TaxTMI 
TaxTMI 
2017 (6) TMI 119
X X X X Extracts X X X X
X X X X Extracts X X X X
....ENCH No. - 3106 of 2011 MISC. BENCH No. - 677 of 2011 MISC. BENCH No. - 1041 of 2013 ORDER ( Delivered by Hon'ble Sudhir Agarwal, J. ) 1. Heard Sri Pradeep Agarwal, Sri Yogesh Chandra Srivastava, holding brief of Sri Piyush Agarwal and Sri Rahul Agarwal, learned counsels for petitioner and Sri Rajesh Singh Chauhan, learned counsel for respondents. 2. In all these writ petitions since common questions are involved therefore, have been heard together and are being decided by this common judgment. 3. In all the writ petitions vires of Sections 75(A)(6)(h) and 77 of Finance Act, 2010 and Sections 65(90)(a) and 65(105)(zzzz) read with Section 66 of Finance Act, 1994 as amended by Finance Act, 2007 and Finance Act, 2010, has been challenged as being illegal, arbitrary and lacking legislative competence infringing Articles 14, 246 and 265 of Constitution of India. 4. Petitioners have also challenged consequential circular dated 04.01.2008 and 22.05.2007, as void, nullity, illegal and ultra vires of provisions of Finance Act, 1994 as amended by Finance Act, 2007, Finance Act, 2008 and Finance Act, 2010. 5. For convenience prayers made in Writ Petition no 182....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any service tax under the said impugned provision of the said Act. (vi) issue a writ, order or direction in the nature of certiorari quashing the Circular No. 98/1/2008-ST dated 4.1.2008 and Notification No. 24/2007 dated 22nd May, 2007 as revived by the Finance Act, 2010 issued by the opposite party no. 1 as illegal, null and void and ultravires the provisions of Finance Act, 1994 as amended by Finance Act, 2007, Finance Act, 2008 and Finance Act, 2010." 6. Petitioner, M/s N.K. Bhasin, sole petitioner in Writ Petition no. 1827 (MB) of 2011 is a Limited Company incorporated under Act, 1956. It is also in similar lease agreement of immovable properties and has challenged service tax which is now payable under provisions detailed above, by it. 7. Petitioner, M/s HCl Technologies Ltd, sole petitioner in Writ Petition no. 10347 (MB) of 2011 is a Limited Company incorporated under Act, 1956, engaged in offering integrated portfolio of service including software-led IT solutions, remote infrastructure management, engineering and RGD Industry verticals including financial services, manufacturing, consumer services, public services and health care. For the said purpose it h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as taken on lease or license, different properties at Noida, Ghaziabad, Meerut, Mathura, Agra and Varanasi, details whereof are given in para 10 and 11 respectively of the above writ petitions. Under the agreement with respective owners, liability of payment of service tax was upon owners but the said owners insist upon petitioner to make payment of service tax. This was also endorsed by Government of India vide letter dated 26.02.2010 and petitioner has challenged it since liability has been thrust upon petitioner. In other words liability has been created upon tenants under Finance Act, 1994 and that has been challenged. 13. Petitioner, M/s Barista Coffee Company Ltd. sole petitioner in Writ Petitions no. 2171 (MB) of 2011 and 3104 (MB) of 2011, is also a Limited Company incorporated under Act, 1956, having its registered office at 55, Community Centre, Basant Lok Market, Vasant Vihar, New Delhi. It is engaged in the business of running a chain of Restaurants under the name of "Barista Coffee Company". It has also taken several properties by ways of lease or license, whereupon liability of service tax had fallen upon it and hence it has joined this bunch of writ petitions. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 65 (90a) "renting of immovable property" includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include- (i) renting of immovable property by a religious body or to a religious body; or (ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or filed, other than a commercial training or coaching centre; Explanation No. 1;- For the purposes of this clause, "for use in the course or furtherance of business or commerce included use of immovable property as factories, office buildings, warehouses, theaters, exhibition halls and multiple use buildings. Explanation No. 2:- For the removal of doubts, it is hereby declared that for the purposes of this clause "renting of immovable property" includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property." (emphasis added) 20. Section 65(105) defines services which are taxable service. It includes Clause (a) to (zzzzw). ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....65A was inserted by Finance Act, 2003 w.e.f. 14.05.2003 and talks of classification of taxable services and reads as under:- "65A. Classification of taxable services (1) For the purposes of this Chapter, classification of taxable services shall be determined according to the terms of the sub-clause of clause (105) of section 65. (2) Where for any reason, a taxable service is, prima facie, classifiable under two or more sub-clause of clause (105) of section 65, classification shall be effected as follows:- (a) the sub-clause which provides the most specific description shall be preferred to sub-clause providing a more general description; (b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service, which gives them their essential character, in so far as this criterion is applicable; (c) when a service cannot be classified in the manner specified in clause (a) or clause (b) it shall be classified under the sub-clause which occurs first among the sub-clause which equally merit consideration." 23. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shall be deemed to be and deemed always to have been, for all purposes, as validly and effectively taken or done or omitted to be done as if the amendment made in sub-clause (zzzz) of clause (105) of section 65, by sub-item (i) of item (h) of sub-clause (5) of clause (A) of section 75 of the Finance Act, 2010 had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority- (a) any action taken or anything done or omitted to be taken or done in relation to the levy and collection of service tax during the said period on the taxable service of renting of immovable property, shall be deemed to be and deemed always to have been, as validly taken or done or omitted to be done as if the said amendment had been in force at all material times; (b) no suit or other proceedings shall be maintained or continued in any court, tribunal or other authority for the levy and collection of such service tax and no enforcement shall be made by any court of any decree or order relating to such action taken or anything done or omitted to be done as if the said amendment had been in f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as the case may be, which have been refunded but which would have been collected or, as the case may be, would not have been refunded, as if the said amendment had been in force at all material times. Explanation- For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable had this amendment not come into force." 