TMI Blog2017 (6) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Delhi HC is pending before SC. - Subsequently parliament amended the provisions with retrospective effect. Effects of amendments - retrospective or prospective? - Held that: - Though the appeal before SC are pending, the fact remains that various High Courts have affirmed the amendments which are under challenge in these writ petitions and appeals are pending before Supreme Court. Amendments made with retrospective effect are nothing but clarificatory and by way of ex abundanti cautela. Petition fails - decided against petitioner. - Misc. Bench Nos. 1827 of 2011, 9661, 10347, 10341, 7893, 10513, 10514 of 2010, 3102, 3104, 2171, 3106, 677 of 2011 and 1041 of 2013 - - - Dated:- 30-5-2017 - Hon'ble Sudhir Agarwal And Hon'ble Ravindra Nath Mishra-II, JJ. For the Petitioner : Pradeep Agrawal For the Respondent : A.S.G., Rajesh Singh Chauhan Bling Creation (P) Ltd. , HCl Technologies Ltd. , HCl Comment Ltd. , Ing Vysya Bank Limited, Shoppers Stop Limited , Devyani International Limited, Barista Cofee Co. Limited , Barista Coffee Co. Ltd. , A.N. Traders , K.B. Tiwari, The Commercial Motors Ltd. Versus Union of India, Through Secretary, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction be issued declaring that Article 246 read with Entry 97 of List I of the VII Schedule to the Constitution of India does not confer legislative power on the Union to enact Section 65(90)(a) read with Section 65(105)(zzzz) of the Finance Act, 1994 as amended by the Finance Act, 2007 and Finance Act, 2010. (iv) issue a writ of prohibition, or a writ in the nature of prohibition, or any other appropriate writ, order or direction under Article 226 of the Constitution of India, prohibiting the opposite parties by their servants, agents and subordinates from, a. directly or indirectly giving effect to the impugned provisions viz. Section 65(90)(a) read with section 65(105) (zzzz) of the Finance Act, 1994 as amended by the Finance Act, 2007 and Finance Act, 2010 and Levying or attempting to levy, collect or recover from the petitioner any service tax under the said impugned provision of the said Act. (v) issue a writ or mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India. a. Restraining the opposite parties by their servants, agents and subordinates from, (1) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporated under Act, 1956, engaged in the business of banking and allied banking services having lease of several properties for running banking services. It is now under an obligation to pay service tax by virtue of provisions whereof validity has been challenged in this writ petition. 10. Petitioner Bling Creations Private Limited in Writ Petition no. 9661 (MB) of 2010 is engaged in the business of selling goods and accessories through shops taken on rent. It has hired property of E-City Real Estates (P) Limited, Fun Republic Mall, Near Eldeco Greens, Lohia Path, Gomti Nagar, Lucknow (impleaded as respondent no. 5) in the said writ petition. 11. Petitioner, M/s Shopper's Stop Limited sole petitioner in Writ Petition no. 10513 (MB) of 2010 is a Limited Company incorporated under Act, 1956 engaged in the business of selling of goods and accessories through shops taken on rent. Certain properties owned by respondents 5 to 7 have been taken on rent by petitioners and liability of service tax fallen on petitioner by virtue of provisions referred herein above is under challenge. 12. Petitioner, Devyani International Ltd., sole petitioner in Writ Petition no. 10514 (MB) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aditya Birla Nuvo Ltd. on 05.09.2007; third lease agreement on 26.10.2008 with M/s Metlife India Insurance Company Ltd; and fourth agreement dated 26.12.2009 with M/s Edelweiss Broking Ltd.. In respect of properties let out under the said agreement, petitioner is now liable to pay service tax, hence this writ petition. 17. Service tax in India was introduced in 1994 by Chapter V of Finance Act 1994. It introduced service tax w.e.f. 01.07.1994 at the rate of five percent . It was subsequently increased to eight percent w.e.f. 14.05.2003, ten percent w.e.f. 10.09.2004 and addition of Education Cess of two percent was also increased in 2004. Applicability of net of service tax was very wide resulting in a huge revenue earning to Central Government. Encouraged thereby, rate of service tax was increased to twelve percent by Finance Act 2006 w.e.f. 18.04.2006 maintaining two percent Education Cess w.e.f. 01.04.2012. The effective rate of service tax is 12.63 percent. 18. Chapter V of Finance Act, 1994 had provisions relating to 'service tax' from Sections 64 to 96. 