JUDGMENT 1. - Since common questions of law and facts are involved in these writ applications, they are being decided by this common order. 2. The facts are being noted from D.B. Civil Writ Petition No. 13535/2010 Ashiana Housing Limited & anr. v. Union of India & Ors. The petitioners have questioned the validity of explanation to clause (zzq) and (zzzh) of Section 65(105) and clause (zzzzu) to Section 65 (105) of the Finance Act, 1994 (hereinafter referred to as 'the Act of 1994’) as amended by the Finance Act, 2010 (hereinafter referred to as "the Act of 2010") and prayed to declare that levy of service tax under the said provisions is illegal, arbitrary and ultra vires the Constitution. 3. It is averred in the petition that the petitioners are engaged in the real estate business in India. They are engaged in carrying out construction for themselves and thereafter, sale of building/premises to the purchaser of the immovable property. According to the petitioners, consideration paid to them is purely a consideration for sale of immovable property and not for providing any construction service to the purchaser. Since the petitioners are receiving consideration for sale of immovable property before grant of completion certificate, the petitioners are directly affected by the explanation to Section 65(105) (zzq) and (zzzh) and Section 65(105) (zzzzu) of the Act of 1994 amended by the Act of 2010. The petitioners being the deemed service: provider have to bear the service tax as required by the said provisions. Hence, the present writ petition was filed challenging the explanation to Section 65(105) (zzq) and (zzh) and Section 65(105) (zzzzu) being arbitrary, illegal discriminatory and violative of Article 14 of the Constitution of India. It was contended that builders, who have received the payment of sale of immovable property subsequent to the grant of completion certificate has been exempted from payment of service tax whereas the builders who have received payment for sale of immovable property before the grant of completion certificate has been deemed to be service provider, especially when in both the situation the transaction is of sale of immovable property on which admittedly no service tax is chargeable. The classification based upon the time of receipt of payment from prospective buyer is wholly arbitrary, discriminatory and unreasonable and not based on any intelligible differentia. The classification based upon the time of receipt of payment from prospective buyer is wholly arbitrary, discriminatory and unreasonable and not based on any intelligible differentia. According to petitioners, the impugned provisions are ultra vires the Article 246 read with entry 49 of List II of Seventh Schedule to the Constitution. The Central Government was not competent to levy the service tax under the impugned provisions which seek to bring sale of immovable property within the purview of taxable services. No tax can be collected without authority of law as per Article 265 of the Constitution of India. The Union of India has no power to levy the service tax on impugned transaction and sale of immovable property. Entry 54 of the State List of Seventh Schedule deals with taxes on sale or purchase of goods and Entry 49 of State List of Seventh Schedule deals with taxes on lands and buildings. Thus, it was not within the power of the Union of India to levy service tax on land and building as it is a State subject. The impugned provisions of Section 65 (105) (zzq), (zzzh) and (zzzzu) are ultra vires the Constitution of India, particularly Articles 245, 246, 265 read with Entry 54 of the State List of Seventh Schedule. No service element is involved in the transaction of sale of immovable property and thus, service tax cannot be levied by impugned provisions as the very nature of tax will become direct in nature and the tax will be confiscatory and coercive on the petitioners and assessees. 4. A reply to the writ petition has been filed by the respondents contending that the provisions of Section 65(105)(zzq), (zzzh) and (zzzzu) cannot be said to be arbitrary, illegal, discriminatory, unconstitutional and violative of Article 14 of the Constitution of India. The builders who have received the payment for sale of immovable property subsequent to the grant of completion certificate have been exempted from payment of service tax because they are not providing any construction service after completion certificate, whereas the builders who have received the payment of sale of immovable property before the grant of completion certificate have been deemed to be service provider because before completion certificate they provide construction service to their prospective buyers or in other words they got construction services on behalf of their prospective buyers and therefore, chargeable to service tax. Service tax is being levied under the residuary power of taxation of the Centre in terms of Entry 97 of List I (Union List) of Seventh Schedule to the Constitution. Levy of service tax is not on sale of immovable property but it is on the construction services provided to the prospective buyer before completion certificate instead of sale of immovable property. It is also not a matter of levy of stamp duty on sale of immovable property. The impugned provisions of Section 65(105)(zzq), (zzzh) and (zzzzu) are constitutionally valid and while amending such provisions, no encroachment whatsoever on the power of State legislature was made by the Union of India. 5. The learned counsel appearing on behalf of the petitioners have submitted that levy of service tax under the impugned amended provisions was not within the legislative competence of the Union as the subject matter of tax falls within the competence of State legislature under Entry 49 of List II of the Seventh Schedule to the Constitution. The tax is directly on the transfer of lands or buildings and would fall within the legislative competence of the State under Article 246(3) read with Entry 49 of List II. By the explanation of clauses (zzq) and (zzzh) to Section 65 (105), the construction of a new building or complex has been treated to be a service when the construction is intended for sale and sum is received before grant of completion certificate by the competent authority. The classification based upon time of receipt of payment from prospective buyer is wholly unreasonable, arbitrary and discriminatory. The tax in pith and substance is not on construction, but on the sale of land as the element of sale is essential to fasten the charge. The sale of immovable property before, during or after construction, but before a completion certificate is granted, can by no stretch of imagination be regarded as a service. In fact, the tax is on the transfer of land and building and therefore, a tax on land and building within the meaning of Entry 49 of List II. The provisions of Section 65(105)(zzzzu) are also unconstitutional; no element of service is involved for providing preferential location or development of the complex; the tax should be treated as a tax on land per se; the provisions suffer from the vice of arbitrariness. The provisions of Section 65(105)(zzzzu) are also unconstitutional; no element of service is involved for providing preferential location or development of the complex; the tax should be treated as a tax on land per se; the provisions suffer from the vice of arbitrariness. Between a builder and a contractor who constructs a building, there may be a service element involving a service provider and receiver, but between the builder and a buyer there is no provision of service. Learned counsel for the petitioners have placed reliance on the decisions of the Apex Court in Ajoy Kumar Mukherjee v. Local Board of Barpeta [ 1965(3) SCR 47 : AIR 1965 SC 1561 ] , Bharat Sanchar Nigam Ltd. & anr. v. Union of India & Ors. [ 2006(3) SCC 1 ] , Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes [ 2008(9) STR 337 (SC) : 2008(2) SCC 614 ] and Godfrey Phillips India Ltd. & anr. v. State of U.P. & Ors. [ 2005(2) SCC 515 ] , 6. Per contra, learned counsel for the respondents have submitted that explanation to clauses (zzq) and (zzzh) of Section 65(105) does not impose tax on transfer of property, but the tax is on the service rendered during the course of construction. Construction is an activity on land or a user of land which does not fall within the scope of Entry 49 of List II. The impugned explanation was introduced to plug a loop hole and to obviate a seepage from the value added net of agreements which intrinsically involved service during the course of construction. The tax has not been imposed on the transfer or sale of immovable property, but as a matter of fact, tax is on construction service payable when there is an intent to sell and some payment is received before grant of completion certificate. Construction activity involves element of service. It was further submitted that Clause (zzzzu) to Section 65(105) was introduced to cover diverse services which builders used to provide under different heads for which charges are levied separately. Builders used to charge for providing preferential location and other development facilities and amenities which form part of service rendered. There is no arbitrariness in the provision. While amending the impugned provisions, no encroachment whatsoever on the power of State legislature was made by the Union of India. Builders used to charge for providing preferential location and other development facilities and amenities which form part of service rendered. There is no arbitrariness in the provision. While amending the impugned provisions, no encroachment whatsoever on the power of State legislature was made by the Union of India. The learned counsel for the respondents have relied upon the decisions of the Apex Court in Sudhir Chandra Nawn v. Wealth-tax Officer, Calcutta & Ors. [ AIR 1969 SC 59 ] , All India Federation of Tax Practitioners & Ors. v. Union of India & Ors. [ AIR 2007 SC 2990 : 2007(7) SCC 527 ] and Association of Leasing and Financial Service Companies v. Union of India & ors. [ 2011(2) SCC 352 ] and the decisions of Bombay High Court in Maharashtra Chamber of Housing Industry & Anr. v. Union of India [2012(189) ECR 227 (Bombay) : 2012(34) STT 384] and of Punjab and Haryana High Court in G.S. Promoters v. Union of India & ors. [2011(184) ECR 84 (P&H) : 2011(21) STR 100 ] . 7. Before considering the submissions, it would be appropriate to quote here the impugned provisions of Section 65(105)(zzq) and (zzh) and (zzzzu) ; "65 (105) "Taxable Service" means any service provided or to be provided : (zzq) to any person, by any other person, in relation to commercial or industrial construction service. 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. (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 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 a person authorised by the builder before the 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." (zzzzu) to a buyer, by a builder of a residential complex, or a commercial complex or any other person authorised by such builder, for providing preferential location or development of such complex but does not include services covered under sub-clauses (zzg), (zzq) (zzzh) and in relation to parking place. Explanation-For the purposes of this sub-clause "preferential location" means any location having extra advantage which attracts extra payment over and above the basic sale price." 8. The question which arises for consideration is whether levy of service tax under the amended provisions of Section 65(105)(zzq), (zzzh) and (zzzzu) of the Finance Act is valid and within the competence of Union of India. 9. Service tax is a levy on the event of service. The concept of service tax is an economic concept and its scope is being widened. Service tax is in the form of value added tax. The concepts of activity and the service provider and service recipient are of significance. In All India Federation of Tax Practitioners and others v. Union of India and others , (supra), the Apex Court observed that the source of the concept of service tax lies in economics. It is an economic concept. It has evolved on account of service industry becoming a major contributor to the GDP of an economy, particularly knowledge-based economy. With the enactment of the Finance Act. 1994, the Central Government derived its authority from the residuary Entry 97 of the Union List for levying tax on services. The legal back up was further provided by the introduction of Article 268-A in the Constitution vide the Constitution (Eighty-eighth Amendment) Act, 2003. With the enactment of the Finance Act. 1994, the Central Government derived its authority from the residuary Entry 97 of the Union List for levying tax on services. The legal back up was further provided by the introduction of Article 268-A in the Constitution vide the Constitution (Eighty-eighth Amendment) Act, 2003. It was further observed that just as excise duty is a tax on value addition on goods, service tax is on value addition by rendition of service. Broadly ‘services’ fall into two categories namely, property based services and performance based services. Property based services cover service providers such as architects, interior, designers, real estate agents construction services, mandapwalas etc. Performance based services are services provided by service providers like stock-brokers, practicing chartered accountants, practicing cost accountants, security agencies, tour operators, event managers, travel agents etc. 10. The Finance Act has sought to charge construction activity in the cases of agreements where some part of money has been paid. Explanation added to clauses (zzq) and (zzzh) of Section 65(105) clarifies the concept of service rendered by builder to a purchaser. Prerequisites to levy service tax are in case of complex that intendment to sell must exist along-with construction activity and payment of consideration is before grant of completion certificate. In case no payment has been made by buyer to contractor, service tax cannot be charged A circular has been issued by CBDT on 26.2.2010 containing objective behind the imposition. Relevant part of circular is quoted below : "Service tax on construction services 8.1 The service tax on construction of commercial or industrial construction services was introduced in 2004 and that on construction of complex was introduced in 2005. 8.2 As regards payment made by the prospective buyers/flat owners, in few cases the entire consideration is paid after the residential complex has been fully developed. This is in the nature of outright sale of the immovable property and admittedly no service tax is chargeable on such transfer. However, in most cases, the prospective buyer books a flat before its construction commencement/completion, pays the consideration in instalments and takes possession of the property when the entire consideration is paid and the construction is over. 8.3 In some cases the initial transaction between the buyer and the builder is done through an instrument called 'Agreement to Sell'. However, in most cases, the prospective buyer books a flat before its construction commencement/completion, pays the consideration in instalments and takes possession of the property when the entire consideration is paid and the construction is over. 8.3 In some cases the initial transaction between the buyer and the builder is done through an instrument called 'Agreement to Sell'. At that stage neither the full consideration is paid nor is there any transfer in ownership of the property although an agreement to ultimately sell the property under settled terms is signed. In other words, the builder continues to remain the legal owner of the property. At the conclusion of the contract and completion of the payments relating thereto, another instrument called Sale Deed is executed on payment of appropriate stamp duty. This instrument represents the legal transfer of property from the promoter to the buyer. 