2016 (3) TMI 442 - HC - Service Tax

Writ petition - Legality, validity and vires of Notification No.24/2007 dated 22.5.2007 and circular No.98/1/2008-ST dated 04.01.2008 - Service tax levied on the renting of immovable property as oppose to service tax on a service provided in relation to renting of immovable property - Section 65 (90a) and Section 65 (105 (zzz)) of the Finance Act, 1994 as amended by Finance Act, 2007 errorneously interpreted - Held that - the issue involved is no more res integra and covered by the decision of this Court in the case of Cinemax India Limited v. Union of India 2011 (8) TMI 71 - GUJARAT HIGH COURT where in the context of challenge to notification No.24/2007. S.T. Dated 22nd May, 2007 and with regard to question of law involved therein about validity of Sub-clause (zzzz) of clause (105) of Section 65 of Finance Act, 1994 as amended by Section 75(5)(h) and Section 76 of the Finance Act, 2010 came to be rejected and even SLP preferred before the Apex Court was also rejected. - Matter disposed of

Summary

Issues:
Challenge to the legality, validity, and vires of notification and circular regarding service tax on renting of immovable property.

Analysis:
The petitioners challenged the notification and circular issued by the Ministry of Finance, Government of India, regarding the levy of service tax on the renting of immovable property. They argued that an incorrect interpretation of the relevant sections of the Finance Act led to the imposition of service tax on renting instead of services related to renting. They sought a writ to restrain the respondents from charging service tax on renting and requested a refund of the service tax already paid. The issue was previously addressed in a similar case, where the challenge to the notification was rejected, and the petitions were disposed of together based on that judgment.

In the earlier case, it was noted that the Finance Act of 2007 defined 'renting of immovable property' and introduced sub-clause (zzzz) in the taxable service section, which pertained to services related to renting for business or commerce. The petitioners contended that the intention was to tax services related to renting, not renting itself, as there was no value addition in merely renting out property. The Ministry of Finance's circular authorized the recovery of service tax based on the assumption that renting out property constituted a service.

The court, after considering various case laws and provisions of the Finance Act, upheld the section introducing service tax on renting for business or commerce. It clarified that service tax would not apply if the property was used for specific purposes like agriculture, residential, or entertainment. However, if the property was rented for business purposes, the service tax would be applicable. As the petitioners failed to establish the unconstitutionality of the relevant section, the writ petitions were dismissed for lack of merit.

In conclusion, the court disposed of the writ petitions based on the precedent set in the earlier case, where the legality of the service tax on renting of immovable property was upheld. The rule was discharged, any interim relief was vacated, and no costs were awarded in this matter.