In the dictionary clause in Section 65(90A), while defining renting of immovable property, it has been stated that it includes renting, letting, leasing, licencing or other similar arrangements for immovable property for use in the course or furtherance of business or commerce. On a perusal of the decision in the first Home Solution case (supra), it is discernible that the Division Bench has not appositely adverted to the same. The contention that despite the amendment when the value addition as a concept is not attracted to renting, letting, leasing and licencing even for commercial purpose, the ingredients of service tax are not satisfied is not well founded. In this context, it is to be appreciated that the concept of service, as is understood in common parlance or common understanding, would not be a factor to hold a provision as unconstitutional. We need not advert to whether the Parliament has, by using of the definition, created a fiction. The terms which are significant are renting, letting, leasing and licencing for use in the course or furtherance of business or commerce. The legislature has not merely said renting of immovable property. It has used the terminology renting of property or any service in relation to such renting and that too in the course or furtherance of business or commerce, the last part being important. While understanding the concept of service tax, it is to be kept in mind that it is both a general tax as well as a destination based consumption tax levied on services. Sometimes services can be “property based services” and “performance based services”. The architects, interior designers and real estate agents would come in the category of performance service providers….Para 63
Appreciated in this context, economic rent is a surplus which arises on account of natural differential advantages and can be treated as “service”. That apart, scarcity of premises, the pressure of demand and the increase of population are also contributory factors. Consequently, any land or building situated in a particular place does possess certain inherent qualities which distinguishes it from land or building at other places. The factors which really weigh are location, accessibility, goodwill, construction quality and other advantages. A land or building in one area may fetch more rent than in another area. When a particular building is rented or leased or given under arrangement for commercial or business purposes, many factors are taken into consideration. Every building or premises cannot be utilized for commercial or business purposes. When a particular building or premises has the “effect potentiality” to be let out on rent for the said purpose, an element of service is involved in the immovable property and that tantamounts to value addition which would come within the component of service tax. To further clarify, an element of service arises because a person who intends to avail the property on rent wishes to use it for a specific purpose. The value of the building gets accentuated because of scarcity of land or building, goodwill, accessibility and similar ancillary advantages which constitute value addition……… Para 65
As regards retrospective applicability of the amended provisions, it is worth noting that the Parliament, keeping in view the First Home Solutions case, substituted sub-clause (zzzz) in the present incarnation and gave retrospective effect to cure the deficiency. It is well settled law that it is open to the legislature to pass a legislation retrospectively and remove the base on which a judgement is delivered. Relying on the Apex Court decision in State of Himachal Pradesh v. Narain Singh it was held that it would be permissible for the legislature to remove a defect in earlier legislation and the defect can be removed both retrospectively and prospectively by legislative action and the previous actions can be validated….Paras 71 & 72
Writ Petitions dismissed
IN THE HIGH COURT OF DELHI
WP(C) No. 3398/2010
WP (C) Nos. 3746, 3750, 3782, 3783, 3809, 3837, 3838, 3856, 3867, 3868, 3869, 3881, 3886, 3936, 4010, 4025, 4026, 4028, 4050, 4054, 4079, 4081, 4086, 4087, 4091, 4092, 4098, 4115, 4132, 4139, 4144, 4214, 4216, 4319, 4367, 4440, 4503, 4538, 4539, 4549, 4616, 4650, 4757, 4787, 4792, 4907, 4929, 4952, 5067, 5074, 5123, 5127, 5137, 5138, 5145, 5159, 5160, 5221, 5222, 5223, 5224, 5226, 5227, 5241, 5246, 5263, 5267, 5286, 5291, 5338, 5342, 5346, 5353, 5472, 5545, 5548, 5639, 5652, 5679, 5747, 5751, 5844, 5856, 5896, 5960, 5965, 5970, 5972, 6004, 6021, 6025, 6030, 6047, 6084, 6174, 6189, 6296, 6320, 6345, 6376, 6377, 6392, 6401, 6449, 6490, 6535, 6551, 6553, 6604, 6605, 6659, 6666, 6668, 6669, 6673, 6741, 6750, 6785, 6842, 6861, 6869, 6882, 6883, 7032, 7075, 7106, 7237, 7307, 7308, 7328, 7356, 7369, 7393, 7394, 7454, 7605, 7710, 7747, 7772, 7775, 7896, 7916, 7917, 7930, 7954, 7986, 7988, 8005, 8069, 8087, 8088, 8099, 8124, 8288, 8316, 8317, 8320, 8323, 8379, 8380, 8386, 8387, 8388, 8389, 8390, 8391, 8392, 8447, 8488, 8588, 8674 of 2010
15, 202, 242, 476, 498, 866, 965, 968, 1121, 1128, 1220, 1488, 1585, 1640, 1783, 1787, 1996, 2015, 2341, 2573, 2582, 2613, 2651, 2652, 2654, 3008, 3019, 3058 and 3373 of 2011.
