TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1272
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....5)(zzq), section 65(105)(zzzh) and new Entry (zzzzu) in section 65(105) of the Finance Act, 1994 with the following prayers: "a). Your Lordships may be pleased to declare (i) that the provisions of Finance Act, 1994 as amended by Finance Act, 2010 introducing an explanation to Section 65(105) (zzq) and Section 65(105)(zzzh) and a new entry (zzzzu) in Section 65(105) of the Finance Act 1994 are unconstitutional, void and ultra virus they (a) being beyond the legislative competence of Parliament, (b) being violative of Articles 14, 19(1)(g), 246(1) and 300A of the Constitution of India. (b). Your Lordships may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction in the like nature of mandamus thereby directing the Respondents to forego and refrain from levying any service tax under an explanation to Section 65(105) (zzq) and 65(105) (zzzh) and a new entry 65(105) (zzzzu) of the Finance Act 1994 as amended by Finance Act 2010 in respect of any construction activity undertaken by the Petitioners including sale of immovable property in any manner whatsoever. (c). Your Lordships may be pleased to restrain the Respondents by t....
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....person called service provider and rendering of service to another person by service provider i.e. service receiver. 9. Circular No. B1/6/2005-TRU dated 27th July, 2005 issued by the Ministry of Finance to all Service Tax Authorities provided the services covered for construction of residential complexes and commercial or industrial construction services. 10. By Notification No.1/2006-ST dated 1st March, 2006, certain rebates on payment of service tax leviable in respect of two entries being Entry (zzq) and (zzzh) were provided. 11. Being aggrieved by the aforesaid amendment and notification, Writ Petition No.845 of 2006 and allied matters were filed before the Hon'ble Bombay High Court challenging levy of service tax in respect of aforesaid two entries and constitutional validity of Entry 65(25b) and Entry 65(30a) of the Finance Act, 1994 in respect of service tax on commercial or industrial services and construction of complex services were also challenged wherein Hon'ble Bombay High Court recorded the statement made by the Counsel appearing on behalf of the respondent on 26th April, 2006 to the effect that the department would not take the coercive process against the M....
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...., 2010, the Ministry of Finance issued Notification No.36/2010-ST in respect of service tax and a corrigendum was issued to that notification on 29th June, 2010. 19. The newly inserted earlier clauses (zzq) and (zzzh) of sub-clause (105) of section 65 and newly inserted entry (zzzzu) to sub-clause (105) of section 65 read as under: "Section 65(105)(zzq)- "Taxable Service" in relation to commercial or industrial construction means any service provided or to be provided to any person, by any other person, in relation to commercial or industrial construction. Explanation-For the purposes of this sub-clause, the construction of a new building which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorized by the builder before grant of completion certificate by the authority to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer; Section 65 (105) (zzzh) "Taxable Service"....
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....lding construction does not involve any rendering of service and as such, there is no element of service on which the service tax can be levied. 22. It was submitted that similar matter was filed before the Hon'ble Bombay High Court, however, it was candidly submitted that Hon'ble Bombay High Court in case of Maharashtra Chamber of Housing Industry and another v. Union of India and others has dismissed the Writ Petition No.845 of 2006 and other allied matters by judgment and order dated January 19/20, 2012 against which the petitioners have preferred SLP before the Hon'ble Apex Court which is pending for adjudication. 23. Learned advocate Mr. Bhavsar has also placed on record the details of all pending matters before the Hon'ble Apex Court arising out of judgment and order passed by the Bombay High Court. 24. The Hon'ble Bombay High Court [Coram : Hon'ble Mr. Justice D.Y. Chandrachud (As His Lordship was then) and Hon'ble Mr. Justice A.A. Sayed (As His Lordship was then)] in similar challenge after considering the submissions made by both the sides held as under: "24. Now it is in this background that it is necessary for the Court to address itself to the challeng....
