2023 (2) TMI 833 - HC - Service Tax

Service Tax on Airport Rentals Taxable Only After 2007; CBEC Circulars Not Binding, Status Quo Pending Supreme Court Decision.

VKC Credit and Forex Services (P) Ltd., “Aishwareya Complex” Versus The Union of India, Rep. by its Secretary, Ministry of Finance, Department of Revenue, The Central Board of Excise and Customs, Dept. of Revenue, Ministry of Finance, The Director General of Service Tax, The Airports Authority of India having its office at Rajiv Gandhi Bhavan Safdarjung Airport, New Delhi., The Director, Airport Authority of India, The Deputy General Manager – Commercial Airport Authority of India

The court addressed the constitutionality and applicability of service tax on rental/lease charges within airport premises, emphasizing that such charges ... Renting of immovable property - Airport/Civil Enclave - Constitutional Validity of levy, imposition, demand or collection of service tax from the petitioner by the respondents herein for the payment of license/rental fee paid by the petitioner to the fifth respondent - seeking Writ of Mandamus (command issued by the court to a public official asking him/her to perform his/her official duties) to forbear the respondents, their men, agents, sub-ordinates or anyone claiming under them from in any manner imposing, levying, demanding or collecting service tax from the petitioner towards the rent/license fee paid by the petitioner to the fifth respondent other than by authority of law. The specific case of the petitioner is that the fifth respondent has not provided any taxable service to the petitioner during the period between 10.09.2004 and 01.06.2007 and therefore, the attempt of the fourth, fifth and sixth respondents to fasten the service tax liability on the petitioner by passing on the incidence of tax on the petitioner under Section 65(105)(zzm) of the Finance Act, 1994 (Chapter V - Service Tax) was unsustainable and contrary to law. HELD THAT:- Service of renting of immovable property is a separate specie of service. It was brought within the purview of service tax separately vide Section 65(105)(zzzz) with effect from 01.06.2007. Ipso facto, it would not mean that any service tax which was payable by the fourth respondent for the service provided by it in any Airport or a Civil Enclave to any person between 10.09.2004 and 31.06.2007 was not taxable - Merely because the service of renting of immovable property was introduced as a separate levy with effect from 01.07.2007 ipso facto would not mean that service provided by the Airport Authority of India was not liable to tax w.e.f. 10.09.2004. By this Writ Petition, the petitioner has attempted to pre-empt the fourth, fifth and sixth respondents from passing on the incidence of service tax which was either borne by them or was proposed to be borne by them towards renting of space to them within the Airport or a Civil Enclave. Whether the fourth respondent is/was liable to tax or not is to be determined by the Authorities enforcing the provisions of the Finance Act, 1994. The present Writ Petition to scuttle any assessment and adjudication proceedings and proposal to pass on incidence of service tax on the petitioner by the Airport Authority of India namely, the fourth respondent cannot be countenanced - It is preemptory move in an anticipation of steps that would have been taken by the Airport Authority of India by passing on the incidence of service tax in terms of Section 65(105)(zzm) of the Finance Act, 1994 (Chapter V – Service Tax) as it stood with effect from 10.09.2004. Considering the fact that the issue is pending before the Hon’ble Supreme in S.L.P. filed against the above decision of Delhi Tribunal in Airport Authority of India Vs. Commissioner of Service Tax, Delhi, [2015 (1) TMI 1049 - CESTAT NEW DELHI], we refrain to give any final view on the subject - In case the above decision of Delhi Tribunal in Airport Authority of India Vs. Commissioner of Service Tax, Delhi, is upheld by the Hon’ble Supreme Court, the fourth respondent Airport Authority of India can indeed pass on the incidence of the tax on the petitioner - In case the decision is reversed, it is open for the petitioner to either file a refund claim under Section 11B of the Central Excise Act, 1944 as made applicable to the provisions of the Finance Act, 1994 in terms of Section 83 of the Finance Act, 1994, in accordance with law and law settled by the Hon’ble Supreme Court if the incidence of service tax was passed on it or in the alternative defend such proceedings that may be initiated to recover the amount of service tax from it. It is deemed fit to direct the respondents to maintain the status quo as on date pending further decision of the Hon’ble Supreme Court in the above S.L.P. filed by the Airport Authority of India - petition disposed off. Issues Involved:1. Constitutionality of service tax on license/rental fee.2. Applicability of service tax on rental/lease charges within Airport/Civil Enclave premises.3. Retrospective amendment and its impact on service tax liability.4. Binding nature of CBEC Circulars on courts.5. Classification of services under Section 65 of the Finance Act, 1994.6. Legal precedents and their applicability to the case.Issue-wise Detailed Analysis:1. Constitutionality of Service Tax on License/Rental Fee:The petitioner sought a declaration that the levy, imposition, demand, or collection of service tax on the license/rental fee paid to the fifth respondent was unconstitutional. The court examined the specific case that the fifth respondent had not provided any taxable service during the period between 10.09.2004 and 01.06.2007. It was argued that the attempt to fasten the service tax liability on the petitioner under Section 65(105)(zzm) of the Finance Act, 1994 was unsustainable and contrary to law.2. Applicability of Service Tax on Rental/Lease Charges within Airport/Civil Enclave Premises:The court noted that renting of immovable property was made liable to service tax only with effect from 01.06.2007 through Section 65(105)(zzzz) of the Finance Act, 1994. Prior to this, the CBEC Circular No.80/10/2004-ST dated 17.09.2004 clarified that service tax would not be attracted on rental/lease charges within Airport/Civil Enclave premises. However, this circular was not binding on the court, as held by the Supreme Court in Commissioner of Central Excise, Bolpur Vs. M/s Ratan Melting & Wire Industries.3. Retrospective Amendment and Its Impact on Service Tax Liability:The court discussed the retrospective amendment introduced by the Finance Act, 2010, which substituted Section 65(105)(zzzz) with effect from 01.06.2007. The court emphasized that the renting of immovable property was brought within the purview of service tax net separately and did not imply that any service tax payable by the fourth respondent for services provided between 10.09.2004 and 31.06.2007 was not taxable.4. Binding Nature of CBEC Circulars on Courts:The court reiterated that CBEC Circulars are not binding on the courts, although they are binding on the authorities. The clarification in Circular No.80/10/2004-ST that rental/lease charges would not be subjected to service tax was not given a seal of approval by the court.5. Classification of Services under Section 65 of the Finance Act, 1994:The court analyzed the definitions and amendments of 'taxable service' under Section 65(105)(zzm) and Section 65(105)(zzzz). It concluded that the fourth respondent was indeed providing a taxable service to the petitioner and was entitled to pass on the incidence of the tax. The introduction of the proviso to Section 65(105)(zzm) with effect from 01.07.2010 was intended to address confusion arising from various High Court orders.6. Legal Precedents and Their Applicability to the Case:The court referenced several legal precedents, including the decisions in Flemingo Duty Shops Private Limited Vs. Union of India, Sahara Airlines Limited Vs. Union of India, and CCE Vs. Cochin International Airport. The court also discussed the Tribunal's decision in Airport Authority of India Vs. Commissioner of Service Tax, Delhi, which held that renting/leasing of space inside Airports/Civil Enclaves is a service covered by Section 65(105)(zzm) and taxable. The court noted that this decision is pending before the Supreme Court.Conclusion:The court directed the respondents to maintain the status quo pending the Supreme Court's decision on the SLP filed against the Tribunal's decision. The writ petition was disposed of with the observation that the petitioner could approach the Supreme Court if advised and could file a refund claim or defend proceedings based on the outcome of the Supreme Court's decision.