HOME SOLUTIONS RETAILS (INDIA) LTD.
Vs
UNION OF INDIA & ORS
Dipak Misra, CJ, A K Sikri and Sanjiv Khanna, JJ
Dated : September 23, 2011
Appellants rep by: Mr Harish Salve, Dr A M Singhvi, Mr S Ganesh, Mr N K Kaul, Sr. Advs. with Mr Rishi Agarwala, Mr Ameet Naik, Mr Akshay Ringe, Mr Nikhil Rohtagi, Mr Vatsal Shah, Mr S Sukumaran, Mr Anand Sukumaran and Mr Bhupesh Kumar Pathak, Ms. Dhanashree Deoskar, Mr Aneesh Patnaik, Advs. for Petitioner in CWP No. 3398/2010
Mr Sumesh Dhawan, Ms Vatsala Kak, Advs. for Petitioners in CWP Nos. 5159/2010 & 5160/2010
Mr Rajiv Bansal, Adv. for petitioners in CWP Nos. 4952/2010 & 5267/2010.
Mr Amit Gupta, Mr A S Aman, Advs. for Petitioner in CWP No. 5241/2010
Mr P K Sahu, Mr Srinivas, Mr Sandeep Jha, Mr Prashant Shukla, Advs. for Petitioner in CWP Nos. 4139, 5246 & 5246 of 2010
Mr Ruchir Bhatia, Adv. for Petitioner in CWP Nos. 4050, 4539, 5342, 5346, 6741, 7710, 7772 & 7775 of 2010
Mr Manish Sharma and Mr Vishal Malhotra, Advs. for petitioner in CWP No. 5751/2010
Mr Milanka Chaudhury, Mr Puneet Yadav and Mr Abhishek Sharma, Advs. for Petitioner in CWP No. 6376/2010
Ms Meenakshi Arora and Ms.Vaishnavi Krishnamani, Advs. for Petitioner in CWP No. 5639/2010
Mr Rajat Bhalla, Adv. for Petitioner in CWP No. 6449/2010
Mr Biji Rajesh, Mr. Shiladitya Goswami, Advs. for Petitioner in CWP No. 6047/2010, 6785/2010
Mr Shivanand Thakur, and Mr.Rajesh Bhatnagar, Advs. for Petitioner in CWP No.8069/2010
Mr Jasmeet Singh, Mr K D Sengupta, Advs. for Petitioner in CWP Nos. 6861, 6883, 7393 & 7930 of 2010 and 15/2011.
Mr S P Menia, Adv. for Petitioner in CWP No. 8674/2010
Mr R K Pandey, Adv. for Petitioner in CWP No. 866/2011
Mr J K Mittal, Mr Arun Gulati, Advs. for Petitioner in CWP No. 7747/2010
Ms Vibha Datta Makhija and Mr Philemon Nongbri, Advs. for Petitioner in CWP No. 6869/2010
Mr Anuj Berry and Mr Manu Nair, Advs. for Petitioner in CWP Nos. 4538/2010 & 5074/2010.
Mr Akashdeep Kakkar, Adv. for Petitioners in CWP Nos.8386, 8387, 8390, 8391 & 8392 of 2010
Mr Raman Kapur, Adv. for Petitioners in CWP No. 7988/2010
Mr Debashish Moitra and Mr Rajat Jain, Advs. for Petitioner in CWP No. 5896/2010
Mr Vijay K Singh, Adv. for Petitioner in CWP No. 242/2011 and 1128/2011
Mr Mohan Kukreja, Adv. for Petitioner in CWP No. 6750/2010
Mr M P Devnath, Mr.Monish Panda and Mr Abhishek Anand, Mr K Krishnamohan Menon, Advs. for Petitioners in WP(C) Nos. 3746, 4086, 4092, 5291, 6174, 8288, 8388 and8389 of 2010 and 1585/2011.