19. Section 65 contains definition for the purpose of Chapter V. Sub section (90a) was inserted by Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, boarding houses, holiday accommodation, tents, camping, facilities. Explanation 2- For the purposes of this sub-clause, an immovable property partly for use in the course of furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce. 21. Clause (zzzz) was inserted in Section 65(105) by Finance Act, 2007 w.e.f. 01.06.1007. Subsequently by Finance Act, 2010 the substantive clause was substituted by the following; to any person, or 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, business of commerce. By the same Act i.e. Finance Act 2010 a clause (v) in Explanation I of Section 65 (105) (zzzz) was inserted which reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint- ........ (5) in clause (105)- ........ (h) in sub-clause (zzzz)- (i) for the portion beginning with the words to any person and ending with the words business or commerce the following shall be substituted and shall be deemed to have been substituted with effect from the Ist day of June, 2007 namely:- 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. (ii) in Explanation I, after item (iv), the following item shall be inserted, namely:- (v) vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce. Section 76 of Finance Act, 2010; 76. Any action taken or anything done or omitted to be done or purported to have been taken or done or omitted to be done under sub-clause (zzzz) of clause (105) of section 65 of the Finance Act, 1994 at any time during the period commencing on and fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en or done or omitted to be done as if the amendment made in sub-clause (zzzz) of clause (105) of section 65, by sub-item (I) of item (h) of sub-caluse (6) of clause (A) of section 76 of the Finance Act, 2010 had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any Court, tribunal or other authority- (32 of 1994) (a) any action taken or anything done or omitted to be taken or done in relation to the levy and collection of service tax during the said period on the taxable service of renting of immovable property, shall be deemed to be and deemed always to have been, as valldly taken or done or omitted to be done as if the said amendment had been in force at all material times; (b) no suit or other proceedings shall be maintained or continued in any court, tribunal or other authority for the levy and collection of such service tax and no enforcement shall be made by any court of any decree or order relating to such action taken or anything done or omitted to be done as if the said amendment had been in force at all material times; (c) recovery shall be made of all such amounts of service tax, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yse the provisions of Section 65(105)(zzzz). It has reference to a service provided or to be provided 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. The wordings of the provision are so structured as to entail-a service provided or to be provided to 'A'' by 'B'' in relation to 'C''. Here, 'A'' is the recipient of the service, 'B'' is the service provider and 'C'' is the subject matter. As pointed out above by Mr Ganesh, the expression in relation to may be of widest amplitude, but it has been used in the said Act as per its context. Sometimes, in relation to would include the subject matter following it and on other occasions it would not. As in the case of the service of dry cleaning, the expression in relation to dry cleaning also has reference to the very service of dry cleaning. On the other hand, the service referred to in Section 65(105)(v), which refers to a service provided by a real estate agent in relation to real estate , does not, obviously, include the subject matter as a service. This is so because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitute a taxable service and be exigible WPC Nos. 1659/2008 ors Page No.39 of 39 to service tax under the said Act. The obvious consequence of this finding is that the interpretation placed by the impugned notification and circular on the said provision is not correct. Consequently, the same are ultra vires the said Act and to the extent that they authorize the levy of service tax on renting of immovable property per se, they are set aside. 37. Before parting with this batch of cases, we would like to observe that we have not examined the alternative plea taken by the petitioners with regard to the legislative competence of the Parliament in the context of Entry 49 of List II of the Constitution of India. Such an examination has become unnecessary because of the view we have taken on the main plea taken by the petitioners as indicate above. 38. The writ petitions are allowed to the extent indicated above. The parties are left to bear their own costs. 