SSIPL Retail Limited and Others vs Union of India (UOI) and Others

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 22nd May, 2007 was thereafter issued making the aforesaid amendment effecting from 01.06.2007. 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 18th April, 2009 in Home Solution Retail India Ltd. Vs. Union of India (UOI) and Others, 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 SLP No. 13850/2009 in the Supreme Court challenging the aforesaid judgment dated 18th April, 2009 rendered by this Court, though in the SLP till date Supreme Court has not granted any stay on the operation of that judgment. Therefore even when SLP is pending, the judgment of this Court as of today holds and in the absence of any stay the respondents are bound to follow the same. Grievances made in this petition is that in spite of the aforesaid position, the respondent No. 1 is issuing instructions to its officers throughout the country stating 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-payers 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 24.07.2009 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 13.07.2009 on the above mentioned subject.

The Department has filed an Appeal in the Hon''ble Supreme Court against the Delhi High Court Order. As the case has not reached its finality, you are hereby requested to discharge Service tax on the above Services rendered.

Learned Counsel has also handed over another such communication issued by the Office of the Assistant Commissioner of Service Tax dated 11.08.2009 in the following terms:

Subject: Delhi High Court ruling dated 18.04.2009.

Please refer to your ST-3 return for the period Oct-08 to Mar. 09 wherein you have not discharged your service tax liability citing the ruling of Delhi High Court dated 18.04.09. It may be noted that this office has filed a SLP in the Hon''ble Supreme Court of India and the case is currently sub-judice. Hence you are requested to continue to discharge your service tax liability as earlier including interest, if applicable, till the final ruling is given by the Hon''ble Supreme Court of India. Copy of challans showing deposit of service tax may be supplied to this office within 5 days of receipt of this letter. Failure to comply with the same will initiate further necessary action against you.

It is clear from the perusal of the aforesaid communications that message given is that on account of pendency of the Special Leave Petition, such persons are under obligation to deposit the service tax, so much so even threat is extended to the extent that failure to comply the same will leave to initiate the further necessary action against the defaulters. When this Writ Petition came up for hearing on 15th December, 2009 Mr. Mukesh Anand, who appeared on advance notice submitted that the Writ Petition be adjourned to enable him to seek further instructions in this matter. Mr. Mukesh Anand has shown to us the letter dated 18th December, 2009 written by the office of the Commissioner of Service Tax to the counsel in which it is stated that the Commissioner has not instructed to pursue for payment of any service tax. At the same time, this very letter records that the Joint Secretary (TRU), Ministry of Finance, Department of Revenue, New Delhi had issued instructions dated 15th July, 2009 to take necessary action to safeguard revenue by either perusing the tax payer to pay up the service tax due or resort to means under law to protect the revenue in view of the pendency of the SLP which means that judgment of this Court has not attained finality.

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 matter 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 supersession of earlier instructions, to the officers not to write such letters demanding the payment of service tax or threatening coercive steps. On this assurance no further orders are required to be passed in this Writ Petition. Writ Petition is disposed of.