Mr Gaurang Kanth, Mr Saurabh Khanna, Advs. for Petitioner in CWP Nos. 6047/2010 & 6785/2010
Mr Satyen Sethi, Mr A T Panda, Advs. for Petitioner in CWP No.5972 of 2010
Mr Atul Jain, Adv. for Petitioner in CWP No. 965/2011.
Ms Roopa Dayal, Adv. for Petitioners in CWP Nos. 4650, 7307, 7308 and 7356 of 2010
Mr Raj K Batra, Mr Rohan Ahuja, Advs. for Petitioners in CWP Nos. 6377, 6401, 6490, 6551 and 6553 of 2010
Mr Pawan Kumar Bansal, Adv. for Petitioner in CWP No. 7106/2010
Mr Ashu Kansal, Mr Aniket Gautam, Advs. for Petitioner in CWP Nos. 5067, 5224, 7328, 8099, 8320 & 8323 of 2010
Mr Tarun Gulati, Mr Neil Hildreth, Mr Sparsh Bhargava, Mr Rony O John, Mr Shashi Mathews, Ms Shruti Sabharwal and Mr Kishore Kunal, Advs. for Petitioners in CWP Nos. 4081, 4616, 5286, 6296 & 7032 and 5263 of 2010
Mr Rajiv K Garg and Ashish Garg, Advs. for Petitioner in CWP Nos. 4757/2010, 5896/2010, 6320/2010 and 7394/2010.
Mr Ashish Batra, Adv. for Petitioner in CWP No.3750/2010
Mr Hemant K Chaudhry, Adv. for Petitioner in CWP No.8317/2010
Mr Kunal Tandon, Adv. for Petitioners in CWP Nos. 4115/2010, 5965, 5970 & 7986 of 2010
Mr Mrityunjay Kumar Tiwary, Adv. for Petitioner in CWP No. 7454/2010
Ms Alka Srivastava, Adv. for Petitioner in CWP Nos.5221, 5222, 5223, 5226 of 2010
Mr Piyush Kumar, Ms Shikha Sapra, and Mr Abhinav Jain, Advs. for Petitioners in CWP Nos. 4440/2010 and 4054/2010
Mr Kunal Sinha, Adv. for Petitioner in CWP No.6605/2010
Mr Arun Kumar Roy, Adv. for Petitioner in CWP No. 15/2011
Mr Niraj Singh and Mr Lakhmi Chand, Advs. for Petitioner in CWP No. 6345/2010
Mr L K Bhushan, Mr Munish Malik and Mr Gaurav Bahl, Advs. for Petitioner in CWP No. 4929/2010
Mr Gaurav Gupta, Adv. for petitioners in CWP Nos. 6535/2010 & 8380/2010
Mr Kavin Gulati and Ms Rashmi Singh, Advs. for Petitioners in CWP Nos. 8316/2010 and 8588/2010
Mr Ajit Warrier, Mr Varun Shankar, Mr Divyakant Lahoti, Adv. for Petitioner in CWP No.7075/2010
Mr Sunil Kumar, Adv. for Petitioner in CWP No.498/2011.
Mr Prem Prakash, Adv. for Petitioner in CWP No.7369/2010.
Mr.Ajay Bhargava, Ms.Vanita Bhargava and Mr.Nitin Misra, Advocates for petitioners in CWP Nos. 3783, 4025, 4087, 4098, 4132, 4907, 5545, 5548, and 6604 of 2010
Mr. Amir Singh Pasrich, Mr.Mohit Sharma and Mr.Aditya Jain, Advocates for Petitioner in CWP No. 4787/2010
Mr. Balbir Singh, Mr. Deepak Sinhmar, Adv. for petitioner in CWP No.3936/2010
Mr. Vivek Sarin, Adv. for the petitioner in CWP No.8447/2010
Mr. K.K. Khurana, Mr. Anshul Arora, Mr. A.K. Mehta, Adv. for petitioners in CWP Nos. 1121/2011, 1220/2011
Mr.R.K.Gupta, Advocate for Petitioner in CWP No.6084/2010.
Mr.Rakesh Mukhija, Mr.Gurpreet Singh and Mr.Rohit Sharma, Advocates for Petitioner in CWP No.4539/2010, 5145/2010, 6030/2010, 6673/2010 and 7954/2010.
