The Chairman, Life Insurance Corporation of India and The Zonal Manager, Life Insurance Corporation of India and The Senior Divisional Manager Life Insurance Corporation of India V. The Union of India by its Economic Adviser-1, Ministry of Finance, Department of Finance Service and The Commissioner of Income Tax Tax-1, Range and The Superintendent of Service Tax Range-1, Service Tax Division and M/S Kale Gowda Enterprises

WA/776/2023

AI Insights

This case involves a writ appeal by the Life Insurance Corporation of India (LIC) against a decision that held them liable for the payment of service tax, despite being the recipients of the service. The appellants argued that the contractual arrangement with the service provider, under which the service provider was responsible for the tax, was not honored. The respondents, including the Union of India and other tax authorities, contended that the legal and factual matrix supported the Single Judge's decision. The High Court's judgment relied on precedents and the specific terms of the lease agreement between the parties, which allowed for the transfer of tax liability under certain conditions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 701362 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-09-2023
• Assessment Year: misc
• Other Referred Cases: UNION OF INDIA vs BENGAL SHRACHI HOUSING DEVELOPMENT LIMITED, M/S MEATTLES PVT. LTD. vs HDFC BANK LIMITED
• Laws Referred To: Karnataka High Court Act, 1961, UNION OF INDIA vs BENGAL SHRACHI HOUSING DEVELOPMENT LIMITED, (2018) 1 SCC 311, M/S MEATTLES PVT. LTD. vs HDFC BANK LIMITED, 2012 SCC OnLine Del 5508
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: ANUPAMA HEGDE
• Assessee Lawyers: HALLUR BASAVARAJ
• Keywords: Liability Transfer; Service tax; Taxable event; Taxable Person
• Section: 4

