TMI Blog2009 (4) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... D BARDEZ, GOA Versus UOI ORS. BIBA APPARELS P. LTD. Versus UOI ORS. ASHOK KUMAR JAIN Versus UOI ORS. VARDHAMAN PROPERTIES LTD. Versus UOI ORS. WADHAWAN LIFESTYLE RETAIL P. LTD. Versus UOI ORS. ASHOK JAIN AND ANOTHER Versus UOI ORS. VATIKA LTD AND ANR Versus UOI ORS. VATIKA HOSPITALITY PVT. LTD AND ANR Versus UOI ORS. SAFFRON FOODS (P) LTD. Versus UOI ORS. M/S FOOD PLAZA EXPRESS KITCHEN AND ORS. Versus UOI ORS. SSIPL RETAIL LTD AND ANR. Versus UOI ORS. GENESIS COLORS PVT LTD AND ORS. Versus UOI ORS. M/S BATA INDIA LTD. Versus UOI ORS. VINNAMR HOSPITALITY P. LTD. Versus UOI M/S BPTP LTD. Versus UOI ORS. HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE RAJIV SHAKDHER Judgment delivered on: 18.04.2009 WP(C) 1659/2008, WP(C) 4130/2008, WP(C) 4131/2008, WP(C) 4749/2008, WP(C) 5036/2008, WP(C) 5643/2008, WP(C) 5976/2008, WP(C) 5978/2008, WP(C) 6033/2008, WP(C) 6734/2008, WP(C) 6744/2008, WP(C) 6993/2008, WP(C) 7004/2008, WP(C)7122/2008, WP(C) 7164/2008, WP(C) 7212/2008, WP(C) 7654/2008, WP(C) 7664/2008, WP(C) 7722/2008, WP(C) 7723/2008, WP(C) 8538/2008, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 130/08. Ms Anjana Gosain for the Respondent/UOI in WP(C) Nos.9642/07, 5036/08, 6734/08 8554/08. Mr R. S. Mathur for the Respondents 17 18 in WP(C) 6033/08. Mr Prakash Kumar for the Respondent No. 3 in WP(C) 4749/08. Mr Pradeep Aggarwal with Mr Deep Dhamija for the Respondent No. 6 in WP(C) 1659/2008. Ms Sonia Mathur with Mr Sushil Kr Dubey for the Respondent in WP(C) 4130/08, 4131/08, 4749/08, 5976/08, 5978/08, 6744/08, 6993/08, 7004/08, 7122/08, 7164/08, 7212/08, 7654/08, 7664/08, 7722/08, 7723/08. Mr Amit Bhagat with Mr Pulkit Gupta for the Respondent No. 16 in WP(C) 5978/08. Mr Ankit Jain for the Respondent No. 4 in WP(C) 5643/08. Mr Rajesh Mahna with Mr Ramanand Roy for the Respondents 14-16 in WP(C) 6033/08. Ms Priyadeep for the Respondent No. 6 in WP(C) 4131/2008. Mr Sachin Sood for the Respondent No. 5 in WP(C) 4130/08. Mr Sachin Sood for the Respondent No. 7 in WP(C) 4131/08. Mr Sachin Sood for the Respondent No. 14 in WP(C) 5978 /08. Mr Tarun Gulati with Mr Tushar Jarwal for the Respondent No. 11 in WP(C) 7043/08. Mr Tarun Gulati with Mr Tushar Jarwal for the Respondent No. 4 in WP(C) 8554/08. Mr Tarun Gulati with Mr Tushar Jarwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le service of renting of immovable property , referred to in sub-clause (zzzz) of clause (105) of section 65 of the Finance act, from so much of the service tax levy as was in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable property less taxes on such property, namely property tax levied or collected by local bodies. An example has also been provided in the said notification by way of illustration. The example is as under:- Example: Property tax paid for April to September = Rs 12,000/- Rent received for April = Rs 100,000/- Service tax payable for April = Rs 98,000/-(100,000-12,000) * applicable rate of service tax 5. It is the contention of the petitioners that though this notification speaks of an exemption it also refers to the -taxable service as a taxable service of renting of immovable property. This, according to the petitioners, is not so provided under the said act. It is contended that section 65(105)(zzzz) refers to the 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 bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or part of a building; (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, but does not include-- (a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining 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, hostels, boarding houses, holiday accommodation, tents, camping facilities. Explanation 2. - For the purposes of this sub-clause, any immovable property partly for use in the course or 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 busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of renting of removal property . 9. It was further contended that the said provision indicates that the service will be provided by any other person and not only by the owner or lessor or person in possession of the immovable property. Furthermore, the service could be rendered to any person provided it was in relation to the renting of the property and not merely to the person who takes the property on rent. If the renting of property as such constituted a service which could be taxed, then such a service could only be rendered to the person taking the property on rent and not to any person . According to the learned senior counsel, this clearly indicates that renting of immovable property as such cannot be regarded as a service on which service tax could be levied under the provisions of the said act. 10. Mr. Ganesh also sought to draw a distinction between the provisions of section 65(105)(zzzz) and section 65(88) of the said act. The latter provision has a reference to the service of a real estate agent in relation to the renting of immovable property. It was contended that the language of the two provisions is similar. From this it was sought to be contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the Doypack Systems Private Limited v. Union of India: (1998) 2 SCC 299, which had interpreted the words in relation to , also contemplated that it applied to a different subject matter as compared to the thing to which it was related. In this backdrop, the learned counsel submitted that the service in relation to the renting of immovable property necessarily has to be a distinct subject matter as compared to the renting out of the property itself. There is no doubt that the words in relation to have a wide ambit but that only means that a wide variety of services relating to the renting a property would be covered by the charge of service tax. 13. It was further contended that a bare room in a commercial building could not be considered to be an office unless and until it was fully equipped with equipment and also manned by personnel. It is only then that the renting of such an office or permitting its use would constitute the rendering of a service. Similarly, renting out of a large property does not constitute a service in itself even though the tenant may use it for the purpose of conducting a wedding or other ceremonial function. Referring to the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber 4131/2008 [Shoppers Stop Limited v. Union of India], submitted that the expression in relation to separates objects from each other. According to him the phrase by itself conceives of two separate things. He submitted that service tax is a value-added tax and therefore only the value addition is liable to be taxed by way of a service tax. He referred to the decision of the Supreme Court in the case of All India Federation of Tax Practitioners (supra). In particular, he referred to paragraph 8 of the said decision which reads as under:- 8. As stated above, service tax is VAT. Just as excise duty is a tax on value addition on goods, service tax is on value addition by rendition of services. Therefore, for our understanding, broadly services fall into two categories, namely, property-based services and performance based services. Property-based services cover service providers such as architects, interior designers, real estate agents, construction services, mandapwallas, etc. Performance-based services are services provided by service providers like stockbrokers, practising chartered accountants, practising cost accountants, security agencies, tour operators, event mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the arguments of Mr. Ganesh and Dr. Singhvi. Both of them also contended that renting of immovable property by itself did not constitute a service. 19. Mr. PP Malhotra, the learned Additional Solicitor General of India, appearing for the Union of India contended that the user of land/building itself is the service. He referred to the decision of the Supreme Court in the case of All India Federation (supra) and contended that service tax is a value-added tax which in turn is a general tax which applies to all commercial activity involving production of goods and provision of services. He contended that the transfer of the right to use a particular property for a commercial or business purpose was itself the service which was contemplated in section 65 (105) (zzzz) of the said act. According to him, the mere renting of immovable property in itself constituted a service. He submitted that the definition of renting of immovable property in section 65 (90a) was an all inclusive definition. Referring to the decision in Kalyana Mandapam Association (supra), Mr. Malhotra submitted that even if premises were made available for a few hours for the purpose of utilisation as a mandap, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Mr. Malhotra sought to contend that the use of the property by itself was a service. He contended that letting out the property or permitting another person to use the same as a licensee by itself constituted an act which could be classified as a service. 22. With reference to the Supreme Court decision in Doypack Systems Private Limited (supra), he contended that the expression in relation to is used in an expansive sense. It is an expression of expansion and not of contraction. Therefore, the expression in relation to renting of immovable property must be given an expansive meaning of the widest amplitude. Consequently, he said that the expression would definitely cover the renting of immovable property itself and not be limited to some service in connection with the renting of immovable property. 23. Our attention was also drawn to the decision of the Supreme Court in the case of Lucknow development authority v. MK Gupta: (1994) 1 SCC 243, wherein at page 254 the following observation is to be found:- 4. What is the meaning of the word 'service'? Does it extend to deficiency in the building of a house or flat? Can a complaint be filed under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es , other than the services provided by a mandap keeper such as catering services. 