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TMI Blog2014 (9) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... intention of the parties that it is the Petitioner who would bear the incidence of all taxes. In light of the decision in Rashtriya Ispat Nigam Ltd. v. M/s. Dewan Chand Ram Saran [2012 (4) TMI 457 - Supreme Court of India], the view of the learned Arbitrator that in terms of Clause 7.1 of the lease deed, the Service Tax liability is that of the service provider, i.e. the Petitioner, is a plausible one. - Decided against the petitioner. - OMP 955 of 2011 and IA No. 20953 of 2011 - - - Dated:- 4-7-2012 - S. Muralidhar, J. Shri Simran Mehta, Advocate, for the Petitioner. Shri Chinmoy Pradip Sharma and Sayan Ray, Advocates, for the Respondent. JUDGMENT The challenge by Raghubir Saran Charitable Trust in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 ( Act ) is to an Award dated 14th December 2011 passed by the learned Arbitrator in the dispute between the Petitioner and the Respondent, Puma Sports India Pvt. Ltd., in relation to the Service Tax liability arising out of the renting of premises belonging to the Petitioner by the Respondent. By the impugned Award, the learned Arbitrator has interpreted Clause 7.1 of the lease deed to mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. By an order dated 21st November, 2008, the Court appointed the sole Arbitrator. Before the learned Arbitrator, the Petitioner filed a claim on 27th October, 2009 for a sum of ₹ 37,42,954/- being the Service Tax payable for the period from 1st June, 2007 to 31st March, 2009 along with interest at 18% per annum. 5. From April, 2009 onwards the Petitioner stopped including the Service Tax component and cess in the rent bills issued to the Respondent as by a judgment dated 18th April, 2009 in Home Solutions Retail India Ltd. v. Union of India - 158 (2009) DLT 722 (DB) = 2009 (14) S.T.R. 433 (Del.) = 2009 (237) E.L.T. 209 (Del.) (hereafter Home Solutions-1) a Division Bench of this Court struck down as unconstitutional the aforementioned amendment to the Finance Act, 1994. The challenge to the said judgment in the Supreme Court is stated to be pending. Later by the Finance Act, 2010, the Service Tax liability for renting of premises for commercial purpose was reintroduced with retrospective effect from 1st June, 2007. This was again challenged but the challenge was negatived by a Full Bench of this Court by a judgment dated 23rd September, 2011 in Home Solutions Retails ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 68 of the Finance Act, but was in effect only collecting the Service Tax from the beneficiary and passing it on to the authority. In other words, the Petitioner was only an agency for identification, assessment and collection of the levy on behalf of the Government. Reliance is placed on the decisions in All-India Federation of Tax Practitioners v. Union of India - (2007) 7 SCC 527 = 2007 (7) S.T.R. 625 (S.C.), Coca Cola India (P) Ltd. v. Commissioner of Central Excise - 2009 (242) E.L.T. 168 (Bom.) = 2009 (15) S.T.R. 657, All India Taxpayers Welfare Association v. Union of India - 2006 (4) S.T.R. 14 (Madras Division Bench), Andaman Chamber of Commerce and Industry v. Union of India - 2006 (2) CHN 290 (Calcutta Division Bench), Indian National Shipowners Association v. UOI, (2009) 244 CTR (Bom.) 197 and T.N. Kalyana Mandapam Assn. v. UOI - (2004) 5 SCC 632 = 2004 (167) E.L.T. 3 (S.C.) = 2006 (3) S.T.R. 260. It is submitted that the learned Arbitrator proceeded to pass the impugned Award on the assumption that the judgment of this Court in Home Solutions-1 was still good law when, in fact the said judgment was overruled by the Full Bench in Home Solutions-2. 9. It is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esorted to only if the service recipient agreed to take on the burden of the Service Tax which was otherwise that of the service provider. Reliance is placed on the decision in Rashtriya Ispat Nigam Limited v. M/s. Dewan Chand Ram Saran - 2012 (4) SCALE 588 = 2012 (26) S.T.R. 289 (S.C.) which lays down that the passing on of the Service Tax liability would be governed by the contract between the service provider and service recipient. Relying on the decision in Kerala State Electricity Board v. Commissioner of Central Excise, Thiruvananthapuram - (2008) 1 SCC 780 = 2008 (9) S.T.R. 3 (S.C.) it is submitted that it is the express term of the contract which would determine whether a service provider or the service recipient is liable to bear the burden of Service Tax. 12. It is submitted by Mr. Sharma that the interpretation placed on Clause 7.1 of the lease deed by the learned Arbitrator does not call for interference as it was consistent with the law. It is submitted that the word other outgoings in Clause 7.1 of the lease deed would include all taxes, levies and cesses levied from time to time. The said words were of wide import. It is submitted that the principle of ejusdem