04 February 2010

SLP on ST on Renting of Immovable Property

Propriety of revenue's instruction to its officers demanding service tax on renting of immovable property against High Court's ruling during pendency of SLP before Supreme Court

In absence of Supreme Court's order staying operations of High Court's judgment relating to levy of service on renting of immovable property, Revenue Department could not instruct its officers to pursue the matter with tax payers calling upon them to pay service tax on same or to resort to other means under the law to protect the Revenue.


SSIPL Retail Ltd.


Union of India

Writ Petition (Civil) No. 13861 of 2009

December 18, 2009


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By the Finance Act, 2007, service "in relating to renting of immovable property for use in the course or furtherance of business or commerce" was introduced within the definition of taxable service as sub-section (zzz) to section 65 (105) along with corresponding insertions to section 66 and 65 (90a) thereto. Notification dated 22-5-2007 was thereafter issued making the aforesaid amendment effecting from 1-6-2007. The said Notifications/amendments as well as circular was challenged by various tenants and landlords by filing various Writ Petitions. These writ petitions were decided by this Court on 18 -4-2009 in Home Solution Retail India Ltd. v. UOI and others (2009) 20 STT 129 by the said judgment this Court hold that aforesaid notification and circular were ultra vires the provisions of the Finance Act.

Respondent no. 1 has filed Special Leave Petition No. 1385O/ 2009 in the Supreme Court challenging the aforesaid judgment dated 18,h April. 2009 rendered by this Court, though in the Special Leave Petition till date Supreme Court has not granted any stay on the operation of that judgment. Therefore even when Special Leave Petition is pending, the judgment of this Court as of today holds and in the absence of any stay the respondents are hound to follow the same.

Grievances made in this petition is that in spite of the aforesaid position, the respondent No. l is issuing instructions to its officers throughout the' country slating that in view of the filing and pendency of the said Special Leave Petition, the officers should safeguard the revenue by either pursuing the tax-pavers to pay the service tax on renting of immovable property for use in the course of furtherance of business or commerce or resorting to means under law to protect the Revenue It is further stated on the basis of these instructions received by the officials of the Department, they are sending notices to various persons with instructions to start complying with the provisions of the aforesaid notification and circular by paying the requisite -'Service tax. One specimen of such notice is enclosed along with this writ petition which is notice dated 24\07£009 issued by the Office of the Commissioner of Service Tax, Service Tax Commissionerate, to Karnataka State Industrial Investment and Development Corporation Ltd:-

"Sub. Issue of leviability of ST on renting of immovable property - Clarification sought for - Reg.

Please refer to your letter dated IS.07.2009 on the above mentioned subject.

As pointed out above, even when the judgment of this Court is challenged by filing the SLO, till date there is no order passed by the Supreme Court staying the operation of that judgment. In these circumstances, the respondent could not instruct their officers to peruse the mater with tax payers calling upon them to pay service tax or to resort to other means under the law to protect the Revenue. The manner in which the letters are written clearly indicate that the payment of tax is demanded and the threat is also extended that if there is no compliance, Department would initiate further necessary action against them.

Mr. Chandhiok, learned ASG appearing for the respondent, assures that corrective steps shall be taken by issuing further instructions, in suppression of earlier instructions, to the officers not to write such letters demanding the payment of service tax or threatening corrective steps. On this assurance no further orders are required to be passed in this Writ Petition.

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