Delve into a comprehensive review of the court’s detailed legal analysis on the contentious issue of imposing service tax on Composite Works Contracts. The examination focuses on the significance of precedents, principles of stare decisis, and the consistency upheld in judicial interpretations. Gain insights into the intricate legal framework surrounding tax laws and the nuanced reasoning behind the court’s decisions.
Facts
- FAC stands for ‘Foreign Exchange Regulation Act’
- It is pertinent to note that the services provided by the Appellant are in relation to Offshore Supply Services, which involve the supply of goods and services outside India
- The issue in this appeal revolves around the classification for the services provided by the Appellant
- The Appellant contends that the services provided fall under ‘export of services’ as defined under the Finance Act, 1994
- The Appellant argues that the services provided by them are covered under the Export of Services Rules, 2005
- The Revenue Department argues that the services provided do not amount to ‘export of services’
- The primary bone of contention is whether the services provided by the Appellant can be considered as export of services under the law
- The Tribunal held that the services provided by the Appellant do not fall under the definition of ‘export of services’ and hence are not exempt from service tax
- The FAC aspect of the case is crucial in determining the applicability of service tax on the services provided by the Appellant
- Several parties are feeling aggrieved and dissatisfied with various judgments and orders passed by different courts
- The parties have preferred Civil Appeals against these judgments and orders
- The appeals involve issues related to service tax and have been heard together with other related appeals
- Some appeals have been kept pending due to oversight
- The appellants include companies like Larsen and Toubro, G.D. Builders, M/s. Unitech Ltd., and NBCC
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Issue
- The common question of law and facts arising in the group of appeals is whether service tax could be levied on Composite Works Contracts before the introduction of the Finance Act, 2007.
- The High Court dismissed the writ appeals and confirmed the judgment of the learned Single Judge, stating that the appellant had an alternative remedy available through statutory appeal.
- The specific issue in the appeals is whether service tax could be imposed on Composite Works Contracts prior to the amendment of the Finance Act, 1994 in 2007 introducing Section 65(105)(zzzza) pertaining to Works Contracts.
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Arguments
- Ms. Madhavi Divan, learned Additional Solicitor General, supports the prayer to re-consider the decision in the Larsen and Toubro Limited case.
- She argues that there was a machinery provision to charge the service component in Works Contracts even before Finance Act, 2007.
- Shri Datar, a Senior Advocate, emphasizes the principle of stare decisis and suggests not taking a contrary view to the Larsen and Toubro Limited case.
- Ms. Madhavi Divan does not dispute that the issue in the present appeals aligns with the Larsen and Toubro Limited case.
- Shri Datar adds detailed submissions on the non-levy of service tax on Composite Works Contracts before Finance Act, 2007.
- The argument revolves around the correctness of the observation that no service tax was leviable on Works Contracts before Finance Act, 2007 as per the Larsen and Toubro Limited case.
- Ms. Madhavi Divan presents the definition of Works Contracts and cites various other cases in support of her argument.
- Shri Datar contends that if the Larsen and Toubro Limited case is reconsidered after six to seven years, it may disrupt decisions made by Tribunals and High Courts.
- He highlights the consistent following of the Larsen and Toubro Limited case post 2015 by various courts.
- Shri Datar also refers to an exemption notification and argues that since service tax was found non-existent, exemptions do not apply.
- The decision in the Larsen and Toubro Limited case has been upheld in subsequent cases like Commissioner of Service Tax vs. Bhayana Builders Private Limited.
- Service tax is being levied on Composite Works Contracts for the first time.
- This levy is pursuant to the Finance Act amendment made via Finance Act, 2007.
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Analysis
- Judicial consistency promotes confidence in the system, emphasizing the need for consistency in legal principles.
- References to larger benches should only be made when a proposition contradicts a subsequent judgment, becomes unworkable, or conflicts with established principles.
- The principle of stare decisis, i.e., standing by decided cases, upholding precedents, and maintaining former adjudication, is crucial.
- The relevance and significance of the principle of stare decisis has been emphasized in various judgments, promoting certainty and continuity in the legal system.
- Precedent plays a key role in promoting stability and even-handedness.
- The Court’s reliance on precedents creates certainty for individuals and enhances stability in the legal system.
- The Court should exercise caution in overruling judgments, ensuring that there are compelling reasons to depart from established precedents.
- Consistency, certainty, and uniformity in judicial decisions create a pattern for future conduct and enable the development of law.
- The doctrine of stare decisis should generally be adhered to, but changes in facts and circumstances may justify a fresh look.
- Avoiding frequent reviews of earlier decisions is necessary to prevent uncertainty and confusion in the law.
- The rule of stare decisis is crucial for maintaining continuity and interpretation of law.
- The Court must satisfy itself whether it is necessary to review an earlier decision in the interest of public good or for other compelling reasons, emphasizing certainty and continuity in legal interpretation.
- The decision of the Court in the case of Larsen and Toubro Limited (supra) made in 2015 states that service tax was not leviable on indivisible works contracts pre-Finance Act, 2007.
- The Court considered the entire levy scheme of service tax pre-Finance Act, 2007 and gave cogent reasons for its decision.
- The Court did not agree to re-consider or refer the matter to a Larger Bench based on principles of stare decisis and consistency.
- Various High Courts and Tribunals have followed the decision in Larsen and Toubro Limited (supra) which has been accepted by the Revenue in finalized cases.
- Since no review application was filed by Revenue, the decision has stood the test of time and the Court did not find any reason to revisit it.
- The request for reconsideration was made by Revenue post a significant time lapse from the original decision in 2015.
- The decision post-2007 regarding service tax on Composite Works Contracts is settled due to the decision in Larsen and Toubro Limited (supra).
- Revenue’s appeal dismissed in Civil Appeal No 6792 of 2010 based on the decision in Larsen and Toubro Limited case
- Assessee not liable to pay service tax until the date of amendment of the provision on indivisible/composite works contracts based on the same decision
- Assessments orders levying service tax are to be set aside for the said appeals
- Decision based on the view that pre-Finance Act, 2007, service tax was not leviable on indivisible/composite works contracts
- Civil Appeal Nos. 4547-4548 of 2014, Civil Appeal No 2667 of 2022 and Civil Appeal No 2668 of 2022 to be allowed based on the same decision
Decision
- Several Civil Appeals have been discussed and their impugned judgments and orders have been allowed.
- Judgments and orders passed by the High Courts/Tribunals holding that service tax is payable on indivisible/composite works contracts for the period pre-Finance Act 2007 have been quashed and set aside.
- Assessment orders levying service tax on assesses for the period before 2007 on indivisible/composite works contracts have been quashed and set aside.
- Civil Appeal No 6792 of 2010 has been dismissed.
- No order as to costs has been given in the circumstances of the case.
Case Title: M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT LTD. Vs. THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES (2022 INSC 780)
Case Number: C.A. No.-008673-008684 / 2013
