2014 (7) TMI 661 - HC - Service Tax

Constitutional validity of S. 65(105)(zzzz) and S. 66 of the Finance Act, 1994 as amended by Finance Act, 2010 - levy of service tax on renting of immovable property service - Held that - Following decision of Home Solutions Retails India Ltd. Versus UOI and Ors. 2011 (10) TMI 13 - Supreme Court of India - collection of service tax on rental arrangement service until 30th September 2011 is stayed - Validity of S. 65(105)(zzzz) and S. 66 is upheld - Whatever amount is collected and withheld by the Municipality for any period prior to 30th September, 2011 should be paid to the appellants/petitioners. Recovery of arrears in all these cases up to 30th September, 2011 will remain stayed until judgment of the Supreme Court and thereafter based on such judgment. Whoever has paid tax can claim refund, if eligible, after and based on the judgment of the Supreme Court. If service tax is not paid from 1st October, 2011, it can be recovered by coercive steps but will be subject to judgment of the Supreme Court - Decided in favour of assessee.

Summary

Issues:
Challenge to the constitutional validity of S. 65(105)(zzzz) and S. 66 of the Finance Act, 1994 as amended by Finance Act, 2010 regarding the levy of service tax on renting of immovable property service.

Analysis:

The Writ Appeals and Writ Petitions presented a challenge to the constitutional validity of specific sections of the Finance Act, 1994, as amended in 2010, which dealt with the imposition of service tax on renting of immovable property service. The Standing Counsel for the respondents referred to a Full Bench decision of the Delhi High Court that upheld the validity of the 2010 amendment. However, the appellants produced an order from the Supreme Court granting leave and staying the collection of service tax on rental arrangement service until a specified date. Despite this, the High Court decided to uphold the amendments to the Finance Act, 1994, based on the Delhi High Court's judgment. The High Court directed the appellants to remit tax from a certain date onwards, subject to the result of the pending Supreme Court judgment. The High Court clarified that the decision on constitutional validity would apply to all parties, eliminating the need for each party to individually approach the Supreme Court. The judgment was made subject to the outcome of the Supreme Court's decision in the pending case.

The High Court further directed that any amount collected and withheld by the Municipality before a specific date should be paid to the appellants. The recovery of arrears up to a certain date was stayed pending the Supreme Court's judgment. Individuals who had paid tax were permitted to claim a refund if eligible based on the Supreme Court's judgment. If service tax was not paid from a certain date, coercive recovery measures could be taken, but this action was also subject to the Supreme Court's judgment. The High Court provided detailed directions regarding the payment and recovery of taxes, emphasizing the importance of the pending Supreme Court judgment in determining further actions related to the service tax issue.