Judgement Text

" - 1 - NC: 2023:KHC:33940-DB WA No. 776 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF SEPTEMBER, 2023 PRESENT THE HON'BLE MR PRASANNA B. VARALE, CHIEF JUSTICE AND THE HON'BLE MR JUSTICE KRISHNA S DIXIT WRIT APPEAL NO. 776 OF 2023 (GM-RES) BETWEEN: 1. THE CHAIRMAN, LIFE INSURANCE CORPORATION OF INDIA, YOGAKSHEMA BUILDING, EAST WING, 3RD FLOOR, JEEVANA BHIMA MARGA, MUMBAI - 400 021. 2. THE ZONAL MANAGER, LIFE INSURANCE CORPORATION OF INDIA JEEVAN BHAGYA, OPP. SECRETARIAT, SAIFABAD, HYDERABAD-560 063, ANDHRA PRADESH. 3. THE SENIOR DIVISIONAL MANAGER LIFE INSURANCE CORPORATION OF INDIA, DIVISIONAL OFFICE, BUNNY MANTAPA ROAD, MYSURU - 571 015. …APPELLANTS (BY SRI. HALLUR SHIVAYOGI BASAVARAJ.,ADVOCATE) AND: 1. THE UNION OF INDIA BY ITS ECONOMIC ADVISER-1, MINISTRY OF FINANCE, DEPARTMENT OF FINANCE SERVICE, Digitally signed by SHARADA VANI B Location: HIGH COURT OF KARNATAKA - 2 - NC: 2023:KHC:33940-DB WA No. 776 of 2023 ROOM NO. 9 , JEEVAN DEEP BUILDING, PARLIAMENT STREET, NEW DELHI - 110 001. 2. THE COMMISSIONER OF INCOME TAX TAX-1, RANGE, NO.59, HMT BHAVAN, 4TH FLOOR, BELLARY ROAD, GANGANAGAR, BENGALURU-560 032. 3. THE SUPERINTENDENT OF SERVICE TAX RANGE-1, SERVICE TAX DIVISION AND FAROOUIA BUILDING, NEW SAYYAJI RAO ROAD, MYSURU-570 021. 4. M/S KALE GOWDA ENTERPRISES NO. 224/11-P1, OMC ROAD, JKALLAHALLI, MANDYA CITY, MANDYA, R/BY ONE OF ITS PARTNER SRI. K. GURUSWAMY S/O LATE KALEYGOWDA, AGED ABOUT 63 YEARS, R/O OLD M.C. ROAD, KALLAHALLI, MANDYA CITY, MANDYA - 571 401. …RESPONDENTS (BY SMT. ANUPAMA HEGDE.,ADVOCATE FOR R1) THIS WRIT APPEAL FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT,1961 PRAYING TO 1. SET ASIDE THE ORDER DATED 18.04.2023 PASSED BY THE LEARNED SINGLE JUDGE IN W.P. No. 12322/2014 (GM-RES)2. QUASH THE ENTIRE PRAYER OF THE 4TH RESPONDENT HEREIN AS PRAYED FOR IN THE WRIT PETITION AGAINST THE APPELLANTS AND ETC., THIS APPEAL COMING ON FOR PRELIMINARY HEARING, THIS DAY, CHIEF JUSTICE DELIVERED THE FOLLOWING: - 3 - NC: 2023:KHC:33940-DB WA No. 776 of 2023 JUDGMENT The unsuccessful respondents in W.P. No.12322/2014 have preferred this intra-court appeal for calling in question a learned Single Judge's order dated 18.04.2023 whereby the said writ petition came to be allowed holding that it is the liability of the appellants herein to pay the service tax, though they happened to be the recipient of services and as a corollary, the writ petitioner who happens to be respondent No.4 herein has been relieved of the obligation. 2. Learned panel counsel appearing for the appellants vehemently submits that the liability to pay the service tax cannot be denied is true; however, on whose shoulders such liability rests is a matter of contract between the parties namely, the service provider and the service recipient; under the arrangement in question, such an obligation lies with the service provider only. He adds that all this having been wrongly assessed, the impugned order is liable to be set at naught. Learned CGC - 4 - NC: 2023:KHC:33940-DB WA No. 776 of 2023 appearing for the official respondents repels the submission of the appellant contending that the learned Single Judge's views accord with the rulings of the Courts. 3. Having heard the learned counsel appearing for the parties and having perused the appeal papers, we decline interference in this matter broadly being in agreement with the reasoning of the learned Single Judge who has structured the impugned order keeping in view the observations of the Apex Court in UNION OF INDIA vs BENGAL SHRACHI HOUSING DEVELOPMENT LIMITED, (2018) 1 SCC 311, which discusses the difference between a taxable event and the taxable person. Service tax is an indirect tax and therefore it can be passed on by the service provider to the recipient of service, is true as a general proposition. 4. The above having been said, one has to keep in view peculiar fact situation of a case. When the service provider has already remitted certain sums of money to the service recipients namely, the appellants as has been - 5 - NC: 2023:KHC:33940-DB WA No. 776 of 2023 mentioned in para 14 of the impugned order in a tabular form, the general proposition would not come to the aid of appellants and their case would fall in an exception thereto. The tabular form contains the information furnished by the learned counsel appearing for the Revenue before the learned Single Judge and the same is as under: SL.No. Particulars Amount (in Rs.) i Towards service tax 18,53,955/- ii Towards interest 12,25,895/- iii Towards penalty 4,63,489/- iv Towards late fee 17,400/- V Towards interest 15,135/- 5. The vehement submission of learned counsel appearing for the appellants that under the lease deed dated 18.11.2010 in question, a condition is incorporated whereunder the service provider has to pay all rates, taxes etc., gains some support, is true. However, condition No.2 - 6 - NC: 2023:KHC:33940-DB WA No. 776 of 2023 in para VI of the lease deed which is an exception to the general rule incorporated in condition No.1 reads as under: \"2. In case of failure by the lessors to pay the said amount dues as above, the lessee shall have the right to pay the said amounts upon receipt of notice on it by the said authorities and deduct the same out of the monthly rent payable to the lessors.\" Learned CGC Smt. Anupama Hegde appearing for the UOI is justified in placing reliance on a decision of Delhi High Court in M/S MEATTLES PVT. LTD. vs HDFC BANK LIMITED, 2012 SCC OnLine Del 5508 in support of her submission that in the fact matrix of the appeal at hands, the liability to pay the service tax stands transferred to the shoulders of the appellants, coupled with its past conduct of making the payment itself. At para 9, what is observed as under comes to the rescue of respondents; \"…The legislative intent, therefore, is quite clear i.e. the service tax is to be ultimately borne by the recipient of the service, though it is the service provider who is statutorily liable to pay the said tax to the exchequer…\" - 7 - NC: 2023:KHC:33940-DB WA No. 776 of 2023 In the above circumstances, we find no reasons to interfere in this writ appeal and therefore, the same is dismissed, costs having been made easy. Nothing hereinabove said shall come in the way of the appellants recovering from the private respondents by way of reimbursement, the amount paid as tax and that all contentions in regard to the same are kept open. Sd/- CHIEF JUSTICE Sd/- JUDGE Snb/ List No.: 1 Sl No.: 20 "