9911796707
TMI Blog2014 (8) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... resent petition, the petitioner further apprehended that the service tax authorities may seek to tax the licence fees paid by the petitioner to DIAL as 'taxable service' as defined under Section 65(105)(zzm) of the Act (hereinafter referred to as the 'airport services'). Therefore, the petitioner sought to amend the writ petition and the same was allowed by this court by an order dated 19.07.2010. By way of said amendment, the petitioner added an additional plea that clause 65(105)(zzm) of the Act would be applicable only in a case where the service was being rendered to the petitioner. It was averred that in the present case, DIAL had only let out immovable property to the petitioner and this transaction could not be considered as rendering of a service. The petitioner also sought to include the following additional prayer: "declare that no Demand for service tax can be raised on the Petitioner under section 65(105)(zzm) of the Finance Act, 1994 as amended by the Finance Act 2010 and that the Circular dated 01.07.2010 (Annexure O) is illegal and bad in law and null and void." 3. The question whether imposition of service tax on renting of immovable property is ultra vires the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tail (India) Limited (Pantaloon India) whereby a licence was granted to Alpha Airports and Pantaloon India to set up and operate duty free shops within the Airport premises. Under the said agreement, it was clarified that Alpha Airports and Pantaloon India were representing a joint venture company to be incorporated in the name of Alpha Future. Thereafter, Airport Retail India Pvt Ltd, petitioner herein (formerly known as Alpha Future Airport Retail Pvt. Ltd.) was incorporated and a settlement agreement dated 07.02.2008 was signed by the parties whereby License Agreement dated 09.11.2006 was novated in favor of the petitioner. 8. In consideration of the said licence, the petitioner was required to pay to DIAL a fixed monthly licence fee and also a share of the gross revenue generated by the various product categories which were to be sold at the said duty free shops. Pursuant to the licence granted by DIAL, petitioner established a duty free outlet at the Delhi Airport. The petitioner closed its operations at the Delhi Airport with effect from 30.06.2010. 9. The petitioner filed a writ petition (WP(C) No.8554/2008) in this court challenging the levy of service tax, on rental incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fee including fixed rent, royalty and revenue share etc. and called upon the petitioner to remit the entire amount of service tax w.e.f. 01.06.2007. The petitioner being aggrieved with the same preferred the present writ petition being WP(C) No.4274/2010. At the material time, a similar writ petition (Home Solutions Retails-II (supra)) was also pending before this court in respect of similar issues. This court, by an order dated 23.06.2010, extended the interim order dated 18.05.2010 as passed in Home Solutions Retails-II (supra) to the present writ petition. 12. During the pendency of the petition, DIAL again addressed a letter dated 28.06.2010 demanding the payment of service tax from the petitioner under section 65(105)(zzm) of the Act. The petitioner, thereafter, amended the present writ petition and also challenged the levy of service tax as 'airport services' under clause (zzm) of Section 65(105) of the Act as well as the Circular dated 01.07.2010. 13. Thereafter, the respondent revenue issued a Demand cum Show Cause Notice dated 22.10.2010 to DIAL demanding service tax from the DIAL for the period covering 2006-2007 to 2009-2010 including tax on the consideration receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... require." 16. DIAL also moved an application (CM No.7344/2012) inter alia praying discharge that the payment by the petitioner of the service tax and other liability be considered as a payment by DIAL. This court, by an order dated 05.11.2012, disposed of the said applications with a direction to the petitioner to furnish a bank guarantee of Rs. 42,36,52,066/- in favour of the Registrar General of this Court for securing the amount as none of the Directors of the petitioner company were within the jurisdiction of this court and the petitioner itself had no assets in this country. Furthermore, their operation in India had also been wound up on 30.06.2010. 17. The petitioner failed to comply with the said direction and had filed an application (CM No.2222/2013) seeking modification of order dated 05.11.2012. On 27.02.2013, this court directed the petitioner to furnish a bank guarantee of Rs. 25 crores in favour of the Registrar General of this Court as an interim measure and on 10.04.2013, which was subsequently confirmed. The petitioner contended that the insistence of DIAL that the petitioner deposit the tax or furnish a bank guarantee was contrary to the terms of the arbitratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich indicated that DIAL's approval was required in respect of various aspects of operating the duty free outlet including pricing policy, service standards capital expenditure, etc. The licence fee payable to DIAL was also split into two components. First component was fixed at Rs. 15,000/- per sq. metre and the second component was a specified percentage of the gross revenue or minimum annual guarantee as specified, whichever was higher. The minimum annual guarantee for the first year was agreed at US$13,755,719. The minimum guaranteed for the second and third year was specified as US$31,537,703 and US$37,873,643 respectively. It was contended that the entire agreement, read as a whole, indicated that the arrangement between DIAL and the petitioner was not one of leasing or licensing of space but was in the nature of a joint venture. It was submitted that in the given circumstances it could not be contended that DIAL was rendering any service to the petitioner. 20. It was next contended that even if it was assumed that there was any service rendered by the DIAL, there were no machinery provisions under the Act for determining the consideration received by DIAL for the purported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeking modification of the stay granted by this Court, and at the instance of DIAL the petitioner was required to provide a bank guarantee. The learned Senior Counsel pointed out that at the material stage the petitioner would incur a cost of Rs. 1.06 crores for furnishing the bank guarantee and in the given circumstances DIAL was liable to compensate the petitioner for the same. 24. Mr Rajiv Mehra, learned ASG appearing for the Union of India and respondent authorities submitted that whereas the services contemplated within the meaning of 'airport services' under clause (zzm) of section 65(105) of the Act are area specific, the services as contemplated under clause (zzzz) of section 65(105) of the Act were activity specific. It was submitted that any service within the airport would fall within the definition of airport