9911796707
TMI Blog2015 (3) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... f service tax on such service, are also put to challenge. 3. Apart from the above two types of cases, there are some writ petitions, wherein, writ of mandamus/prohibition is also sought. However, the prayer in those writ petitions also are in connection with levy of service tax on renting of immovable property only. 4. Thus, since common questions of law and facts are involved and to be adjudicated in these writ petitions, all the writ petitions are decided by this common order. 5. It is also brought to the knowledge of this Court that the validity of the above said provisions has been upheld by various High Courts in the following judgments: i. [2011] 37 VST 46 (P & H), Shubh Timb Steels Limited v. Union of India and another; ii. 2011 (22) STR 257 (Ori.), Utkal Builders Limited vs. Union of India; iii 2012 (25) STR 231 (M.P.), Entertainment World Developers Limited vs. Union of India; iv [2011] 45 VST 523 (Guj), Cinemax India Limited vs. Union of India and Others; v 2011 (24) STR 129 (Del.) (FB) Home Solutions Retails (India) Ltd. vs. Union of India and Others; (Home Solutions-II case, for brevity) and vi [2012] 52 VST 409 (Raj), Purshottam Das malpani vs. Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady pointed out in the earlier paragraph, the aggrieved parties had also preferred Special Leave Petitions before the Hon'ble Supreme Court of India challenging the dismissal of the writ petitions, wherein, vires of the said provisions was challenged and Civil Appeals are also pending adjudication on the file of the Hon'ble Supreme Court of India. 8 Originally, Section 65(105)(zzzz) of the Finance Act, 1995, read as follows: "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." 9 The said provision was put to challenge before the Delhi High Court in Home Solutions Retails (India) Ltd. vs. Union of India and Others case and a Division Bench of the Delhi High Court, in the judgment reported in 2009 [22] VST 508 (Del.)=2009 237 ELT 209, (Home Solutions-I case, for brevity) decided on 18.04.2009, has struck down the said provision, being unconstitutional and ultra vires the Constitution of India on the ground that by renting of the immovable property, no value addition was involved in the said transaction. A Special Leave Petition was preferred against the said judgment before the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land, vests with the State Government under Entry 18 of List II and also, the power to impose tax in respect of rights in or over land, also vests with the State Legislature under Entry 49 and for that reason also, the amended provision is to be struck down as illegal and ultra vires the Constitution of India. 12 Some of the petitioners had also made a challenge with regard to the retrospective levy on the ground that the retrospective amendment is unreasonable, arbitrary and is in violation of Articles 14 and 19 of the Constitution of India. According to them, the retrospective amendment may be said to be valid, only if it passes the test of enforceability, compulsion and proportionality and the retrospective amendment does not pass the said test and therefore, it is also invalid. 13 The history of service tax has been traced in the judgment reported in AIR 2004 SC 3757, Tamil Nadu Kalyana Mandapam Association vs. Union of India (T.N.Kalyana Mandapam case, for brevity) and AIR 2007 SC 2990, All India Federation of Tax Practitioners vs. Union of India (All India Federation of Tax Practitioners case, for brevity). 14 In T.N. Kalyana Mandapam case, challenge was made to sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther relevant decisions rendered by the Hon'ble Supreme Court of India, has upheld the said provision. 18 In all the above decisions, the primordial submission was that, by resorting to Entry 97 of List I, the said levy cannot be imposed and the submission made in that regard was negatived and it was held that the Parliament is having legislative competence to make such a levy by resorting to Entry 97 of List I. It was also contended that in the absence of any Entries in List III, viz., Concurrent List, as to the levy of service tax on rent in respect of commercial premises, levy cannot be resorted to, by invoking Entry 97 of List I. 19 The Revenue has opposed the challenge made to the said provision by contending inter alia that the Union Government can validly impose Indirect Taxes like Excise Duty and Customs Duty as they are not Direct Taxes on property or income and since service tax is also an Indirect Tax, levy on certain exercise/activity, undertaken by the service provider, cannot be termed as tax on property or income; levy of service tax is on the activity of service only and not a tax on property and as such, it can be validly imposed by the Union Government. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be found (iii) the Court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence (iv) hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law and (v) in the field of taxation, the Legislature enjoys greater latitude for classification." 22 This Court, keeping in mind, the above said settled position of law and coupled with the decisions rendered by a number of High Courts upholding the validity of the said provisions, has carefully considered the rival submissions and also perused the materials available on record. 23 In Home Solutions-II case, similar issue arose for consideration and Hon'ble Mr. Justice Dipak Misra, Chief Justice, Delhi High Court (as the Hon'ble Judge then was), has delivered the judgment of the Full Bench. In the above said decision, the Full Bench of Delhi High Court has referred to all the judgments relied on by the respective learned counsel appearing for the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other service in relation to such letting for use in the course of furtherance of business or commerce be liable to service tax. 63 The Division bench in the first Home Solution case (supra), as we have reproduced hereinbefore, has opined that renting of immovable property for use in the course or furtherance of business or commerce by itself would not constitute service s there is no value addition. In the dictionary clause in Section 65(90A), while defining renting of immovable property, it has been stated that it includes renting, letting, leasing, licencing or other similar arrangements for immovable property for use in the course or furtherance of business or commerce. On a perusal of the decision in the first Home Solution case (supra), it is discernible that the Division Bench has not appositely adverted to the same. The contention that despite the amendment when the value addition as a concept is not attracted to renting, letting, leasing and licencing even for commercial purpose, the ingredients of service tax are not satisfied is not well founded. In this context, it is to be appreciated that the concept of service, as is understood in common parlance or common under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o superior land over inferior land called marginal land . It also depended upon shifting of population. Be it noted, the rent varies depending upon advantages. To give an example, two decades back, a market is established in zone A , thereafter, a railway station starts in another zone called B . The cost of a particular item on being transported from zone A to outside the city will cost more than the articles transported from Zone B. Compared to zones A and B , if there are other zones which are farther away like Zones C and D , they will be less advantageous. Thus, the lands or buildings located in Zones A and B would be more advantageous. The value difference comes into play because of transport charges. The surplus arises because of the location and availability of facilities. Appreciated in this context, economic rent is a surplus which arises on account of natural differential advantages and can be treated as service. The apart, scarcity of premises, the pressure of demand and the increase of population are also contributory factors. Consequently, any land or building situated in a particular place does possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes within the concept of activity and the value addition is inherent. It is worth noting that the language employed in the dictionary clause and the charging section, that is, commercial use for business have their own significance. In Black's Law Dictionary, commercial has been defined as relates to or is connected with trade and traffic or commerce in general; is occupied with business and commerce . In R.M. Investment and Trading company Pvt. Ltd. v. Boeing Company and another, (1994) 4 SCC 541, while dealing with the expression commercial it has been opined that the expression commercial should be construed broadly having regard to the manifold activities which are integral part of international trade today. 68 When premises is taken for commercial purpose, it is basically to subserve the cause of facilitating commerce, business and promoting the same. Therefore, there can be no trace of doubt that an element of value addition is involved and once there is a value addition, there is an element of service. 69 In view of our aforesaid analysis, we are disposed to think that the imposition of service tax under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court of India in the above said case is to the ambit and scope of Entry in the Union, State and Concurrent Lists. The Hon'ble Supreme Court of India, in the decision reported in AIR 1970 SC 999, The Second Gift Tax Officer, Mangalore, etc. vs. D.H. Hazareth etc., has considered the scope of Entry 97 and held as follows: "5. It will, therefore, be seen that the sovereignty of Parliament and the Legislatures is a sovereignty of enumerated entries, but within the ambit of an entry, the exercise of power is as plenary as any legislature can possess, subject, of course, to the limitations arising from the Fundamental Rights. The entries themselves do not follow any logical classification or dichotomy. As was said in State of Rajasthan v. S. Chawla the entries in the lists must be regarded as enumeration simplex of broad categories. Since they are likely to overlap occasionally, it is usual to examine the pith and substance of legislation with a view to determining to which entry they can be substantially related, a slight connection with another entry in another list notwithstanding. Therefore, to find out whether a piece of legislation falls within any entry its true nature an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... topics of legislation into three broad categories: (a) entries enabling laws to be made, (b) entries enabling taxes to be imposed, and (c) entries enabling fees and stamp duties to be collected. It is not intended that every entry gives a right to levy tax. The taxes are separately mentioned and in fact contain the whole of the power of taxation. Unless a tax is specifically mentioned it cannot be imposed except by Parliament in the exercise of its residuary powers already mentioned. Therefore, Entry 18 of the State List does not confer additional power of taxation. At the most fees can be levied in respect of the items mentioned in that entry, vide Entry 66 of the same list. Nor is it possible to read a clear cut division of agricultural land in favour of the State although the intention is to put land in most of its aspects in the State List. But, however, wide that entry, it cannot still authorise a tax not expressly mentioned. Therefore, either the pith and substance of the Gift Tax Act falls within Entry 49 of State List or it does not. If it does, then Parliament will have no power to levy the tax even under the residuary powers. If it does not, the Parliament must undoubted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2010, fails and hence, W.P. Nos.21564/2008, 24234/2008, 25280-25286/2008, 27820-27823/2008, 27917 & 27918/2008, 28021 & 28022/2008, 29188/2008, 16789 & 16790/2008, 662/2009, 747/2009, 2766-2770/2009, 3995/2009, 6346/2009, 8562/2009, 8613/2009, 8827-8846/2009, 12268 & 12269/2009, 19995-20013/2009, 20524/2009, 22687/2009, 23231/2009, 3977/2010, 26377/2009, 26515/2009, 26886/2009, 1141/2010, 1251/2010, 6288/2010, 14116/2010, 14886/2010, 16610 & 16611/2010, 17607/2010, 17916 & 17917/2010, 18347/2010, 19321/2010, 19407, 19409 & 19410/2010, 26510/2009, 20981/2010, 22207/2010, 23492/2010, 24240 & 24241/2010, 24294 & 24295/2010, 24376/2010, 24803/2010, 27548/2010, 30070/2010, 1182/2011, 1190/2011, 1309/2011, 2059/2011, 2407/2011, 2770/2011, 5158/2011, 8140/2011, 9950/2011, 11744/2011, 12308 & 12309/2011, 12540/2011, 13735/2011, 14848 & 14849/2011, 15089/2011, 16123/2011, 18119/2011, 18936/2011, 20181 & 20182/2011, 20221/2011, 20380/2011, 20400/2011, 22176/2011, 25649/2011, 28061/2011, 28883/2011, 28988/2011, 8223/2012, 12090/2012, 3279/2013, 7176/2013, 4516 & 4517/2012, 12035/2010, 28895/2008, 8902/2013, 11095/2013, 5110/2011, 20170 & 20171/2010, 933 & 934/2011, 2318/2011, 32255/2012, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng upon the impugned Notifications or Circulars or impugned provisions of the Finance Act, 2010 on the basis of Section 65(105)(zzzz) read with Section 65(90-a) with retrospective operation on and from 01.06.2007. 35 W.P. Nos.23109/2009 and 4544/2010 are filed seeking to declare the respective Notification and Circular issued by the second respondent for collecting service tax on the renting of immovable property, as illegal, null and void and ultra vires the provisions of the Finance Act, 1994 as amended by the Finance Act, 2007 and Finance Act, 2008. 36 In view of paragraph no.30 above, upholding the validity of Section 65(105)(zzzz) and 65(90-a) of the Finance Act, 1994, as amended by the Finance Act, 2010 and Section 77 of the Finance Act, 2010, W.P. Nos.24586 and 24588 of 2010, W.P. Nos.14887, 19322, 20982 and 24804 of 2010, W.P. Nos.24589, 24766, 26517, 24427, 24429 and 24587 of 2010 and W.P. Nos.23109 of 2009 and 4544 of 2010 and 4417 of 2011 are dismissed. 37 W.P. No.26459 of 2011 filed by Indian Railway Catering and Tourism Corporation Ltd. (IRCTC, for brevity) challenges Section 65(90a) and 65(105)(zzzz) of the Finance Act, 1994, as amended by the Finance Act, 2010 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition renting of immovable property and hence, service tax cannot be levied. 