P.B. Suresh Kumar, J.:— The petitioner is a hotelier. The writ petition is preferred challenging Ext.P3 notice issued by the fourth respondent in as much as the said notice proposes to demand service tax on proceeds from sale of food and beverages at the premises of the hotel of the petitioner on which value added tax liability has been discharged by the petitioner and in as much as it proposes to demand service tax on services which come under the purview of tax on luxuries which was held unconstitutional by this Court. The petitioner is also challenging the constitutional validity of levy of service tax on services which come under the purview of ‘taxes on luxuries’ and ‘taxes on sale or purchase of goods’ and the constitutional validity of the definition of ‘service’ provided under Section 65(B)(44) of the Finance Act, 1994 in as much as the said definition covers services/transactions which come under the purview of ‘taxes on luxuries’ and ‘taxes on sale or on purchase of goods’. The petitioner is also challenging the notification providing for levy of service tax on 60% of the accommodation charges and Section 67 of the Finance Act, 1994 which does not provide for deduction of the value of transactions which have been subjected to Value Added Tax.
2. Heard the learned counsel for the petitioner as also the learned Standing Counsel for respondents 3 to 6.
3. In W.A. No. 1125/2013 and connected cases, a Division Bench of this Court held that levy of service tax on restaurants and hotels is beyond the legislative competence of the Parliament and they are covered by Entry 54 and Entry 62 respectively of List II of the Seventh Schedule of the Constitution and the States alone, therefore, have the legislative competence to enact any law imposing tax on the said matter. It is seen that the very basis of the writ petition is the decision of the Division Bench in W.A. No. 1125 of 2013.
4. A perusal of Ext.P3 show cause notice indicates that the Department has preferred a Special Leave Petition before the Apex Court against the decision of the Division Bench of this Court in W.A. No. 1125 of 2013 and connected cases and the matter is pending before the Apex Court and that Ext.P3 show cause notice is issued to protect the interest of the department in the event of a favourable decision in the said matter pending before the Apex Court. The said aspect is made clear in Ext.P3 show cause notice itself stating therein that further action on the same will be subject to the outcome of the decision of the Apex Court in the matter referred to above.
5. The learned counsel for the petitioner however contended that despite the statement in Ext.P3 notice that further action pursuant to the same will be taken only after the disposal of the matter pending before the Apex Court, it is specifically provided in the notice that the petitioner has to offer their explanation against the proposal made therein within thirty days from the date of receipt of the notice. According to the learned counsel for the petitioner, in the circumstances, they had no option but to challenge the notice.
6. In so far as it is made clear in the notice itself that further proceedings pursuant to the show cause notice will be subject to the outcome of the decision of the Apex Court in the matter pending before it as referred to in the notice, fairness demands that the petitioner be given a further notice before action is initiated against them in the event of the Apex Court taking a decision favourable to the Department.
7. In the said view of the matter, the writ petition is disposed of directing that further proceedings pursuant to Ext.P3 notice shall be deferred till the Special Leave Petition referred to in Ext.P3 notice is finally decided by the Apex Court. It is also directed that in the event of a favourable decision in the said matter by the Apex Court, the petitioner shall be given an opportunity to file additional objections. Needless to say that the petitioner shall also be given an opportunity of hearing before final orders are passed on Ext.P3 show cause notice thereafter.
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