TMI Blog2014 (9) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of transaction, which they have entered into with the petitioner. - Decision in the case of [2015 (3) TMI 391 - MADRAS HIGH COURT] followed - petitioner is not the service provider and he has not challenged the power of the second respondent to levy and demand Service Tax and the first respondent Municipality being the service provider is bound to pay the Service Tax, which has been remitted. In the light of the above findings, no grounds have been made out by the petitioner to interfere with the impugned proceedings. - Decided against Assessee. - W.P. (MD) No. 5743 and M.P. (MD) Nos. 1 & 3 of 2014 - - - Dated:- 24-9-2014 - T.S. Sivagnanam, J. Shri T.S.R. Venkatramana, for the Petitioner. Shri P. Athimoola Pandian and B. Vijaya Karthikeyan, for the Respondent. ORDER With the consent of both parties, this writ petition is taken up for final disposal. 2. The petitioner has filed this writ petition challenging the order, dated 27-2-2012, passed by the first respondent Municipality, by which the petitioner has been directed to remit Service Tax in respect of the licence granted to him. 3. The impugned demands are in respect of four licences granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mr. B. Vijaya Karthikeyan, learned standing counsel for the second respondent, referred to Section 65(90a) of the Act and submitted that renting of immovable property includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course of furtherance of business or commerce but does not include renting of immovable property by a religious body or to a religious body, or renting of immovable property to an educational body, imparting skill, or knowledge or lessons on any subject or field, other than a commercial training or coaching centre. By relying upon Explanation 2 contained in Section 65(90a) it is submitted that for the removal of doubts, which has been declared that for the purposes of Clause 65(90a) of the Act renting of immovable property includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property. Therefore, it is submitted that the type of services provided by the Municipality clearly falls within the definition of Section 65(90a) of the Act. Further, it is submitted that the petitioner is not a service provider, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, who is the service provider and registered with the Department is not maintainable in law. 11. Mr. P. Athimoola Pandian, learned counsel for the first respondent Municipality, at the outset raised a preliminary objection as regards the maintainability of the single writ petition challenging four demand notices. Further, it is submitted that the Service Tax has been collected as per the demand raised by the second respondent and the petitioner being a licensee is bound to pay the same as it is one of the conditions of the tender and in this regard reference has been made to Clauses (1) and (17) of the terms and conditions of tender as published by the first respondent Municipality and accepted by the petitioner. 12. Heard the learned counsel for the parties and perused the materials placed on record. 13. At the outset it has to be pointed out that the petitioner is not a service provider. The first respondent Municipality is the service provider, who has been registered with the Department. The onus is on the first respondent Municipality to remit the Service Tax. In turn, the first respondent Municipality has demanded the same from the petitioner, who is their licensee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auses (i) to (iii), provided to business entities. Therefore, the Municipality is bound to pay Service Tax on the nature of transaction, which they have entered into with the petitioner. 16. The question as to whether the Service Tax is payable on such type of transaction was considered in a batch of cases in W.P.(MD) No. 16400 of 2013 etc., batch, dated 20-6-2014. In the said batch of writ petitions, the first writ petition namely W.P.(MD) Nos. 16400 of 2013 was by the licensee of a local body namely Gobichettipalayam, Municipality, wherein he had been granted licence to collect fee and identical grounds were raised by the petitioner therein and they sought for declaration to declare the provisions of Sections 65(105)(zzzz) and 65(90a) of the Act as invalid. The Hon ble Division Bench of the Principal Bench of this Court, after considering all the decisions on the point held as hereunder : 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 refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concept of value addition. The hub of the matter is when a premise is let out for use, should a person who rents an immovable property or renders 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 herein before, has opined that renting of immovable property for use in the course or furtherance of business or commerce by itself would not constitute service as 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, licensing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to certain facets relating to fertility, productivity, extensive cultivation, quality, etc. Ricardo fundamentally considered rent as a surplus accruing to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on mere letting but associated it with business or commercial use. Thus, it comes within the concept of activity and the value addition in 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 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Hon ble Supreme Court of India in the above said case is to the ambit and scope of Entry in the Union, State and Concurrent List. The Hon ble Supreme Court of India, in the decision reported in AIR 1970 SC 999, The Second Gift Tax Officer, Mangalore, etc. v. 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 to find out whether a piece of legislation falls within any entry its true nature and character must be in respect to that particular en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree 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 undoubtedly possess that power under Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act deals with charge of Service Tax on and after Finance Act, 2012 and it states that there shall be levied a tax (Service Tax) at the rate of twelve per cent on the value of all services, other than those service specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Further, it is submitted that prior to 10-5-2013, there was an explanation under Section 66B, which states that for removal of doubts, it is hereby clarified that the references to the provisions of Section 66 in Chapter V of the Finance Act, 1994 (32 of 1994) or any other Act, for the purpose of levy and collection of Service Tax, shall be construed as references to the provisions of Section 66B. Though initially inserted, it was omitted by Finance Act, 2013 (Act 17 of 2013), dated 10-5-2013. Therefore, it is submitted that Section 66 of the Act has to be read along with Section 66B. 18. It is to be noted that though Explanation under Section 66B was omitted by Finance Act, 2013, dated 10-5-2013, it was inserted as Section 66BA. Sub-section (1) of Section states that for the purpose of levy and collect ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
