2015 (3) TMI 391 - HC - Service Tax

Constitutional validity of levy of service tax on renting of immovable property - Section 65 (105)(zzzz) and 65(90a) of the Finance Act, 1994 - Held that - Of course, reference made to the Larger Bench in the decision Mineral Area Development Authority and Others vs. Steel Authority of India and Others 2011 (3) TMI 1554 - SUPREME COURT , was not brought to the knowledge of the Full Bench of Delhi High Court in Home Solutions-II case. But, the fact remains that the validity of Section 65(105)zzzz and 65(90-a) of the Finance Act, 1994, has been upheld by a number of High Courts as stated above and since the very same arguments which have been addressed, have been considered and dealt with, more particularly, in Home Solutions-II case 2011 (9) TMI 46 - DELHI HIGH COURT , this Court is not persuaded to take any different view from that decision and as already pointed out, in the Special Leave Petition preferred as against the said decision, leave has been granted and the matter is pending adjudication before the Hon ble Supreme Court of India. Therefore, the challenge made to Section 65(105)(zzzz) and 65(90-a) of the Finance Act, 1994, as amended by the Finance Act, 2010 and Section 77 of the Finance Act, 2010, fails. Renting of premises by IRCTC/Railways - it is argued that when the Railways is an essential public utility service for carriage of goods and transport of passengers throughout the country, a portion of the Railway premises is being used for the Railways for running refreshment stalls and the said part of the railway station premises and catering services through eating joints is nothing but part of essential passenger amenity to enable the travelling public to find easy access to eateries and the said catering service is not done by the railway administration with any profit motive - Held that - Tehre is no valid arugment - further for want of alternate remedy, writ petition dismissed.

Issues Involved:
1. Challenge to the provisions of Section 65(105)(zzzz) and 65(90a) of the Finance Act, 1994, as amended by the Finance Act, 2010, and Section 77 of the Finance Act, 2010.
2. Challenge to consequential proceedings/orders regarding the levy of service tax on renting of immovable property.
3. Requests for writs of mandamus/prohibition in connection with the levy of service tax on renting of immovable property.
4. Retrospective levy of service tax.
5. Legislative competence of the Parliament to levy service tax on renting of immovable property.
6. Validity of service tax on renting of immovable property in light of previous judgments and constitutional provisions.

Detailed Analysis:

1. Challenge to the Provisions of Section 65(105)(zzzz) and 65(90a) of the Finance Act, 1994:
The petitioners challenged the provisions on the grounds that they were illegal, arbitrary, and ultra vires the Constitution of India, arguing that mere renting of immovable property does not constitute a service and thus cannot be subjected to service tax. The court noted that similar challenges had been dismissed by various High Courts, including Delhi, Madhya Pradesh, Orissa, Gujarat, and Bombay, and upheld the validity of the provisions. The court emphasized that the legislative competence of the Parliament to levy service tax on renting of immovable property has been affirmed by multiple judicial precedents.

2. Challenge to Consequential Proceedings/Orders:
The court addressed the challenge to consequential proceedings/orders related to the levy of service tax on renting of immovable property. The court reiterated that the validity of the provisions had already been upheld by various High Courts and the Supreme Court had not stayed the imposition of service tax on future liabilities. Therefore, the consequential proceedings/orders were deemed valid and enforceable.

3. Requests for Writs of Mandamus/Prohibition:
Several writ petitions sought writs of mandamus/prohibition to prevent the levy of service tax on renting of immovable property. The court dismissed these petitions, stating that the validity of the provisions had been upheld and the petitioners were required to comply with the statutory requirements, including the payment of service tax.

4. Retrospective Levy of Service Tax:
The petitioners argued that the retrospective amendment to levy service tax was unreasonable, arbitrary, and violated Articles 14 and 19 of the Constitution. The court, referencing previous judgments, held that retrospective amendments are permissible to clarify legislative intent and rectify defects in existing laws. The court upheld the retrospective applicability of the provisions.

5. Legislative Competence of the Parliament:
The petitioners contended that the levy of service tax on renting of immovable property was beyond the legislative competence of the Parliament, as taxes on land and buildings fall under the State List. The court, citing the Full Bench judgment of the Delhi High Court in Home Solutions-II case, held that the levy of service tax on renting of immovable property is an activity-based tax and falls under the residuary power of the Parliament under Entry 97 of List I.

6. Validity of Service Tax on Renting of Immovable Property:
The court examined the validity of the service tax on renting of immovable property in light of previous judgments and constitutional provisions. The court referred to the principles laid down by the Supreme Court regarding service tax and concluded that the provisions were intra vires the Constitution. The court emphasized that service tax is levied on the activity of renting for commercial purposes, which involves value addition and constitutes a service.

Conclusion:
The court dismissed all the writ petitions challenging the vires of Section 65(105)(zzzz) and 65(90a) of the Finance Act, 1994, as amended by the Finance Act, 2010, and Section 77 of the Finance Act, 2010. The court upheld the validity of the provisions, the retrospective levy of service tax, and the legislative competence of the Parliament to impose such a tax. The court also dismissed the petitions seeking writs of mandamus/prohibition and directed the petitioners to comply with the statutory requirements.

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