27. He submitted that whenever the meaning of words in a statute is in question the same has to be seen in the context in which they are used. Reliance was placed upon the Supreme Court decision reported in His Holiness Kesavananda Bharati Sripadagalvaru and Ors. v. State of Kerala and Anr. : (1973) 4 SCC 225 [at page 316]. He submitted that the expression in relation to was used in varying contexts in section 65 (105) of the Act itself. For example, in section 65 (105) (zm) there is reference to a service provided or to be provided to any person by a banking company or a financial institution including a nonbanking financial company, or any other body corporate or commercial concern, in relation to banking and other financial services. The expression in relation to clearly refers also to the banking and other financial services. The activity, that is, banking and other financial services, is clearly an unmistakably a service. The service provider is identified and the nature of the service is such that it can be provided by the service provider. But, the renting of immovable property is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he taxable service provided by a mandap keeper. The said taxable service was earlier indicated under Section 65(41)(p) of the said Act. At present, with minor modifications, the relevant provision is Section 65(105)(m) of the said Act. Earlier, mandap keeper was defined under Section 65(20) and mandap itself was defined under Section 65(19). At present, mandap keeper is defined under Section 65(67) and mandap is defined under Section 65(66). There are only minor changes. As the provisions stood at the time of the decision of the Supreme Court in All India Federation (supra), the taxable service in question was:- Any service provided to a client, by a mandap keeper in relation to use of a mandap in any manner, including the facilities provided to the client in relation to such use and also the service, if any, rendered as a caterer ; Mandap keeper was defined to mean a person who allowed temporary occupation of a mandap for consideration for organising any official, social or business function. Mandap was defined to mean any immovable property as defined in Section 3 of the Transfer of Property Act, 1882 and included any furniture, fixtures, light fittings and floor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... among other reasons, which may include avoidance of repetition of the same phrase in the same clause or sentence, a method followed in good drafting. The word 'pertain' is synonymous with the word 'relate'. The term 'relate' is also defined as meaning to bring into association or connection with. The expression 'in relation to' (so also 'pertaining to'), is a very broad expression which presupposes another subject matter. These are words of comprehensiveness which might have both a direct significance as well as an indirect significance depending on the context. The Supreme Court also observed:- 51. Taxable services, therefore, could include the mere providing of premises on a temporary basis for organizing any official, social or business functions, but would also include other facilities supplied in relation thereto. No distinction from restaurants, hotels etc which provide limited access to property for specific purpose. 30. Furthermore, the Supreme Court emphasized that a tax cannot be struck down on the ground of lack of legislative competence by enquiring whether the definition accords with what the layman's view of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been executed. Although the right of ownership is not transferred and is retained by the owner, the right of possession certainly gets transferred in the case of a lease. In the case of a licence also, the possession is of the licensee although the nature of such possession is only permissive. Thus, the observations of the Supreme Court in T.N. Kalyana Mandapam (supra) that the utilization of the premises as a mandap by itself would constitute a service would have to be distinguished from the kind of activity that is contemplated under Section 65(105)(zzzz). We are of the view that the case of a mandap and service provided by a mandap keeper would not be applicable to the case of renting of immovable property simpliciter. The Supreme Court in paragraph 56 of the said decision itself makes it clear that mandap keepers provide a wide variety of services apart from the service of allowing temporary occupation of a mandap. A mandap keeper, apart from the proper maintenance of mandap, also provides the necessary paraphernalia for holding official, social or business functions, apart from providing the conditions and ambience which are required by the customer, such as providing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt also noted that service tax is a tax on service and not on the service provider. 34. From the above discussion, it is apparent that service tax is a value added tax. It is a tax on value addition provided by a service provider. It is obvious that it must have connection with a service and, there must be some value addition by that service. If there is no value addition, then there is no service. With this in mind, it would be instructive to analyse 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service provided alongwith the renting of immovable property, then it would fall within Section 65(105)(zzzz). 36. In view of the foregoing discussion, we hold that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