services. It was contended that clause 65(105)(zzzz) was activity specific and in general covered the activity of leasing or licensing use of space. It was submitted that if the said service/activity was carried out in respect of a space within the specific area of an Airport, the same would fall within the definition of 'airport services'. It was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, imposed upon DIAL, nonetheless certain events had taken place after passing of the consent award which prompted DIAL to seek a modification of the stay order. It was contended that, first of all, the retrospective amendment of clause (zzzz) of Section 65(105) of the Act levying service tax on letting of immovable property was upheld by a Full Bench of this Court in Home Solutions Retail-II (supra). Secondly, the Finance Act, 2012, had enacted a provision [Section 80(2)] to provide amnesty from penalty in case outstanding service tax in respect of renting of immovable property was paid within six months i.e. by November, 2012. Despite the offer of amnesty, the petitioner had declined to discharge the said liability. It was further contended that the petitioner had also not filed an affidavit stating that any liability owed by the petitioner could be recovered from its group companies. It was submitted that in the given circumstances, DIAL had sought modification of the stay order in order to protect its rights. It was further submitted that the petitioner could not claim the cost of bank guarantee from DIAL, as the same was a condition imposed by this Court for granting of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Explanation 2.-For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce;" 32. Circular No 80/10/2004-ST dated 17.09.2004 issued by the CBEC expressly clarified that in case a part of the airport/civil enclave premises was rented/leased out, the lease rental/lease charges would not be subject to service tax as the activity of letting out of premises would not amount to rendering any service. The relevant part of the said circular is quoted below: "The Finance Bill (No.2), 2004 has been enacted on 10.09.2004. With the enactment of the Finance Bill, The following new services have come under the service tax levy,- Business exhibition services Airport services xxxx xxxx xxxx xxxx xxxx Airport services: Services provided in an airport or civil enclave, to any person by Airports Authority of India (AAI), a person authorized by it, or any other person having charge of management of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abovementioned order dated 03.11.2009. 35. Clause (zzzz) of sub-section 105 of Section 65 of the Act was amended by Finance Act, 2010 with retrospective effect from 01.06.2007 to read as under: "(105) "taxable service" means any service provided or to be Provided xxxx xxxx xxxx xxxx (zzzz) to any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or for furtherance of, business or commerce. Explanation 1.-For the purposes of this sub-clause, "immovable property" includes- (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or part of a building; (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, (v) vacant land given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce, but does not include (a) vacant land solely used for agriculture, aquaculture, farming, forestr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sub-clause which occurs first among the sub-clauses which equally merit consideration." 38. By virtue of the retrospective amendment under clause 65(105)(zzzz) introduced by the Finance Act, 2010, the transaction entered into between DIAL and petitioner could be subjected to service tax with effect from 01.06.2007, as taxable service defined under Clause 65(105)(zzzz), provided that the transaction was determined as a simple letting out of premises as contended by the learned Additional Solicitor General. 39. In our view, the license arrangement between DIAL and the petitioner could not be subject to service tax under Clause 65(105)(zzm) prior to 01.07.2010, as in no event could the same be considered as 'airport services' under Clause (zzm) of Section 65(105) of the Act. This is so, because letting of immovable property was specifically covered under Clause (zzzz) of Section 65(105) and Section 65A(2) mandates that the sub-clause which provides the most specific description would be preferred to sub-clauses providing a more general description. Indisputably, if the transaction between DIAL and the petitioner is considered merely as letting of immovable property, then by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and license were purely consideration for acquiring the occupational rights of these premises. The application for amendment of the writ petition (CM No.9320/2010) preferred by the petitioner also specifically stated that "DIAL had only let out immovable property to the petitioner and this transaction cannot in law be considered to constitute the rendering of service." 44. Secondly, the question as to the nature of the transaction between DIAL and the petitioner and/or the nature and extent of participation of DIAL in the duty free shop is a question of fact which need not be examined in the writ petition in the first instance. 45. We are inclined to accept the contention canvassed by the learned Additional Solicitor General that merely because the licence fee is split into two components-one being fixed and the other based on revenue sharing, cannot by itself lead to a conclusion that the licence fee is not a consideration for use of premises. In a given circumstance, it is quite possible that lease rentals or fees for use of space may be based on the revenue that may be generated from use of the premises, in the course of business. This would not alter the nature of transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 30.03.2011 which specifically held as under:- "(iii) Respondent shall pay to the Claimant, the entire actual amount towards - (a) Service Tax (b) Interest on Service Tax, and (c) Penalty on Service Tax as may be imposed by the Government and/ or relevant authority in relation to the invoices raised by DIAL on Alpha Airport Retail Private Limited under the Agreement within 7 days of such imposition. As the actual amount towards (a), (b) and (c) (together referred to as "Tax Liability") cannot be ascertained as of now, in view of the litigation pending (i.e. under Civil Writ Petition No.4274 of 2010) before the High Court of Delhi, the amount calculated towards the Tax Liability is the aggregate of: - (a) an amount of INR 177,424,866 (Indian Rupees one Hundred and Seventy-Seven Million Four Hundred and Twenty Four Thousand Eight Hundred and Sixty Six only) towards Service Tax chargeable and payable to the Government of India, which may be increased or decreased as per the assessment or demand made by the Service Tax authorities; (b) an amount payable towards the interest on Service Tax, calculated in accordance with the applicable Service Tax rules; (c) an amount payable towar ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
