CESTAT: Service Tax not applicable on Collection of Octroi for Entry of Goods in discharge of Sovereign Privilege
1. The Customs, Excise s, Service Taxes Appellate Tribunal (CESTAT), Mumbai Bench held sovereign privilege that the service tax is not applicable to the collection of Octroi for entry of goods by the appellant in the discharge of sovereign privilege.
2. Mumbai Port Trust, along with Central Excise authorities and Central Railway, was vested with the responsibility under Mumbai Municipal Corporation (Levy of Octroi) Rules, 1965 to collect octroi on the entry of goods for consumption and use in the municipal area within their respective operational jurisdictions for which 3% of such collections was retained as recompense.
3. Mumbai Port Trust was is aggrieved by the crystallization of liability of Rs. 21,19,68,032/- under section 73 of Finance Act, 1994, along with appropriate interest under section 75 of Finance Act, 1994, besides being imposed with a penalty of the like amount under section 78 of Finance Act, 1994 and as the demand was held to be liable for recovery from the Traffic Manager on whom the penalty of Rs. 10,000/- under section 77 of the Finance Act, 1994 was also imposed.
4. The adjudicating authority derogated the collection of octroi from exclusion devolving on the exercise of ‘sovereign function’ characterized by the entity is a public authority, providing service that is mandatory and statutory and the consideration thereof, as statutory fee or compulsory levy, deposited in the government account.
5. It is apparent that the adjudicating authority has proceeded on the assumption that the collection of octroi was the service rendered by the appellant and the sole aspect that remained in dispute was the fitment within the proposed taxable service.
6. The tribunal consisting of Technical Member, C.J. Mathew, and Judicial Member Dr Suvendu Kumar Pati levy and collection of tax is a sovereign privilege and must have the authority of law enacted by the Union Parliament or the legislatures of constituent states.
“We are constrained to take note of the solecism evident in those findings. Tax officials are creations of taxing statutes and not only required to be diligent in enforcing levies contemplated in those statutes but also be soldiers in defence of rule of law. Incorrect sequencing of the hierarchy of findings underlines disregard for other taxing statutes and even of the Constitution itself which may be attributable either to ignorance or to egregious disrespect,” the tribunal while allowing the appeal said.