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SCA/8408/2009 12/ 12 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 8408 of 2009
For
Approval and Signature:
HONOURABLE
MR.JUSTICE D.A.MEHTA
HONOURABLE
MS.JUSTICE H.N.DEVANI
=========================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================
SELVEL
MEDIA SERVICES PRIVATE LIMITED, REGISTERED OFFICE AT - Petitioner(s)
Versus
MUNICIPAL
CORPORATION OF CITY OF AHMEDABAD & 2 - Respondent(s)
=========================================
Appearance :
MR
SN SOPARKAR with MR AMAR N BHATT
for Petitioner
MR
PRASHANT G. DESAI, SR. ADVOCATE with MR HIMANSHU K PATEL for
Respondent-1
MR YN RAVANI for Respondent(s) : 2 -
3.
=========================================
CORAM
:
HONOURABLE
MR.JUSTICE D.A.MEHTA
and
HONOURABLE
MS.JUSTICE H.N.DEVANI
Date
: 19/03/2010
ORAL
JUDGMENT
(Per
: HONOURABLE MR.JUSTICE D.A.MEHTA)
The
parties have been heard at length at the admission stage.
Considering the controversy involved, the Court has found it
necessary to hear the matter finally. Rule. Learned counsel
appearing for respective respondents are directed to waive service
of rule.
The
petition challenges the various communications issued by respondent
No.1, Ahmedabad Municipal Corporation seeking service tax from the
petitioner with incidental prayer to refund amount of Rs.6,17,165/-
with interest at the rate of 12% per annum from the date of payment
till realization.
The
petitioner is a Company registered under the Companies Act, 1956
carrying on business as an Advertising Agent. Respondent No.1 is
Ahmedabad Municipal Corporation (hereinafter referred to as the
AMC ). As a part of the statutory duties and functions imposed by
virtue of provisions of the Bombay Provincial Municipal Corporation
Act, 1949 (hereinafter referred to as the BPMC Act ), AMC is
required to grant written permission for erecting, fixing,
exhibiting or retaining any sky-sign or advertisement of the kind
prescribed by Rules upon any land, building, wall, hoarding or
structure. The case of the petitioner is that since last more than
fifty years, AMC has been permitting placing of advertisements in
and on private properties and AMC charges fees at the prescribed
rates for hoardings in and on private properties in the city of
Ahmedabad. The petitioner has been paying such fees regularly.
Respondent
AMC vide impugned communication dated 6.5.2008 (Annexure A )
called upon the petitioner to pay service tax on the license fee
charges for 2006-07 on the advertising boards put up on private
properties. This was followed by communications dated 8.7.2008,
30.9.2008, 6.10.2008, 14.7.2009 and 18.7.2009. It appears that the
petitioner has deposited various amounts from time to time towards
such demand of service tax, totalling to Rs.6,17,165/- under
protest while challenging the right of AMC to recover such
service tax. The petitioner has ultimately challenged the action of
AMC by way of this petition, and Commissioner of Central Excise,
Customs and Service Tax, Ahmedabad has been impleaded as respondent
No.3 after obtaining permission from this Court vide order dated
17.8.2009.
The
case of the petitioner as propounded by learned Senior Advocate
appearing for the petitioner is that service tax which is levied by
provisions of Finance Act, 1994 as amended from time to time,
including the amendments by Finance Act, 2006, has cast a duty on a
person who is providing taxable service to pay service tax and
taxable service has been assigned the meaning stipulated by
section 65(105) of Finance Act, 1994 as amended by Finance Act, 2006
(hereinafter referred to as the Service Tax Act ), wherein
clause (zzzm) of section 65(105) of the Service Tax Act provides
that taxable service means any service provided to any person,
by any other person, in relation to sale of space or time for
advertisement etc. Explanation 1 thereunder explains what the phrase
sale of space or time for advertisement includes. That a
plain reading of the said provision would indicate that AMC cannot
be termed to be a person who is providing service to any person so
as to fall within the ambit of the said definition of taxable
service , and if AMC cannot be termed to be a person who is
providing space for display or for advertisement, AMC cannot seek to
recover any service tax on the fees charged by AMC as license fees
because, as per provisions of the BPMC Act, such fees are charged as
license fees for the purposes of putting up / erecting a structure /
hoarding for the purposes of advertisement, but the erection of such
hoarding is on a land belonging to and owned by a private party and
therefore, the license fees charged by AMC cannot be equated with
any services being rendered by AMC so as to fall within the ambit of
definition of the term taxable service envisaged by section
65(105)(zzzm) of the Service Tax Act.
