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Constitutional validity of Service tax — Levy on renting of immovable property service held valid.
Facts:
The petitioner filed a writ application declaring the provisions, i.e., section 65(90a) read with section 65(105)(zzzz) of the Finance Act, 1994 as null and void and ultra vires the Constitution of India.
The arguments of the petitioner were as under:
(i) The petitioner relied on the case of Home Solution Retail India Ltd. v. Union of India and Others, 2009 (14) STR 433 (Del.) which stated that renting of immovable property was not a taxable service by itself. The amendment made to section 65(105)(zzzz) as amended by the Finance Act, 2010 does not remedy the constitutional infirmity as held by the Delhi High Court.
(ii) The contention of the petitioner clearly distinguished between ‘property-based service’ and ‘performance-based service’. Any service connected with ‘renting of immovable property’ would fall within the ambit of Service tax. However, whether renting would constitute a taxable service or not, especially when there was no value addition by the service provider, it could not be regarded as service.
(iii) The Revenue placed reliance on the judgment of the Punjab and Haryana High Court in the case of M/s. Shubh Timb Steels Ltd. v. Union of India and Another, wherein the challenge to the levy of Service tax on ‘renting activity’ was and turned down by the Court. They further contended that in Tamil Nadu Kalyana Mandapam Association v. Union of India and Others, (2004) 5 SCC 632 it was clearly held that services rendered by ‘mandap’ were termed as ‘property-based services’ and currently, renting itself is deemed as taxable services due to the retrospective amendment from 1st June, 2007 on renting of immovable property service.
Held:
The definition of ‘taxable service’ includes the activity of renting, for use in the course or furtherance of business or commerce with the introduction of the Finance Act, 2011. Although challenge is made to the amendment made by the Finance Act, 2010 with retrospective effect, the nature of transaction made by the petitioner with its tenant clearly amounts to renting of an immovable property for the purpose of business or commerce. Service tax is clearly leviable thereon. The Court held a considered view that the renting of immovable property itself is clearly covered by section 65(90a) of the Act and that the Delhi High Court did not discuss its scope and impact in the case of Home Solution Retail India Ltd.’s case (supra) and the entire focus was on the amendment of section 65(105(zzzz) of the Finance Act. It is a well-settled principle of law that if a judgment proceeds without taking note of the relevant provisions of law, it cannot be held to have correctly decided the case. The amendment is clearly clarificatory in nature and the Parliament possessed requisite competence to declare it retrospective. The writ was dismissed accordingly.
