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TMI Blog2014 (8) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... r with their separate contribution towards a common venture, would depend on various factors including the extent of participation of the co-venturers in the joint venture. We do not propose to examine the extent of participation of DIAL in the operation of the duty free shops in the present petition, as the same is a question of fact and the writ petition is bereft of any pleading in this regard. - Decided against the assessee. The contention that the licence granted by DIAL to the petitioner cannot contain any element of service on account of it being a statutory obligation delegated by the AAI to DIAL is not acceptable. - Decided against the assessee. Whether DIAL is liable to pay the cost for obtaining the bank guarantee furnished by the petitioner - Held that:- DIAL was fully aware of the implications of the stay order granted by this Court and had consented to an arrangement as recorded in the award dated 30.03.2011. In the given circumstances, it was not open for DIAL to seek that the petitioner deposit the entire amount of service tax as the same was contrary to the consent award dated 30.03.2011. Despite having a consent award in its favour, DIAL had insisted on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the Constitution of India is no longer res integra in view of the decision by a Full Bench of this court in Home Solutions Retails Ltd. v. Union of India Ors: 2011 (24) STR 129 (hereinafter referred to as Home Solutions Retails II ). 4. Mr Rajeeve Mehra, learned ASG appearing for the respondent authorities pointed out that the Demand cum Show Cause Notices issued to DIAL were limited to taxing the alleged service under clause 65(105)(zzm) and not under clause 65(105)(zzzz) of the Act. He clarified that the stand of the government was that DIAL has provided service to the petitioner by permitting it, through a licence, to use and occupy space for running a duty free shop within the airport premises and this fell within the taxable service of airport services under clause (zzm) of section 65(105) of the Act. 5. In view of the decision of this court in Home Solutions Retails II (supra) and the statement made by the learned Additional Solicitor General, the only question that remains for this court to consider is whether in the given facts the transaction entered into between DIAL and the petitioner could be construed as DIAL providing services to the petitioner which f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax, on rental including royalties payable to DIAL (respondent no. 2 therein) for hiring space in the airport premises for housing of the duty free shops, as ultra vires the Constitution of India. On 03.11.2009, this court allowed the said petition while following the judgment passed by a Division Bench of this court in Home Solution Retail India Ltd. v. Union of India Ors: 2009 (237) ELT (Del.) (hereinafter referred to as Home Solutions Retails I ) and inter alia held as follows:- Learned counsel for the Respondent concedes that this case is covered by Division Bench's judgment of this Court in Home Solution Retail India Ltd. vs. Union of India, 2009 (237) ELT (Del.). In that case this Court has held that Section 65(105)(zzz) [sic][recte 65(105)(zzzz)] of the Finance Act, 1994 does not in terms entail that the renting out of immovable property for use in the course or furtherance of business or commerce would by itself constitute a taxable service and be exigible to Service Tax. As a consequence of this finding, this Court held the notification and circular as ultra vires to the extent it authorized the levy of service tax on renting of immovable property per se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding tax on the consideration received/receivable for providing commercial outlets and space at the airport to various parties. DIAL submitted its reply dated 20.06.2011 stating that they were paying service tax on license fee received by them after 01.07.2010 and they had not paid the service tax, prior to 01.07.2010, on the license fee pertaining to such licenses in view of the specific stay order from this Court. The respondent authorities issued another Demand cum Show Cause Notice dated 28.11.2011 to DIAL demanding the service tax for the period April 2010 to June 2010. 14. While demands on account of service tax were made on DIAL being the alleged service provider, DIAL asserted that the liability was that of the petitioner. The disputes between DIAL, petitioner and petitioner s holding company, namely, Autogrill Holdings, U.K. PLC were settled and an arbitration award dated 30.03.2011 was passed with the consent of the said parties which recorded that the service tax, interest and penalty, if any, on the transaction between DIAL and the petitioner was liable to be paid by the petitioner in terms of the arbitration award dated 30.03.2011. The petitioner does not dispute t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax or furnish a bank guarantee was contrary to the terms of the arbitration award and, thus, the costs of the bank guarantee which was stated to be ₹ 1.06 crores was liable to be paid by DIAL. This question was left open by this court. Submissions 18. Mr S. Ganesh, the learned Senior Counsel appearing for the petitioner submitted that the arrangement between the petitioner and DIAL was not a simple transaction of letting out immovable property but was an agreement between principal and principal which involved reciprocal obligations for establishment and operation of duty free shops at the airport. It was contended that the licence was granted by DIAL in order to discharge its obligations which had been delegated to DIAL by the AAI. It was submitted that the AAI had certain obligations under Section 12 of the Airports Authority of India Act, 1994 (hereinafter referred as the AAI Act ) and it was obliged to provide facilities for passengers and provide for growth and development of the airport. The AAI was also empowered to lease the premises of the airport. It was contended that it was in pursuance to these powers that AAI had leased the airport premises to DIAL, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions under the Act for determining the consideration received by DIAL for the purported services or computing the quantum of service tax. The licence fee payable by the petitioner could not be stated to be the consideration for services as the agreement contained reciprocal obligations and mutual rights. The learned counsel for the petitioner referred to the decision of the Supreme Court in the case of Commissioner of Income Tax v. B.C. Srinivasa Setty: (1981) 2 SCC 460 and PNB Finance Ltd. v. Commissioner of Income Tax: (2008) 13 SCC 94 in support of its contentions that in absence of machinery provisions to compute the quantum of tax it must be presumed that the legislature did not intend to levy any tax. It was submitted that in absence of machinery provisions which enabled precise quantification of tax the charge itself was liable to fail. 21. The petitioner next contended that the authorities were seeking to tax the alleged service as airport services under clause (zzm) of Section 