The Kerala High Court, known for some quirky verdicts, has declared that service tax imposed on luxury hotels as "unconstitutional, as Parliament is not legally competent enough to amend Finance Act of 2013-14. This year’s budget has enlarged the scope of service tax net and brought luxury hotels, AC restaurants under service tax.
A single bench of justice AM Shafique passed the order Wednesday while allowing a batch of petitions filed by the Kerala Classified Hotels and Restaurants Association, challenging the imposition of service tax.The court said that the imposition of service tax by the Centre by amending the Finance Act is “beyond the legal competency of Parliament as the subject comes under the state.” The court also said if any payment was made by the petitioners on the basis of amendment to Finance Act, they were entitled for a refund.
