates the fundamental right
guaranteed under Article 19(1)(g) of the
Constitution of India was also set aside – Thus,
writ petition dismissed. - Kerala Colour Lab
Association Vs Union of India [2003] 156 ELT 17
(Ker.) (HC)

Constitutional Validity upheld – Tour operator
& Rent-a-Cab

 Service tax on Tour Operators, or on a renting a


Cab Operators – Constitutional validity – Legal
competence – Held that the stage carriage
operators, contract carriage operators, cab/maxi
cab operators and rent a cab scheme operators
are liable to pay service tax – Provisions making
the above services taxable are not ultra viresand
within the legislative competence of the
Government - Do not defy any of the provisions
of the Constitution as argued by the appellants –
All writ petitions filed in this regard accordingly
dismissed. - Secy. Federation of Bus Operator
Association of T.N. Vs Union of India [2001] 134
ELT 618 (Madras-HC)

Constitutional Validity Upheld – Outdoor
Caterer

 Constitutional validity of service tax on Caterers


– Legislative competence – Not covered under
Entry 54 of List II (State List) of Schedule VII to
Constitution – Levy of tax on the said service held
to be within the legislative competence of the
Government and otherwise constitutionally valid
and otherwise in order – It does not violates
Article 14 of the Constitution. - Tamilnadu Hotels
Associations Vs Union of India [2001] 133 ELT 265
(Madras HC)

Constitutional Validity Upheld – Mandap
Keeper

 Service tax on Mandap Keeper –


Constitutional validity – Legislative
competence does not violative of
provisions of Constitution on issues
raised by the appellant – Writ petition
dismissed. – Tamil Nadu Kalyana
Mandapam Owners Association Vs
Union of India [2001] 133 ELT 36
(Madras-HC)

PROFESSION vs. SERVICE
TAX
•  The Gujarat High Court and the Mumbai
High Court in the judgment have held
that the tax on profession (which is in
the State list) is a tax on the privilege of
carrying on such profession
• Therefore, such a tax is irrespective of the
fact whether professional does or does
not render professional service for
remuneration
• Whereas the service tax is a levy, which
has to be paid each time a professional
•  A number of trade bodies and individual service
providers have challenged the levy of service
tax by the Union Government under the
residuary entry no. 97, list I in Seventh
Schedule of the Constitution.
• They contended that the service tax nothing but a
tax on professions, which is specifically listed,
in the State list. Therefore, the Union
Government is not empowered to levy service
tax on professional services.
• Additionally, the levy has also been challenged on
the grounds of hostile discrimination vis-à-vis
other services and/or the service providers
CENTRAL EXCISE
NATURE OF EXCISE DUTY

• As per section 3 of Central Excise Act


(CEA) excise duty is levied if :
 - The duty is on goods.
 - The goods must be excisable
 - The goods must be manufactured or
produced
 - Such manufacture or production
must be in
 India
 Unless all of these conditions are
satisfied, Central Excise Duty cannot be
HISTORY AND
DEVELOPMENTS
• The tax is administered by the Central
Government under the authority of Entry
84 of the Union List (List 1) under
Seventh Schedule read with Article 226
of the Constitution of India
• the rates of duty, ad valorem or specific,
are prescribed under the Schedule I and
II of the Central Excise Tariff Act, 1985
• taxable event under the Central Excise law
is ‘manufacture’

CONSTITUTIONAL VALIDITY

• Article 246 of our Constitution


indicates bifurcation of powers to
make laws, between Union
Government and State
Governments.
• Entry No. 84
• entry No. 51 - 'State Excise'


RULES FOR LEVY OF CENTRAL
EXCISE
• In India, excise duty is levied in accordance with
the provisions of Central Excise Act, 1944
• The Central Excise Rules, 2002 (Section 143 of
the Finance Act, 2002)
• The Central Excise (Settlement of Cases) Rules,
2001
• The Central Excise (Removal of Goods at
Concessional Rate of Duty for Manufacture of
Excisable Goods) Rules, 2001
• Central Excise Valuation (Determination of Price
of Excisable Goods) Rules, 2000
• Consumer Welfare Fund Rules, 1992
• The Central Excise (Advance Rulings) rules, 2002
TYPES OF EXCISE DUTY

• Duties under Central Excise Act


• National Calamity Contingent Duty
(NCD)
• Additional Duty on goods of special
importance
• Additional Duty on Textile Articles
• Duty on Medical and Toilet
preparations
• Additional duty on mineral products
CLASSIFICATION OF GOODS

• The two step process is :


 (a) Correctly classify the goods
 (b) Find its assessable value.

