2017 (6) TMI 119 - HC - Service Tax

Renting of immovable properties - case of petitioner is that they were landlords or tenants of leased premises and contended that they could not have been saddled with liability of service tax inasmuch as it amounts to tax on land hence was outside legislative competence of Parliament inasmuch as land is an item covered under Entry 49 List II Schedule VII of Constitution of India and within exclusive domain of State Legislature, therefore imposition of service tax on land, by Parliament was ultra vires - Held that - Division Bench of Delhi High vide judgment in Home Solutions Retail India Limited 2009 (4) TMI 14 - DELHI HIGH COURT held that Section 65(105) (zzzz) does not in terms entail that renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. While interpreting circular, it was found obnoxious and beyond the said provision. Court therefore, struck down the same. - Appeal against the decision of Delhi HC is pending before SC. - Subsequently parliament amended the provisions with retrospective effect. Effects of amendments - retrospective or prospective? - Held that - Though the appeal before SC are pending, the fact remains that various High Courts have affirmed the amendments which are under challenge in these writ petitions and appeals are pending before Supreme Court. Amendments made with retrospective effect are nothing but clarificatory and by way of ex abundanti cautela. Petition fails - decided against petitioner.

Summary

Issues Involved:
1. Vires of Sections 75(A)(6)(h) and 77 of Finance Act, 2010.
2. Vires of Sections 65(90)(a) and 65(105)(zzzz) read with Section 66 of Finance Act, 1994 as amended by Finance Acts of 2007 and 2010.
3. Validity of consequential circulars dated 04.01.2008 and 22.05.2007.
4. Legislative competence of the Union to enact the impugned provisions.
5. Retrospective effect of the amendments.

Detailed Analysis:

1. Vires of Sections 75(A)(6)(h) and 77 of Finance Act, 2010:
The petitioners challenged the vires of Sections 75(A)(6)(h) and 77 of the Finance Act, 2010, arguing that these provisions were illegal, arbitrary, and lacked legislative competence, infringing Articles 14, 246, and 265 of the Constitution of India. The court upheld the validity of these provisions, referencing the legislative competence and the judicial precedents from various High Courts, including the Full Bench of Delhi High Court, which had overruled its earlier judgment in Home Solution Retail India Ltd. and affirmed the amendments.

2. Vires of Sections 65(90)(a) and 65(105)(zzzz) read with Section 66 of Finance Act, 1994 as amended by Finance Acts of 2007 and 2010:
The petitioners contended that these sections were null and void and ultra vires the Constitution. The court noted that the amendments made by the Finance Act, 2010 were upheld by various High Courts, including the Punjab and Haryana High Court, Orissa High Court, and Bombay High Court. The Full Bench of Delhi High Court also upheld these amendments, stating that they were clarificatory and did not lack legislative competence. The court adopted the reasoning of these judgments and upheld the validity of the impugned provisions.

3. Validity of Consequential Circulars dated 04.01.2008 and 22.05.2007:
The petitioners challenged the consequential circulars as void, nullity, illegal, and ultra vires of the provisions of the Finance Act, 1994 as amended. The court upheld the validity of these circulars, aligning with the judgments of other High Courts that had considered similar challenges and found the circulars to be consistent with the legislative amendments.

4. Legislative Competence of the Union to Enact the Impugned Provisions:
The petitioners argued that Article 246 read with Entry 97 of List I of the VII Schedule to the Constitution of India did not confer legislative power on the Union to enact the impugned provisions. The court referred to the Full Bench judgment of the Delhi High Court, which had held that the Union had the legislative competence to enact these provisions. The court also referenced the judgments of the Punjab and Haryana High Court and the Orissa High Court, which had similarly upheld the legislative competence of the Union.

5. Retrospective Effect of the Amendments:
The petitioners challenged the retrospective effect of the amendments made by the Finance Act, 2010. The court noted that the retrospective amendment had been upheld by various High Courts, including the Full Bench of the Delhi High Court, which had stated that the retrospective amendment was clarificatory and constitutionally valid. The court adopted the reasoning of these judgments and upheld the retrospective effect of the amendments.

Conclusion:
The court upheld the validity of the impugned provisions and the consequential circulars, finding them to be intra vires the Constitution and within the legislative competence of the Union. The petitions were dismissed, and the court refrained from making the judgment voluminous by repeating the detailed reasoning already provided in the judgments of other High Courts. The court found itself in respectful agreement with the reasoning of these judgments and did not find any persuasive arguments to take a different view.