26. It is contended that Section 65(90a) and (105) (zzzz) of Finance Act, 1994 as amended by Finance Act, 2007 as also Notification no. 24/2007 dated 22.05.2007 and Circular no. 98/1/08-ST dated 04.01.2008 issued by Secretary, Department of Revenue, Government of India, New Delhi, were challenged before Delhi High Court in various writ petitions led by Writ Petition (C ) no. 1659 of 2008, Home Solution Retail India Limited Vs Union of India and others, 2009 (22) VST 50. Petitioners before Delhi High Court were landlords or tenants of leased premises and contended that they could not have been saddled with liability of service tax inasmuch as it amounts to tax on 'land' hence was outside legislative competence of Parliament inasmuch as 'la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a service. Going back to the structured sentence, i.e.- service provided or to be provided to 'A'' by 'B'' in relation to 'C'', it is obvious that 'C'' can either be a service (such as dry cleaning, hair dressing, etc.) or not a service by itself, such as real estate. The expression "in relation to" would, therefore, have different meanings depending on whether 'C'' is a service or is not a service. If 'C'' is a service, then the expression "in relation to" means the service 'C'' as well as any other service having connection with the service 'C''. Where 'C'' is not a service, the expression "in relation to" would have reference only to some service which has a connection with 'C''. But, this would not imply that 'C'' itself is a service. WPC Nos. 1659/2008 & ors Page No.38 of 39 35. From this analysis, it is clear that we have to understand as to whether renting of immovable property for use in the course or furtherance of business or commerce by itself is a service. There is no dispute that any service connected with the renting of such immo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eafter Parliament has made further amendment by Finance Act, 2010 in Section 65(105) (zzzz) and the substantive provision under Clause (zzzz) is amended and given retrospective effect from 01.06.2007 while Clause (v) inserted in Explanation I to Section 65(105) (zzzz) has been given effect from the date of amendment. 30. The amended provision and its retrospective amendment came up for consideration before Division Bench of Punjab and Haryana High Court. The judgment delivered by Hon'ble Mr. Justice Adarsh Kumar Goel (as his Lordship then was) in M/s Shubh Timb Steels Limited Vs Union of India and another, 2010 (236) CTR 562 (P&H) has upheld the retrospective amendment. It has also negatived arguments that service tax on service of renting of property is exclusively covered by Entry 49 List II and therefore, argument of lack of legislative competence has also been negatived. Paras 22 to 26 of judgment are reproduced as under:- "22. In view of above discussion, we are unable to hold that service tax on service of renting of property is exclusively covered by Entry 49 List II. As already observed, Entry 49 of List II relates to tax on land and building and not any act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment acting within its legislative field had the power and could by law both prospectively and retrospectively levy excise duty under the Central Excises and Salt Act, 1944 even where it was established that by reason of the retrospective effect being given to the law, the assessees were incapable of passing on the excise duty to the buyers. After considering certain American decisions, Ayyangar, J. observed at SCR p. 37 thus: "It would thus be seen that even under the constitution of the United States of America the unconstitutionality of a retrospective tax is rested on what has been termed ''the vague contours of the 5th Amendment'. Whereas under the Indian Constitution that grounds on which infraction of the rights a property is to be tested not by the flexible rule of ''due process' but on the more precise criteria set out in Article 19(5), mere retrospectivity in the imposition of the tax cannot per se render the Law unconstitutional on the ground of its infringing the right to hold property under Article 19 (1)(f) or depriving the person of property under Article 31(1). If on the one hand, the tax enactment in question were beyond legislative....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x from the purchaser and sometimes by reason of competition with other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax. This also makes it clear that the sales tax need not be passed on to the purchasers and this fact does not alter the real nature of the tax which, by the express provisions of the law, is cast upon the seller. The buyer is under no liability to pay sales tax in addition to the agreed sale price unless the contract specifically provides otherwise. See Love v. Norman Wright (Builders) Ltd. LR (1944) 1 KB 484. If that be the true view of sales tax then the Bihar Legislature acting within its own legislative field had the powers of a sovereign legislature and could make its law prospectively as well as retrospectively. We do not think that there is any substance in this contention either." 26. In view of above, we do not find any ground to set aside giving of retrospective effect to the amendment from 1.6.2007 on which date levy was initially provided." 31. Orissa High Court has also examined validity of Section 65(90a) and 65(105) (zzzz) as amended by Finance Act, 2007, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... judgment said as under:- "Therefore in our view, looked at from either stand point, the legislative basis that has been adopted by Parliament in subjecting taxable services involved in the renting of property to the charge of service tax cannot be questioned. The assumption by a legislative body that an element of service is involved in the renting of immovable property is certainly not an assumption which can be regarded by the Court as being so manifestly absurd or perverse as to lead to an inference that Parliament had treated as a service, an item which in no rational sense could be regarded as involving service. But more significantly, even if the Court were to proceed on the basis, suggested by the Petitioners that no element of service is involved, that would not make the legislation beyond the legislative competence of Parliament. So long as the legislation does not trench upon a field which has been reserved to the State legislatures, the only conclusion that can be drawn is that the law must be treated as valid and within the purview of the field set apart for Parliament. There is, it must be emphasised, no violation set up of any provision in Part III of the Co....