On
behalf of AMC, no affidavit in-reply has been tendered, but
considering the stand of AMC, it is strictly not necessary that AMC
should file an affidavit in-reply. On behalf of AMC, learned Senior
Advocate submitted that, because AMC has been called upon to make
payment of service tax by the Service Tax Department, AMC has sought
to recover such service tax, after paying the same to the Service
Tax Department, from persons like the petitioner to whom written
permission is granted upon payment of license fees. It was
submitted that if AMC is not liable to pay service tax, there is no
question of AMC being required to make payment to the Service Tax
Department and recover the same from the petitioner.
On
behalf of respondent No.3, attention was invited to paragraphs No.7
and 8 of the affidavit in-reply dated 4.11.2009, to submit that it
was not relevant whether AMC was owner of the space let out for
billboards / hoardings in respect of such billboards / hoardings put
up in or on private properties within the city of Ahmedabad, nor was
it relevant whether AMC was charging any rent in this regard. That
so long as service is provided by AMC, irrespective of the fact as
to who holds the material / property on the basis of which service
is provided, the service rendered becomes taxable event and as laid
down in the case of Empire India Ltd. v. Union of India,
1985 (20) ELT 179 (SC), ownership was not a relevant factor. That a
plain reading of section 65(105)(zzzm) of the Service Tax Act made
it clear that the provision was unambiguous and had no nexus with
the aspect of ownership while providing service. Learned advocate
appearing for Service Tax Department, therefore, submitted that AMC
was justified in raising the demand of service tax from the
petitioner and the petition was devoid of merits.
The
petition raises two issues which can be formulated in the following
terms :
Firstly,
whether AMC is rendering any service which can be
termed to be taxable service within the meaning of the said
term as defined in section 65(105)(zzzm) of the Service Tax Act?
Secondly,
if AMC is liable to pay service tax on the footing that AMC is
rendering taxable service, whether AMC is entitled to recover the
same from the petitioner, and if so, under which provision?
The
facts are not in dispute. In the present case, AMC has granted
written permission to the petitioner to erect certain hoardings on
private premises and for granting such written permission, AMC has
charged and collected certain fees. For this purpose, sections 244
and 245 of BPMC Act when read together provide for granting of
written permission for erecting, fixing, exhibiting or retaining any
sky-sign or advertisement upon any land, building, wall, hoarding or
structure, subject to the applicant fulfilling the requisite
conditions prescribed by Rules. Under section 386 of the BPMC Act,
AMC is entitled to charge a fee at the prescribed rate for granting
the written permission. It is necessary to note that all the
parties, including AMC, have used the term license fees ,
however, a conjoint reading of the provisions of sections 244, 245
and 386 of the BPMC Act makes it clear that what is envisaged by the
provisions is only a written permission and not a license.
Licensing is providing in sections 372 to 385 of Chapter XXII of the
BPMC Act, and the same is in relation to specific items enumerated
in the said provisions. As against this, sections 244, 245 and 386
of the BPMC Act only talk of written permission and
the two are not one and the same. Even if, a common application
form may be prescribed, the fees which are charged and collected by
AMC for granting written permission under sections 244 and 245 of
the BPMC Act, are fees for the written permission and not for a
license.
A
plain reading of sections 244 and 245 of the BPMC Act makes it clear
that the said provisions are for the purposes of regulating and
controlling the erection etc. of sky-signs and/or billboards,
hoardings etc., to ensure that the structure so erected does not
pose as a public hazard either by virtue of projection / abutment on
a public road/street, or by way of obstructing vision, or any such
similar hazard to the public at large. Hence, granting of written
permission, after ensuring that the structure so erected complies
with the relevant bye-laws and/or the building regulations in force
from time to time, is a part and parcel of function of a Municipal
Corporation in the form of a duty to the public to ensure a better
municipal government of the city and cannot be termed to be a
service rendered to the petitioner so as to be covered by the
meaning of the definition of taxable service envisaged by
section 65(105)(zzzm) of the Service Tax Act.
Section
65 of the Service Tax Act provides in the opening portion that in
Chapter 5, unless the context otherwise requires, the definition
provided in various sub-sections would become applicable.
Sub-section (105) and clause (zzzm) of section 65 of the Service Tax
Act, which are relevant for the present, read as under:
(105) Taxable
service means any service provided or to be provided –
(zzzm) to
any person, by any other person, in relation to sale of space or time
for advertisement, in any manner; but does not include sale of space
for advertisement in print media and sale of time slots by a
broadcasting agency or organisation.
Explanation
1 For the purposes of this sub-clause, sale of space or time
for advertisement includes –
[i] providing
space or time, as the case may be, for display, advertising,
showcasing of any product or service in video programmes, television
programmes or motion pictures or music albums, or on billboards,
public places, buildings, conveyances, cell phones, automated teller
machines, internet;
[ii] selling
of time slots on radio or television by a person, other than a
broadcasting agency or organisation; and
[iii] aerial
advertising.
