BADAR DURREZ AHMED, J

1. In this batch of writ petitions the legality, validity and vires of notification no. 24/2007 dated 22/05/2007 and circular no. 98/1/2008-ST dated 04/01/2008 issued by the Secretary, Ministry of Finance, Department of Revenue, Government of India, New Delhi is challenged. It is alleged that by virtue of the said notification and circular a completely erroneous interpretation is placed on section 65 (90a) and section 65 (105) (zzzz) of the Finance Act, 1994 as amended by the Finance Act, 2007. It is further alleged that because of this incorrect interpretation, service tax is sought to be levied on the renting of immovable property as opposed to service tax on a service provided "in relation to the renting of immovable property".

2. In essence, the petitioners have raised the question as to whether the Finance Act, 1994 (hereinafter referred to as the said Act) envisages the levy of service tax on letting out / renting out of immovable property per se ? According to the petitioners, who are either landlords or tenants in respect of leased premises, no such tax is envisaged under the said act. Consequently, the said notification dated 22/05/2007 and the said circular dated 04/01/2008 are sought to be set aside as being ultra vires the said act.

3. Alternatively, the petitioners have taken the plea that in case it is held that such a tax is envisaged then the provisions of section 65(90a), section 65(105)(zzzz) and section 66 insofar as they relate to the levy of service tax on renting of immovable property would amount to a tax on land and would therefore fall outside the legislative competence of Parliament inasmuch as the said subject is covered under Entry 49 of List II of the Constitution of India and would fall within the exclusive domain of the state legislature. As such, the said provisions would have to be declared as un-constitutional.

4. The said notification dated 22/05/2007 is an exemption notification purportedly issued in exercise of the power conferred by sub-section (1) of section 93 of the Finance Act, 1994. By virtue of the said notification, the central government exempted the "taxable service of renting of immovable property", referred to in sub-clause (zzzz) of clause (105) of section 65 of the Finance act, from so much of the service tax levy as was in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable property less taxes on such property, namely property tax levied or collected by local bodies. An example has also been provided in the said notification by way of illustration. The example is as under:-

"Example: Property tax paid for April to September = Rs 12,000/- Rent received for April = Rs 100,000/- Service tax payable for April = Rs 98,000/-(100,000-

12,000) * applicable rate of service tax"

5. It is the contention of the petitioners that though this notification speaks of an exemption it also refers to the “taxable service as a taxable service of renting of immovable property”. This, according to the petitioners, is not so provided under the said act. It is contended that section 65(105)(zzzz) refers to the service provided or to be provided to any person, by any other person, in relation to renting of immovable property for use in the course or furtherance of business or commerce. The reference in the said provision is not to the taxable service of renting of immovable property but to the taxable service "in relation to" the renting of immovable property. It is the petitioners contention that while the act does not treat renting of immovable property as a taxable service, the notification proceeds on the basis that the taxable service is the renting of immovable property itself. It is on this basis that it has been contended that service tax is sought to be

recovered from the petitioners on a pure misreading of the statutory provision.

6. Similarly, the impugned circular whilst giving a clarifi

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