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TMI Blog2012 (10) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... ay Service tax to the plaintiff. Accordingly, the plaintiff has sought recovery of Rs.14,08,553/- towards arrears of Service tax for the period June, 2007 to January, 2012. It has also claimed interest on the aforesaid amount @ 18% per annum amounting to Rs.6,07,390/-, thereby making a total sum of Rs.20,15,943/-. The plaintiff has also sought a declaration to the effect that the defendant is liable to pay service tax on the lease rent. A mandatory injunction has also been sought requiring the defendant to pay Service tax on the lease rent. 2. The defendant has contested the suit and has denied any liability to pay service tax. It is further alleged that in terms of the lease deed dated 25.11.2004, the liability to pay service tax is of the lessor. 3. The following issues were framed on the pleading of the parties on 26.9.2012:- 1. Whether the defendant is liable to pay service tax on rent, as alleged in the plaint? OPP 2. To what amount, if any, the plaintiff is entitled from the defendant? OPP 3. Whether the suit is barred by limitation? OPD 4. Since there was no dispute on facts, the matter was listed for final hearing and arguments have accordingly been heard. The plainti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is not included in the term `outgoings‟, as qualified in clause 4(v) of the lease deed. Since the expression 'outgoings', for the purpose of clause 7 of the schedule has to be read in terms of clause 4(v) of the lease deed, it is obvious that the liability of the lessor would be to pay only those taxes, charges and other outgoings which are levied by Municipal Corporation/Municipality/Gram Panchayat or any other local authority. It is, thus, quite clear that payment of service tax is not at all covered under the covenants contained in the lease deed dated 25.11.2004. 7. The next question which arises for consideration is as to whether in the absence of an agreement for payment of service tax by the tenant, can the landlord recover the same from the tenant. The contention of the learned counsel for the plaintiff was that under the lease deed, the plaintiff agreed to let out the premises on receipt of a particular amount for rent and that amount cannot be reduced to his disadvantage by fastening the liability of service tax on it. The next contention of the learned counsel for the plaintiff was that service tax being a tax on service, it is the recipient of the service who h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intent, there would have been no occasion to apply Sections 12A and 12B of Central Excise and Salt Act in relation to service tax. Even in the absence of Sections 12A and 12B of Central Excise and Salt Act in relation to service tax, nothing prevented the service provider from entering into an agreement with the recipient of the service, for reimbursement of the amount of service tax, by the recipient of the service to its provider. Extension of Sections 12A and 12B of Central Excise and Salt Act in relation to the service tax gives a legal right to the service provider to recover the amount of service tax from the recipient of the service, even if there is no agreement between them for reimbursement of such tax by the recipient of the service to its provider. 10. The view being taken by me finds full support from the decision of a Division Bench of Madras High Court in All India Tax Payers Welfare Association v Union of India 2006 Law Suit (Mad) 362 where the court, after noticing the provisions of Section 83 of Finance Act2004 along with Sections 12A and 12B of Central Excise and Salt Act, inter alia, held as under:- "9. The provider of service is an assessee Under Section 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal 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. 11. The learned counsel for the defendant has referred to the decision of this Court in Raghubir Saran Charitable Trust v. Puma Sports India Pvt. Ltd. 2012(191) DLT 183. In that case, an award was passed by the arbitrator requiring the landlord (petitioner before the Court) to bear the liability of all property taxes and other outgoings, including service tax liability. The arbitrator had distinguished the decision of this Court in Pearey Lal Bhawan Association (supra) on the ground that clause 7.1 of the lease deed in that case was worded differently from the relevant clauses of the lease deed in Pearey Lal Bhawan Association (supra.) Rejecting the challenge to the award, the Court, inter alia, held as under:- "6. It may also be noted that the question of the liability to pay service tax for the subsequent period from 1st April 2009 to 30th September 2011 has been referred to a separate arbitration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Single Judge did not in the said judgment actually examine whether the expression "outgoing charges" could include service tax. The Court went by the objective of the levy which made service tax an indirect tax and which necessarily meant that the consumer of the services had to bear the burden. Even while referring to Section 64A SGA the Court did not dwell on the opening words of the said provision: "unless a different intention appears to the terms of the contract". In the circumstances it is not possible to accept the contention of the learned counsel for the Petitioner that the decision in Pearey Lal Bhawan Association v. Satya Developers Pvt. Ltd. covers the case on hand in its favour. The learned Arbitrator committed no error in distinguishing the said decision. 22. There is merit in the contention that as far as the present case is concerned, Clause 7.1 of the lease deed is wide enough to include the service tax "in respect of" the premises. Merely because levy was not statutorily operative at the time of entering into the lease deed did not mean that the said liability did not attach to the Petitioner. The fact that Section 83 of the Finance Act read with Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the words "and no claim for contribution towards such taxes, cesses, levies or increases shall be made by the Lessor or to be entertained by the Lessee" is yet another indicator that the parties in that case had clearly agreed that the lessee would pay nothing more than the actual rent and any other liability in respect of the tenancy premises would be borne solely by the lessor. This judgment, therefore, is clearly distinguishable on facts. 12. Learned counsel for the defendant has also referred to Numaligarh Refinery Ltd. V Daelim Industrial Co. Ltd 2007(8) SCC 466. The issue before the Court was with respect to payment of countervailing, excise duty which had been imposed after execution of contract between the parties. Clause 2B and 6 of the contract in that case read as under:- "Clause 2(b) all taxes and duties in respect of job mentioned in the aforesaid contracts shall be the entire responsibility of the contractor.... 6. It is specifically understood and agreed between the parties hereto that if there is any liability towards taxes/ duties (including custom duty on foreign component of supply portion) as may be assessed/ claimed/demanded by the concerned Indian or fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor that the burden of any tax arising out of obligations of the respondent under the contract would be borne by him. Since there is no agreement between the parties to this suit, for shifting the ultimate liability towards service tax to the plaintiff, nothing in law prevents it from recovering the same from the defendant. I have also perused the other two judgments relied upon by the defendant and none of them applies to the legal issue involved in this case, i.e,. the right of the service provider to recover the amount of service tax from the recipient of the service, in a case where there is no contract between the parties as to who has to ultimately meet this statutory liability. For the reasons stated hereinabove, I hold that the plaintiff is entitled to recover service tax, to the extent the liability has not become barred by limitation, from the defendant. 13. ISSUE NO.3 The present suit was filed on 17.2.2012. A perusal of the affidavit filed by the plaintiff on 6.10.2012 would show that some payments were made by it between 31.3.2008 to 5.2.2009 i.e. more than 3 years before the suit was filed. Article 23 of the Limitation Act provides a limitation of three years, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court under Section 3 of the Interest Act 1978 which reads as under:- "1. In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say,- (b) if the proceedings do not relate to any such debt, them from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings: Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this section for the period after such repayment." In the case before this Court, a number of notices/letters were sent by the plaintiff to the defendant before filing this suit. These notices and letters have been specifically referred in paras 10 and 13 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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