28. We are informed that against aforesaid judgment of Delhi High Court an appeal was preferred by Union of India before Supreme Court and in one of such appeal being Special Leave Petition (Civil) No. 13850 of 2009, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chment on List II. 23. We now come to the aspect of retrospectivity. It is well settled that competent legislature can always clarify or validate a law retrospectively. It cannot be held to be harsh or arbitrary. Object of validating law is to rectify the defect in phraseology or lacuna and to effectuate and to carry out the object for which earlier law was enacted. 24. In Shiv Dutt Rai Fateh Chand v. Union of India, (1983) 3 SCC 529, it was observed:- 32. The next point to be considered is whether the imposition and collection of penalty with retrospective effect amounts to an imposition of an unreasonable restriction on the fundamental right of the petitioners to own property and to carry on business guaranteed under Article 19(1)(f) and (g) of the Constitution. We have already indicated above the circumstances under which it became necessary to levy penalties with retrospective effect and to validate all the proceedings relating to levy of penalties and recovery thereof. The scope of the power of a legislature to make a law validating the levy of a tax or a duty retrospectively was considered by this court in Chhotabhai Jethabhai Patel Co. v. Union of India, AI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchaser, it cannot be called sales tax. In our judgment this argument is not sound. From the point of view of the economist and as an economic theory, sales tax may be an indirect tax on the consumers, but legally it need not be so. Under the 1947 Act the primary liability to pay the sales tax, so far as the State is concerned, is on the seller. Indeed before the amendment of the 1947 Act by the amending Act the sellers had no authority to collect the sales tax as such from the purchaser. The seller could undoubtedly have put up the price so as to include the 31 31 of 33 ::: Downloaded on - 29-05-2017 17:58:09 ::: CWP No.11597 of 2010 sales tax, which he would have to pay but he could not realise any sales tax as such from the purchaser. That circumstance could not prevent the sales tax imposed on the seller to be any the less sales tax on the sale of goods. The circumstance that the 1947 Act, after the amendment, permitted the seller who was a registered dealer to collect the sales tax as a tax from the purchaser does not do away with the primary liability of the seller to pay the sales tax. This is further made clear by the fact that the registered dealer need not, if he so plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, therefore, we do not find any error or lack of competence in such legislation. 11. In view of the facts as noted hereinabove, we find no merits in the present challenge and accordingly, the writ petition is dismissed. 12. We may further note that the Petitioner had approached this Court at the stage where a show-cause notice had been issued to him and therefore, while dismissing the writ application, we direct that the Petitioner may respond the show-cause notice within a period of four weeks from today and the revenue authorities may proceed in the matter in accordance with law. 32. Third judgment has come up from Bombay High Court by a Division Bench consisting of Dr. D.Y. Chandrachud (as his Lordship then was) and Anoop V. Mohra,JJ in Writ Petition no. 2238 of 2010 M/s Retailers Association of India (RAI) Vs Union of India and others, and other connected matters, decided on 04.08.2011. In para 38, Bombay High Court has referred to the judgments of Punjab and Haryana High Court in M/s Shubh Timb Steels Limited (supra) and Orissa High Court in Utkal Builders Limited Vs Union of India (supra). 33. With regard to service tax on rented property, Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided vide judgment dated 23.09.2011. Full Bench consisted of Hon'ble Deepak Misra, CJ, Hon'ble A.K. Sikri,J (as their Lordships then were) and Hon'ble Sanjiv Khanna,J. 37. Full Bench of Delhi High Court over ruled its earlier judgment in Home Solution Retail India Ltd. (supra) and held that amendments made with retrospective effect are nothing but clarificatory and by way of ex abundanti cautela. It has also held that there is no lack of competence and earlier Bench did not properly appreciate Section 65(90a). Consequently two amendments have been affirmed and all the writ petitions have been dismissed. Operative part contained in paras 73 to 75 reads as under:- 73. On the question of penalty due to non-payment of tax, it is open to the government to examine whether any waiver or exemption can be granted. It may be noted that the appeal against Home Solutions-I is pending before the Supreme Court but the operation of the said judgment has not been stayed. 74. Quite apart from the above, as we have overruled the first Home Solution case, we are disposed to think that the provisions would operate from 2007 and the amendment brought by the Parliament is by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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