8.4 In other places a different pattern is followed. At the initial stage, instruments are created between the promoter and all the prospective buyers (which may include a person who has provided the vacant land for the construction), known as ‘Sale of Undivided Portion of the This instrument transfers the property right to the buyers though it does not demarcate a part of land, which can be associated with a particular buyer. Since the vacant land has lower value, this system of legal instrumentation has been devised to pay lesser stamp duty. In many cases, an instrument called ‘Construction Agreement’ is parrallely executed under which the obligations of the promoter to get property constructed and that of the buyer to pay the required consideration are incorporated. 8.5 These different patterns of execution, terms of payment and legal formalities have given rise to confusion, disputes and discrimination in terms of Service tax payment. 8.6 In order to achieve the legislative intent and bring in parity in tax treatment, an Explanation is being inserted to provide that unless the entire payment for the property is paid by the prospective buyer or on his behalf after the completion of construction (including its certification by the local authorities), the activity of construction would be deemed to be a taxable service provided by the builder/promoter/developer to the prospective buyer and the service tax would be charged accordingly. This would only expand the scope of the existing service, which otherwise remain unchanged." 11. This would only expand the scope of the existing service, which otherwise remain unchanged." 11. The explanation of Section 65(105)(zzq), (zzzh) & (zzzzu) expands the meaning of construction service. Main provision has to be read with explanation. In Hiralal Ratan Lal v. The Sales Tax Officer [ AIR 1973 SC 1034 ] , the Supreme Court held that explanation can widen scope of main section. Label of legislative provision is not material. Plain language or intent has to be given effect. 12. Though under the Transfer of Property Act, 1882 property is not transferred merely on an agreement to sell, however fiscal legislation taking into account contracts involving various kinds of agreements between builders and buyers regarded that the transaction did involve an element of service, were sought to be taxed. We cannot accept the submission that provision is discriminatory as such violative of Article 14, inasmuch as, no service tax is levied in case of sale when no part of consideration is paid earlier. There is no question of parity in such case as once payment is made before grant of completion certificate the construction is on behalf of intending buyer which includes various services but it is not so when there is no payment of consideration during construction and outright sale after completion. 13. In the case of residential or commercial complex, clause (zzzzu) of Section 65(105) brings in services provided to a buyer by a builder for providing preferential location or development of such complex with certain exclusions. The preferential location attracts extra payment over and above the basic sale price for extra advantages. As per circular dated 26 February 2010 of CBDT, in addition to activities involving construction, completion and furnishing repair, alteration, renovation or restoration, the builders of residential or commercial complexes provide other facilities and charge separately for them. There are similar other charges, they were brought within the ken of clause (zzzzu). 14. The classification cannot in any manner be regarded as arbitrary or discriminatory. The legislature has expanded the notion of taxable service by incorporating within the ken of clause (zzq) and clause (zzzn) services rendered by a builder to the buyer in the course of an intended sale. The legislative provision cannot be said to be arbitrary in any manner. As already stated above, service tax is a value added tax. The legislature has expanded the notion of taxable service by incorporating within the ken of clause (zzq) and clause (zzzn) services rendered by a builder to the buyer in the course of an intended sale. The legislative provision cannot be said to be arbitrary in any manner. As already stated above, service tax is a value added tax. Value addition is on account of the activity like planning, consultation, advising etc. It is an activity which provides value addition as in the case of manufacturer of goods, which attract service tax. Service tax has been levied on account of the activity involving a value addition such as activities undertaken by an architect, by civil contractors and engineers in constructing the building and in the provision of other utility services. Various choices are offered to buyers in respect of bath-rooms, other fittings, flooring, paints, other materials to be used for furnishing, electrical fitting, wash basins, showers etc. Value additions are provided by developers. Service tax is levied on the value addition which builders provide to buyers in the form of service rendered in the course of construction and construction related activities can by no stretch of imagination be regarded as so manifestly absurd so as to impinge on the constitutional validity of the provision. 15. Thus, the explanation to clause (zzq) and (zzzh) of Section 65(105) and clause (zzzzu) of Section 65 (105) cannot in any manner be said to be ultra vires, arbitrary, discriminatory and violative of Article 14 of the Constitution. 16. In Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes (supra) upon which reliance has been placed by the learned counsel for the petitioners, the question arose whether the charges collected towards the services for evolution of prototype conceptual design on which service 2 tax had been paid under the Finance Act, 1994 as amended from time to time is liable to tax under the Karnataka Value Added Tax Act, 2003. An order was passed by the Assessing Authority in terms of Section 12 of the Karnataka Sales Tax Act and Rule 3 of the Karnataka Sales Tax Rules. The Apex Court held that as the appellant was a service provider and it provides for service, it 3 is assessable to a tax known as service tax. Such tax is leviable by reason of a Parliamentary statute. The Apex Court held that as the appellant was a service provider and it provides for service, it 3 is assessable to a tax known as service tax. Such tax is leviable by reason of a Parliamentary statute. In the matter of interpretation of a taxing statute, as also other statutes where the applicability of Article 246 of the Constitution of India, read with Seventh Schedule thereof in question, the Court may have to take recourse to various theories including ‘aspect theory’ as was noticed in Federation of Hotel & Restaurant Association of India etc. v. Union of India & Ors. [ 1989(3) SCC 634 ] , The Apex Court Imagic Creative Pvt. Ltd. (supra) has further held that payments of service tax as also the VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as contra distinguished from an indivisible contract. It may consist of different elements providing for attracting different nature of levy. It is therefore, difficult to hold that in a case of this nature, sales tax would be payable on the value of the entire contract, irrespective of the element of service provided. The approach of the assessing authority was upheld. 17. The decision in the case of Imagic Creative Pvt. Ltd. (supra) is not helpful to the petitioners. Rather each transaction has to be considered and when service tax is to be considered, aspect theory has also to be taken into consideration. 