Tenants challenged notices by Yemmiganur Municipality demanding Service Tax on rent. The Court held notices were based on lease agreements, not the Act/Rules. Rejected plea to stay pending Supreme Court appeals. Petitions dismissed.
Writ petitions dismissed; no stay granted; Municipalities free to file statutory remedies.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
HON’BLE Ms. JUSTICE G. ROHINI AND
HON’BLE SRI JUSTICE CHALLA KODANDA RAM
WRIT PETITION Nos.8685 OF 2013; 36325, 36458, 36472, 36479, 36480, 36481, 36484, 36508, 36627, 36644, 36667 AND 38478 OF 2012
COMMON ORDER:- (per Hon’ble Sri Justice Challa Kodanda Ram)
In this batch of writ petitions, petitioners are all individuals, who are lessees/tenants of the immovable properties belonging to Yemmiganur Municipality, Yemmiganur, Kurnool District. The petitioners are all aggrieved by the notices issued by the 3rd Respondent-Yemmiganur Municipality, demanding to pay Service Tax on rent for the period 01.06.2007 to 31.10.2012.
2) Sri S.Nageswar Reddy, the learned counsel appearing on behalf of the petitioners, would mainly submit that the demand notice is illegal, arbitrary and unconstitutional and against the provisions of the Finance Act, 1994 (for short “the Act”) and the Municipality is not the competent authority to impose and collect Service Tax and thus the demand is ultra vires the Service Tax Rules, 1994 (for short “the Rules). He would further submit that under Section 65 (105) (zzz) of the Act, which has come into force with effect from 01.06.2007, renting of immovable property though is taxable service, the Service Tax is payable by the service provider but not the service recipient. He would further submit that both the landlords and tenants had challenged this provision in various writ petitions and those writ petitions have been dismissed and the matters are pending before the Hon’ble Supreme Court. He would further submit that as a matter of fact Adoni Municipality had approached the Supreme Court and the matters are still pending. He would draw the attention of the Court to the letter dated 29.10.2012 addressed by the Yemmiganur Municipal
Shops Lease Holders Association, to the Commissioner, Yemmiganur Municipality, wherein all these facts have been set out. The learned counsel for the petitioners would also submit that certain municipalities had approached the appellate authorities under the Act and the appeals are pending and the 3rd respondent-Municipality instead of filing appeals like other Municipalities, is demanding the Service Tax from the tenants. Submitting that the shop keepers are small businessmen, he would finally request the Court to defer the hearing of the cases till issue is settled by the Supreme Court in Civil Appeal No.8390 of 2011 and batch.
3) We have heard the learned counsel for the respondent and perused the counter.
4) A bare reading of the impugned notice in vernacular would go to show what all has been stated therein is that on account of the Act, brining in renting of immovable property as liable to service Tax and the Municipality is required to pay the same and as such, it is required to be collected from the lessee/tenants. The notice also further states that non-payment of the Service Tax in time would result in payment of penalty. Therefore, we are unable to agree with the contention of the learned counsel for the petitioners that the impugned notices are issued under the Act, or the Rules. 5) By no stretch of imagination, it could be said that the Municipality has issued notice under the provisions of the Act or the Rules. According to us the impugned notice which has been issued is in the capacity of landlord and their right is traceable to the covenant in the agreement entered into by them with the tenants/lessees.
6) It is not in dispute that individual shop owners either have entered into or in occupation of the respective premises as tenants/lessees by virtue of agreements, whereunder they have
agreed “to bear, pay and discharge all existing and further charges assessments and out goings payable in respect of said premises inclusive of the ground rent of Rs.___/- or any other sum that may from time to time be levied as such upon the piece or parcel of land by the Collector, Kurnool District, on behalf of the Central Government or the Government of Andhra Pradesh.
7) Apart from this, though the primary responsibility of payment of Service Tax is on the landlord, the landlord is entitled to collect the same from the tenant. In other words, the Service Tax paid/payable by the landlord is a pass through.
8) Inasmuch as there is no challenge to the provisions of the Act, the reference to the cases pending in the Supreme Court has no relevance and as such we are unable to accede the request of the learned counsel to defer the cases and to await the outcome of the cases pending in the Supreme Court. Accordingly, these writ petitions are liable to be dismissed.
9) We make it clear that the dismissal of the writ petitions at the instance of the tenants, does not prevent the 3rd respondentMunicipality to file any statutory remedies as otherwise available to them. We are also not expressing any opinion with respect to various other contentions which have been pleaded in these writ petitions, but not urged before us.
10) In the result, these writ petitions are dismissed. No order as to costs. Miscellaneous petitions, if any, pending in these Writ Petitions shall stand dismissed.
______________ G. ROHINI, J
____________________________ CHALLA KODANDA RAM, J
Date:04.09.2013. Ssv
HON’BLE Ms. JUSTICE G. ROHINI AND
HON’BLE SRI JUSTICE CHALLA KODANDA RAM
WRIT PETITION Nos.8685 OF 2013; 36325, 36458, 36472, 36479, 36480, 36481, 36484, 36508, 36627, 36644, 36667 and 38478 OF 2012
Date: 4 th September, 2013.
Ssv
2 issues framed by the court
Whether notices issued by the Municipality demanding Service Tax from tenants are issued under the Act or Rules.
Whether the High Court should stay proceedings pending the outcome of tests pending in the Supreme Court.
2 provisions across 2 enactments
Tenants/Lessees (Shop Lease Holders)
Yemmiganur Municipality
G. Rohini
Challa Kodanda Ram
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
