To finance and promote Swachh Bharat initiatives, an enabling provision was incorporated in the Finance Act, 2015 (hereinafter referred as the Act) vide Chapter VI to empower the Central Government to impose a Swachh Bharat Cess (hereinafter referred as SBC) on all or any of the taxable services at a rate of 2% on the value of such taxable services. Sub-section (2) of Section 119 of the Finance Act, 2015 which is the charging section, is reproduced below:-
“119(2) There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Swachh Bharat Cess, as service tax on ALL or ANY of the taxable services at the rate of two per cent on the VALUE of such services for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.”
The government suggested and it was expected that the SBC may be imposed only on few selective services like telecommunication services, works contract services, hotel services, etc. Since the Central Government was not sure whether it should levy the tax on all taxable services or on few selective services, they used the phrase, “all or any” and enabled itself to keep any service outside the scope of charging section!!
With due respect, the author is of the view that the words ‘or any’ has been used unnecessarily in the charging section, as it leads to vagueness and uncertainty to the subject of the levy. The charging section should be clearly worded without any deficiency as regards the subject or person to be taxed. In the instant case, whether the legislation has levied SBC on all the services or on any particular services is unknown and unclear. The subject of the levy cannot be left open to be imposed at the option of the executive.
The Central Government has not yet issued notification to specify either ‘all taxable services’ or ‘list of services’ which are leviable to SBC u/s 119(2) of the Act. Interestingly, without specifying the taxable services subjected to the levy, the government has issued Notification No. 22/2015-ST dated 06-11-2015 exempting the following service from payment of SBC:
1. Services covered under Negative List u/s 66D
2. Services exempt from ‘service tax’ under any notification issued u/s 93(1) of the Finance Act, 1994
Applying strict literal interpretation as applicable in case of taxing statutes, one can challenge the levy of SBC from 15-11-2015 because the Central Government has not yet exercised the powers granted under the enabling provision u/s 119(2) of the Act to notify the services which are leviable to SBC. The notification no. 21/2015-ST has simply made effective the provisions of Chapter VI from 15-11-2015 and notification no. 22/2015-ST is an exemption notification u/s 93(1) read with section 119(5). In effect, the Central Government seems to have committed blunder by exempting few services from payment of SBC without first bringing such exempted services within the four corners of the LEVY of SBC. It has not issued any notification to LEVY SBC on ALL taxable services!!! Nothing can be assumed in law.
Some important rulings of the apex court are extracted below to highlight the importance of charging section and the words used therein in case of levy of tax.
The Hon’ble Supreme Court in the case of Mathuram Agrawal v. State of Madhya Pradesh [(1999) 8 SCC 667] observed: “The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter.”
A taxing statute must be couched in express and unambiguous language. [Banarsi Debi v. JTO – (1964) 7 SCR 539].
The Act must be strictly construed in order to find out whether a liability is fastened on a particular subject. The subject is not to be taxed without clear words for that purpose; and every Act of Parliament must be read according to its natural construction of words. [A.P. Board far Water Pollution Control v. A.P. Rayons Ltd., (1989) 1 SCC 44; Re Nick-lethwait – (1855) HExch 452; Tennant v. Smith – (1892) AC 150; St. Aubyn v. A.G. -(1951) 2 All ER 473].
Words must say what they mean, nothing should be presumed or implied, they must say so. The true test must always be the language used. [Goodyear India Ltd. v. State of Haryana – (1990) 2 SCC 71].
If the intention of the government was to exempt from SBC any particular service or to exempt the services covered under mega exemption notification or other notifications issued u/s 93(1), as it has done vide Notification No. 22/2015-ST, the same objective could have been achieved even without the use of the words ‘or any’ in the section 119(2) of the Finance Act, 2015. Section 119(5) of the Act has clearly empowered the government to use powers u/s 93 of Finance Act, 1994 to exempt any service from SBC. Thus, the words ‘or any’ has been unnecessarily used in the charging section of Swachh Bharat Cess.
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