Mr.Sanjeev Kumar and Mr.Manu Yadav, Advocates for Petitioners in CWP 4079/2010
Mr.Manu Monga, Advocate for Petitioner in CWP No.5652/2010
Mr.Amit Sood, Advocate for Petitioners in CWP Nos.5227/2010 and 7237/2010
Mr.Alishan Naqvee and Ms.Rupal Bhatia, Advocates for Petitioners in CWP Nos.3867, 3868, 3869, 3881, 3886/2010, 4050, 4319, 5353 and 8088/2010.
Mr. Neeraj Kishan Kaul, Sr. Adv. with Mr.Kapil Rustagi and Mr.Karan Luthra, Advocates for petitioner in WP(C) 1488/2011
Mr. K.K. Narang, Mr.Sanjay Visen and Mr.Kaushal Narayan Mishra, Advocates for Petitioners in CWP No.1783/2011, 1787/2011 & 2015/2011
Mr.Rajeev Kumar and Ms.Alka Srivastava, Advocates for Petitioners in CWP No.5221/2010, 5222/2010, 5223/2010 and 5226/2010.
Mr.Anirban Bhattacharya and Mr.Viveknanda, Advocates for Petitioners in CWP Nos.4079/2010 and 7075/2010.
Mr.Vikas Chopra and Mr.Ashish Mahajan, Advocates for Petitioner in 4139/2010.
Mr.Rajeev Kumar, Advocate for Petitioner in CWP Nos.5221/2010,5222/2010,5223/2010 and 5226/2010.
Mr. Sudhir Makkar, Adv. for Petitioners in CWP Nos.2613/2011 & 2654/2011
Mr. Chirag M. Shroff, Adv. for the Petitioner in CWP Nos.2651/2011 and 2652/2011
Mr. Manish Sharma, Adv. for Petitioner in CWP No.3058/2011
Mr.Rahul Raj Verma, Adv. for Petitioner in CWP No.1121/2011 and CWP 1220/2011.
Respondents rep by: Mr.A.S.Chandhiok, ASG with Mr. Bhagat Singh, Mr.H.C.Bhatia, Ms.Sonia Sharma, Mr.Gurpreet S. Parwanda and Mr.Sumit Batra, Mr. Jatan Singh, Mr.Ruchir Mishra, Mr. S.P. Kansal, Mr. Vikrant Sharma, Mr. Ravinder Agarwal, Ms. Anjana Gosain, Mr.Sachin Datta, Mr.B.V.Niren, Advocates for respondent Union of India.
Mr. Mukesh Anand, Adv. for Department of Service Tax & Central Board of Excise & Customs in CWP Nos. 3398/2010, 3746, 3750, 3782, 3783, 3809, 3837, 3838, 3856, 3867, 3868, 3869, 3881, 3886, 3936, 4010, 4025, 4026, 4028, 4050, 4054, 4079, 4081, 4086, 4087, 4091, 40, 92, 4098, 4115, 4132, 4139, 4144, 4214, 4216, 4319, 4367, 4440, 4503, 4538, 4539, 4549, 4616, 4650, 4757, 4787, 4792, 4907, 4929, 4952, 5067, 5074, 5123, 5127, 5137, 5138, 5145, 5159, 5160, 5221, 5222, 5223, 5226, 5227, 5246, 5267, 5291, 5639, 5652, 5679, 5751, 6750, 6785, 6842, 6869, 6882, 7369, 7393, 7454, 7747, 7916, 7917, 7954, 8087, 8088, 8099, 8316, 8317, 8320, 8323, 8379, 8380, 8386, 8387, 8388, 8389, 8390, 8391, 8392, 8447, 8488, 8588, 8674 of 2010 and CWP Nos. 965, 968, 1121, 1128, 1220, 1585, 2613, 2651, 2652 and 2654 of 2011
Mr. Satish Kumar, Adv. for Department of Revenue, Ministry of Finance, Central Board of Excise & Customs, DG, Service Tax in CWP Nos. 5224, 5241, 5338, 5342, 5346, 5353, 5545, 5546, 5747, 5844, 5856, 5896, 5960, 5965, 5970, 5972, 6004, 6021, 6025, 6030, 6047, 6084, 6174, 6189, 6296, 6320, 6345, 6376, 6377, 6392, 6401, 6449, 6490, 6535, 6551, 6553, 6605, 6659, 6666, 6668, 6669, 6741, 6861, 6883, 7032, 7075, 7106, 7237, 7307, 7308, 7328, 7356, 7394, 7605, 7710, 7747, 7772, 7775, 7896, 7916, 7986, 8005, 8069, 8087, 8088, 8099, 8124, 8288, 8488, of 2010, 242, 498, 866, 1783, 1787, 1996, of 2011
Mr.Atul Nanda, Sr. Advocate with Mr.Ruchir Mishra, Mr.Anuj Aggarwal and Mr.Gaurav Khanna, Advocates for UOI in CWP Nos. 4754/2010, 5145/2010, 6376/2010, 6401/2010, 6449/2010, 7237/2010, 7916/2010, 7930/2010 and 7986/2010.
