DELHI INTERNATIONAL AIRPORT PVT. LTD. Versus UOI AND OTHERS: Supreme court- The Finance Act, 2007
Supreme Court of India
CIVIL APPEAL NO.10785 OF 2014 @ SPECIAL LEAVE PETITION (CIVIL) NO.22941 OF 2014 Judgment Date: Dec 04, 2014
Non-Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.10785 OF 2014 @
SPECIAL LEAVE PETITION (CIVIL) NO.22941 OF 2014
DELHI INTERNATIONAL AIRPORT
PVT. LTD. .... Appellant
Versus
UOI AND OTHERS .... Respondents
O R D E R
Uday U. Lalit, J.
1. Leave granted. This appeal seeks to challenge the order dated
30.07.2014 passed by the High Court of Delhi in Writ Petition No.4274 of
2010 to the extent it directed the appellant to bear the cost for the bank
guarantee furnished by the present Respondent No.5.
2. The appellant and the Airport Authority of India entered into an
Operation, Management and Development Agreement ("OMDA" for short) dated
04.04.2006 whereby the appellant, undertook inter alia, to perform the
functions of the operation, management, development and design,
upgradation, modernization, finance and management of the Indira Gandhi
International Airport at Delhi and to perform Aeronautical Services and Non-
Aeronautical Services. The appellant was given on lease the premises of
the Airport for performing the obligations as mentioned in the OMDA. In
pursuance of its business and operation at the Airport, the appellant
entered into an agreement dated 09.11.2006 whereby licensees named therein
were granted a licence to set up and operate duty free shops within the
airport premises. Thereafter Respondent No.5 herein was incorporated and a
settlement agreement dated 07.02.2008 was signed whereby licence agreement
dated 09.11.2006 was novated in favour of Respondent No.5. In
consideration of said licence, Respondent No.5 was required to pay to the
appellant a fixed monthly licence fee and also a share of the gross revenue
generated by various products categories which were to be sold at the duty
free shops.
3. The Finance Act, 2007 introduced the levy of service tax on services
in relation to renting of immovable property through the introduction of
Section 65(90)(a). The charge of service tax was accordingly introduced in
Section 65(105)(zzzz). Thereafter section 65 (105)(zzm) of the Finance
Act, 1994 was amended with effect from 01.07.2010 and section 65 (105)
(zzzz) of the Finance Act, 1994 was also amended with retrospective effect
from 01.06.2007. In view of the amended clause 65 (105) (zzzz), service
tax was levied retrospectively from 01.06.2007 on renting of the immovable
property. In view of such retrospective amendment the appellant called
upon Respondent no.5 to send the entire amount of service tax w.e.f.
01.06.2007, which led to the filing of W.P. No.4274 of 2010 by respondent
no.5 in the High Court of Delhi. The High Court by its order dated
23.06.2010 extended the interim order passed in similar matter in favour of
respondent no.5 to the effect, "In the meanwhile there shall be no
recovery of service tax from the petitioner in respect of renting of
immovable property alone." During the pendency of said petition, the
appellant again vide its letter dated 28.06.2010 demanded payment of
service tax from respondent no.5.
4. Thereafter the revenue issued a demand-cum-show cause notice dated
22.10.2010 to the appellant demanding service tax for the period covering
2006-2007 to 2009-2010. While these demands were raised, the appellant
asserted that the liability was that of respondent no.5. Around this time
the disputes between the appellant, respondent no.5 and the holding company
of respondent no.5 were settled and an arbitration award was passed with
consent on 30.03.2011 which recorded that the service tax, interest and
penalty, if any, on the transaction between the appellant and respondent
no.5 was liable to be paid by respondent no.5 in terms of said award. The
relevant portion of the Consent Award was to the following effect:
"(iii) Respondent shall pay to the Claimant, the entire actual amount
towards - (a) Service Tax (b) Interest on Service Tax, and (c) Penalty on
Service Tax as may be imposed by the Government and /or relevant authority
in relation to the invoices raised by DIAL on Alpha Airport Retail Private
Limited under the Agreement within 7 days of such imposition. As the
actual amount towards (a), (b) and (c) (together referred to as 'Tax
Liability') cannot be ascertained as of now, in view of the litigation
pending (i.e. under Civil Writ Petition No.4274 of 2010) before the High
Court of Delhi, the amount calculated towards the Tax Liability is the
aggregate of :-
(a) an amount of INR 177,424,866 (Indian rupees one Hundred and Seventy-
Seven Million Four Hundred and Twenty Four Thousand Eight Hundred and Sixty
Six only) towards Service Tax chargeable and payable to the Government of
India, which may be increased or decreased as per the assessment or demand
made by the Service Tax Authorities.
