Service Tax on Renting of Immovable Property - Is Delhi High Court Judgement applicable to rest of India?
LITIGANTS don't really walk out of court rooms all that happy after winning a case – for that is not the end of the story. There is always an appeal or a retrospective legislation, in public interest of course. The other day, the Revenue Secretary was explaining to a trade body how difficult it is for him and his dedicated boys to draft and get retrospective legislation enacted. In Public Interest! What a thankless job, really!
Coming back to renting, since the Delhi High Court delivered its landmark judgement in the HOME SOLUTION RETAIL INDIA LTD case , unfortunate landlords in rest of India are in a daymare. Their tenants are refusing to pay Service tax, citing the Delhi High Court decision. The Board had sent a very diplomatic letter to the field asking them to try to collect the tax by persuasion or law!
The Chennai Service Tax Commissioner was more forthright in his reply to a question raised in the RAC meeting held on 25.06.2009. He stated,
Board was aware of the decision of the Hon'ble High Court of Delhi and a SLP along with Stay Petition has been filed before the Hon'ble Supreme Court of India. It would be incorrect to stop payment of service tax, as otherwise demand notice would be issued by the jurisdictional officers invoking interest and penalty provisions. In the event of Revenue winning the appeal, the responsibility for the payment of applicable Service Tax with interest would squarely fall on the landlord. Hence, till the Hon'ble Supreme Court decides the case, it would be proper to mention service tax in the bills and remit the tax collected into the Govt. Account.
But what happens if the tenant doesn't pay or worse still, some tenants pay and some don't?
Is the Delhi High Court judgement binding on the Tribunal?
I had an interesting case sometime back. On an identical issue, there were two conflicting decisions of the AP High Court and Kerala High Court. The AP High Court decision was in favour of the importer while the Kerala High Court decision was against. On the same day the tribunal had to decide an appeal from Kerala and another from AP. The Tribunal being bound by both the High Courts decided the Kerala case against the importer and the AP case against the Revenue.
We should seriously think of certainty and clarity before we embark on mega projects like DTC and GST (no code yet)