Indirect service tax on leased property falls on the user of the service when the contract does not clearly provide otherwise.

Service tax on renting of immovable property was treated as an indirect levy on the service, not as a tax on property, so its incidence ordinarily fell on the user of the service. Because the levy arose after the lease was executed and the contract did not clearly exclude that burden, the contractual tax clause did not displace the statutory incidence. The court therefore held that the lessee bore the service tax, and the plaintiff was entitled to declaration, injunction and recovery of the tax amounts paid.

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Issues: (i) Whether, on the terms of the lease and the statutory scheme, the incidence of service tax on renting of immovable property fell on the lessor or the lessee. (ii) Whether the plaintiff was entitled to declaration, injunction and money decree for the service tax amounts paid.

Issue (i): Whether, on the terms of the lease and the statutory scheme, the incidence of service tax on renting of immovable property fell on the lessor or the lessee.

Analysis: Service tax on renting of immovable property was treated as a levy on the service and not as a tax on property. The statutory scheme, including the provisions making the relevant Central Excise Act provisions applicable to service tax, indicated that the tax was indirect in character and capable of being passed on to the user of the service. Although the lease deeds referred to taxes borne by the lessor, the levy in question was not contemplated when the contracts were executed. In that context, the court applied the principle that the incidence of an indirect tax ordinarily falls on the consumer of the service, and also drew support from the rule that post-contract tax burdens may be added unless a different intention appears from the contract.

Conclusion: The incidence of service tax fell on the lessee, and this issue was answered in favour of the plaintiff and against the defendant.

Issue (ii): Whether the plaintiff was entitled to declaration, injunction and money decree for the service tax amounts paid.

Analysis: Once the incidence of the levy was held to rest on the lessee, the plaintiff became entitled to the declaratory and injunctive reliefs claimed, along with recovery of the amounts paid towards service tax for the relevant period.

Conclusion: The plaintiff was entitled to the declaration, injunction and money decrees claimed.

Final Conclusion: The suits succeeded and were decreed in favour of the plaintiff, with costs, subject to the ultimate outcome of the challenge to the levy.

Ratio Decidendi: Service tax on renting of immovable property is an indirect tax whose incidence falls on the user of the service, and where the levy arises after the contract, the contractual allocation of taxes will not displace that statutory incidence unless the contract clearly provides otherwise.

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