Mr. Amish Tandon, Adv. for Respondent No.36 to 38 in CWP No. 5896/2010
Mr. Amrreeta Swaarup, Adv. for Respondent Nos. 27 to 29 in CWP No.15/2011
Mrs.Anusuya Salwan, Advocate for Respondent No.4 in CWP No. 6296/2010
Mr. Shobit Chandra, Adv. for Respondent No.8 in CWP No.3782/2010
Mr. Anil Grover, Mr. Rakesh Kumar Garg, Advs. for Respondents in CWP No. 15/2011
Mr. Neeraj Chaudhary, CGSC for UOI in CWP Nos.4952, 5267, 6666, 6668, 6669, 6673, 6882 of 2010 and CWP No.1220, 2573 and 2582 of 2011
Mr. Sunil Kumar, Mr. Rajiv Ranjan Mishra, Advs. for UOI in CWP No.3837/2010
Mr. Sumesh Dhawan, Ms. Vatsala Kak, Advs. for Respondent Nos. 4 to 6 in CWP No. 6741/2010 and for Respondent No.7 in CWP No.3837/2010.
Ms.Pooja Singh, Advocate for Respondent No.8 in CWP Nos. 3809/2010 & 3837/2010 and for Respondent No.6 in CWP Nos.4503/2010 & 5751/2010
Ms.Malabika Sarkar, Ms.Susmita Lal and Mr.G.K.Sarkar, Advocates for Respondent No. 8 in CWP No.6861/2010
Mr. Kapil Kher, Adv. for Respondent No.5 in CWP No.4081/2010, for Respondent Nos. 48 & 49 in CWP No.4025/2010 and for Respondent Nos. 17 & 18 in CWP No.15/2011
Ms. Neha Mittal, Adv. for Respondent No.4 in CWP No.6396/2010
Mr. Sahil Mongia, Adv. for Respondent Nos. 20, 21 and 22 in CWP No. 7394/2010
Mr.Nirbhay Sharma for Mr. Anjum Javed, Adv. for Respondent No. 4 in CWP Nos.6861/2010 & 6883/2010.
Ms.Bhanita Patowary, Advocate for Respondent No.7 in CWP No. 6376/2010
Mr.Rajan Bhanti, Advocate for Respondent No.5 in CWP No.6376/2010
Mr. Vaibhav Arora, Mr.Ajay Monga, Mr. Ateev Mathur and Mr.Sumit Bansal, Adv. for Respondent No.5 in CWP No.4929/2010 and for Respondent Nos. 6 to 8 in CWP No.4010/2010
Mr. Satyen Sethi, Mr. A.T. Panda, Advs. for Respondent No.3 in CWP No.4092/2010
Ms.Priyanka Kathuria and Ms.Sangeeta Chandra, Advocates for Respondent DDA in CWP No.4132/2010.
Mr. Sangeeta Sharma, Adv. for Respondent No.8 in CWP 4050/2010
Ms.Archana Gaur, Advocate for MCD in CWP No.4132/2010.