65(105) of the Act. It was submitted that the same would be permissible only if the revenue could show: (a) that there was a service rendered by DIAL to the petitioner; and (b) that the allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an Airport, the same would fall within the definition of airport services . It was submitted that the clause (zzm) was introduced w.e.f. 10.09.2004 and with effect from the said date all services rendered within the specific area of the airport would be exigible to service tax. Since, the licence for immovable space was granted for a specific space within the specified area of the airport, the same fell within the definition of airport services and were thus chargeable to service tax. 25. The learned counsel appearing for DIAL supported the contention of the petitioner that the transaction entered into between DIAL and the petitioner was on principal to principal basis and contemplated sharing of revenue, and the same could thus not be subjected to service tax. 26. It was further contended on behalf of DIAL that the question whether service tax could be levied under clause (zzm) of Section 65(105) of the Act was already decided in favour of the petitioner by an order dated 03.11.2009 passed by this Court in W.P.(C) No.8554/2008 preferred by the petitioner. It was pointed out that the petitioner had preferred a writ petition challenging levy of service tax on lease rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim the cost of bank guarantee from DIAL, as the same was a condition imposed by this Court for granting of the interim relief, which was sought by the petitioner. Analysis and findings 28. We have heard learned counsel for the parties. 29. Before proceeding further, it would be necessary to refer to the provisions of the Act and certain legislative changes that have been made thereto. 30. Airport services were brought into net of tax by virtue of the Finance Act, 2004 with effect from 10.09.2004 with the introduction of clause (zzm) to section 65(105) of the Act. At the material time, the said clause read as under: 65. Definitions. In this Chapter, unless the context otherwise requires, -- xxxx xxxx xxxx xxxx xxxx (105) taxable service means any service provided or to be Provided xxxx xxxx xxxx xxxx (zzm) to any person, by airports authority or by any other person, in any airport or a civil enclave; 31. Leasing or renting an immovable property was not a taxable service at the material time. The service in relation to renting of immovable property for use in the course or furtherance of business was included as a taxable service by virtue of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 an airport are taxable under this category. This includes variety of services provided to airlines, as well as for cargo and passenger handling such as security, transit facilities, landing charges, terminal navigation charges, parking and housing charges and route navigation facility charges. It would be on the gross amount chargeable by AAI or other such authorized person. Thus, charges such as royalty, license fees etc. collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services etc. are chargeable to service tax. However, in case a part of airport/ civil enclave premises is rented / leased out, the rental/lease charges would not be subjected to service tax, as the activity of letting out premises is not rendering a service. 33. The service in relation to letting out of immovable property was sought to be taxed for the first time w.e.f. 01.06.2007. In view of the above circular there can be no dispute that prior to 01.06.2007, there could be no levy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and building used for the purposes of accommodation, including 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; 36. The aforesaid amendment was upheld by this Court in Home Solutions Retail -II (supra). Thus, in the event the transaction between DIAL and petitioner is considered to be a simple letting out of immovable property, as is contended by the learned ASG, then the same would be exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cription 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 of Section 65A(2)(a) the same would be considered as taxable service under Clause 65(105)(zzzz) and could not be classified as airport services under clause (zzm) of Section 65(105) of the Act. 40. In addition to amending Clause (zzzz) of Section 65(105), the Finance Act, 2010 also brought about an amendment in Clause 65(105)(zzm). However, this amendment was not retrospective and came into effect from 01.07.2010. The said clause as amended by Finance Act, 2010 reads as under:- (105) taxable service means any service provided or to be Provided xxxx xxxx xxxx xxxx (zzm) to any person, by airports authority or by any other person, in any airport or a civil enclave: Provided that the provisions of section 65A shall not apply to any service when the same is rendered wholly within the airport or civil enclave; 41. With the introduction of the proviso to Clause (zzm) of Section 65(105) of the Act, recourse to Section 65A was no longer available to dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 transaction or the nature of interest in the immovable property that is created in favour of the lessee/licencee. The question whether an arrangement is in nature of a joint venture where two or more parties come together with their separate contribution towards a common venture, would depend on various factors including the extent of participation of the co-venturers in the joint venture. We do not propose to examine the extent of participation of DIAL in the operation of the duty free shops in the present petition, as the same is a question of fact and the writ petition is bereft of any pleading in this regard. 46. We also cannot readily accept the contention that the licence granted by DIAL to the petitioner cannot contain any element of service on account of it being a statutory obligation delegated by the AAI to DIAL. The arrangement between DIAL and the petitioner is a contractual one and whether the said contract entails providing any taxable servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 towards penalty, if any, imposed on nonpayment of Service Tax calculated in accordance with the applicable Service Tax rules. The Respondent shall make payment of the amount due towards the Tax Liability within 7 (seven) days of receipt of demand from the Claimant in this regard. 49. It is apparent that the matter before the Arbitrator included the question of the liability of petitioner to pay service tax as well as the consequence of the stay order obtaining in the present writ petition at the material time. DIAL consented to an award which provided that the petitioner would pay the actual amount of service tax, interest on service tax as well as penalty that may be imposed by the Government or the relevant authority in relation to the invoices raised by DIAL on the petitioner within seven days of such imposition. The award also referred to the present writ petition. DIAL had explained that despite entering into a consent award, it had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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