41 The official respondents had filed their common counter affidavit stating inter alia that IRCTC is an extended arm of Railways chosen to provide various services to travelling public and the licencees were chosen by floating tenders and the job of choosing them was left to IRCTC and the successful tenderers are permitted to put up stalls as per the specifications prescribed by Railways / IRCTC and with regard to the user of the land, a fixed percentage out of the licence fee is paid to Railways. It is further stated in the counter affidavit that the activities undertaken by IRCTC/Railways, viz., renting/leasing out specific locations on platforms/concourse area of railway stations to various persons by awarding licences for setting up kiosks, food plazas, etc. and collecting licence fee and usage charges for the same are distinct activities covered by the scope of definition of renting of immovable property and therefore, it is liable to pay service tax. 42 The learned Standing Counsel for the Revenue, inviting the attention of this Court to the order passed by the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of receipt of a copy of this order and therefore, W.P. No.26460 of 2011 is premature and accordingly, the said writ petition is dismissed with the said liberty. 46 W.P. No.4052 of 2011 is filed by the District Forest Officer, Tiruchirappalli Division, seeking to declare Section 65(90-a) and Section 65 (105(zzzz) of the Finance Act as ultra vires the Constitution of India. The petitioner would state that the Department of Forest, Government of Tamil Nadu is the owner of a factory located in Thekkupattu Village, Vaniyambadi Taluk, Vellore District for the manufacture of sandalwood products and it has been leased out on lease rent basis to M/s. Tamil Nadu Forest Plantation Corporation Ltd.-Government of Tamil Nadu undertaking and the said Corporation is running the factory and are paying lease rent at the rate of 13% of the sale value of the goods manufactured and sold by them and therefore, details of rent were called for from the office of the District Forest Officer who has let out the said factory in favour of M/s.Tamil Nadu Forest Plantation Corporation Ltd. as to the details of rent received by them and the said official, in turn, has informed the second respondent abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot inclined to go into the same as the said provision is intra vires of the Constitution in view of the decision taken by this Court in paragraph no.30 above, following the decision in Home Solutions-II case and the judgment reported in [2012] 52 VST 409 (Raj.), Purshottam Das Malpani vs. Union of India and Others. Accordingly, W.P. No.8932 of 2011 is dismissed. 52 In W.P. No.26012 of 2012, the Tamil Nadu Slum Clearance Board has made a challenge to the order dated 03.12.2010 passed by the first respondent, calling upon the petitioner to pay service tax for the years 2007-2008, 2008-2009 and 2009-2010. It is the stand of the petitioner-Tamil Nadu Slum Clearance Board that it mainly caters to the need of poorer and weaker sections of the society and plots are allotted subject to payment of instalments and the Tamil Nadu Slum Clearance Board is incurring huge loss for subsidising the cost of housing and rehabilitation of slum dwellers and it is purely a service-oriented one with no element of profit and it is further stated that the Tamil Nadu Slum Clearance Board is also offering space for locating bunk shops to run post offices and ration ships with meagre rent of Re.1/- per squar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... body, viz., Gobichettipalayam Municipality and he seeks to declare the provisions of Section 65(105)(zzzz) and 65(90-a) of the Finance Act, 1994, as invalid. 56 Since the validity of Section 65(105)(zzzz) and 65(90-a) of the Finance Act, 1994, as amended by the Finance Act, 2010, has been upheld in paragraph no.30 above, it is open to the local body to pass on the burden to the petitioner herein, who is liable to pay service tax as demanded by the local body. If the petitioner is aggrieved by the order passed by the adjudicating authority, he is entitled to invoke the appellate remedy in terms of the Finance Act, 1994. 57 W.P. No.16400 of 2013 is dismissed with the above said liberty. 58 In W.P. Nos.34221, 34299, 34751 to 34762 of 2007, notices issued by Metropolitan Transport Corporation, demanding service tax are put to challenge. 59 The petitioners, being licencees of the shops owned by the Metropolitan Transport Corporation (Chennai) Limited, have filed these writ petitions challenging the legality of the notices in and by which they have been directed to pay service tax at the rate of 12.36%. 