TaxTMI 
TaxTMI 
2013 (6) TMI 588
X X X X Extracts X X X X
X X X X Extracts X X X X
....d as follows: "65. Definitions.- (1) ..................... (2) ....................... (105) "taxable service" means any service provided or to be provided, - (a) -------------------- (zzq)- to any person, by any other person, in relation to commercial or industrial construction; Explanation : For the purposes of this sub-clause, the construction of a new building which is intended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorised by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer; ................................................................................... (zzzh) - to any person, by any other person, in relation to construction of complex; Explanation : For the purposes of this sub-clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorised by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lause (zzzzu), providing of a preferential location or development of a residential or a commercial complex is also added to the list of taxable services. 5. Let me now refer to the contentions urged by the learned counsel for the petitioners. The main contention is that no element of service is involved in construction & sale of a building/flat or in providing a preferential location vis-a-vis the builder and the buyer. Hence the impugned provisions are unconstitutional as Parliament lacks legislative competence to tax the services referred to therein, as the tax, in substance, is a tax on transfer of lands and buildings and therefore, the subject matter will fall within the ambit of Entry 49 of List II (State list) of the Seventh Schedule of the Constitution of India. 5.1 He further submitted that the impugned explanations are discriminatory inasmuch as no service tax is leviable on the construction, if no sum had been received from the prospective buyer before grant of completion certificate by the Competent Authority, whereas, if any sum had been received before grant of completion certificate, such a construction is exigible to service tax. He submitted that the aforesaid cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... property itself which would be referable to Entry 49 List II. It is, therefore, not possible to accept Mr. Krishnamurthy Iyer's submission and that a cess on royalty cannot possibly be said to be a tax or an impost on land. Mr. Nariman is right that royalty which is indirectly connected with land, cannot be said to be a tax directly on land as a unit. .........." (Emphasis Supplied) In the light of the above observations of the Supreme Court as to the scope of Entry 49, a tax on a particular activity in connection with land (in the present case it is Construction) cannot be said to be a tax directly on land to fall within the ambit of Entry 49 of List II of the Seventh Schedule of the Constitution. I may add that the law with respect to a subject might incidentally affect another subject in some way; but that is not the same thing as the law being on the latter subject In this context, it is relevant to refer to the following observations made in Federation of Hotel & Restaurant Association of India v. Union of India [1989] 3 SCC 634 on 'aspect theory' and 'overlapping': "31. Indeed, the law 'with respect to' a subject might incidentally 'affect&#....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w extends to any matter not covered by List II. In any event, as the impugned provisions are not with respect to any of the matters enumerated in List II, Parliament's power to levy service tax could be traced to its residuary power of Legislation under Article 248 read with Entry 97 of List I of the Seventh Schedule of the Constitution. It is useful to refer to a Seven judge Bench decision of the Supreme Court in Union of India v. H.S. Dhillon (AIR 1972 SC 1061), wherein it was held that the power of Parliament to make law extends to any matter not covered by List II (State list). The following observations made therein are relevant: "59........................we have the three lists and a residuary power and therefore it seems to us that in this context, if a Central Act is challenged, as being beyond the legislative competence of Parliament, it is enough to enquire if it is a law with respect to matters or taxes enumerated in List II. If it is not, no further question arises." (Emphasis supplied) In view of the above, the contention that Parliament lacks competence to enact the impugned provisions is devoid of merit. 8. Whether the impugned explanations are discriminatory....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... other tobacco called country tobacco 'Nattu tobacco'. If there is, then the Act is valid, if not it must be held to be unconstitutional. The finding of learned Judges on this point is as follows:- ................................................. Thus it will be seen that Virginia tobacco has features which distinguish it from country tobacco, and can be treated as a class in itself. It will therefore be within the power of the State to impose a tax on the sales of Virginia tobacco while exempting the country tobacco. (5) It is argued for the appellants that to repel the charge of discrimination in taxing only Virginia tobacco, and not the country tobacco, it is not sufficient merely to show that there are differences between the two varieties, but that it must further be shown, as held in Budhan Choudhry v. State of Bihar 1955-1 SCR 1045 : (S) AIR 1955 SC 191 and Ram Krishna Dalmia v. S.R. Tendolkar 1959 SCR 279 : (AIR 1958 SC 538), that the differentia has reasonable relation to the object of the legislation .................... We are unable to agree with this contention. If a State can va....