2011 (3) TMI 773 - HC - Service Tax

Justification - Section 65(90-a) of the Finance Act renting of immovable property has not undergone any amendment by the Finance Act of 2010 - It is only Section 66(105) taxable service which has undergone amendment to include as taxable service any service provided to any other person by renting of immovable property or any movable property or any other service relating to such renting for use in course or furtherance of business or commerce - Therefore the nature of the transaction made by the petitioner with its tenant clearly amounts to renting of an immovable property for the purpose of business or commerce and is therefore clearly covered by Section 65(90-a) of the Finance Act 1994 and service tax is clearly leviable thereon - Although challenge in the present case has been made to the Amendment Act of 2010 to Section 66(105)(zzzz) find no justification to entertain the present writ application since we are also of the view that the amendment is clearly clarificatory in nature and Parliament certainly possesses the necessary legislative competence to declare the said amendment to be retrospective in operation and therefore do not find any error or lack of competence in such legislation.

Issues Involved:
1. Constitutionality of Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994 as amended.
2. Legality of Notification No. 24/2007 and Circulars dated 4-1-2008 and 26-2-2010.
3. Validity of demand notice and summon/notice issued by the authorities.
4. Retrospective application of the Finance Act, 2010 amendments.
5. Legislative competence of Parliament to enact and amend fiscal statutes.

Detailed Analysis:

1. Constitutionality of Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994 as amended:
The petitioner challenged the constitutionality of these sections, arguing that "renting of immovable property" does not constitute a taxable service as there is no value addition by the service provider. The petitioner relied on the Delhi High Court judgment in Home Solution Retail India Ltd. v. Union of India, which declared that renting out immovable property for business or commerce does not constitute a taxable service. However, the court noted that the Delhi High Court's judgment had been stayed by the Supreme Court. Additionally, the court observed that the amendment by the Finance Act, 2010 clarified that renting of immovable property for business or commerce is a taxable service. The court held that Parliament has the legislative competence to enact and amend fiscal statutes, including giving them retrospective effect.

2. Legality of Notification No. 24/2007 and Circulars dated 4-1-2008 and 26-2-2010:
The petitioner sought to declare these notifications and circulars as illegal and ultra vires. The court noted that these notifications and circulars were issued to clarify the scope of taxable services under the Finance Act. The court found no merit in the petitioner's challenge, as the amendments and clarifications were within the legislative competence of Parliament and were intended to clarify the existing provisions.

3. Validity of demand notice and summon/notice issued by the authorities:
The petitioner sought to quash the demand notice dated 25-11-2010 and summon/notice dated 21-12-2010. The court observed that the petitioner had approached the court at the stage of a show-cause notice. The court directed the petitioner to respond to the show-cause notice within four weeks and allowed the revenue authorities to proceed in accordance with the law.

4. Retrospective application of the Finance Act, 2010 amendments:
The petitioner argued against the retrospective application of the amendments. The court held that it is within the competence of Parliament to give retrospective effect to fiscal statutes, especially when the amendments are clarificatory in nature. The court found no error or lack of competence in the retrospective application of the amendments.

5. Legislative competence of Parliament to enact and amend fiscal statutes:
The court reaffirmed that Parliament has the necessary legislative competence to enact and amend fiscal statutes, including the imposition of service tax on renting of immovable property for business or commerce. The court emphasized the presumption in favor of the constitutionality of legislative provisions and upheld the amendments made by the Finance Act, 2010.

Conclusion:
The court dismissed the writ petition, finding no merit in the challenges raised by the petitioner. The court upheld the constitutionality and validity of the amendments to the Finance Act, 1994, and the related notifications and circulars. The petitioner was directed to respond to the show-cause notice within four weeks, and the revenue authorities were allowed to proceed in accordance with the law.

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