60 The case of the petitioners is that the respondent Transport Corporation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 64 Since the validity of Section 65(105)(zzzz) and 65(90-a) of the Finance Act, 1994, as amended by the Finance Act, 2010, has been upheld in paragraph no.30 above, following the decision in Home Solutions-II case and the judgment reported in [2012] 52 VST 409 (Raj.), Purshottam Das Malpani vs. Union of India and Others, W.P. No.1644 of 2012 is dismissed. 65 In W.P. No.18795 of 2009, the petitioner, took on lease the godown belonging to Tamil Nadu Warehousing Corporation Limited, Ranipet and the said Corporation issued a notice dated 29.09.2008, calling upon the petitioner to pay service tax and challenge is made to the said order. 66 Likewise, in W.P. Nos.23436/2010, 6875/2011, 22175/2011, 29125 & 29126/2011, 13656/2011, 26395/2011 and 13272/2013 also, the respective show cause notice is put to challenge. 67 Since the validity of Section 65(105)(zzzz) and 65(90-a) of the Finance Act, 1994, as amended by the Finance Act, 2010, has been upheld in paragraph no.30 above, following the decision in Home Solutions-II case and the judgment reported in [2012] 52 VST 409 (Raj.), Purshottam Das Malpani vs. Union of India and Others, as a natural corollary, W.P. Nos. 18795/2009, 23436/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity as well as retrospective amendment and also held that Home Solutions-I case did not lay down correct law and further, the Civil Appeal preferred as against the Full Bench judgment of Delhi High Court is pending. This Court has also upheld the validity of Section 65 (105)(zzzz) and 65(90a) of the Finance Act, 1994, as amended by the Finance Act, 2010 and Section 77 of the Finance Act, 2010, in paragraph no.30 above, following the decision in Home Solutions-II case and the judgment reported in [2012] 52 VST 409 (Raj.), Purshottam Das Malpani vs. Union of India and Others. 73 In the light of the reasons assigned above, W.P. No.20580 of 2009 is dismissed. 74 In W.P. Nos.8109 of 2009 and 13880 of 2013, M/s. Elnet Technologies Limited, made a challenge to the demand in respect of the show cause notice issued by the Commissioner of Service Tax, Chennai, as to the non-inclusion of electricity charges collected from the occupants of their immovable property in the taxable value. 75 It is to be pointed out at this juncture that after the judgment rendered by the Delhi High Court in Home Solutions-I case, an amendment was brought forth in the Finance Act, 2010 in respect of Section 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, has upheld the validity of Section 65 (105)(zzzz) and 65(90a) of the Finance Act, 1994, as amended by the Finance Act, 2010 and Section 77 of the Finance Act, 2010 by following the decision rendered in Home Solutions-II case and the subsequent Division Bench judgment of the Rajasthan High Court reported in [2012] 52 VST 409 (Raj.), Purshottam Das Malpani vs. Union of India and Others and the Special Leave Petition filed as against the judgment given by the Full Bench of Delhi High Court in Home Solutions-II case is pending consideration. That apart, this Court is of the further view that the impugned order is appealable in nature. 82 In the light of the foregoing reasons, W.P. No.4100 of 2010 is dismissed with liberty to the petitioner to invoke the appeal remedy in accordance with law. 83 W.P. Nos.12315 of 2011 and 9251 of 2009 are filed seeking to declare the provisions of Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994 and the consequential respective show cause notice as ultra vires the Constitution of India. 84 It is to be pointed out, at this juncture, that after the judgment rendered by the Delhi High Court in Home Solutions-I case, an amendment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 28.11.2008, within a period of two weeks from the date of receipt of a copy of this order and on receipt of such response, the first respondent is directed to consider and dispose of the same in accordance with law, as expeditiously as possible. To sum up: W.P. Nos.4100 of 2010, 26458 of 2011, 26460 of 2011, 26012 of 2012 and 16400 of 2013 are dismissed with liberty to the petitioners to invoke the appeal remedy. If appeal is presented within 30 days from the date of receipt of a copy of this order, the same shall be entertained by the appellate authority and considered on merits without reference to limitation. W.P. Nos.8109 of 2009, 18795 of 2009, 23436 of 2010, 6875 of 2011, 22175 of 2011, 29125 & 29126 of 2011, 13656 of 2011, 26395 of 2011 and 13272 of 2013 and 13880 of 2013, filed challenging show cause notices, are dismissed. Similarly, W.P. Nos.6114 of 2010, 3259 of 2011 and 20466 of 2011 which are filed seeking mandamus forbearing the first respondent from proceeding with the adjudication of the respective show cause notices, are also dismissed. However, the petitioners are given two weeks' time from the date of receipt of a copy of this order, to give reply to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
