All industries transporting goods through trucks and other transport operators and even individuals transporting household goods from one place to other, one city to another city now have to pay this tax at 10%.
A division bench of Justices Ruma Pal and Arun Kumar dismissed a batch of about 40 petitions, including the one by Gujarat Ambuja Cements, challenging imposition of the tax on the person transporting rather than on the transporter.
It may be recalled that there was a massive country wide strike in 2000 by transporters protesting the tax initially imposed on them. Subsequently the Centre succumbed to the pressure tactics and amended the law in the Finance Act, 2000 so that the consumer (the person or industry transporting) of the transport paid the tax rather than the service provider paying the service tax.
While terming the law as discriminatory, the petitioners had claimed that the service provider was liable to pay service tax in other areas.
They had also challenged the legislative competence of Parliament to enact a law on transport sector saying this fell within the exclusive jurisdiction of the states.
The court said that the government had legislative competence and powers to enact such a law.
Rejecting the arguments of petitioners, Justice Pal said the legislature enjoys a large discretion in the classification of tax regime and the courts are extremely circumspect on questioning the reasonability of such classification.
The apex bench also pointed out that the Service Tax Rules, 1994, imposing levy on service providers was amended following an all-India strike by goods transport operators and forwarding and clearing agents protesting the service tax imposed on them.
The bench said, The legislature is permitted a large discretion in the matter of classification to determine not only what should be taxed but also the manner in which the tax may be imposed. Courts are extremely circumspect in questioning the reasonability of such classification..., it added.
The petitioners, then, argued there was a discrimination in the method of collection of tax from the clients of the services provided by goods transporters and forwarding and clearing agents.