TMI Blog2013 (6) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax and not the landlord. There is no dispute about the quantum of the amount of service tax which already stands paid by the appellant which is ₹ 37,42,954/- and ₹ 48,27,777/- in the two appeals respectively which will now thus have to be paid by the respondent to the appellant. Since the premises were vacated on 30.09.2011, we consider it appropriate to grant interest from 01.10.2011 till date of payment at the rate of 9% per annum simple interest. - FAO (OS) No.440/2012, FAO (OS) No.52/2013 - - - Dated:- 15-5-2013 - Sanjay Kishan Kaul And Sanjeev Sachdeva,JJ. For the Petitioner : Mr. Simran Mehta, Advocate. For the Respondent : Mr. Chinmoy Pradip Sharma and Mr. Sayan Ray, Advocates JUDGMENT Sanjay Kishan Kaul, J. 1) The appellant, Raghubir Saran Charitable Trust, is the owner of premises bearing no.E-10, Block-E, Inner Circle, Connaught Place, New Delhi, which was leased out to the respondent in pursuance to a Lease Deed dated 25.04.2007 for a period of 60 months, renewable at the sole option of the respondent for a further period of 48 months on the same terms and conditions other than the rent which was specified with increases f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 07.07.2012 rejecting the claim petition of the appellant (claiming service tax for the period from 01.04.2009 to 30.09.2011 amounting to Rs. 48,27,777 along with interest @18% p.a.) on a reading of the clauses of the Lease Deed. A petition under Section 34 of the said Act was filed, challenging this Award, which was dismissed by the learned Single Judge on 06.11.2012 on the basis of the decision dated 04.07.2012 in the connected matter i.e. OMP No.955/2011 which is also sought to be assailed before us. 7) It may be noticed that in view of a Division Bench judgment of this court which struck down, as unconstitutional, the amendment to the Finance Act, 1994, the appellant stopped including the service tax component but on reintroduction with the retrospective effect of sub-Clause (zzzz) of Section 65 (105), by virtue of the Finance Act, 2010, the amount was so deposited. Suffice to say that this issue stands resolved with the legal position being that such tax was liable to be deposited and thus the only question for examination is as to whether the liability to pay service tax is of the appellant or the respondent. In order to appreciate the controversy, we consider it appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned Single Judge is concerned, there is in fact a more elaborate discussion qua the interpretation of this clause. The learned Single Judge took note of the prohibition contained in the latter part of the clause to conclude that any revision in the rates was also to be borne by the lessor since the expression outgoings was of wide import where the word such referred to the property taxes and other outgoings was in respect of the premises. The plea that the expression outgoings should be read as ejusdem generis with the words property tax , was repelled. This wide expression was thus held to include all taxes in respect of the premises and service tax being such an outgoing, it was held to be the liability of the lessor. This conclusion was sought to be supported by the observations in Brett v. Rogers; (1897) 1 QBD 525 where the expression duties imposed in respect of the premises was held to be wide enough to include the expenses incurred by the landlord for replacing a new drain. The learned single Judge has opined that the Judgment in Pearey Lal Bhawan Association v. Satya Developers Pvt. Ltd.; 173 (2010) DLT 685 would not apply on account of the wording of the clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial activities and it is not a charge on the business but on the consumer. That, service tax is an economic concept based on the principle of equivalence in a sense that consumption of goods and consumption of services are similar as they both satisfy human needs. Today with the technological advancement there is a very thin line which divides a ―sale‖ from ―service‖. That, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It is this principle of equivalence which is inbuilt into the concept of service tax under the Finance Act, 1994. That service tax is, therefore, a tax on an activity. That, service tax is a value added tax. The value addition is on account of the activity which provides value addition, for example, an activity undertaken by a chartered accountant or a broker is an activity undertaken by him based on his performance and skill. This is from the point of view of the professional. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly than the clause before us. However, the findings pertaining to the said clause 5.0 are contained in para 14 of the judgment, which read as under: 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 the Supreme Court, were to be taken into consideration, it is the service which is taxed, and the levy is an indirect one, which necessarily means that the user has to bear it. The rationale why this logic has to be accepted is that the ultimate consumer has contact with the user; it is from them that the levy would eventually be realized, by including the amount of tax in the cost of the service (or goods). 16) Thus, the ratio is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than municipal taxes and other related property taxes. The submission thus is that if Clause 7.1 is read with clause 9 (d), it is obvious that actually the incidence of taxes has to fall on the lessee (the tenant), the exception being only municipal taxes and other related property taxes which are taken care of in Clause 7.1. Service tax is an incidence of the business activity in the premises. 