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TMI Blog2014 (9) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... rictly speaking, the petitioner ought to have filed four writ petitions since four independent licences were granted to him and four demands have been issued. 4. Be that as it may, the petitioner has canvassed the legal issue challenging the jurisdiction of the first respondent Municipality in demanding of Service Tax on the ground that the Finance Act, 1994 (hereinafter referred to as 'the Act') does not provide for levy of Service Tax on licensees, who have been granted licence for parking places. 5. Mr. T.S.R. Venkatramana, learned counsel for the petitioner submitted that unless there is authority of law to collect tax there can be no collection of tax and the respondents have no authority to levy Service Tax on the licence granted to the petitioner and therefore the demand itself is without jurisdiction. 6. By referring to Section 64(3) of the Act, it is submitted that the Service Tax shall apply to taxable services provided on or after the commencement of Chapter V of the Act and if the services are not taxable, the question of imposing tax does not arise. Further, by referring to Section 65(105)(zzzz), it is submitted that taxable service means any service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in conjunction with land used for educational, sports, circus, entertainment and parking purposes. By referring to Clause (a) contained in Explanation 1 to Section 65(105)(zzzz), it is submitted that the conjunction 'and' is conspicuously absent in Clause (a), which says that vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes. Therefore, it is submitted that the interpretation given by the petitioner is incorrect. 9. Further, it is submitted that on and after 1-7-2012, taxable service has been defined under Section 65B(51) to mean any service on which Service Tax is leviable under Section 66B. Section 66B of the Act states that there shall be levied a tax at the rate of twelve per cent on the value of services other than those services specifically mentioned in the negative list. It is further submitted that admittedly, the service rendered by the first respondent Municipality is not contained in the negative list and therefore the same does not exempt from levy of Service Tax. Further, it is submitted that in terms of Section 66E(a) renting of immovable property shall constitute as a declared service. 10. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner is a licensee has to necessarily fail. Nevertheless, since this Court heard the learned counsel for the petitioner in great length, this Court proposes to consider the submissions made by the parties as regards the jurisdiction to levy the Service Tax. 14. Renting of immovable property was brought under the Act with effect from 1-6-2007. Section 65(105)(zzzz) defines taxable service, which means any service provided to any person by any other person by renting of immovable property or any other service in relation to such renting for use in the course of or for furtherance of, business or commerce and it includes vacant land given on lease or licence and the test is as to whether it is used in the course of or furtherance of business of commerce. Admittedly, the petitioner is a licensee of the first respondent Municipality and the property has been used in the course of business or commerce. As noticed above, Section 65(90a) defines renting of immovable property including renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce. 15. Admittedly, the properties in question do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the aforesaid pronouncements in the field, the following principles regarding Service Tax can be fruitfully culled out : (i) The measure of taxation does not affect the nature of taxation and, therefore, the manner of quantification of the levy of Service Tax has no bearing on the factum of legislative competence. (ii) Taxable services can include providing of premises on a temporary basis for organizing any official, social or business function but also other facilities supplied in relation thereto. (iii) Levy of Service Tax on a particular kind of service cannot be struck down on the ground that it does not conform to a common understanding of the word "service" as long as it does not transgress any specific restriction embodied in the Constitution. (iv) Service Tax is a levy on the event of service. (v) The contempt of Service Tax is an economic concept. (vi) "Consumption of service" as in case of "consumption of goods" satisfies human needs. (vii) Service Tax is a value added tax which, in turn, is a general tax applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to hold a provision as unconstitutional. We need not advert to whether the Parliament has, by using of the definition, created a fiction. The terms which are significant are renting, letting, leasing and licencing for use in the course or furtherance of business or commerce. The legislature has not merely said renting of immovable property. It has used the terminology renting of property or any service in relation to such renting and that too in the course or furtherance of business or commerce, the last part being a general tax as well as a destination based consumption tax levied on services. Sometimes services can be "property based services" and "performance based services". The architects, interior designers and real estate agents would come in the category of performance service providers. 64. It is contended that when a property is leased or rented, the element of service is absolutely absent. In this context, the contempt of rent has to be appositely understood. A rent is basically a reward paid for the use of the land. The tenant or the occupant pays the same to use the premises. In the economic concept, rent can be categorized into two heads, namely, contract rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors which really weigh are location, accessibility, goodwill, construction quality and other advantages. A land or building in one area may fetch more rent than in another area. When a particular building is rented or leased or given under arrangement for commercial or business purposes; many factors are taken into consideration. Every building or premises cannot be utilized for commercial or business purposes. When a particular building or premises has the effect potentiality" to be let out on rent for the said purpose, an element of service is involved in the immovable property and that tantamounts to value addition which would come within the component of Service Tax. To further clarify, an element of service arises because a person who intends to avail the property on rent wishes to use it for a specific purpose. The value of the building gets accentuated because of scarcity of land or building, good will accessibility and similar ancillary advantages which constitute value addition. 66. The modern economic theory of rent also has a nexus with demand and supply In this analysis, rental is hiked because supply of land is scarce in relation to its demand. This economic con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otes the letting or leasing with a purpose, and the purpose is fundamentally or commercial or business purpose and its furtherance. The concept has to be read in conjunction. As we have explained that Service Tax is associated with value addition as evolved by the judgments of the Apex Court, the submission that the base of the said decisions cannot be taken away by a statutory amendment need not be adverted to. Once there is a value addition and the element of service is involved in conceptual essentiality, Service Tax gets attracted and the impost gets out of the purview of Entry 49 of List II of the Seventh Schedule of the Constitution and falls under the residuary entry, that is, Entry 97 of List I" 25. In the aforesaid decision, the retrospective applicability of the said provisions was also considered and by placing reliance upon the decision reported in (2003) 5 SCC 298, Bakhtawar Trust and Others v. M. D. Narayan and Others and (2009) 13 SCC 165, State of Himachal Pradesh v. Narain Singh, the Full Bench of the Delhi High Court held that it would be permissible for the Legislature to remove a defect in legislation and it can be removed both retrospectively and prospect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try in any of the three lists covers it, then it must be regarded as a matter not enumerated in any of the three lists. Then it belongs exclusively to Parliament under Entry 97 of the Union List as a topic of legislation. 6. The Gift Tax Act was enacted by Parliament and it is admitted that no entry in the Union List or the Concurrent List mentions such a tax. Therefore, Parliament purported to use its powers derived from Entry 97 of the Union List, read with Article 248 of the Constitution. This power admittedly could not be invoked if the subject of taxes on gifts could be said to be comprehended in any entry in the State List. The High Court has accepted the contention of the tax-payers that it is so comprehended in Entries 18 and 49 of the State List. Those entries read : "18. Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; and improvement and agricultural loans; colonisation." "49. Taxes on lands and buildings." 7.&emsp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Hon'ble Supreme Court of India reported in AIR 1970 SC 999, The Second Gift Tax Officer, Mangalore, etc. v. D.H. Hazareth etc., was also considered and followed by the Full Bench of Delhi High Court in Home SoIutions-II case for upholding the validity of the amended provisions, viz., Section 65(105)(zzzz) and Section 66 of the Finance Act, 1994. 29. In (2011) 4 SCC 450, Mineral Area Development Authority and Others v. Steel Authority of India and Others, the nature of taxation in respect of royalty came up for consideration and the Hon'ble Supreme Court of India, having noted that in view of conflict between the decisions rendered by 5-Judge Bench and 7-Judge Bench, the matter requires consideration by a Bench comprising 9 Judges, had framed 11 questions of law to be decided by a Larger Bench. Question No. 5 is "whether the majority decision in State of West Bengal v. Kesoram Industries Ltd., reported in (2004) 10 SCC 201, could be read as departing from the law laid down in the 7-Judge Bench decision in India Cement Ltd. v. State of Tamil Nadu reported in (1990) 1 SCC 12. Question No. 6 is whether "taxes on land and buildings" in List II, Entry 49 of the VII Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, 1994 or any other Act for the time being in force, shall be construed as reference to Section 66B thereof. In terms of sub-section (2) of Section 66BA, the provision namely Section 66BA shall be deemed to have come into force on 1-7-2012. It is to be noted that on and after the introduction of Section 66B with effect from 1-6-2012, there was a diametric shift in the pattern of levy and collection of Service Tax by virtue of interpretation of the negative list. Therefore, the provision had to be made with regard to the levy and collection of Service Tax, after interpretation of Section 66B, for which purpose initially there was an explanation under Section 66B, which was omitted and inserted as Section 66BA. However, this omission or insertion does not in any manner improve the case of the petitioner, who is not a service provider. Hence, the contention raised on behalf of the petitioner does not merit acceptance. 19. In the light of the above decision of the Hon'ble Division Bench referred supra, which has been rendered following the earlier decision, squarely covers the case on hand and that apart the petitioner is not the service provider and he has not challenged th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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