Mr.Rajiv Nanda, Addl. Standing Counsel with Ms.Rachna Saxena, Advocate for Respondent No.4 in CWP Nos. 5291/2010 and 5965/2010
Ms.Bindra Rana and Ms.Meenu Sharma, Advocates for Respondent No.21 in CWP No.6376/2010
Mr. Neil Hildreth, Mr.Sparsh Bhargava, Mr.Rony O John, Mr.Shashi Mathews and Ms.Shruti Sabharwal, Advocates for Respondent No.39 in CWP No.3838/2010, for Respondents No.6 and 7 in CWP No. 7106/2010, for Respondent No.49 in CWP No.4091, for Respondent No.51 in CWP No. 6376/2010
Mr. Rajat Aneja, Adv. for Respondent Nos. 7 to 11 in CWP No.4092/2010
Mr. Rakesh Chitkara, Mr. Surender Gupta, Advs. for respondent in CWP Nos. 5679/10, 5844/10, 5856/10, 5960/10, 6666/10, 6668/10, 6669/10, 8087/10 & 8124 of 2010
Mr. Arun K. Sharma, Adv. for Respondent No.4 in CWP No.7605/2010
Mr. Arun Vohra, Adv. for Respondent No.4 & 6 in CWP No.8380/2010
Mr. K.K. Khurana, Mr. Anshul Arora, Mr. A.K. Mehta, Adv. for Respondent No.54 in CWP No.5127/2010
Mr. Praveena Gautam, Adv. for Respondent No.5 in CWP No.6376/2010
Mr. Vikram Saini, Adv. for Respondent No.4 in CWP No.6296/2010
Mr. S.P. Kaushal, Mr. Vikrant Sharma, Adv. for Respondent Nos.14 to 18 in CWP No.4792/2010
Mr. B.B. Gupta, Adv. for Respondent in CWP Nos. 4319, 5067, 5241, 5970, 5972/2010.
Ms. Aakansha Munjhal, Adv. for Respondent-JSL in CWP No.4050/2010
Mr. Mahesh B. Chhibber, Adv. for Respondent Nos. 12 to 16 in CWP No.4139/2010
Mr. Mehjaveen A. Marak, Adv. for Respondent No.5 in CWP No.4539/2010
Mr. Vaneet Garg, Adv. for respondent Nos. 51 to 57 in CWP No. 5896/2010 and for Respondent Nos. 9 & 10 in CWP No. 7394/2010
Mr. Kartik Bhatnagar, Mr. Sarthak, Advs. for Respondent in CWP No.5159/2010
Mr. Akashdeep Kakkar, Adv. for Respondent in CWP No.15/2011
Mr. Digvijay Rai, Adv. for AAI in CWP Nos. 4538, 5074 & 7106 of 2010
Mr. Vinod Mehta, Adv. for Respondent Nos. 21, 22, 23, 42 & 43 in CWP No.15/2011
Ms. Divya Jain, Mr. Atul Grover, Adv. for Respondent Nos. 8 & 9 in CWP No.5346/2010
Mr. Kapil Arora, Ms. Manjula, Advs. for Respondent No.13 in CWP No.7394/2010
Mr. Anshul Arora, Mr. A.K. Mehta, Adv. for Respondent No.54 in CWP No.4050/2010
Mr. Navneet Kumar and Mr.Deepak Chawla, Adv. for J&K Bank.
Mr.Anil Kher, Sr.Advocate with and Mr.S.S. Pandit, Advocate for Respondent No.17 and 18 in CWP No.7393/2011 for Respondent No.5 in CWP No.4081/2010 and for Respondent Nos.48 and 49 in CWP No.4025/2011.
Mr.Mahesh B. Chhiber, Advocate for Respondent No.12 to 16 in CWP No.4139/2010.
Ms.Amreeta Swarup, Advocate for Respondents No.27 to 29 in CWP No.15/2011
Mr.Harsh Raghuvanshi for Mr. Arvind Nayar, Advocate for Respondent No.7 in CWP No.3837/2010.
Mr.Rahul Raj Verma, Advocate for Respondent No.54 in WPC 4050/2010.
Mr.Shobhit Chandra, Advocate for respondent No.8 in WP(C) No.3782/2010.
Mr.Arvind Nayyar and Ms.Taniya Sharma, Advocates for Applicant Ambiance Mall in CWP No.3750/2010.
Mr.Anurag Chawla, Advocate for Respondent in CWP No.15/2011
JUDGEMENT
Per : Dipak Misra:
In this batch of writ petitions preferred under Article 226 of the Constitution of India, the constitutional validity of Section 65(105)(zzzz) of the Finance Act, 1995 (for short ‘the 1995 Act’) and Section 66 as amended by the Finance Act, 2010 (for brevity ‘the 2010 Act’) is called in question. The matters were initially placed before a Division Bench wherein the learned counsel for the parties raised many a submission and regard being had to the nature of the cases, the Division Bench thought it appropriate that the controversy should be dwelled upon by a larger Bench. Thereafter, the matters have been placed before us.