20) On the other hand, learned counsel for the respondent sought to support the impugned decisions by canvassing that though service tax is in the nature of an indirect tax, it does not necessarily have to be borne by the service recipient as there can be an agreement inter se the parties to the contrary. It was, thus, his submission that Clause 7.1 of the Lease Deed was, in fact, such an agreement where reference was made to other outgoings and clarified by the words whatsoever payable . The liability as specified in the clause is towards taxes, cesses and levies. Insofar as the expression outgoings is concerned, learned counsel relied upon the Halsbury s Laws of England 4th Edition Volume 42 where in para 125 it has been observed as under: The term outgoings is of very wide import, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s fell into an error in applying the principle of ejusdem generis when interpreting the expression ―other authorities‖ in Article 12 of the Constitution, as they overlooked the basic principle of interpretation that, to invoke the application of ejusdem generis rule, there must be a distinct genus or category running through the bodies already named. Craies on Statute Law summarises the principle as follows:- The ejusdem generis rule is one to be applied with caution and not pushed too far.... To invoke the application of the ejusdem generis rule there must be a distinct genus or category. The specific words must apply not to different objects of a widely differing character but to something which can be called a class or kind of objects. Where this is lacking, the rule cannot apply, but the mention of a single species does not constitute a genus [ Craies on Statute Law, 6th Edn, p 181] .‖ Maxwell in his book on Interpretation of Statutes' explained the principle by saying: ―But the general word which follows particular and specific words of the same nature as itself takes its meaning from them, and is presumed to be restricted to the same genus as those w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction. (2) The provisions of sub-section (1) apply to the following taxes, namely :- a) any duty of customs or excise on goods; b) any tax on the sale or purchase of goods.‖ 24) In the aforesaid context, it has been contended that the party which has agreed to bear the taxes under the agreement has to pay the new levy too (Ref: Numaligarh Refinery Ltd s case (supra). 25) In the end, learned counsel for the respondent laid emphasis on the scope of the jurisdiction under Section 34 of the said Act to contend that interpretation of clauses of an agreement is solely within the domain of an Arbitrator and even if there are two plausible interpretations, the view taken by the Arbitrator has to be upheld. Construction of terms of a contract does not amount to an error of jurisdiction and courts cannot interfere with the findings which are based on sound and reasonable interpretation of clauses of contract. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Clause 7.1 falls under the heading of Maintenance, Electricity and Water . Thus, the clauses under this heading ought to have been dealing with aspects of this nature. However, learned counsel for the respondent is partially right in contending that not much assistance can be taken from this heading as none of the clauses really deal with that aspect as Clause 7.1 deals with taxes, Clause 7.2 deals with legal proceedings instituted by or against the lessor and Clause 7.3 deals with regular water supply and requisite electricity load. Thus, only Clause 7.3 strictly deals with the heading. 30) We have deliberately used the expression partially right because Clause 7.2 alone is completely de hors the heading. Clause 7.3 directly deals with the heading. These are aspects of municipal services for which arrangements have to be made by the lessor in respect of the premises. Clause 7.1 undisputedly deals with property tax which again is an incident of the ownership of the property. The only question thus is whether the expression outgoings in respect of the premises and the expression such taxes, cesses, levies or increases is wide enough to encompass any nature of indirect tax. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the slightest of doubt that these are not clauses which can brook of any two interpretations, but there can by only one interpretation on a plain reading of the clauses. The language of a clause cannot be twisted to come to a conclusion as is sought to be done by the learned Arbitrator. It appears that Clause 9 (d) seems to have been completely lost by the learned Arbitrator. The judgments thus relied upon by the arbitral tribunal and by impugned order would be of no assistance to the respondent. In fact, it has been rightly pointed out by learned counsel for the appellant that Rashtriya Ispat Nigam Limited s case (supra) dealt with a levy which was in existence at the time of execution of the contract and was thus in contemplation while Numaligarh Refinery Ltd s case (supra) dealt with countervailing duty imposed by the Customs Tariff (Amendment) Act, 1994 when the contract inter se the parties required all taxes and duties including custom duties to be paid by the party apart from the fact that the actual contract came into being only post the levy. The judgment in Pearey Lal Bhawan s case (supra) thus, cannot be distinguished, as rightly submitted by learned counsel for the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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