The Supreme Court has upheld the levy of service tax by the central government on financial leasing services, including the leasing or hire-purchase of equipment.

A three-member bench comprising Chief Justice S H Kapadia and Justices K S Radhakrishnan and Swatanter Kumar dismissed a batch of petitions challenging the validity of amendments to the Finance Act, 1994, which provided for the levy of service tax on leasing and hire purchase transactions."We hold that the service tax imposed by Section 66 of the Finance Act, 1994, on the value of taxable services... (provided as) financial leasing services, including equipment leasing and hire-purchase, is within the legislative competence of the Parliament under Entry 97, List I of the Seventh Schedule of the Constitution," the bench said.

The apex court's ruling came over a batch of petitions filed by associations of leasing and financial companies, which had challenged the amendment to the Finance Act, 1994, for the levy of service tax on financial leasing services.

The government had first introduced the concept of service tax on July 1, 1994, through the Finance Act, 1994. Later, in 2001, service tax was extended to banking and other financial services.

Opposing the imposition of service tax on leasing and hire purchase services, the financial companies had contended before the apex court that these kind.

 

Full text of Judgment

Association of Leasing & Financial Service Companies Versus Union of India and others [2010 -TMI - 78066 - SUPREME COURT OF INDIA]    

 

Other Cases in which SC upheld the Legislative Competence of Parliament to levy service tax

T.N. Kalayana Mandapam Association [2005 -TMI - 135 - SUPREME COURT OF INDIA]

Gujarat Ambuja Cements Ltd. [2008 -TMI - 40371 - SUPREME Court]

All-India Federation of Tax Practitioners [2007 -TMI - 1556 - Supreme Court]

     

Service tax on financial leasing upheld as within Parliament's legislative competence under the Union List entry. Parliament may impose service tax on financial leasing services, including equipment leasing and hire-purchase, and the imposition on the value of taxable services provided as financial leasing falls within Parliament's legislative competence under the Union List entry; amendments to extend the Finance Act's service taxation to leasing and hire-purchase transactions are valid exercises of parliamentary power.