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I. High Court
The service receiver to whom the burden of tax is ultimately passed on is not entitled to challenge the levy as the liability is imposed on the service provider. Further in case of a joint development agreement, the land owner and the third parties avail of construction services from the builder.
Facts
The petitioner has entered into a joint development agreement with one of the Respondents for the property owned by him and his siblings for construction of a Residential Complex. 65% of the built up area is to be handed over to the petitioner against conveyance of 35% of undivided share of land. In terms of the agreement, the builder viz. one of the respondents issued a letter demanding service tax and VAT. A writ petition is filed challenging the payment of service tax on a mere exchange of property and the provisions of section 66B and 66E(b) of the Finance Act, 1994 and thereafter the prayer was modified to challenge only the circular No 151/2/2012 dated 10/02/2012 and the recommendations of the TRU dated 20/01/2016.
Held
The Hon. High Court held that the writ petition is not maintainable as the law makes the service provider liable to pay service tax and it is open for him to either pass on the burden or not. After having entered into an agreement for development and accepting the burden of service tax to the extent liable, the petitioner cannot now challenge the circulars imposing an obligation upon persons who have entered into such contracts. If the person to whom the burden is ultimately passed is allowed to challenge a levy, the same will lead to a disastrous consequence considering the number of consumers. Further it was also noted that the agreement for development gave rise to a bouquet of rights for the builder, one was construction of an area, a part of which could be sold to third parties along with undivided share of land. The petitioner did not stand on a different footing than those persons except that the consideration was paid in the form of undivided share of land and not by cash and therefore the petition was dismissed.