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....me which arises from land or buildings is not a tax on land and buildings; and vi) A tax on a transaction involving a transmission of title to or a transfer of land and buildings is not a tax on land and buildings under Entry 49 List II. 27. A precise elaboration of these principles is contained in the judgment of the Constitution bench in D.H. Nazareh (supra) : "The pith and 'substance of Gift Tax Act is to place the "tax on the gift of property which may include land and buildings. It is not a tax imposed directly upon lands and buildings but is a tax upon the value of the total gifts made, in a year which is above the exempted limit. There is no tax upon lands or buildings as units of taxation. Indeed the lands and buildings are valued to find out the total amount of the gift and what is taxed is the gift. The value of the lands and buildings is only the measure of the value of the gift. A gift tax is thus not a tax on lands and buildings as such (which is a tax resting upon general ownership of lands and buildings) but is a levy upon a particular use, which is transmission of title by gift. The two are not the same thing and the incidence of the t....
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....ex does not determine the legislative competence of Parliament. The fact that the activity in question is an activity which is rendered on land does not make the tax a tax on land. The charge is on rendering a taxable service and the fact that the service is rendered in relation to land does not alter the nature or character of the levy. The legislature has expanded the notion of taxable service by incorporating within the ambit of clause (zzq) and clause (zzzh) services rendered by a builder to the buyer in the course of an intended sale whether before, during or after construction. There is a legislative assessment underlying the imposition of the tax which is that during the course of a construction related activity, a service is rendered by the builder to the buyer. Whether that assessment can be challenged in assailing constitutional validity is a separate issue which would be considered a little later. At this stage, what merits emphasis is that the charge which has been imposed by the legislature is on the activity involving the provision of a service by a builder to the buyer in the course of the execution of a contract involving the intended sale of immovable property. ....
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....to buyers in the form of service rendered in the course of construction and construction related activities can by no stretch of imagination be regarded as so manifestly absurd so as to impinge on the constitutional validity of the provision. It would also be necessary to record that on 1 March 2006 a notification was issued by the Union Ministry of Finance in exercise of powers conferred by Section 93(1) of the Finance Act 1994 to provide for an exemption to the extent of 67% of the gross value of construction. By a subsequent notification dated 22 June 2010, the extent of the exemption has been enhanced to 75% of the gross value. What is taxed therefore is the value addition involved in the rendering of the service. 31. The submission that the explanation brings in two fictions and is ultra vires the provisions of Sections 67 and 68 of the Finance Act is completely lacking in substance. The levy under Section 66 is on the value of taxable services. Section 65(105) defines taxable services. The explanation cannot possibly be held to be ultra vires Sections 67 and 68. 32. The provisions of clause (zzzzu) which were introduced by the Finance Act of 2010 in the prov....
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....nvolves a locational choice of a prospective buyer having an extra advantage for which additional payment is made by the buyer to the builder over and above the basic sale price. These according to the Revenue involve value additions and services when the prospective purchaser purchases a flat or a unit before the completion certificate is obtained. We find merit in the contention which has been urged on behalf of the Revenue that if no charge is levied for a preferential location or development, no service tax would be attracted in the first place. Builders, however, follow the practice of levying charges under diverse heads including preferred development of the property intended to be sold or in terms of a preferred location which is made available to the buyer. Clause (zzzzu) only intends to obviate a leakage of revenue and plugs a loophole which would have otherwise resulted. To reiterate, if no separate charge is levied, the liability to pay service tax does not arise and it is only where a particular service is separately charged for that the liability to pay service tax arises. The fact that the service is rendered in the context of a location, does not make it a tax on lan....
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....tion of complex within the ambit of taxable services by simultaneously, providing definitions of the expressions "commercial or industrial construction service" in clause (25b) and the expression "construction of complex" in clause (30a) and of "residential complex" in clause (91a) of section 65 of the Finance Act, 1994. 27. The Hon'ble Bombay High Court has also considered the provisions of Finance Act, 2010 which brought within the field of service tax, the cases which may have passed out of the net of value added tax merely on account of the timing of the execution of the agreement and by the amendment, an explanation was inserted in clause (zzq) and clause (zzzh) of Section 65(105) and after considering the introduction of explanation and circular issued by the Central Board of Excise and Customs dated 26th February, 2010, the Hon'ble Bombay High Court has referred to the Notes on clauses annexed to the Finance Bill of 2010 and referred to decisions of Hon'ble Supreme Court in case of Dattatraya Govind Mahajan v. The State of Maharashtra reported in AIR 1977 SC 915 wherein Hon'ble Apex Court emphasised that while a traditional function of an explanation is to expound the mea....