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2017 (11) TMI 444

Head Note:
Renting of immovable property - levy of service tax - lease rentals - who is liable to bear the burden of tax i.e. the provider of services (lessor) or the recipient of services (the lassee) - scope of agreement - lease (rent) deed does not refer to service tax.

Held that: - It is clear, on a conspectus of the authorities of this Court, that service tax is an indirect tax, meaning thereby that the said tax can be passed on by the service provider to the recipient of the service. Being a tax on service, it is not a direct tax on the service provider but is a value added tax in the nature of a consumption tax on the activity which is by way of service. It is settled by various judgments of this Court that, in order to have conceptual clarity, the taxable event and the taxable person are distinct concepts.

In Babu Ram Jagdish Kumar & Co. v. State of Punjab, [1979 (5) TMI 135 - SUPREME COURT OF INDIA], this Court made it clear that, in the case of a purchase tax, the “taxable event” is the purchase of paddy, whereas the “taxable person”, who is the person liable to pay the tax, is the purchaser - In the present case, therefore, the “taxable event” is the provision of the service of renting out immovable property, and the “taxable person”, that is the person liable to pay tax, is the service provider, namely the lessor.

The fact that service tax may not, in given circumstances, be passed on by the service provider to the recipient of the service would not, therefore, make such tax any the less a service tax. It is important to bear this in mind, as the main prop of Shri Jaideep Gupta’s argument is that service tax being an indirect tax which must be passed on by virtue of the judgments of this Court, would make the recipient of the service the person on whom the tax is primarily leviable.

Though in law and under clause 6 of the lease deed the Appellant is not required to pay service tax, we are loathe to upset the finding of the learned single Judge based upon a letter by the Appellant to the Respondent in which the Appellant has expressly stated that it was liable to pay service charges - the the case is in favor of appellant on law, but is against the appellant on facts - appeal dismissed - decided against appellant.

 

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