TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2667
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....intenance charges payable under the lease deed executed inter se the parties, recovery of amount and mandatory injunction requiring the defendants to pay to the plaintiff service tax of the amount on the lease rentals payable in future. Thus the three appeals are being disposed off by a common judgment as they involve common question of law. 3. In CS (OS) Nos.1018/2008 and 1016/2008 Plaintiff PLBA claimed that it was a registered society and being the owner of the building Pearey Lal Bhawan located at 2, Bahadur Shah Zafar Marg, New Delhi-110002 had entered into a registered lease deed dated October 09, 2006 with the Defendant Satya Developers in respect of an area measuring 500 sq.feet on the third floor of the premises Pearey Lal Bhawan and in respect of an area measuring 2818 sq.feet on the ground floor of the premises Peary Lal Bhawan. On October 16, 2006 the parties entered into a further agreement for maintenance of common service and facilities. With effect from June 01, 2007 the Central Government by amending Chapter-V of the Finance Act, 1994 levied service tax on renting of immovable property for business purposes. It was claimed that the service tax being an indirect ta....
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....st the defendant, holding that the defendant is liable to pay the service tax, which is leviable on the rent and the maintenance charges payable under the lease deed dated 09.10.2006 and the Agreement of Maintenance for Common Services and Facilities dated 16.10.2006, respectively? 2. Whether the plaintiff is entitled to a decree of permanent mandatory injunction against the defendant directing the defendant to pay to the plaintiff the amount of service tax leviable on the rent and maintenance charges payable under the lease deed dated 09.10.2006 and the Agreement of Maintenance for Common Service and Facilities dated 16.10.2006 respectively, during the currency of the said agreements? 3. Whether the plaintiff is entitled to recovery of a sum of Rs. 24,720/- paid by the plaintiff, on behalf of the defendant, on account of service tax for the period 01.06.2007 to 31.03.2008? 4. Whether the plaintiff is entitled to interest on the amount of service tax paid by it on behalf of the defendant during the pendency of the suit and if so, at what rate? 5. Relief." 8. The issues settled in CS (OS) No.512/2012 were: "1. Whether the defendant is liable to pay service tax on ren....
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.... or assumptions. 12. Learned counsel for HDFC Bank contends that Section 68 (2) of the Finance Act provides that notwithstanding anything contained in sub-section (1) the Central Government is empowered to notify in the official gazette the service tax on taxable services, as notified, to be paid by such person and in such a manner as may be prescribed. However, there is no notification directing the lessee to make the payment of service tax and hence in the absence of a notification no tax liability can be fastened on HDFC. Referring to the decision reported as JT 2005 (1) SCC 449 Maruti Udyog Ltd. vs.Ram Lal and Ors. it is contended that in construing a legal fiction, the purpose for which it is created should be kept in mind and should not be extended beyond the scope thereof or beyond the language by which it is created. Further a deeming provision cannot be pushed too far so as to result in an anomalous or absurd position. Referring to the decision reported as 2012 (191) DLT 183 Raghubir Saran Charitable Trust vs. Puma Sports India Pvt. Ltd.it is contended that the service tax liability has to be determined in terms of the contract between the parties. 13. Learned counsel fo....
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....f India & Ors. it is contended that in case of indirect tax the Court would presume until a contrary is established that a duty of excise or a custom duty has been passed on to the consumer. It is undoubtedly a rebuttable presumption but the burden of rebutting it lies on the person who claims the refund. It is stated that Section 64A of the Sales of Goods Act is based on rule of equity. Service tax being an indirect tax it is possible that it may be passed on. Further the statutory provision can be of no relevance to determine the rights and liabilities between the parties to the contract and there is nothing in law to prevent the parties from entering into an agreement with the burden of any tax arising out of obligation of a party under the contract to be borne by such party. Mr.Balbir Singh, Senior Advocate points out that pursuant to the 8th report of the Law Commission goods under the Sales of Goods Act, 1930 were provided to include the electricity, gas and water and amendments were also brought by insertion of Section 64A by replacing Section 10 of the Tariff Act. Section 64A of the Sales of Goods Act is a rule of equity based on the basic principle that indirect taxes can ....