2. For the sake of clarity and convenience, we shall advert to the facts adumbrated in W.P.(C) No.3398/2010 and deal with the contentions canvassed by the learned counsel for the parties in all the writ petitions as the issue is common to all. The petitioner, a registered company under the Companies Act, 1956, has taken commercial property/shops on rent for carrying on its retail business. It takes immovable property by way of lease or licence and once the lease deed or the deed of licence is entered with the owner, there is no continuous flow of transaction between them. The tenant is entitled to use the premises for a fixed tenure under the agreement and the transaction with the owner is a onetime transaction. The transactions are principal to principal and there is no value addition by providing the premises on lease/licence by the owner of the property. The petitioner, as pleaded, is a substantial contributor to the sustained growth and development of the national economy and has contributed huge amounts to the revenue by payment of taxes, charges and cess under diverse heads and the premises occupied by it establishing commercial establishments like shops are meant for diverse situations and, accordingly, arrangements have been made. The consideration paid by the petitioner under the lease deed or agreement of licence is purely a consideration for acquiring the occasional and possessory rights of these premises and utilizing the same. The premises that have been taken by the petitioner have been referred to in the petition and it is urged that in the case of the agreements that have been entered with the respective owners, the liability rests with the owners to pay the service tax but the owners insist upon the petitioner to make payment of the service tax. It is contended that an artificial liability has been created on the tenants by the Finance Act, 1994 which introduced the service tax. Reference has been made to sub-section 90(a) which was inserted in Section 65 of the Finance Act, 1994 by the Finance Act, 2007 to tax any “service provided to any person by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce”. The renting of immovable property has been defined to include renting, letting, leasing, licensing and other similar arrangements of immovable property for use in the course of furtherance of business or commerce including use as factory, building, warehouse, exhibition halls, multiple use building, etc. The said provision came into force with effect from 1.6.2007. It is urged that contrary to the express words of the provisions of the Act, the first respondent, placing an erroneous interpretation on Section 65(105)(zzzz) as it stood in 2007, issued a notification No.24/2007 dated 22.5.2007. After the notification was issued, a circular dated 4.1.2008 was issued by the Ministry of Finance of the Union of India. The constitutional validity of the notification and the circular was questioned before this Court in the case of Home Solution Retail India Ltd. v. Union of India, 158 (2009) DLT 722 (DB) = 2009-IST-12-HC-DEL-ST.
3. In the case of Home Solution Retail India Ltd. (supra), it was contended that the notification and circular had come into existence by absolute fallacious interpretation placed on Section 65(105)(zzzz) and Section 65(90)(a) inasmuch as an attempt has been made to levy service tax on renting of immovable property as opposed to the levy of service tax on the service provided “in relation to renting of immovable property”. The Division Bench adverted to the language employed in the notification dated 22.5.2007 and the circular dated 4.1.2008 and after referring to the decisions in T.N. Kalyana Mandapam Association v. Union of India & Others, (2004) 5 SCC 632 = 2004-IST-03-SC-ST , All India Federation of Tax Practitioners & Ors. v. Union of India, (2007) 7 SCC 527 = 2007-IST-09-SC-ST , Doypack Systems Private Limited v. Union of India, (1998) 2 SCC 299 = 2002-IST-66-SC-MISC , BSNL v. Union of India, (2006) 3 SCC 1 = 2006-IST-16-SC-CT-LB , Commissioner of Income-tax, Bangalore v. B.C. Srinivasa Shetty, (1981) 2 SCC 460 , Lucknow Development Authroity v. MK Gupta, (1994) 1 SCC 243, NS Nayak and Sons v. State of Goa, (2003) 6 SCC 56 and interpreting the terms “in relation thereto”, distinguished the decision rendered in T.N. Kalyana Mandapam Association (supra) holding that the utilization of premises as a mandap by itself would constitute service as has been held by the Apex Court but the same is different from the kind of activity that is contemplated under Section 65(105)(zzzz). The Division Bench thereafter proceeded to state as follows:
“33. The next decision which requires consideration is the decision of the Supreme Court in the case of All India Federation of Tax Practitioners (supra). We have already quoted paragraph 8 of the said decision wherein it has been observed that service tax is a value added tax and that just as excise duty is a tax on value addition on goods, services tax is on value addition by rendition of services. A distinction has also been sought to be made between property based services and performance based services. The property based services cover service providers, such as architects, interior designers, real estate agents, construction services, mandap keepers, etc. Whereas the performance based services are those provided by persons, such as stock-brokers, practising chartered accountants, practising cost accountants, security agencies, tour operators, event managers, travel agents etc. The Supreme Court also noted that service tax is a tax on service and not on the service provider.
