TMI Blog2010 (10) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... i Sacchin Puri Ms Jyoti Ojha, Advs. JUDGEMENT Per: S Ravindra Bhat: 1. These two suits involve determination of common questions of fact and law; they were accordingly heard together. The plaintiff claims declaratory and injunctive relief as to whether it or the defendant has to bear service tax liability in respect of the rents paid (by the defendant) and received (by the plaintiff). In addition, money decrees for specified amounts, is claimed. 2. The Plaintiff Society is owner of the building Pearey Lal Bhawan located at 2, Bahadur Shah Zafar Marg, (hereafter called the suit premises ) and the principal lessee of the land. The Plaintiff had entered into a registered Lease Deed on 09.10.2006 first lease with the Defendant, (hereafter Satya Developers ) in respect of an area measuring 2818 sq. ft. on the ground floor of the premises Pearey at Lal Bhawan. On 16th October, 2006, the parties entered into an Agreement for Maintenance of Common Services and Facilities in respect of the leased premises. 3. It is the common case of the parties that with effect from 1st June, 2007 the Central Government, by amending Chapter V of the Finance Act, 1994, levied serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce. Explanation 1.- For the purposes of this sub-clause, immovable property includes- (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or part of a building; (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, but does not include- (a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Explanation 2.-For the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tya Developers point out to the relevant clauses of the Lease Deed, particularly Clause 5 reads as under : 5. That the lessor shall continue to pay all or any taxes, levies or charges imposed by the MCD, DDA, L DO and or Government, Local Authority etc . The defendant also relies on clause II (1), which reads as under : II (1) That the Lessor to pay all rates, taxes, ground rent, house-tax charges, firefighting tax, easements and outgoing charges imposed or payable to the MCD, L DO, DDA or Government in respect of the demised premises payable by the Lessor and discharge all its obligations well in time . It is argued that the parties clearly agreed that all taxes would be borne and paid by the Plaintiff thus the question of Defendant paying any taxes much less service tax does not arise. 9. The defendant contends that service tax, is a tax on property and if the plaintiff has any grievance in respect of the imposition of service tax it is open for the Plaintiff to take up the matter in the appropriate forum with the Central Government. The defendant argues that contractual clauses have to be plainly read by the Court, and no attempt to supply meanings other t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions in the contract clearly stipulate that all taxes, etc. are to be borne by the plaintiff landlord. It relies on principles of interpretation of contract, to submit that when parties visualize situations and provision for them, it is not open to either of them to roam outside the express terms, and try to discover obligations when none exist. 13. The Supreme Court, in All India Federation of Tax Practitioners v. Union of India, - (2007) 7 SCC 527 , speaking about the nature of service tax liability, held that: 4. Service tax is an indirect tax levied on certain services provided by certain categories of person including companies, associations, firms, body of individuals, etc., Service sector contributes about 64% to GDP. Services constitute a heterogeneous spectrum of economic activities. Today services cover wide range of activities such as management, banking insurance, hospitality, consultancy, communication, administration, entertainment, research and development activities forming part of retailing sector. Service sector is today occupying the centre stage of the Indian economy. It has become an Industry by itself. In the contemporary world, development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate the quantum of tax, on the goods or services, sold or offered, for sale. The said provisions are as follows: 12A. PRICE OF GOODS TO INDICATE THE AMOUNT OF DUTY PAID THEREON. Notwithstanding anything contained in this Act or any other law for the time being in force, every person who is liable to pay duty of excise on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold . 14. It is true, that the contracts entered into between the parties in this case, spoke of the plaintiff lessor s liability to pay municipal, local and other taxes, in at least two places. The Court, however, is not unmindful of the circumstance that service tax is a species of levy which the parties clearly did not envision, while entering into their arrangement. It is not denied that leasing, and renting premises was included as a service and made exigible to service tax, by an amendment; the rate of tax to be collected, is not denied. If the overall objective of the levy as explained by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id such tax or such increase. Although there is no explicit provision to that effect, enabling lessors such as the plaintiff, to the service tax component, this Court is of the view that there is sufficient internal indication in the Act, through Section 83 read with Section 12-A and Section 12-B suggesting that the levy is an indirect tax, which can be collected from the user (in this case, the lessee). This issue, is therefore, answered in the plaintiff s favour, and against the defendant. Issue No. 2 16. The plaintiff seeks a decree for declaration in both the suits, and consequential injunction, to the effect that the extent of service tax liability has to be borne by Satya Developers; money decrees are also sought; in Suit No. 1016/2008, a decree for Rs.3,55, 270/- is claimed; in Suit No. 1018/2008, a decree for Rs.24,720/- is claimed. The plaintiff has placed on record documents showing that these amounts were paid towards service tax liability for the period 01.06.2007 to 31.03.2008, in respect of the two agreements (i.e. for lease and Maintenance) dated 09.10.2006 and 16.10.2006. The levy had, apparently been held to be Unconstitutional during the pendency of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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