18. In Godfrey Phillips India Ltd. & anr. v. State of U.P. and ors. (supra), the Apex Court held that under the three lists of the Seventh Schedule to the Constitution a taxation entry in a legislature list may be with respect to an object or an event or may be with respect to both. Article 246 makes it clear that the exclusive powers conferred on Parliament or the States to legislate on a particular matter includes the power to legislate with respect to that matter. Hence, where the entry describes an object of tax, all taxable events pertaining to the object are within that field of legislation unless the event is specifically provided for elsewhere under a different legislative head. Hence, where the entry describes an object of tax, all taxable events pertaining to the object are within that field of legislation unless the event is specifically provided for elsewhere under a different legislative head. Where there is the possibility of legislative overlap, courts have to resolve the issue according to settled principles of construction of entries in the legislative lists. Various settled principles have been taken into consideration which includes "aspect theory". Merely because construction activities were taken over the land or building, it would not become a tax on land. 19. There may be various aspects of an activity. Merely because the construction activities were taking place on the land or building, it cannot be said that the service tax is on the land or building which is covered under Entry 49 of List II of Seventh Schedule to the Constitution. There are various aspects of such transaction. The issue of interpretation of taxing entries under the Constitution of India including the aspect theory has been considered by the Apex Court in various decisions. In Federation of Hotel & Restaurant Association of India, etc. v. Union of India & ors. (supra), the aspect theory has been considered thus : 26 Wherever legislative powers are distributed between the Union and the States, situations may arise where the two legislative fields might apparently overlap. It is the duty of the courts, however difficult it may be, to ascertain to what degree and to what extent, the authority to deal with matters falling within these classes of subjects exists in each legislature and to define, in the particular case before them, the limits of the respective powers. It could not have been the intention that a conflict should exist; and, in order to prevent such a result the two provisions must be read together, and the language of one interpreted, and, where necessary modified by that of the other. 27. It could not have been the intention that a conflict should exist; and, in order to prevent such a result the two provisions must be read together, and the language of one interpreted, and, where necessary modified by that of the other. 27. The Judicial Committee in Prafulla Kumar Mukherjee v. Bank of Commerce AIR 1947 PC 60 , referred to with approval the following observations of Sir Maurice Gwyer ‘C.J.’ in Subrahmanyan Chettiar case : "It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind observance to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the legislature enacting them may appear to have legislated in a forbidden sphere. Hence the rule which has been evolved by the Judicial Committee, whereby the impugned statute is examined to ascertain its 'pith and substance’, or its ‘true nature and character', for the purpose of determining whether it is legislation with respect to matters in this list or in that." 28. This necessitates as an "essential of federal Government the role of an impartial body, independent of general and regional governments", to decide upon the meaning of division of powers. The Court is this body. 29. The position in the present case assumes a slightly different complexion. It is not any part of the petitioners’ case that "expenditure tax" is one of the taxes within the States’ power or that it is a forbidden field for the Union Parliament. On the contrary, it is not disputed that a law imposing "expenditure tax" is well within the legislative competence of Union Parliament under Article 248 read with Entry 97 of List I. But the specific contention is that the particular impost under the impugned law, having regard to its nature and incidents, is really not an "expenditure tax" at all as it does not accord with the economists' notion of such a tax. That is one limb of the argument. The other is that the law is, in pith and substance, really one imposing a tax on luxuries or on the price paid for the sale of goods. That is one limb of the argument. The other is that the law is, in pith and substance, really one imposing a tax on luxuries or on the price paid for the sale of goods. The crucial questions, therefore, are whether the economists’ concept of such a tax qualifies and conditions the legislative power and, more importantly, whether "expenditure" laid out on what may be assumed to be "luxuries" or on the purchase of goods admits of being isolated and identified as a distinct aspect susceptible of recognition as a distinct field of tax legislation. 30. In Lefroy’s Canada’s Federal System the learned Author referring to the “aspects of legislation" under Sections 91 and 92 of the Canadian Constitution i.e. British North America Act, 1867 observes that "one of the most interesting and important principles which have been evolved by judicial decisions in connection with the distribution of legislative power is that subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power." Learned Author says : ".... that by ‘aspect’ must be understood the aspect or point of view of the legislator in legislating the object, purpose, and scope of the legislation that the word is used subjectively of the legislator, rather than objectively of the matter legislated upon." In Union Colliery Co. of British Columbia v. Bryden 1899 AC 580, 587 , Lord Haldane said : "It is remarkable the way this Board has reconciled the provisions of Section 91 and Section 92, by recognising that the subjects which fall within Section 91 in one aspect, may, under another aspect, fall under Section 92." 31. Indeed, 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. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detract from the distinctiveness of the aspects. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detract from the distinctiveness of the aspects. Lord Simonds in Governor-General-in-Council v. Province of Madras AIR 1945 PC 98 in the context of concepts of Duties of Excise and Tax on Sale of Goods said : "The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of, his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separated and distinct posts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale " 32. Referring to the "aspect' doctrine Laskin’s Canadian Constitutional Law states : "The ‘aspect’ doctrine bears some resemblance to those just noted but, unlike them, deals not with what the ‘matter’ is but with what it ‘comes within' .... (p. 115) ".... it applies where some of the constitutive elements about whose combination the statute is concerned (that is, they are its ‘matter’), are a kind most often met with in connection with one class of subjects and others are of a kind mostly dealt with in connection with another. As in the case of a pocket gadget compactly assembling knife blade, screwdriver, fishscaler, nail file, etc., a description of it must mention everything but in characterising it the particular use proposed to be made of it determines what it is. (p. 116) ".... I pause to comment on certain correlations of operative incompatibility and the ‘aspect’ doctrine. Both grapple with the issues arising from the composite nature of a statute, one as regards the preclusory impact of federal law on provincial measures bearing on constituents of federally regulated conduct, the other to identify what parts of the whole making up a ‘matter’ bring it within a class of subjects " (p. 117). 