The main legal point established in the judgment is the interpretation of contractual documents in light of the provisions of the Finance Act, 1994, Central Excise Act, 1944, and the principles of Value Added Tax (VAT) to determine the liability of the defendants to pay the service tax.

Mukta Gupta, J.

1. Pearey Lal Bhawan Association (in short “PLBA”) filed two suits being CS(OS) Nos. 1016/2008 and 1018/2008 against Satya Developers Pvt. Ltd. (in short “Satya”) whereas M/s Meattles Private Limited (in short “Meattles”) filed CS(OS) No. 512/2012 against M/s HDFC Bank Ltd. (in short “HDFC Bank”) seeking declaration and injunction qua the service tax paid in respect of rented premises.

2. The plaintiffs in the suit sought a declaration holding the defendants to be liable to pay the service tax leviable on the rent and the maintenance charges payable under the lease deed executed inter se the parties, recovery of amount and mandatory injunction requiring the defendants to pay to the plaintiff service tax of the amount on the lease rentals payable in future. Thus the three appeals are being disposed off by a common judgment as they involve common question of law.

3. In CS (OS) Nos.1018/2008 and 1016/2008 Plaintiff PLBA claimed that it was a registered society and being the owner of the building Pearey Lal Bhawan located at 2, Bahadur Shah Zafar Marg, New Delhi-110002 had entered into a registered lease deed dated October 09, 2006 with the Defendant Satya Developers in respect of an area measuring 500 sq.feet on the third floor of the premises Pearey Lal Bhawan and in respect of an area measuring 2818 sq.feet on the ground floor of the premises Peary Lal Bhawan. On October 16, 2006 the parties entered into a further agreement for maintenance of common service and facilities. With effect from June 01, 2007 the Central Government by amending Chapter-V of the Finance Act, 1994 levied service tax on renting of immovable property for business purposes. It was claimed that the service tax being an indirect tax has to be deposited by the service provider who was entitled to collect the same from the user of the service as it was a tax on the service and not on the service provider.

4. In the written statements filed Satya referring to the following terms of the lease agreement claimed that the parties have contracted that PLBA will pay the tax levied by the government and thus it had no liability to pay the service tax:-

“5. That the lessor shall continue to pay all or any taxes, levies or charges imposed by the MCD, DDA, L&DO and or Government, Local Authority etc”.

The defendant also relied on clause II(1) of the agreement for maintenance of common service and facilities, which reads as under:-

“II (1) That the Lessor to pay all rates, taxes, ground rent, house-tax charges, fire-fighting tax, easements and outgoing charges imposed or payable to the MCD, L&DO, DDA or Government in respect of the demised premises payable by the Lessor and discharge all its obligations well in time”.

5. In CS (OS) No.512/2012 Meattles claimed to be the lessor of the demised premises bearing Nos.3909-3912, Hamilton Road, Mori Gate, Kashmere Gate, New Delhi measuring approximately 2700 sq.ft of built up area on the ground floor leased out to HDFC Bank vide the registered lease deed dated November 25, 2004. The issue again raised was in relation to the service tax net w.e.f June 01, 2007 vide notification No.23/2007-ST dated May 22, 2007 and Finance Act, 2007.

6. In the written statement filed HDFC Bank also claimed that in terms of Clause 4(v) of the lease agreement it was not liable to pay the service tax as agreed between the parties which is reproduced as under:-

“The municipal taxes, rates, charges and other outgoings in respect of the demised premises that would be determined/fixed/varied from time to time by the Municipal Corporation/Municipality/Gram Panchayat or any other local authority shall be paid by the Lessor or the Lessee as specified/stipulated in the schedule annexed herewith and shall keep the other party indemnified at all times against the same.”

7. In CS (OS) Nos.1018/2008 and 1016/2008 the following common issues were settled except that in issue No.3 in CS (OS) No.1016/2008 the amount was Rs.3,55,270/- whereas in CS (OS)