2012 (10) TMI 685 - HC - Service Tax

Court rules in favor of plaintiff, awards service tax recovery with interest, totaling Rs. 9,91,311.83.

M/s MEATTLES PVT. LTD. Versus HDFC BANK LIMITED

M/s MEATTLES PVT. LTD. Versus HDFC BANK LIMITED - 2016 (42) S.T.R. 655 (Del.) Issues Involved:1. Liability to pay service tax on rent.2. Entitlement of the plaintiff to any amount from the defendant.3. Whether the suit is barred by limitation.Issue-wise Detailed Analysis:1. Liability to Pay Service Tax on Rent:The primary issue was whether the lease deed between the parties addressed the payment of service tax and who was liable for it. Clause 4(v) of the lease deed specified that municipal taxes, rates, charges, and other outgoings determined by local authorities were to be paid by the lessor or lessee as per the schedule. Clause 7 in the schedule stated these were to be borne by the lessor only. However, since the lease deed was executed before the imposition of service tax (effective from 1.6.2007), it did not specifically address service tax. The court concluded that service tax, being a tax on services levied by the Union of India, was not covered under the term 'outgoings' as defined in the lease deed. Therefore, there was no agreement regarding the payment of service tax.The court further examined whether, in the absence of an agreement, the landlord could recover service tax from the tenant. It referenced Sections 12A and 12B of the Central Excise Act, applied to service tax via Section 83 of the Finance Act, which create a statutory presumption that the service tax is passed on to the recipient of the service. The court held that these provisions gave the service provider a legal right to recover service tax from the recipient, even without an explicit agreement. This view was supported by precedents, including the Madras High Court's decision in *All India Tax Payers Welfare Association v. Union of India* and the Delhi High Court's decision in *Pearey Lal Bhawan Association v. Satya Developers Pvt. Ltd.*2. Entitlement of the Plaintiff to Any Amount from the Defendant:The plaintiff sought recovery of Rs.14,08,553/- towards arrears of service tax and Rs.6,07,390/- as interest, totaling Rs.20,15,943/-. The court determined that the plaintiff was entitled to recover service tax from the defendant, except for amounts barred by limitation. The court awarded the plaintiff Rs.9,74,922/- for service tax deposited between 5.3.2009 and 6.9.2012.Regarding interest, the court noted the absence of an agreement on interest payment but referred to Section 3 of the Interest Act 1978, which allows courts to award interest. The court awarded interest at 6% per annum on the amount of Rs.3,45,049/- deposited between 05.03.2009 to 02.05.2011, from 2.5.2011 to the filing of the suit, amounting to Rs.16,389.83. Thus, the total amount recoverable by the plaintiff was Rs.9,91,311.83.3. Whether the Suit is Barred by Limitation:The suit was filed on 17.2.2012. The court applied Article 23 of the Limitation Act, which provides a three-year limitation period for money paid for the defendant. Payments made between 31.3.2008 and 5.2.2009 were thus barred by limitation. The court rejected the plaintiff's argument that the limitation period was affected by the legal challenges to the service tax notifications and amendments, citing Section 9 of the Limitation Act, which states that once time begins to run, it cannot be stopped by subsequent events.Order:The court decreed the recovery of Rs.9,91,311.83 in favor of the plaintiff against the defendant, with no order as to costs. If the amount was not paid within four weeks, it would carry pendent lite and future interest at 6% per annum.