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Judgment
This bunch of writ petitions challenges the imposition of ''service-tax'' on renting of immovable property. 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 read as follows :
92C. Taxes on service.
The Supreme Court in the case of All India Federation of Tax Practitioners and Others Vs. Union of India (UOI) and Others, upheld the validity of the said constitutional amendment.
In exercise of the legislative power conferred by the said entry, service-tax was introduced by the Parliament.
The Delhi Court in its judgment dt. 18th April, 2009, rendered in a bunch of cases headed by the case of Home Solution Retail India Ltd. Vs. Union of India (UOI) and Others, held that mere renting out of immovable property would not amount to ''service'' and, therefore, would not be amenable to service-tax. A SLP by the Union of India against the said decision of the Delhi High Court, being SLP (C) No. 13850 of 2009, is pending in the Supreme Court. However, the legislature without waiting for the decision of the SLP amended the definition of "taxable service" by enacting the Finance Act, 2010, wherein sub-cl. (zzzz) of cl. (105) of s. 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".
Further by s. 77 of the Finance Act, 2010, this amendment was given retrospective effect.
This amendment as well as retrospectivity of the same is under challenge. The challenge is primarily based on the same arguments which were advanced and accepted by the Delhi High Court in the case of Home Solutions Retail India Ltd. (supra).
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 & Haryana High Court, Bombay High Court, Gujarat High Court and Orissa High Court in Shubh Timb Steels Limited Vs. Union of India (UOI) and Another, , Retailers Association of India & Ors. vs. Union of India & Ors., Writ Petn. No. 2238 of 2010 decided on 4th Aug., 2011 [reported at (2011) 243 CTR (Bom) 201 : (2011) 60 DTR (Bom) 49--Ed.], Cinemax India Ltd. & Ors. vs. Union of India & Ors., SCA No. 8032 of 2010 decided on 23rd Aug., 2011 [reported at (2011) 243 CTR (Guj) 570 : (2011) 61 DTR (Guj) 25--Ed.] and Utkal Builders Ltd. vs. Union of India, Writ. Petn. (Civil) No. 23155 of 2010 decided on 17th March, 2011.
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 Art. 20(1) of the Constitution of India.
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.
In the case of Tamil Nadu Kalyana Mandapmam am Assn. Vs. Union of India (UOI) and Others, , the Supreme Court has held in paras 54 and 55 of that law report as under :
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.
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.
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.
All the writ petitions are dismissed.