38. Both grapple with the issues arising from the composite nature of a statute, one as regards the preclusory impact of federal law on provincial measures bearing on constituents of federally regulated conduct, the other to identify what parts of the whole making up a ‘matter’ bring it within a class of subjects " (p. 117). 38. Indeed, as an instance of different aspects of the same matter, being the topic of legislation under different legislative powers, reference may be made to the annual letting value of a property in the occupation of a person for his own residence being, in one aspect, the measure for levy of property tax under State law and in another aspect constitute the notional or presumed income for the purpose of income tax." 20. Thus, in the case of Federation of Hotel & Restaurant Association of India (supra), it was observed that subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. There might be overlapping, but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detract from the distinctiveness of the aspects. 21. In State of W.B. v. Kesoram Industries Ltd. [ 2004(10) SCC 201 ] , the Apex Court has clarified that there can be an overlapping in fact, as the methodology or mechanism adopted for assessment and quantification can be similar for taxes relating to different fields of taxation, but there can be no overlapping in law i.e. even though the mechanism adopted for assessment is similar but the subject matter of two taxes by reference to the two lists can be different and therefore, two taxes cannot be said to be overlapping. The Apex Court relied upon the decisions in Hoechst Pharmaceuticals Ltd. v. State of Bihar [ 1983(4) SCC 45 ] and Governor General in Council v. Province of Madras [ AIR 1945 PC 98 ] . The Apex Court in the case of Kesoram (supra) has laid down thus : "31. Article 245 of the Constitution is the fountain source of legislative power. The Apex Court in the case of Kesoram (supra) has laid down thus : "31. Article 245 of the Constitution is the fountain source of legislative power. It provides - subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of the State. The legislative field between Parliament and the 5 legislature of any State is divided by Article 246 of the Constitution. Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule, called the "Union List". Subject to the said power of Parliament, the legislature of any State has power to make laws with respect to any of the matters to enumerated in List III. called the "Concurrent List". Subject to the above said two, the legislature of any State has exclusive power to make laws with respect to any of the matters enumerated in List II, called the “State List". Under Article 248 the exclusive power of Parliament to make laws extends to any matter not enumerated in the Concurrent List or State List. The power of making any law imposing a tax not mentioned in the Concurrent List or State List vests in Parliament. This is what is called the residuary power vesting in Parliament. The principles have been succinctly summarised and restated by a Bench of three learned Judges of this Court in a review of the available decision in Hoechst Pharmaceuticals Ltd. v. State of Bihar . They are : (1) The various entries in the three lists are not "powers" of legislation but "fields" of legislation. The Constitution effects a complete separation of the taxing power of the Union and of the States under Article 246. There is no overlapping anywhere in the taxing 2 power and the Constitution gives independent sources of taxation to the Union and the States. (2) In spite of the fields of legislation having been demarcated, the question of repugnancy between law made by Parliament and a law made by the State Legislature may arise only in cases when 3 both the legislation's occupy the same field with respect to one of the matters enumerated in the Concurrent List and a direct conflict is seen. (2) In spite of the fields of legislation having been demarcated, the question of repugnancy between law made by Parliament and a law made by the State Legislature may arise only in cases when 3 both the legislation's occupy the same field with respect to one of the matters enumerated in the Concurrent List and a direct conflict is seen. If there is a repugnancy due to overlapping found between List II on the one hand and List I and List III on the other, the State law will be ultra vires and shall have to give way to the Union law. (3) Taxation is considered to be a distinct matter for purposes of legislative competence. There is a distinction made between general subjects of legislation and taxation. The general subjects of legislation are dealt with in one group of entries and power of taxation in a separate group. The power to tax cannot be deduced/from a general legislative entry as an ancillary power. (4) The entries in the lists being merely topics or fields of legislation, they must receive a liberal construction inspired by a broad and generous spirit and not in a narrow pedantic sense. The words and expressions employed in drafting the entries must be given the -widest-possible interpretation. This is because, to quote V. Ramaswami, J., the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere simplex enumeration of broad categories. A power to legislate as to the principal matter specifically mentioned in the entry shall also include within its expanse the legislation's touching incidental and ancillary matters. (5) Where the legislative competence of the legislature of any State is questioned on the ground that it encroaches upon the legislative competence of Parliament to enact a law, the question one has to ask is whether the legislation relates to any of the entries in List I or III. If it does, no further question need be asked and Parliament’s legislative competence must be upheld. Where there are three lists containing a large number of entries, there is bound to be some overlapping among them. In such a situation the doctrine of pith and substance has to be applied to determine as to which entry does a given piece of legislation relate. Where there are three lists containing a large number of entries, there is bound to be some overlapping among them. In such a situation the doctrine of pith and substance has to be applied to determine as to which entry does a given piece of legislation relate. Once it is so determined, any incidental trenching on the field reserved to the other legislature is of no consequence. The court has to look at the substance of the matter. The doctrine of pith and substance is sometimes expressed in terms of ascertaining the true character of legislation. The name given by the legislature to the legislation is immaterial. Regard must be had to the enactment as a whole, to its main objects and to the scope and effect of its provisions. Incidental and superficial encroachments are to be disregarded. (6) The doctrine of occupied field applies only when there is a clash between the Union and the State Lists within an area common to both. There the doctrine of pith and substance is to be applied and if the impugned legislation substantially falls within the power expressly conferred upon the legislature which enacted it, an incidental encroaching in the field assigned to another legislature is to be ignored. While reading the three lists, List I has priority over Lists III and II and List III has priority over List II. However, still, the predominance of the Union List would not prevent the State Legislature from dealing with any matter within List II though it may incidentally affect any item in List I. 43. In Ralla Ram v. Province of East Punjab AIR 1949 FC 81 the Federal Court made it clear that every effort should be made as far as possible to reconcile the seeming conflict between the provisions of the Provincial legislation and the Federal legislation. Unless the court forms an opinion that the extent of the alleged invasion by a Provincial Legislature into the field of the Federal Legislature is so great as would justify the view that in pith and substance the impugned tax is a tax within the domain of the Federal Legislature, the levy of tax would not be liable to be struck down. The test laid down in Sir Byramjee Jeejeebhoy case AIR 1940 Bom. 65 by the Full Bench of the Bombay High Court was approved. 