The Bombay High Court has allowed members of the Maharashtra Chamber of Housing Industry (MCHI) to deposit the service tax collected from buyers in the court.

The High Court had modified the earlier rule of undertakings to be submitted by the developers to the court.

A Division Bench comprising Mr Justice J.P. Devdhar and Mr Justice Mridula Bhatkar ordered deposit of the tax collected by the builders while hearing the writ petition filed by MCHI against the Union Government on February 18, 2011.

MCHI has challenged the Constitutional validity of the Finance Act 2010, seeking to amend the Finance Act 1994 to introduce the Service Tax concept of ‘Deemed Service.”

The High Court while admitting the petition on July 23 had granted an interim stay until further hearing.

The writ petition urged the High Court to restrain the respondents (Union of India and others) from taking steps against MCHI members in respect of the transactions for constructions, development and sale of immovable property under the various provisions of the Finance Act, 1994 and a new entry as amended thereon.

Mr Sunil Mantri, President, MCHI, said the Centre and the State have separate domains with regard to tax.

Mr Mantri said sale of a unit in a complex as per the settled law of transfer of property is not a service. Accordingly, sale of the same by the builder should not be treated as a service since Service Tax is levied ultimately on the property.