Karnataka High Court
The Chairman vs The Union Of India on 20 September, 2023
Bench: Chief Justice, Krishna S Dixit
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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,
Digitally signed
by SHARADA ANDHRA PRADESH.
VANI B
Location: HIGH 3. THE SENIOR DIVISIONAL MANAGER
COURT OF LIFE INSURANCE CORPORATION OF INDIA,
KARNATAKA
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,
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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:
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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
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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
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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
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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..."
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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/