44. In Asstt. Commr. The test laid down in Sir Byramjee Jeejeebhoy case AIR 1940 Bom. 65 by the Full Bench of the Bombay High Court was approved. 44. In Asstt. Commr. of Urban Land Tax v. Buckingham and Carnatic Co. Ltd. (1969) 2 SCC 55 for the purpose of attracting the applicability of Entry 49 in List II, so as to cover the impugned levy of tax on lands and buildings, the Constitution Bench laid down twin tests, namely : (i) that such tax is directly imposed on lands and buildings, and (ii) that it bears a definite relation to it. Once these tests are satisfied, it was open for the State Legislature, for the purpose of levying tax, to adopt the annual value or the capital value of the lands and buildings for determining the incidence of tax. Merely, on account of such methodology having been adopted, the State Legislature cannot be accused of having encroached upon Entry 86, 87 or 88 of List II. Entry 86 in List I proceeds on the principle of aggregation and tax is imposed on the totality of the value of all the assets. It is quite permissible to separate lands and buildings for the purpose of taxation under Entry 49 in List II. There is no reason for restricting the amplitude of the language used in Entry 49 in List II. The levy of tax, calculated at the rate of a certain per centum of the market value of the urban land, was held to be intra vires the powers of the State Legislature and not trenching upon Entry 86 in List I. So is the i view taken by another Constitution Bench in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality (1969) 2 SCC 283 where the submission that the levy was not a rate on lands and buildings as appropriately understood but rather a tax on capital value, was discarded. 45. R.R. Engg. Co. v. Zila Parishad, Bareilly (1980) 3 SCC 330 is a case of circumstances and property tax levied on the basis of income which the Assessee receives from his profession, trade, calling or property. The plea that the tax was a tax on income was discarded. The test propounded by the Constitution Bench is that an excessive levy on circumstances may be tend to blur the distinction between a tax on income and a tax on circumstances. The plea that the tax was a tax on income was discarded. The test propounded by the Constitution Bench is that an excessive levy on circumstances may be tend to blur the distinction between a tax on income and a tax on circumstances. Income will then cease to be a measure or yardstick of the tax and will become the very subject-matter of the tax. Restraint in this behalf is a prudent prescription for the local authorities to follow. The Constitution Bench observed that it was only a -matter of convenience that income was adopted as a yardstick or measure for assessing the tax and the evolvement of such mechanism was not conclusive on the nature of tax. xxx xx xx xxx 50 .... The Constitution is an organic living document. Its outlook and : expression as perceived and expressed by the interpreters of the Constitution must be dynamic and keep pace with the changing times. Though the basics and fundamentals of the Constitution remain unalterable, the interpretation of the flexible provisions of the Constitution can be accompanied by dynamism and lean, in case of conflict, in favour of the weaker or the one who is more needy. Several taxes are collected by the Centre and allocation of revenue is made to States from time to time. The Centre consuming the lion’s share of revenue has attracted a good amount of criticism at the hands of the States and financial experts. The interpretation of entries can afford to strike a balance, or at least try to remove imbalance, so far as it can. Any conscious whittling down of the powers of the State can be guarded against by the courts. "Let it be said that the federalism in the Indian Constitution is not a matter of administrative convenience, but one of principle - the outcome of our own historical process and a recognition of the ground realities." (SCC p. 217, para 276) Quoting from Setalvad, M.C. : Tagore Law Lectures, "Union and State Relations under the Indian Constitution" (Eastern Law House, Calcutta, 1974), Jeevan Reddy, J. observed : (SCC p. 217, para 276) "It is enough to note that our Constitution has certainly a bias towards centre vis-a-vis the States ... It is equally necessary to emphasise that courts should be careful not tip upset the delicately crafted constitutional scheme by a process of interpretation." Xx xx xx xx In a nutshell 129. The relevant principles culled out from the preceding discussion are summarised as under: (1) In the scheme of the lists in the Seventh Schedule, there exists a clear distinction between the general subjects of legislation and heads of taxation. They are separately enumerated. (2) Power of "regulation and control" is separate and distinct from the power of taxation and so are the two fields for purposes of legislation. Taxation may be capable of being comprised in the main subject of general legislation head by placing an extended construction but that is not the rule for deciding the appropriate legislative field for taxation between List I and List II. As the fields of taxation are to be found clearly enumerated in Lists I and II, there can be no overlapping. There may be overlapping in fact but there would be no overlapping in law. The subject-matter of two taxes by reference to the two lists is different. Simply because the methodology or mechanism adopted for assessment and quantification is similar, the two taxes cannot be said to be overlapping. This is the distinction between the subject of a tax and the measure of a tax. (3) The nature of tax levied is different from the measure of tax. While the subject of tax is clear and well defined, the amount of tax is capable of being measured in many ways for the purpose of quantification. Defining the subject of tax is a simple task; devising the measure of taxation is a far more complex exercise and, therefore, the legislature has to be given much more flexibility in the latter field. The mechanism and method chosen by the legislature for quantification of tax is not decisive of the nature of tax though it may constitute one relevant factor out of many for throwing light on determining the general character of the tax. (4) Entries 52, 53 and 54 in List I are not heads of taxation. They are general entries. The mechanism and method chosen by the legislature for quantification of tax is not decisive of the nature of tax though it may constitute one relevant factor out of many for throwing light on determining the general character of the tax. (4) Entries 52, 53 and 54 in List I are not heads of taxation. They are general entries. Fields of taxation covered by Entries 49 and 50 in List II continue to remain with State Legislatures in spite of the Union having enacted laws by reference to Entries 52, 53 and 54 in List I. It is for the Union to legislate and impose limitations on the States’ otherwise plenary power to levy taxes on mineral rights or taxes on lands (including mineral-bearing lands) by reference to Entries 50 and 49 and in List II, and lay down the limitations on the States’ power, if it chooses to do so, and also to define the extent and sweep of such limitations. (5) The entries in List I and List II must be so construed as to avoid any conflict. If there is no conflict, an occasion for deriving assistance from non-obstante clause "subject to" does not arise. If there is conflict, the correct approach is to find an answer to three questions step by step as under: One - Is it still possible to effect reconciliation between two entries so as to avoid conflict and overlapping ? Two - In which entry the impugned legislation falls