• The Central Excise Tariff Act, 1985


(CETA) classifies all the goods
under 91 chapters

VALUATION

Value under the Central Excise


Act, 1944
 (i) Transaction value under Section
4.
 (ii) Value determined on basis of
maximum
 Retail Sale Price as per Section
4A.
 (iii) Tariff value under Section 3.
CASES

• Case law on manufacture :


 Maa Sharda Wine traders
Vs UOI
• case law on classification of goods :
 state of UP Vs Kores Ltd

CUSTOMS
INTRODUCTION
• CUSTOMS DUTY is a tax which the State collects on
goods imported into or exported out of the
boundaries of a country. The main purpose of the
custom duty in India is the prevention of the illegal
export and import of goods
• It is collected from the importer or exporter of goods,
but its incidence is actually borne by the consumer
of the goods and not by the importer or the
exporter who pay it
• These duties are usually levied with ad valorem rates
and their base is determined by the domestic value
- the imported goods calculated at the official
exchange rate. Similarly, export duties are imposed
on export values expressed in domestic currency
• Customs duty in India falls under the Customs Act
TYPES OF CUSTOMS DUTY

• Basic Duty : The rates of this duty are indicated in the First Schedule of
the Customs Tariff Act, 1975. This is the general kind of duty levied at
the standard rate (The duty may be a percentage of the value of the
goods or at a specific rate) or, in the case of import from some
countries, at the preferential rate or ad valorem rate. The rate varies for
different items from 5% to 40%
• Additional Duty (Countervailing Duty) : This duty is levied under the
Custom Tariff Act, section 3 (1) and its rate structure is equal to central
excise duty leviable on similar goods produced or manufactured in
India. It can be charged on all goods by the central government to
counter balance excise duty leviable to raw materials, components and
other inputs similar to those used in the production of such good. 
• Anti-dumping Duty : This duty prevents the dumping of foreign goods by
the transnational companies with a view to protecting domestic
industry from unfair injury
• Protective Duty : This duty protect the interests of the Indian industrial
sector
• Export Duty : This duty is levied on the export of goods from India the
rate at which the duty is levied are given in the customs tariff act,1975.
 At present very few articles such as skins and leather are subject to
CONSTITUTIONAL VALIDITY
• Customs Act 1962 -
 Replaced the Sea Customs Act,1878. It is the main Act,
which provides for the levy and collection of duty
import/export procedures, prohibition on importation and
exportation of goods, penalties, offenses etc. Under section
156 & 157 of Customs Act, 1962, the Central Government
has been empowered to make rules/regulations. It
consolidates the entire law on the subject of import and
export duties, which were earlier contained in various
enactments like the Sea Customs Act, 1878, In-land
Bounded Warehousing Act, 1896 and Land Customs Act,
1924
• Customs Tariff Act of 1975 -
 Replaced the Indian Tariff Act,1934. The Customs Tariff
Act, 1975 contains two schedules which give classification
and rates of duties for imports and for exports. In addition
the Customs Tariff Act (CTA) makes provisions for duties like
CENTRAL BOARD OF EXCISE
AND CUSTOMS
• The Central Board of Excise and Customs under the Ministry
of Finance manages the customs duty process in the
country
• Central Board of Excise and Customs (CBEC) is a part of the
Department of Revenue under the Ministry of Finance,
Government of India. It deals with the tasks of
formulation of policy concerning levy and collection of
Customs and Central Excise duties, prevention of
smuggling and administration of matters relating to
Customs, Central Excise and Narcotics to the extent
under CBEC's purview

CASES

• TAXABLE EVENT IN IMPORTS : taxable event


occurs when goods become part of mass of
goods within the country after crossing
customs barrier & BOE for home
consumption is filed (Kiran spinning mills
V. CC 1999) and (Garden Silk Mills Ltd.
V UOI 1999)
• TAXABLE EVENT IN EXPORTS : taxable event
occurs when goods cross territorial waters
[12nm] of India (UOI V. Rajindra drying
and printing mills 2005)
• SMUGGLING : any act or omission which will
THE END
THANK YOU