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....ame the Assessee due to amendment of 2000, his position is exactly the same as in respect of Sales Tax, where the seller is the Assessee, and is liable to pay Sales Tax to the tax authorities, but it is open to the seller, under his contract with the buyer, to recover the Sales Tax from the buyer, and to pass on the tax burden to him. Therefore, though there is no difficulty in accepting that after the amendment of 2000 the liability to pay the service tax is on the Appellant as the Assessee, the liability arose out of the services rendered by the Respondent to the Appellant, and that too prior to this amendment when the liability was on the service provider. The provisions concerning service tax are relevant only as between the Appellant as an Assessee under the statute and the tax authorities. This statutory provision can be of no relevance to determine the rights and liabilities between the Appellant and the Respondent as agreed in the contract between two of them. There was nothing in law to prevent the Appellant from entering into an agreement with the Respondent handling contractor that the burden of any tax arising out of obligations of the Respondent under the contract woul....
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....erson who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods." 20. Thus Section 83 of the Finance Act is a legislation by incorporation applying inter alia Section 12B of the Central Excise Act to the Service Tax. Halsbury's Law of England (4th Edn., Vol.44 (1)), para 127 page 744 deals with incorporation of other enactments by reference as under: "It is a common device of legislative drafters to incorporate earlier statutory provisions by reference, rather than setting out similar provisions in full. This saves space and also attracts the case law and other learning attached to the earlier provision. Its main advantage is a Parliamentary one, however, since it shortens Bills and cuts down the area for debate." 21. In the decision reported as 2011 (3) SCC 1 Girnar Traders vs. State of Maharashtra and Ors.the Constitution Bench while dealing with legislation by incorporation held that with the development of law, the legislature has adopted the common practice of referring to the provisions of the existing statute while enacting new laws. It ....
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....f the nature described in Sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax-paid where tax was chargeable at that time- (a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition; and (b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction. (2) The provisions of Sub-section (1) apply to the following taxes, namely;- (a) any du....
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.... or a statutory right arising from Section 72 of the Contract Act, it is neither automatic nor unconditional. The position arising under Article 265 is dealt with later in Paras 75 to 77. Here we shall deal with the position under Section 72. Section 72 is a rule of equity. This is not disputed by Sri F,S. Nariman or any of the other counsel appearing for the appellants-petitioners. Once it is a rule of equity, it is un-understandable how can it be said that equitable considerations have no place where a claim is made under the said provision. What those equitable considerations should be is not a matter of law. That depends upon the facts of each case. But to say that equitable considerations have no place where a claim is founded upon Section 72 is, in our respectful opinion, a contradiction in terms. Indeed, in Kanhaiyalal, the Court accepts that the right to recover the taxes - or the obligation of the State to refund such taxes - under Section 72 of the Contract Act is subject to "questions of estoppel, waiver, limitation or the like", but at the same time, the decision holds that equitable considerations cannot be imported because of the clear and unambiguous language of Sect....
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....b-Section 1 of Section 64A applicable to duty of customs or excise on goods and referring to the decisions of the Federal Court in AIR 1942 FC 33 The Province of Madras vs.Boddu Paidanna & Sons and the Supreme Court reported as AIR 1962 SC 1281 R.C. Jall v. Union of India it was held in Mafat Lal (supra) that in such a situation, it would be legitimate for the Court to presume, until the contrary is established, that a duty of excise or a customs duty has been passed on. It is a presumption of fact which a Court is entitled to draw under Section 114 of the Indian Evidence Act the same being undoubtedly a rebuttable presumption but the burden of rebutting it lies upon the person who claims the refund and it is for him to allege and establish that as a fact he has not passed on the duty and, therefore, equity demands that his claim for refund be allowed. 26. Thus as a legislation by reference sub-Section (2) of Section 64A of the Sales of Goods Act making applicable sub-Section (1) of Section 64A to any duty of Customs or Excise on goods and as a legislation by incorporation Section 83 of the Finance Act making applicable Section 12B of the Central Excise Act to Service Act, Section....
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....meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749. (5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201: "if detailed semantic and synta....
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.... a clause is ambiguous, and one reading produces a fairer result than the alternative, the reasonable interpretation should be adopted. It is to be presumed that the parties, as reasonable men, would have intended to include reasonable stipulation in their contract." 30. In 2009 (5) SCC 713 Vimal Chand Ghevarchand Jain & Ors. vs. Ramakant Eknath Jajoo the Supreme Court reiterated the principle of construction of a commercial contract by looking at the document as a whole and construing it in its entirety. 31. Thus a contract has to be construed by looking at the document as a whole and the meaning of the document has to be what the parties intended to give to the document keeping the background in mind and conclusion that flouts business commonsense must yield unless expressly stated. In the present case it will also have to borne in mind whether the parties intend to include taxes which were not contemplated at the time of the agreement as indubitably the agreements between the parties in the three suits were entered into prior to the Finance Act, 2007 coming into force w.e.f. June 01, 2007. 32. In the agreement between HDFC Bank and Meattles Clause 4(v) imposes liability of mu....