Tenants must pay service tax on leased shop rooms per lease agreements, court rules.

The court dismissed the writ petition challenging orders demanding service tax payments from tenants of shop rooms leased from a Panchayat for the period from 01.06.2007 to 31.03.2012. The court held that the tenants were liable to pay service tax as per the lease agreements' clauses requiring them to bear all charges and assessments related to the leased premises. It was determined that the tenants had agreed to pay future charges, including service tax, and therefore, the petitioners were obligated to remit the service tax arrears as demanded in the orders.

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Issues:
Petition to quash orders demanding service tax payments by tenants of shop rooms leased from a Panchayat. Dispute over liability to pay service tax for the period from 01.06.2007 to 31.03.2012. Interpretation of lease agreements and contractual obligations. Legal implications of service tax arrears and recovery from tenants. Applicability of relevant case laws in determining liability.

Analysis:

1. Quashing of Orders and Liability Dispute:
The petitioners, tenants of shop rooms leased from a Panchayat, sought to quash orders demanding service tax payments for the period from 01.06.2007 to 31.03.2012. The petitioners argued that they are not liable to pay service tax amounts as claimed in the impugned orders. The Panchayat contended that the petitioners are indeed liable to pay service tax along with the monthly rent, as per the Lease Deeds and statutory obligations.

2. Contractual Obligations and Interpretation:
The Lease Deeds executed by the petitioners with the Panchayat, as evidenced by Exts. P1 to P5, contained clauses requiring the lessees to bear, pay, and discharge all charges, assessments, and outgoings payable in respect of the leased premises. The court interpreted this clause to include service tax as a charge/assessment, making the petitioners liable to pay the same.

3. Legal Precedents and Liability Determination:
The petitioners relied on legal precedents to argue that service tax is a tax assessed and imposed on the service provider, in this case, the Panchayat. However, the court distinguished the case at hand from the cited judgments, emphasizing that the petitioners, as lessees, were aware of the terms and conditions of the lease agreements, including the clause regarding payment of charges and assessments.

4. Recovery of Service Tax Arrears:
The court rejected the argument that service tax arrears cannot be recovered from tenants, citing a Supreme Court judgment that statutory provisions concerning service tax are relevant only between the assessee and tax authorities. The court held that the petitioners, by signing the lease agreements, had made themselves liable to pay future charges, assessments, and outgoings of the leased premises, including service tax.

5. Final Decision and Dismissal of Writ Petition:
After considering the arguments and legal principles, the court found no illegality in the impugned orders demanding service tax payments from the petitioners. The writ petition was dismissed, with a discretionary suggestion for the respondents to grant the petitioners an easy installment facility to remit the service tax arrears, considering the circumstances of the case.

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