(b) an amount payable towards the interest on Service Tax, calculated in
accordance with the applicable Service Tax rules;
(c) an amount payable towards penalty, if any, imposed on non-payment of
Service Tax calculated in accordance with the applicable Service Tax rules.
The Respondent shall make payment of the amount due towards the Tax
Liability within 7 (seven) days of receipt of demand from the Claimant in
this regard."
5. After the aforesaid interim order dated 23.06.2010 was confirmed till
the disposal of the writ petition, the appellant preferred CM No.7343 of
2012 for modification of the order dated 23.06.2010 seeking following
reliefs:
"a. Modify the interim order dated 23.06.2010 and pass an order directing
the Petitioner to deposit the amount payable towards Service Tax, interest
and penalty before this Hon'ble Court or to furnish a bank guarantee in
favour of the Applicant, Delhi International Airport Ltd, or the Union of
India of an amount of Rs.42,36,52,066/- comprising of Rs.17,74,24,866 as
service tax payable and Rs.6,88,02,334/ as interest till date and
Rs.17,74,24,866 towards penalty and to continue to deposit periodically
before this Hon'ble Court amounts towards interest accruing on the that
service tax, till the disposal of the petition or periodically increase
bank guarantee in favour of the Applicant in respect of the said amounts;
b. For such further and other orders, directions and reliefs as the
nature and circumstances of the case may require."
6. The aforesaid application was disposed of by the High Court directing
Respondent No.5 to furnish the bank guarantee in the sum of
Rs.42,36,52,066/- in favour of the Registrar General of the High Court for
securing the amount as none of the Directors of Respondent No.5 was within
the jurisdiction of the High Court and as Respondent No.5 had no assets in
this country. Respondent No.5, however, filed CM No.2222 of 2013 seeking
modification of the aforesaid order dated 05.11.2012. On the said
application, the High Court was pleased to direct Respondent No.5 to
furnish a bank guarantee of Rs.25 crores in favour of the Registrar General
of the High Court as an interim measure and the said order was later
confirmed on 10.04.2013. It was the contention of Respondent No.5 that the
insistence on the part of the appellant that Respondent No.5 must deposit
the tax or furnish the bank guarantee was contrary to the terms of the
Arbitration Award and thus the costs in respect of such bank guarantee
which were to the tune of Rs.1.06 crores were liable to be paid by the
appellant. The High Court left this question to be decided along with the
main writ petition.
7. The aforesaid writ petition No.4274 of 2010 preferred by Respondent
No.5 was finally heard by the High Court which held that the transaction
between the appellant and Respondent No.5 regarding letting out of
immovable property would not fall within the taxable service of "airport
services" under clause (zzz) of Section 65(105) prior to 01.07.2010. As
regards the liability to pay the costs for obtaining the bank guarantee
furnished by Respondent No.5 it observed that the appellant was fully aware
and had consented to the arrangements as recorded in the award dated
30.03.2011 and as such it was not open for the appellant to seek that
Respondent No.5 deposit the entire amount of service tax as the same was
contrary to the consent award dated 30.03.2011. It was further observed
that despite having such Consent Award in its favour, the appellant
insisted on Respondent No.5 securing it by a bank guarantee and as such it
is the appellant who must bear the cost for the bank guarantee furnished by
Respondent No.5. The High Court thus directed the appellant to pay to
Respondent No.5 a sum of Rs.1.06 crores, being the cost of bank guarantee.
8. It is this direction that the appellant must pay to Respondent No.5
the cost of bank guarantee, which is under challenge in the present appeal
We have heard Shri S.K. Bagaria, learned Senior Advocate for the appellant
and Mr. S. Ganesh, learned Senior Advocate for Respondent No.5. Having
gone through the matter and considered the rival submissions we affirm the
view taken by the High Court. The interest of the appellant was well
secured by the Award dated 30.03.2011 which was a Consent Award.
Respondent No.5 had an interim order in its favour passed by the High Court
and it was only because of the insistence on part of appellant that
Respondent No.5 was directed to furnish the bank guarantee. It is,
therefore, but logical and consequential that the appellant must bear the
costs for securing such bank guarantee. Confirming the view taken by the
High Court we dismiss the present appeal. However, there will be no order
as to costs.
.............................J.
(Anil R. Dave)
.............................J.
(Uday Umesh Lalit)
New Delhi,
December 04, 2014