Gandhinagar, July 28: The Gujarat High Court has issued notices to the finance ministry and others on a suit by multiplex chain Cinemax India against the levy of service tax on the renting of its premises.
Cinemax India in a writ petition has challenged the constitutional validity of various sections of the 2010 Finance Act.
Counsel Premal Nanavaty said letting out of immovable property was only a property transaction and could not be considered as rendering of a service hence service tax could not be levied.
In its petition, Cinemax said parliament has no legislative competence to impose tax on land and building.
It claimed that entry 49 of the state list pertaining to taxes on land and buildings gave powers to state governments alone to impose tax on land and buildings.
The company said that in case of All India Federation of Tax Practitioners vs Union of India (2007), the Supreme Court has held that service tax is a value added tax (VAT) which in turn is destination-based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer.
The petition also cited a recent order of the Delhi High Court which, in the case of Home Solutions Retail India and others vs Union of India, held that service tax is a VAT and there is no value addition discernible on the renting of immovable property and therefore it cannot be considered as a service.
Further hearing on the case will be held Aug 4.