Explanation
2 For the purposes of this sub-clause, print media means
book and newspaper as defined in sub-section (1) of
section 1 of the Press and Registration of Books Act, 1867 (25 of
1867)
A
plain reading of the aforesaid provisions indicates that taxable
service means any service provided to any person, by any other
person in relation to sale of space for advertisement.
Explanation-1 thereunder specifies what the phrase sale of space
for advertisement includes. Sub-clause (i) stipulates providing
space for display, advertising, etc., on billboards, public places,
buildings etc. For the present, it is not necessary to refer to
the remaining portion of the provisions. Thus, what is primarily
required for a service to become a taxable service for the purposes
of levy of service tax, is a service being provided to any person,
by any other person in relation to sale of space for advertisement,
namely, providing space for display.
The
question, therefore, that is required to be posed and answered is
whether AMC is providing any service to any person in relation to
sale of space for advertisement by providing space for display in
the facts of the case. Admittedly, in the facts of the present case,
the property on which the structure is erected in the form of
billboard or hoarding is not owned by AMC. AMC is only granting
written permission after ensuring compliance with the requisite
regulatory requirements for a fee. AMC is not rendering any service
to the petitioner. It may be that in a wider sense, the regulatory
function of AMC could be termed to be a public service for ensuring
safety of public at large or providing a hazard-free environment
within the local limits of AMC. However, the service envisaged by
section 65(105)(zzzm) of the Service Tax Act, is not of this nature
and therefore, there is no question of AMC being charged service tax
in relation to the fees collected for granting written permission in
terms of sections 244, 245 and 386 of the BPMC Act read together.
The property being admittedly owned by a private person, as
distinguished from AMC, a public body, the act of granting written
permission cannot be treated to be a sale of space for
advertisement, that is, providing space for display. Therefore,
once it is found that AMC is not rendering
any taxable service to the petitioner, in the facts of the present
case, it is not possible to uphold the action of AMC in calling upon
the petitioner to make payment of service tax.
There
is one more aspect of the matter. The provision nowhere envisages
AMC being entitled to charge and collect service tax on the fees
charged and collected by AMC for granting written permission. AMC
cannot act as an agent for the purpose of recovery of service tax,
even if one assumes that the service provided by the petitioner to
the client of the petitioner might be a taxable service. In the
facts of the present case, it is nobody’s case that the demand has
been raised by the Service Tax Department on the petitioner in
relation to the service rendered by the petitioner to its client.
Hence, it is not necessary to dwell any further on this aspect of
the matter, namely, whether the petitioner is rendering any service
to its client so as to be treated as a taxable service under the
provisions of the Service Tax Act.
Hence,
in absence of any authority in law by way of any statutory provision
empowering AMC to collect service tax, the demand raised by AMC and
the amount collected by AMC are without authority of law and cannot
be upheld.
It
is also necessary to note that the contention raised on behalf of
respondent No.3, Service Tax Department, that ownership of property
is not a relevant factor for determining liability to pay service
tax may in abstract appear to be correct. However, what has to be
considered is whether a taxable event has taken place, in the facts
of the present case. The provisions of section 65(105)(zzzm) of the
Service Tax Act require sale of space for advertisement, in other
words, providing space for display or advertisement, and AMC is not
in any manner providing space for display. Hence, to the said
extent, aspect of ownership assumes significance. If the structure
is erected by the petitioner on a premise privately owned, it cannot
be stated that AMC has provided space for display. In the present
case, the Court is not called upon to decide as to whether owner of
such private property answers the description of the person who is
providing service by sale of space for advertisement or providing
space for display.
In
light of what is stated hereinbefore, it is apparent that the act of
AMC in granting written permission for a fee is in context of
provisions of sections 244, 245 and 386 of the BPMC Act read
together and the said act cannot be termed to be a service provided
by AMC to make the act a taxable service for the purposes of Service
Tax Act.
AMC
has, therefore, erred in law in demanding service tax from
petitioner in the facts of the case and recovering the
same without authority of law. Accordingly, communications dated
6.5.2008 (Annexure A ), 8.7.2008 and 30.9.2008 (Annexure AA
collectively), 6.10.2008 (Annexure B ), 14.7.2009 (Annexure
D ) and 18.7.2009 (Annexure E ), are hereby quashed and
set aside, and Ahmedabad Municipal Corporation is directed not to
take any
steps for the purposes of effecting coercive recovery of service
tax. Ahmedabad Municipal Corporation is also directed to refund an
amount of Rs.6,17,165/- having wrongly recovered the same towards
service tax from the petitioner. Considering the nature of the
controversy, the prayer for refunding amount of Rs.6,17,165/- with
interest, is not accepted.
The
petition is allowed, accordingly, in the aforesaid terms. Rule made
absolute to the aforesaid extent with no order as to costs.
[D.A.MEHTA,
J.]
[HARSHA
DEVANI, J.]
parmar*
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