Service tax on property renting upheld as valid retrospective amendment, dismissing challenges on new tax liabilities.

The court upheld the imposition of service tax on renting of immovable property, citing the constitutional authority of Parliament to legislate retrospectively for tax liabilities. The retrospective amendment to include renting of immovable property as a taxable service was deemed valid, rejecting challenges on grounds of creating new tax liabilities. The court clarified that providing premises for specific purposes constituted a service, not a transfer of movable property, falling under taxable service. Consequently, all writ petitions contesting the service tax imposition were dismissed.

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Issues:
Challenge to imposition of service tax on renting of immovable property.
Validity of retrospective amendment to the definition of "taxable service."

Analysis:
The judgment dealt with the challenge against the imposition of service tax on renting of immovable property. The Constitution was amended to introduce a new entry regarding "Taxes on Service," empowering the Parliament to levy Service Tax. The Delhi High Court previously held that mere renting out of immovable property did not amount to a service and was not amenable to service tax. However, the Finance Act 2010 amended the definition of "taxable service" to include renting of immovable property. This amendment was made retrospective, leading to a challenge on the grounds that it imposed a substantive liability retrospectively.

The petitioners argued that the retrospective amendment was impermissible as it created a new tax liability and subjected service providers to interest and penalties for past periods. Similar challenges were rejected by various High Courts, including Punjab and Haryana, Bombay, Gujarat, and Orissa. The judgment highlighted that unless restricted by the Constitution, Parliament has the authority to legislate retrospectively to create tax liabilities. The absence of any constitutional provision limiting Parliament's power to legislate retrospectively for tax liability was noted.

Referring to a previous Supreme Court judgment, the court emphasized that the levy of service tax on a particular service could not be invalidated as long as it did not violate any specific constitutional restriction. The court held that providing premises for a specific purpose, such as a mandap, constituted a service and was not a transfer of movable property, thus falling under the ambit of taxable service. Consequently, the arguments against the imposition of service tax on renting of immovable property were dismissed, and all the writ petitions challenging the tax imposition were rejected.

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