by finding out the pith and substance of the legislation : and Three - Having determined the field of legislation wherein the impugned legislation falls by applying the doctrine of pith and substance, can an incidental trenching upon another field of legislation be ignored ? (6) "Land", the term as occurring in Entry 49 of List II, has a wide connotation. Land remains land though it may be subjected to different user. The nature of user of the land would not enable a piece of land being taken out of the meaning of land itself. Different uses to which the land is subjected or is capable of being subjected provide the basis for classifying land into different identifiable groups for the purpose of taxation. The nature of user of the land would not enable a piece of land being taken out of the meaning of land itself. Different uses to which the land is subjected or is capable of being subjected provide the basis for classifying land into different identifiable groups for the purpose of taxation. The nature of user of one piece of land would enable that piece of land being classified separately from another piece of land which is being subjected to another kind of user, though the two pieces of land are identically situated except for the difference in nature of user. The tax would remain a tax on land and would not become a tax on the nature of its user. (7) To be a tax on land, the levy must have some direct and definite relationship with the land. So long as the tax is a tax on land by bearing such relationship with the land, it is open for the legislature for the purpose of levying tax to adopt any one of the well-known modes of determining the value of the land such as annual or capital value of the land or its productivity. The methodology adopted, having an indirect relationship with the land, would not alter the nature of the tax as being one on land. (8) The primary object and the essential purpose of legislation must be distinguished from its ultimate or incidental results or consequences, for determining the character of the levy. A levy essentially in the nature of a tax and within the power of the State Legislature cannot be annulled as unconstitutional merely because it may have an effect on the price of the commodity. A State legislation, which makes provisions for levying a cess, whether by way of tax to augment the revenue resources of the State or by way of fee to render services as quid pro quo but without any intention of regulating and controlling the subject of the levy, cannot be said to have encroached upon the field of "regulation and control" belonging to the Central Government by reason of the incidence of levy being permissible to be passed on to the buyer or consumer, and thereby affecting the price of the commodity or goods. Entry 23 in List II speaks of regulation of mines and mineral development subject to 'the provisions of List I with respect to regulation and development under the control of the Union. Entries 52 and 54 of List I are both qualified by the expression "declared by Parliament by law to be expedient in the public interest." A reading in juxtaposition shows that the declaration by Parliament must be for the "control of industries" in Entry 52 and "for regulation of mines or for mineral development" in Entry 54. Such control, regulation or development must be "expedient in the public interest". Legislation by the Union in the field covered by Entries 52 and 54 would not like a magic touch or a taboo denude the entire field forming the subject-matter of declaration to the State Legislatures. Denial to the State would extend only to the extent of the declaration so made by Parliament. In spite of declaration made by reference to Entry 52 or 54, the State would be free to act in the field left out from the declaration. The legislative power to tax by reference to entries in List II is plenary unless the entry itself makes the field "subject to" any other entry or abstracts the field by any limitations imposable and permissible. A tax or fee levied by the State with the object of augmenting its finances and in reasonable limits does not ipso facto trench upon regulation, development or control of the subject. It is different if the tax or fee sought to be levied by the State can itself be called regulatory, the primary purpose whereof is to regulate or control and augmentation of revenue or rendering service is only secondary or incidental. (9) The heads of taxation are clearly enumerated in Entries 83 to 92-B in List I and Entries 45 to 63 in List II. List III, the Concurrent List, does not provide for any head of taxation. Entry 96 in List I, Entry 66 in List II and Entry 47 in List III deal with fees. The residuary power of legislation in the field of taxation spelled out by Article 248(2) and Entry 97 in List I can be applied only to such subjects as are not included in Entries 45 to 63 of List II. Entry 96 in List I, Entry 66 in List II and Entry 47 in List III deal with fees. The residuary power of legislation in the field of taxation spelled out by Article 248(2) and Entry 97 in List I can be applied only to such subjects as are not included in Entries 45 to 63 of List II. It follows that taxes on lands and buildings in Entry 49 of List II cannot be levied by the Union. Taxes on mineral rights, a subject in Entry 50 of List II, can also not be levied by the Union though as stated in Entry 50 itself the Union may impose limitations on the power of the State and such limitations, if any, imposed by Parliament by law relating to mineral development to that extent shall circumscribe the States’ power to legislate. Power to tax mineral rights is with the States; the power to lay down limitations on exercise of such power, in the interest of regulation, development or control, as the case may be, is with the Union. This is the result achieved by homogeneous reading of Entry 50 in List II and Entries 52 and 54 in List I. So long as a tax or fee on mineral rights remains in pith and substance a tax for augmenting the revenue resources of the State or a fee for rendering services by the State and it does not impinge upon regulation of mines and mineral development or upon control of industry by the Central Government, it is not unconstitutional. 22. In All-India Federation of Tax Practitioners & ors. v. Union of India & ors. (supra), tax on profession was held to be distinct from professional service. It was observed thus : "34. As stated above, Entry 60, List II refers to taxes on professions, etc. It is the tax on the individual person/firm or company. It is the tax on the status. A chartered accountant or a cost accountant obtains a licence or a privilege from the competent body to practise. On that privilege as such the State is competent to levy a tax under Entry 60. However, as stated above, Entry 60 is not a general entry. It cannot be read to include every activity undertaken by a chartered accountant/cost accountant/architect for consideration. On that privilege as such the State is competent to levy a tax under Entry 60. However, as stated above, Entry 60 is not a general entry. It cannot be read to include every activity undertaken by a chartered accountant/cost accountant/architect for consideration. Service tax is a tax on each activity undertaken by a chartered accountant/cost accountant or an architect. The cost accountant/chartered accountant/architect charges his client for advice or for auditing of accounts. Similarly, a cost accountant charges his client for advice as well as doing the work of costing. For each transaction or contract, the chartered accountant/cost accountant renders profession based services. The activity undertaken by the chartered accountant or the cost accountant or an architect has two aspects. From the point of view of the chartered accountant/cost accountant it is an activity undertaken by him based on his performance and skill. But from the point of view of his client, the chartered