KISHORE K.S Vs. CHERTHALA MUNICIPALITY

JUDGEMENT

(1.) COMMON issues are raised in these writ petitions and hence they are disposed of by a common judgment. Petitioners have taken rooms on rent from the respondent Municipality. They have been called upon to pay service tax. It is their case that the demand for service tax is illegal.

(2.) I heard learned counsel for the petitioner Sri.T.K.Ananda Padmanabhan in WPC No.26625/08, Sri.R.T.Pradeep in WPC No.27899/08, Learned counsel for the Central Government Sri.Gopinath Menon in both cases and learned counsel for the Municipality Sri.J.Omprakash in WPC. No.26625/08 and Sri.V.M.Kurian in WPC. No.27899/08. According to the petitioners, they have entered into agreements with the Municipality and they are in possession of the tenanted premises. Under the agreement, there is no provision for payment of service tax. Therefore, the demand for payment of service tax is illegal. Secondly, they would contend that service tax is a tax which is payable by the Municipality. It is their contention that there is no authority with the Municipality to pass it on to the petitioners. He would further contend that the demand should not be sustained as it violates Article 268A. Sri.R.T.Pradeep further contends that they are small tenants and the Municipality must be treated as units of the State within the meaning of Article 289. The intention behind Article 289 is that the property and income of the State should not be visited with tax. He also referred to Chapter IXA of the Constitution to contend that the Municipality is a unit of the State and, therefore, levy of service tax on the property or on the income of the Municipality is unsustainable. He would further contend that under Article 268A the law provides for sharing of the income between the unions and the States and the distribution must be based on a law made by Parliament and there is no such law.

(3.) SRI .Gopinath Menon and Sri.Omprakash would rely on the Division Bench decision of this court reported in All Kerala Chartered Accountants Association Vs. Union of India [2002 (2) KLT 512]. Therein, the Division Bench of this court referred to section 12B of the Central Excise Act and held as follows: