Case Note & Summary
The petitioner, Rattan India Power Limited, filed a writ petition under Article 226 of the Constitution of India before the Bombay High Court challenging an order passed by the Principal Commissioner of Goods and Service Tax and Central Excise (Respondent No. 3) which levied service tax on the amount paid by the petitioner to the State of Maharashtra for irrigation restoration charges. The petitioner had paid these charges to the State for diversion of water for industrial use, as per the State's 2004 Circular. The respondents raised a preliminary objection that the petitioner had an alternative efficacious remedy of appeal to the Customs Excise and Service Tax Appellate Tribunal (CESTAT). The court examined whether the writ petition should be entertained despite the availability of alternative remedy. The court held that the existence of an alternative remedy is not an absolute bar to the maintainability of a writ petition, especially where the impugned order is without jurisdiction or ex facie illegal. On merits, the court found that the irrigation restoration charges were collected by the State in its sovereign capacity for the purpose of restoring irrigation potential lost due to diversion of water for non-irrigation use. Such charges do not constitute consideration for any 'service' provided by the State, and therefore, service tax under the Finance Act, 1994 cannot be levied. The court quashed the impugned order and allowed the writ petition, holding that the levy of service tax on irrigation restoration charges was without jurisdiction and ultra vires the Act.
Headnote
A) Constitutional Law - Writ Jurisdiction - Alternative Remedy - Availability of alternative remedy is not an absolute bar to maintainability of writ petition under Article 226 of the Constitution of India - Court may entertain petition where the order is without jurisdiction or ex facie illegal - Held that the impugned order levying service tax on irrigation restoration charges was without jurisdiction as the State was acting in sovereign capacity (Paras 2, 5-10). B) Service Tax - Sovereign Functions - Irrigation Restoration Charges - Service tax cannot be levied on amounts paid to the State for sovereign functions such as irrigation restoration - The State of Maharashtra, while collecting irrigation restoration charges, is not providing a 'service' under the Finance Act, 1994 - Held that the levy of service tax on such charges is ultra vires the Act (Paras 11-15).
Issue of Consideration
Whether the writ petition should be entertained despite availability of alternative remedy of appeal, and whether service tax can be levied on irrigation restoration charges paid by the petitioner to the State of Maharashtra.
Final Decision
Writ petition allowed. Impugned order levying service tax on irrigation restoration charges quashed and set aside.
Law Points
- Alternative remedy not an absolute bar to writ jurisdiction
- Service tax on sovereign functions
- Irrigation restoration charges not taxable service
