V.V. Minerals [100% EOU] Vs Commissioner of GST & CE (CESTAT Chennai)
Unless there Is any provision to the contrary, the charging sections of the tax laws apply to illegal acts as they apply to legal acts and therefore tax is leviable notwithstanding that action for the illegal actions may be taken under some other law. This does not amount to endorsing the illegal activity by the State but only the recognition that it has taken place. This taxes Illegal businesses and does not absolve them of their tax liability by virtue of their Illegality. Since tax is leviable on illegal activity, tax benefits or tax relief are equally available to illegal businesses.
The present case pertains to the Service Tax under Chapter V of the Finance Act, 1994. After 2012 amendment, relevant provisions of this Act, viz., definitions of ‘Service’ and ‘taxable service’ and the charging section are as follows:
Section 65 B: Interpretations:
(44) “service” means any activity carried out by a person for another for consideration, and Includes a declared service, but shall not include—
(a) an activity which constitutes merely,— (i) a transfer of title In goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim;
(b) a provision of service by an employee to the employer in the course of or In relation to his employment;
(c) fees taken in any Court or tribunal established under any law for the time being force.
(51) “taxable service” means any service on which service tax is leviable under section 66B;
SECTION 66B. Charge of service tax on and after Finance Act, 2012.- There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen percent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.
Nothing In this Finance Act, 1994 says that the service must be legal for it to be covered as a taxable service Just as the Income Tax Act, 1922 and the Income Tax Act, 1961 nowhere defined the income to be income from legal activities. The case laws discussed above with reference to Income tax apply, in my opinion, equally to the service tax law as In both cases, the charging section does not exclude illegal businesses. Unless they are covered by the negative list, any illegal services (hawala operations, provision of accommodation entries, for example) are chargeable to service tax and there is no exclusion in the charging section to illegal services. Conversely, an exemption notification which is available to legal services is equally available to illegal services or legal services provided to illegal businesses unless a contrary condition is in the notification.
