Final Hearing that was to take place 15th February culminated in a deferment till next Monday with a decision to constitute a larger bench to hear the case.
Division Bench in Court No.1 consisting of Chief Justice Dipak Misra & Justice Sanjeev Khanna finally took this decision. Bench felt that service tax constitutes nearly two thirds of the GDP and considering he matters being brought before them regularly, this matter deserved consideration by a larger bench, more so in view of the nature of complexities involved and importance of the issue.
There was of course another crucial reason. The Bench consisting of the CJ had earlier also raised the issue of handicap of “binding precedent” set by another Division Bench of the same co-ordinate court of same strength.
The earlier decision of 2009 (termed Home Solutions-1) was by a 2-member Division Bench. On 14th Dec., 2010, the Div. Bench consisting of Chief Justice Dipak Misra & Justice Man Mohan had raised this pertinent issue with UOI. ASG Mr. Chandhiok then had countered that those were mere observations and not the ratio of the order, and hence not binding. The Bench seemed unconvinced and passed a specific order to that effect (refer order dated 14.12.2010).
Today however, he came prepared with ammunition. The spanner he threw derailed the gravy train of the army lead by Mr. Ganesh, Sr. Advocate.
Mr. Ganesh valiantly tried to put the train back o the rails by making a “humble and respectful” submission before the bench by trying to argue why the same bench should hear and decide the case. But the body language of the Defence team was obvious. They knew they were checkmated by ASG.
Earlier, it was informed to the Hon’bel High Court was informed that the SLP filed in the earlier writ petition of Home Solution as well as the subsequent one was admitted and the Hon’ble Supreme Court has granted stay against the order passed by this Hon’ble Court in the stay application in the writ petition and ordered for expeditious disposal. [Means stay vacated].
After a long and a through briefing to a mostly half-asleep audience, barely able to stifle yawns, assembled immediately after the lunch, Mr. Ganesh took the Court to the background and judgements pronounced having a bearing on the matter. He was at his persuasive best. No one missed Mr. Harish Salve who lead the trade last time or Mr. Mukul Rohtagi who had appeared in Supreme Court recently. He was the seasoned war veteran having won the battle last time around.
Mr. Ganesh raised four principal grounds challenging the validity of provisions of Sec. 65 (106) (zzzz) and other related Section.
a) The letting of immovable property is mere transaction and not a service as held by the Hon’ble High Court in the case of Home Solution Pvt. Ltd., and thus, per se renting is not a service in view of paragraph 35 of the earlier judgment of Home Solution;
b) The levy of Service Tax Under Section 65 (105) (zzzz) is directly and squarely covered by entry 49 of List-II and is not under 92C and further submitted that the levy of service tax under Entry 97 of List-1 itself is not brought under operation therefore, the same is not covered by the said list;
c) It was further argued that the levy of Service Tax is under legislative competence of the State and not Center; and
d) It was also argued that the imposition of tax on renting within the constitutional scheme cannot be levied by both Center as well as State.
While submitting all these arguments, Mr. Ganesh also pointed out to the Hon’ble High Court the order passed on 14.12.2010 wherein the Hon’ble Delhi High Court has observed that the earlier Division Bench in the writ petition of Home Solution has observed in paragraph No. 35 that the renting per se is not a service which is taxable. Hence the said judgment in entirety will have the binding effect on the present Division Bench, while dealing into the issue of Constitutional Validity of Sec. 65 (105) (zzzz) in the year 2010 under Finance Act.
Then it was the turn of the ASG Mr. A. Chandhiok. He marshaled his arguments:
CJ queried whether the precedent value of the 2009 judgement stood wiped out just because the Supreme Court had granted leave to the UOI, having come in appeal against the High Court’s orders?
Yes, asserted ASG. Not only this, he cited the order of the Supreme Court [2004(2) SCC 747]. A copy of the bound volume containing that order was furnished to the Bench. Both the Judges carefully read it, sharing the same book. Petitioners’ side looked askance and sought a copy. The request was ignored. ASG continued reading to the Court.
This was unusual. Common courtesy was given a go by. It is a usual practice that when one side furnishes any material across to the Bench, a copy is simultaneously handed over to the other side. Mr. Chandhiok still nursing the hurt of a false charge of seeking adjournment while he had merely agreed to the consensus of the High Court to urge the Supreme Court for expeditious disposal, seemed in no mood to display goodwill. This was in sharp contrast to the hearing on 14th Dec. when there was mutual bantering and bonhomie between both sides (Mr. Harish Salve’s presentation – Refer the attachments of proceedings of 14th Dec. and 15th Jan) and when bare knuckles were out on 15th Jan, both sides barely seeing eye to eye.
The Bench immediately pointed out that the cited judgement talks of a larger bench. The ASG just smiled and said nothing. The Sr. CGSC Mukesh Anand winked at him. All along both had been whispering to each other. They had done their home work. The googly had been played.
It then dawned upon everyone that he had played his smartest move. The joker in the pack which beat all cards. Or the move where he had the opponent checkmated.
Ah ! The Bench realized: You are suggesting that we constitute a larger bench. ASG simply nodded. The arrow had hit the bull’s eye.
Mr. Ganesh sprang to his feet and tried to dissuade the Bench. But the body language gave him away. This was the petitioner’s worst fear coming true. They would have preferred the same 2-member division bench who was expected to follow judicial discipline, or else their order would be legally indefensible, if differed.
Alright, the Bench ordered. Let us re-assemble next Monday with a large bench at 12:00 hours. ASG Sardar Chandhiok suggested 12:30. CJ quipped you think things would go better at 12:30. The audience tittered.
Let us now await the outcome of the unending saga. Those who specialize in Astrology and tarot cards, to please enlighten me. Sorry, I don’t need another lawyer to wisen me up.
The optimism of the trade is now steadily giving way to pessimism.
The confabulations would now start feverishly for the next round. Happy journey.
Author- Rakesh Chitkara, Advocate, Delhi High Court, Mobile- 9899998663 / 9891678009