Case Law Details

Case Name : R.R. Ahuja Vs Union of India (Madhya Pradesh High Court)
Appeal Number : W.P. No. 14658 Of 2010
Date of Judgement/Order : 21/09/2011
Related Assessment Year :


R.R. Ahuja


Union of India

W.P. NO. 14658 OF 2010

SEPTEMBER  21, 2011


1. Shri G.N. Purohit, learned senior counsel with Shri Abhishek Oswal for the petitioner.

2. Shri S.A. Dharamadhikari, learned counsel for the respondents.

3. This bunch of writ petitions challenges the imposition of ‘service tax’ on renting of immovable property.

4. By the Constitution 88th Amendment Act, 2003, a new entry 92C was introduced in List I of Seventh Schedule of the Constitution of India which reads as follows :-

“92C. Taxes on Services”.

5. The Supreme Court in the case of All India Federation of Tax Practitioners v. Union of India [2007] 10 STT 166, upheld the validity of the said constitutional amendment.

6. In exercise of the legislative power conferred by the said Entry, Service Tax was introduced by the Parliament.

7. The Delhi High Court in its judgment dated 18-4-2009, rendered in a bunch of cases headed by the case of Home Solution Retail India Ltd. v. Union of India [2009] 20 STT 129 (Delhi) held that mere renting out of immovable property would not amount to ‘service’ and, therefore, would not be amenable to service tax. A S.L.P. by the Union of India against the said decision of the Delhi High Court, being S.L.P. (C) No. 13850/2009, is pending in the Supreme Court [2009 (15) STR J23 (SC)]. However, the legislature without waiting for the decision of the S.L.P. amended the definition of “taxable service” by enacting the Finance Act, 2010, wherein sub-clause (zzzz.) of clause (95) of section 65 was amended and “taxable service” was defined to include “any service provided or to be provided to any person, by any other person, by renting of immovable property”.

8. Further by section 77 of the Finance Act, 2010, this amendment was given retrospective effect.

9. This amendment as well as retrospectively of the same is under challenge. The challenge is primarily based on the same argument which were advanced and accepted by the Delhi High Court in the case of Home Solutions Retail India Ltd. (supra).

10. It has also been argued that retrospectivity was not permissible because this amendment to the definition of “taxable service” is not merely clarificatory but brings about a substantive liability of taxation upon the service providers. It has also been contended that by giving a retrospective effect to this amendment to the definition of “taxable service”, the service provider is also saddled with liability to pay interest as well as penalty on the default in payment of service tax for the past period. These issues have been answered against the petitioners by detailed decisions of the Punjab and Haryana High Court, Bombay High Court, Gujarat High Court and Orissa High Court in Shubh Timb Steels Ltd. v. Union of India [2010] 29 STT 479, Retailers Association of India (RAI) v. Union of India [2011] 32 STT 443, Cinemax India Ltd. v. Union of India [2011] 12 492 (Guj.) and Utkal Builders Ltd. v. Union of India [2011] 12 492 (Ori.).

11. Even if it is assumed for the sake of argument that the amendment is not merely clarificatory but creates a substantive liability or right, the Parliament’s right to legislate and create liabilities or rights with retrospective effect can be curtailed only by a restriction placed upon the legislative power, of Parliament by one or the other provision of the Constitution of India, for example, the restriction of creating an offence with retrospective effect or the restriction from enhancing the punishment for an offence with retrospective effect as found in Article 20(1) of the Constitution of India.

12. We have not been shown any provision of the Constitution of India which restricts the right of Parliament to legislate retrospectively creating a tax liability.

13. In the case of Tamil Nadu Kalyana Mandapam Assn. v. Union of India [2006] 4 STT 308, the Supreme Court has held in paragraph 54 and 55 of that law report as under:

“54. Therefore, a levy of service tax on a particular kind of service could not be struck down on the ground that it does not conform to a common understanding of the word “service” so long as it does not transgress any specific restriction contained in the Constitution.

55. In fact, making available a premises for a period of a few hours for the specific purpose of being utilized as a mandap whether with or without other services would itself be a service and cannot be classified as any other kind of legal concept. It does not certainly involve transfer of movable property of any kind known to law either under the Transfer of Property Act or otherwise and can only be classified as a service”.

14. In view of what has been stated above, we do not find any force in the arguments advanced on behalf of learned counsel for the petitioner.

15. All the writ petitions are dismissed.


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