Striking Down by One High Court - Binding on Other High Courts?
RECENTLY the Delhi High Court struck down the levy of Service Tax on short term accommodation in hotels as it was outside the legislative competence of Parliament. - 2016-TIOL-1730-HC-DEL-ST. In his article 'Short Term Accommodation & Service Tax - the impasse', Bharat Bhushan, Advocate raised a question whether the judgement is applicable to the whole of India or only within the territorial jurisdiction of the Delhi High Court.
What happens when a taxing provision is struck down by a High Court? Is this decision binding on another High Court?
This issue was discussed in the National Judicial Academy recently where several judges (past and present, of High Courts and Supreme Court) and academics participated.
Justice G. Raghuram sharing his experience as President of a tribunal, CESTAT opined that the process of invalidation and interpretation of a statute looks similar; if a judgement of a High Court interpreting the statute has persuasive value on other High Courts then a judgement invalidating a statute should also have persuasive value only. He said that these difference of opinions are bound to exist and if one High Court is bound by invalidation of other, then they should also be bound by in pari materia statutes of other states. One of the participants said that if one High Court invalidates a particular Act, it must be invalidated in other High Courts also. What would be binding then if two High Courts on the same day give contradicting opinions? There has to be certainty and uniformity across the country.
Chief Justice Chagla said in a judgment that if a High Court is deciding a judgment then the other High Courts must follow the earlier judgment unless there is a different perception and in case of such different perception, the judge must mention the reasons for such different perception. While giving a different judgment, such High Court's judge must inform about this change in perception and this different judgment to the High Court whose judgment has not been followed because these judgments are statutes for the entire nation.
In several cases, where the levy of Service Tax was struck down by a High Court, the assessees were in a dilemma whether to pay the tax or not to pay.
In 2009, when the Delhi High Court struck down Service tax on renting, the Chennai Service Tax Commissioner in an RAC Meeting clarified,
Board was aware of the decision of the Hon'ble High Court of Delhi and a SLP along with Stay Petition has been filed before the Hon'ble Supreme Court of India. It would be incorrect to stop payment of service tax, as otherwise demand notice would be issued by the jurisdictional officers invoking interest and penalty provisions. In the event of Revenue winning the appeal, the responsibility for the payment of applicable Service Tax with interest would squarely fall on the landlord. Hence, till the Hon'ble Supreme Court decides the case, it would be proper to mention service tax in the bills and remit the tax collected into the Govt. Account.
Incidentally, in a recent case of Dr. T. Rajakumari & Ors vs. Govt. of Tamil Nadu & Ors, the Madras High Court held -
"4. It is trite to say that once a High Court has struck down the provisions of the Central Act, it cannot be said that it would be selectively applied in other States. Thus, there is no question of applicability of provisions struck down by the High Court as of now until and unless the Hon'ble Supreme Court upsets the Judgment or stays the operation of the Judgment."
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