g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncing the Award nearly ten months thereafter does give cause for concern. It is essential that awards are pronounced without unnecessary delay to allay apprehensions of the fairness of the process. However, when faced with a challenge to the validity of an Award the pronouncement of which is shown to have been extraordinarily delayed, the Court has to examine if the Award deals comprehensively with the issues involved. In other words, the mere fact that the Award was delayed will not by itself constitute sufficient ground for setting aside the Award if it is otherwise a reasoned one. As far as the present case is concerned, the Court finds that the impugned Award does deal with the issues involved in a detailed and reasoned manner. Consequently, the Court is not inclined to hold that the Award is vitiated on account of the delay in its pronouncement. Service Tax liability 15. The central issue that arises for consideration is whether the impugned Award insofar as it holds the Petitioner and not the Respondent liable to pay Service Tax in respect of the renting of the premises in question suffers from any patent illegality or is opposed to the public policy of India as contemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e promptly and timely, including any revisions thereto, directly to the authorities concerned and no claim for contribution towards such taxes, cesses, levies or increases shall be made by the Lessor or be entertained by the Lessee. 19. The last four lines of the above Clause state that no claim for contribution towards such taxes, cesses, levies or increases will be made by the lessor (the Petitioner) or be entertained by the lessee (the Respondent). The word such refers to property taxes and other outgoings in respect of the premises whatsoever payable and as levied from time to time including any revisions thereto. The word outgoings suggests a wide range of levies not confined to tax on the property. The expression from time to time accounts for new levies. The expression increases denotes the possibility of a future levy resulting in enhancement of the tax burden beyond what was prevalent at the time of execution of the lease. There is no scope for reading the expression other outgoings ejusdem generis with the words property tax . The words taxes, cesses, levies or increases denote the range of possible levies and signifies the wide nature of the expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 22. There is merit in the contention that as far as the present case is concerned, Clause 7.1 of the lease deed is wide enough to include the Service Tax in respect of the premises. Merely because levy was not statutorily operative at the time of entering into the lease deed did not mean that the said liability did not attach to the Petitioner. The fact that Section 83 of the Finance Act read with Section 12A of the Central Excise Act, 1944 indicates that Service Tax is an indirect tax which will be presumed to have been passed on to the service recipient does not decide the issue of who should in fact bear the burden. Those provisions are relevant for the assessee being the service provider and being the person, under Section 68 of the Finance Act, who has to in fact remit the tax to the Government. It will be no defence for him to avoid that liability by pleading that he did not pass on the burden to the service recipient. 23. In a given case, a service provider may well decide to undertake the burden of Service Tax itself without passing it on to the service recipient. What the intention of the parties in that regard is can be determined only by examining the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the execution of the contract had to be borne by the contractor. The appellant, a public sector undertaking ( PSU ), was the consumer and the Respondent M/s. Dewan Chand Ram Saran was the service provider. Clause 9.3 of the tender terms in the said contract reads as under :- 9.3 The Contractor shall bear and pay all taxes, duties and other liabilities in connection with discharge of his obligations under this order. Any income tax or any other taxes or duties which the company may be required by law to deduct shall be deducted at source and the same shall be paid to the Tax Authorities for the account of the Contractor and the Company shall provide the Contractor with required Tax Deduction Certificate. 25.2 Interpreting Clause 9.3, the Supreme Court held as under :- 25. It was submitted on behalf of the Respondent that Clause 9.3 and the contract must be read as a whole and one must harmonise various provisions thereof. However, in fact when that is done as above, Clause 9.3 will have to be held as containing the stipulation of the contractor accepting the liability to pay the service tax, since the liability did arise out of the discharge of his obligations under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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