constitutional validity of service tax, excise and customs cia 1 ppt

8/8/2019 Constitutional Validity of Service Tax, Excise and Customs CIA 1 Ppt

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CONSTITUTIONAL VALIDITY OF SERVICE TAX, EXCISE

AND CUSTOMSA 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 specifiedservices called "taxable services". Service tax cannot belevied 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 thedegree of intensity of taxation on manufacturing andtrade 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 bythe 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 rateof Service Tax was reduced from 12 per cent to 10 per



CONSTITUTIONAL VALIDITY

Article 265 of the Constitution lays downthat no tax shall be levied or collected exceptby the authority of law

Schedule VII divides this subject into threecategories :

Ø Union list (only Central Government haspower of legislation)

Ø State list (only State Government has powerof legislation)

ØConcurrent list (both Central and StateGovernment can ass le islation)



CASES

• The validity of Service tax has been challenged invarious courts of India, who have in their variousdecisions 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 advertisingservice 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 notax. It was further held that 'the tax is not onadvertisement' but on the services rendered with

reference to the advertisement and there is a cleardistinction between the advertisement service and



The Supreme Court while deciding the case, observedas follows :

• "The service tax levied by reason of services which

are offered. The imposition is on the personrendering the service. Of course, it may beindirect 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 beregarded as an assessee and not thecustomer. 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 AdvertisingServices – 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 isviolative 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 legislationcompetence of Parliament - Service tax is not onadvertisement but on advertising services provided inconnection with advertisement – Petition challengingof service tax on advertisement services dismissed.Levy of service tax on this category of service was

held to be constitutionally valid -Addition AdvertisingVs 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 tobe valid and within the competence of the

Government – Also held that the double taxationcan not be a ground for invalidating a fiscalstatute – No discrimination by not imposingservice tax on free lancers – Appellant’scontention that it violates the fundamental right

guaranteed under Article 19(1)(g) of theConstitution 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 aCab Operators – Constitutional validity – Legalcompetence – Held that the stage carriageoperators, contract carriage operators, cab/maxi

cab operators and rent a cab scheme operatorsare liable to pay service tax – Provisions makingthe above services taxable are not ultra viresand within the legislative competence of theGovernment - 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] 134ELT 618 (Madras-HC)

•



Constitutional Validity Upheld – OutdoorCaterer

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 theGovernment 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 – MandapKeeper

Service tax on Mandap Keeper –Constitutional validity – Legislative

competence does not violative of provisions of Constitution on issuesraised by the appellant – Writ petitiondismissed. – Tamil Nadu Kalyana

Mandapam Owners Association VsUnion of India [2001] 133 ELT 36(Madras-HC)

•



PROFESSION vs. SERVICE TAX

• The Gujarat High Court and the MumbaiHigh Court in the judgment have heldthat 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 thefact whether professional does or doesnot render professional service forremuneration

• Whereas the service tax is a levy, which

has to be paid each time a professional



• A number of trade bodies and individual serviceproviders have challenged the levy of servicetax by the Union Government under the

residuary entry no. 97, list I in SeventhSchedule of the Constitution.

• They contended that the service tax nothing but atax on professions, which is specifically listed,in the State list. Therefore, the Union

Government is not empowered to levy servicetax on professional services.

• Additionally, the levy has also been challenged onthe grounds of hostile discrimination vis-à-vis

other services and/or the service providers



CENTRAL EXCISE



• 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 productionmust be in

India

Unless all of these conditions aresatisfied, Central Excise Dut cannot be

NATURE OF EXCISE DUTY



HISTORY ANDDEVELOPMENTS

• The tax is administered by the CentralGovernment under the authority of Entry84 of the Union List (List 1) under

Seventh Schedule read with Article 226of the Constitution of India

• the rates of duty, ad valorem or specific,are prescribed under the Schedule I andII of the Central Excise Tariff Act, 1985

• taxable event under the Central Excise lawis ‘manufacture’

•




• Article 246 of our Constitutionindicates bifurcation of powers to

make laws, between UnionGovernment and StateGovernments.

• Entry No. 84

• entry No. 51 - 'State Excise'

•



RULES FOR LEVY OF CENTRALEXCISE

• In India, excise duty is levied in accordance withthe 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 atConcessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001

• Central Excise Valuation (Determination of Priceof 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 goodsunder 91 chapters

•



VALUATION

Value under the Central ExciseAct, 1944

(i) Transaction value under Section4. (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 ongoods imported into or exported out of theboundaries of a country. The main purpose of thecustom 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 consumerof the goods and not by the importer or theexporter who pay it

• These duties are usually levied with ad valorem ratesand their base is determined by the domestic value- the imported goods calculated at the officialexchange rate. Similarly, export duties are imposedon 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 atthe standard rate (The duty may be a percentage of the value of thegoods or at a specific rate) or, in the case of import from somecountries, at the preferential rate or ad valorem rate. The rate varies fordifferent items from 5% to 40%

• Additional Duty (Countervailing Duty) : This duty is levied under theCustom Tariff Act, section 3 (1) and its rate structure is equal to centralexcise duty leviable on similar goods produced or manufactured inIndia. It can be charged on all goods by the central government tocounter balance excise duty leviable to raw materials, components andother inputs similar to those used in the production of such good.

• Anti-dumping Duty : This duty prevents the dumping of foreign goods bythe transnational companies with a view to protecting domesticindustry from unfair injury

• Protective Duty : This duty protect the interests of the Indian industrialsector

• 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




• Customs Act 1962 - Replaced the Sea Customs Act,1878. It is the main Act,

which provides for the levy and collection of dutyimport/export procedures, prohibition on importation andexportation of goods, penalties, offenses etc. Under section

156 & 157 of Customs Act, 1962, the Central Governmenthas been empowered to make rules/regulations. Itconsolidates the entire law on the subject of import andexport duties, which were earlier contained in variousenactments 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 additionthe Customs Tariff Act (CTA) makes provisions for duties like

CENTRAL BOARD OF EXCISE



CENTRAL BOARD OF EXCISEAND CUSTOMS

• The Central Board of Excise and Customs under the Ministryof Finance manages the customs duty process in thecountry

• 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 toCustoms, Central Excise and Narcotics to the extentunder 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 homeconsumption is filed (Kiran spinning millsV. 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 dryingand printing mills 2005)

•

SMUGGLING : any act or omission which will



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constitutional validity of service tax, excise and customs cia 1 ppt

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