34. From the above discussion, it is apparent that service tax is a value added tax. It is a tax on value addition provided by a service provider. It is obvious that it must have connection with a service and, there must be some value addition by that service. If there is no value addition, then there is no service. With this in mind, it would be instructive to analyse the provisions of Section 65(105)(zzzz). It has reference to a service provided or to be provided to any person, by any other person in relation to “renting of immovable property for use in the course or furtherance of business or commerce”. The wordings of the provision are so structured as to entail – a service provided or to be provided to ‘A’ by ‘B’ in relation to ‘C’. Here, ‘A’ is the recipient of the service, ‘B’ is the service provider and ‘C’ is the subject matter. As pointed out above by Mr Ganesh, the expression ‘in relation to’ may be of widest amplitude, but it has been used in the said Act as per its context. Sometimes, ‘in relation to’ would include the subject matter following it and on other occasions it would not. As in the case of the service of dry cleaning, the expression ‘in relation to dry cleaning’ also has reference to the very service of dry cleaning. On the other hand, the service referred to in Section 65(105)(v), which refers to a service provided by a real estate agent ‘in relation to real estate’, does not, obviously, include the subject matter as a service. This is so because real estate by itself cannot by any stretch of imagination be regarded as a service. Going back to the structured sentence, i.e.– service provided or to be provided to ‘A’ by ‘B’ in relation to ‘C’, it is obvious that ‘C’ can either be a service (such as dry cleaning, hair dressing, etc.) or not a service by itself, such as real estate. The expression “in relation to” would, therefore, have different meanings depending on whether ‘C’ is a service or is not a service. If ‘C’ is a service, then the expression ‘in relation to’ means the service ‘C’ as well as any other service having connection with the service ‘C’. Where ‘C’ is not a service, the expression ‘in relation to’ would have reference only to some service which has a connection with ‘C’. But, this would not imply that ‘C’ itself is a service.
35. From this analysis, it is clear that we have to understand as to whether renting of immovable property for use in the course or furtherance of business or commerce by itself is a service. There is no dispute that any service connected with the renting of such immovable property would fall within the ambit of Section 65(105)(zzzz) and would be exigible to service tax. The question is whether renting of such immovable property by itself constitutes a service and, thereby, a taxable service. We have already seen that service tax is a value added tax. It is a tax on the value addition provided by some service provider. Insofar as renting of immovable property for use in the course or furtherance of business or commerce is concerned, we are unable to discern any value addition. Consequently, the renting of immovable property for use in the course or furtherance of business of commerce by itself does not entail any value addition and, therefore, cannot be regarded as a service. Of course, if there is some other service, such as air conditioning service provided alongwith the renting of immovable property, then it would fall within Section 65(105)(zzzz).
36. In view of the foregoing discussion, we hold that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. The obvious consequence of this finding is that the interpretation placed by the impugned notification and circular on the said provision is not correct. Consequently, the same are ultra vires the said Act and to the extent that they authorize the levy of service tax on renting of immovable property per se, they are set aside.
37. Before parting with this batch of cases, we would like to observe that we have not examined the alternative plea taken by the petitioners with regard to the legislative competence of the Parliament in the context of Entry 49 of List II of the Constitution of India. Such an examination has become unnecessary because of the view we have taken on the main plea taken by the petitioners as indicate above.”
[Emphasis added]
4. From the aforesaid decision, it is quite vivid that the Division Bench has held that Section 65(105)(zzzz) could not have brought in its ambit and sweep the renting out of immovable property for use in the course of furtherance of business or commerce to constitute a taxable service and thereby exigible to service tax and, accordingly, the notification and circular were declared ultra vires.
5. After the said decision was rendered, Section 65(90)(a) and Sections 65 and 66 were amended. For the purpose of better appreciation, the provision that existed prior to the Finance Act, 2010 and post amendment by the Finance Act, 2010 are produced below in a tabular form:
