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2016 (4) TMI 1036 - MADRAS HIGH COURT

2016 (4) TMI 1036 - MADRAS HIGH COURT - 2016 (43) S.T.R. 161 (Mad.) - Validity of circular of the Central Board dated 10.2.2012 - Liability of Service tax - Agreement for development entered into between the petitioner and his siblings with the fifth respondent - Held that:- the agreement that the petitioner had, cannot be separated into two portions. The agreement gave rise to a bouquet of rights for the fifth respondent builder. One was to put up a construction of an area, a part of which coul .....

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14 of 2016 - Dated:- 7-4-2016 - V. Ramasubramanian And N. Kirubakaran, JJ. For the Petitioner : Mr. B. N. Suchindran For the Respondents : Mr.A.P.Srinivas, Mr.G.Natarajan ORDER Order of the Court was made by V. Ramasubramanian, J The petitioner, who entered into an agreement with the fifth respondent herein for the joint development of a property owned by him and his brother and sisters, has come up with the above writ petition seeking a declaration that circular No.151/2/2012 dated 10.2.2012 is .....

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el appears for the fifth respondent. 3. As stated earlier, an agreement tiled 'agreement for development' was entered into on 20.2.2013 between the writ petitioner, his brothers and two sisters on the one hand and the fifth respondent herein on the other hand, for the purpose of developing the land owned by the petitioner and his siblings into a complex of residential houses. Under the said agreement, the fifth respondent was obliged to construct a super built up area of 15,600 sq.ft., a .....

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irst part are liable to pay all government taxes, statutory levies including service tax, VAT on construction to the extent of 7,600 sq.ft. of super built up area including common area being residential apartments along with two covered car parks each as contemplated in Clause (5) in the total super built area to be constructed in Schedule A to be delivered by the party of the second part, prior to handing over of the apartments. All other taxes, duties, if any, etc., shall be borne according to .....

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4, the scope of the circulars issued thereunder and also in terms of Clause 23 of the agreement for development. 6. However, contending that the agreement did not envisage the rendition of any services so as to attract payment of service tax and also contending that for the mere exchange of a property, there could not be a service tax, the petitioner came up with the above writ petition challenging the very provisions of Section 66B read with Section 66E(b). Thereafter, the got his prayer modifi .....

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ent, the petitioner and his siblings, who are the service recipients, agreed to take the burden to the extent they are liable. Therefore, the circulars, in our considered view, cannot be challenged by the petitioner. 8. However, relying upon two decisions of the Allahabad High Court, one in Indian Explosives Limited Vs. Commissioner of Sales Tax [(1978) 41 STC 315] and another in U.P. Solvent Extractors Association Vs. Union of India [1987 Law Suit (All.) 211], it is contended by Mr.B.N.Suchindr .....

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e said Court. Where there is a private lis with respect to certain disputed facts, out of which, the liability arises, it may perhaps be open to the person, on whom, the burden is passed on, to question the assessment orders. 10. In U.P. Solvent Extractors Association, a Division Bench of the Allahabad High Court simply rejected the argument of locus standi by observing in one line that the concept of locus standi is getting widened. The said decision does not deal with the law on the point. 11. .....

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the enhancement of tax, cannot be defeated. 12. But, as pointed out earlier, the said dispute was also between two private individuals. The landlord had an agreement with the tenant that in the event of the property tax being enhanced, the burden of payment of the same would be passed on to the tenant. Therefore, the tenant had a right individually to guard himself against the liability, to which, the owner was willing to submit himself to the detriment of the tenant. 13. The cases of the above .....

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The contention that the person, to whom the burden of tax is ultimately passed on, is entitled to challenge a levy, if accepted, would lead to disastrous consequences. Any increase in the incidence of sales tax affects all consumers of all products. Therefore, any person will be entitled to come and challenge the increase in the levy on the ground that the manufacturer or dealer will eventually pass on the burden only to the ultimate consumer. We can quote any number of examples of this nature. .....

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s value of construction, the learned counsel for the fifth respondent clarified that it is not so. The burden passed on, according to the learned counsel for the fifth respondent, related only to that component, which dealt with the value of construction. 16. Referring to the definition of the expression 'service' under Section 65B(44), it is contended by Mr.B.N.Suchindran, learned counsel for the petitioner that any activity, which constituted merely a transfer of title in goods or immo .....

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y or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force." 18. According to the learned counsel for the petitioner, the agreement for development that he had entered into with the fifth respondent, merely enabled the fifth respondent to put up a construction and exchange 35% of the constructed area with 35% of the undivided .....

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agreed to sell 35% of the undivided shares in the land to the nominees of the fifth respondent and the fifth respondent has agreed to pay a consideration not in cash, but in kind in the form of a constructed area. Therefore, the contention of the petitioner is that this service, which falls within the exempted category does not attract service tax. 20. In support of this contention, the learned counsel places reliance upon the decision of the Gauhati High Court in Magus Construction Pvt. Ltd. Vs .....

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rea for the undivided share of the land. But, the agreement can also be looked at from another angle. 23. It is also possible for the Department to contend that a person, who is the owner of the land, had engaged a contractor to put up a construction for themselves upto a particular limit. Since the cost of construction could not be paid by the owner in the form of cash, they agreed to exchange the undivided share of the land with the contractor. If viewed from that angle, what the developer had .....

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