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TMI Blog2008 (11) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... e Municipality must be treated as units of the State within the meaning of Article 289. The intention behind Article 289 is that the property and income of the State should not be visited with tax. He also referred to Chapter IXA of the Constitution to contend that the Municipality is a unit of the State and, therefore, levy of service tax on the property or on the income of the Municipality is unsustainable - Held that:- Article 289 constitutes a fetter on the power of the Union to levy tax on the properly of the State or on its income. The State is an expression which is not defined in Article 366 as such. In Article 12, no doubt, State is defined as including authorities, argument rejected that when service tax is levied on the Municipal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice tax is a tax which is payable by the Municipality. It is their contention that there is no authority with the Municipality to pass it on to the petitioners. He would further contend that the demand should not be sustained as it violates Article 268A. Sri R.T. Pradeep further contends that they are small tenants and the Municipality must be treated as units of the State within the meaning of Article 289. The intention behind Article 289 is that the property and income of the State should not be visited with tax. He also referred to Chapter IXA of the Constitution to contend that the Municipality is a unit of the State and, therefore, levy of service tax on the property or on the income of the Municipality is unsustainable. He would furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is to be paid on all the services notified by the Government of India. It has been further held that the said tax is on service and not on the service-provider. In paragraph 58 it has been observed that under Article 246(1) of the Constitution, Parliament has exclusive powers to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to the Constitution. As per Article 246(3), the State Government has exclusive powers to make laws with respect to matters enumerated in List 11 (State List). In the said Judgment, it has been held that service tax is made by Parliament under Entry 97 of List I. In our view, therefore, the point in issue in the present case is squarely covered by the judgment of this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receiver. Therefore, they would contend that the matter is not res integra and it is open to pass on tax to the beneficiary in this case, the petitioners, who are the tenants. 5. As regards the contention that in the contract in question there is no mention about the liability, it is pointed out that this is a right which the service provider/Municipality have by virtue of the provisions under law to pass on to the tenants. It is another matter that they may decide not to pass it on fully or partly. It is not open to the petitioners to challenge the validity of the demand for service tax, in view of the fact that service tax is an indirect tax and the law provides that it can be passed on to the beneficiary. 6. As far as Article 289 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion that service tax cannot be passed on by the Municipality to the tenants. 8. The second question is whether in the absence of the contract it is open to the Municipality to pass it on. The tax is primarily on the service provider. As already noted, it does prevent passing on of the tax to the tenants. A statutory right exists in favour of the Municipality to pass it on as already noted. It is open to the Municipality to decide not to pass on the burden. But, when the Municipality elects to demand the payment of tax, I would think that it may not be open to the petitioners particularly in a writ jurisdiction to set up the contract as pointed out that it is in violation of the contract to demand payment of service tax. I see no merit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State provides that in this Part, unless the context otherwise requires, the expression State does not include the State of Jammu and Kashmir. Article 155 provides that there shall be Governors in each State. There are various other provisions which pertain to States. On the other hand, in Part IXA of the Constitution, Municipality is defined in Article 243P(c) as follows. Municipality means an institution of sell-government constituted under Article 243Q. The Constitution of Municipalities, duration of Municipalities, reservation of seats and various other matters are dealt with in Part IXA. In other words, by no stretch of imagination, the word State in Article 289 embraces within its scope the Municipalities which are spec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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