accountant/cost accountant is his service provider. It is a tax on "services". The activity undertaken by the chartered accountant or cost accountant is similar to saleable or marketable commodities produced by the Assessee and cleared by the Assessee for home consumption under the Central Excise Act. 35. For each contract, tax is levied under the Finance Acts, 1994 and 1998. Tax cannot be levied under that Act without service being provided whereas a professional tax under Entry 60 is a tax on his status. It is the tax on the status of a cost accountant or a chartered accountant. As long as a person/firm remains in the profession, he/it has to pay professional tax. That tax has nothing to do with the commercial activities which he undertakes for his client. Even if the chartered accountant has no work throughout the accounting year, still he has to pay professional tax. He has to pay the tax till he remains in the profession. This is the ambit and scope of Entry 60, List II which is a taxing entry. Therefore, Entry 60 contemplates tax on professions, as such. Entry 60, List II refers to "tax on employments". Xx xx xxx xxx 43. As stated above every entry in the Lists has to be given a schematic interpretation. As stated above, constitutional law is about concepts and principles. Some of these principles have evolved out of judicial decisions. The said test is also applicable to taxation laws. Entry 60, List II refers to "tax on employments". Xx xx xxx xxx 43. As stated above every entry in the Lists has to be given a schematic interpretation. As stated above, constitutional law is about concepts and principles. Some of these principles have evolved out of judicial decisions. The said test is also applicable to taxation laws. That is the reason why the entries in the Lists have been divided into two groups, one dealing with general subjects and other dealing with taxation. The entries dealing with taxation are distinct entries vis-a-vis the general entries. It is for this reason that the doctrine of pith and substance has an important role to play while deciding the scope of each of the entries in the three Lists in the Seventh Schedule to the Constitution. This doctrine of pith and substance flows from the words in Article 246(1), quoted above, namely, "with respect to any of the matters enumerated in List I". The bottom line of the said doctrine is to look at the legislation as a whole and if it has a substantial connection with the entry, the matter may be taken to be legislation on the topic. That is why due weightage should be given to the words "with respect to" in Article 246 as it brings in the doctrine of "pith and substance" for understanding the scope of legislative powers. 44. Competence to legislate flows from Article 245, 246 and the other articles in Part XI. A legislation like the Finance Act can be supported on the basis of a number of entries. In the “present case, we are concerned with the constitutional status of the levy, namely, service tax. The nomenclature of a levy is not conclusive for deciding its true character and nature. For deciding the true character and nature of a particular levy, with reference to the legislative competence, the court has to look into the pith and substance of the legislation. The powers of Parliament and the State Legislatures are subject to constitutional limitations. Tax laws are governed by Part XII and Part XIII. Article 265 takes in Article 245 when it says that the tax shall be levied by the authority of law. To repeat, various entries in the Seventh Schedule show that the power to levy tax is treated as a distinct matter for the purpose of legislative competence. Tax laws are governed by Part XII and Part XIII. Article 265 takes in Article 245 when it says that the tax shall be levied by the authority of law. To repeat, various entries in the Seventh Schedule show that the power to levy tax is treated as a distinct matter for the purpose of legislative competence. This is the underlying principle to differentiate between the two groups of entries, namely, general entries and taxing entries. We are of the view that taxes on services is a different subject as compared to taxes on professions, trades, callings, etc. Therefore, Entry 60 of List II and Entries 92-C/97 of List I operate in different spheres. Xx xxx xxxx 46. In International Tourist Corpn. v. State of Haryana (1981) 2 SCC 318 , the appellants were transport operators. The State of Haryana levied a tax on passengers and goods under the Haryana Passengers and Goods Taxation Act, 1952. The Appellants questioned the vires of Section 3(3) insofar as the levy of tax on passengers and carriage of goods by their vehicles plying along the national highways. It was urged on behalf of the Appellants that there was nothing in the Constitution to prevent Parliament from combining its power to legislate with respect to any matters enumerated in Entries 1 to 96 of List I with its power to legislate under Entry 97 of List I and, if so, then the power to legislate with respect to tax on passengers and goods carried on national highways was within the exclusive legislative competence of Parliament and, therefore, Section 3(3) of the Haryana Passengers and Goods Taxation Act, 1952 was beyond the legislative competence of the State Legislature. This argument was rejected by the Division Bench of this Court, which took the view that before exclusive legislative competence can be claimed for Parliament by resort to Entry 97, List I, the legislative competence of the State Legislature must be established. Entry 97 itself was specific. In that, a matter can be brought under that entry only if it is not enumerated in Lists II or III, and in the case of tax, if it is not mentioned those Lists. We do not dispute the above proposition. That proposition is well settled. This Court is concerned with the application of the said principle in this case. In that, a matter can be brought under that entry only if it is not enumerated in Lists II or III, and in the case of tax, if it is not mentioned those Lists. We do not dispute the above proposition. That proposition is well settled. This Court is concerned with the application of the said principle in this case. In the present matter, as stated herein above, the State Legislature is empowered to levy tax on professions, trades, callings, etc., as such and, therefore, the word "services" cannot be read as synonymous to the word "profession" in Entry 60. Therefore, tax on services do not fall under Entry 60, List II. That, service tax would fall under Entry 92-C/Entry 97 of List I. Xx xxx xxxx 48. In T.N. Kalyana Mandapam Assn. v. Union of India (2004) 5 SCC 632 , the Division Bench of this Court held that service tax is an indirect tax and is to be paid on all the services notified by the Government of India. It has been further held that the said tax is on "service" and not on the service provider. In para 58 it has been observed that under Article 246(1) of the Constitution, Parliament has exclusive powers to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to the Constitution. As per Article 246(3), the State Government has exclusive powers to make laws with respect to matters enumerated in List II (the State List). In the said judgment, it has been held that service tax is made by Parliament under Entry 97 of List I. In our view, therefore, the point in issue in the present case is squarely covered by the judgment of this Court in T.N. Kalyana Mandapam. Of course, in the present case, we are not concerned with the services rendered by a mandap-keeper, who performs what is called as property based services. In this case, we are concerned with performance based services. However, both the categories fall within the ambit of the word "services". 49. Of course, in the present case, we are not concerned with the services rendered by a mandap-keeper, who performs what is called as property based services. In this case, we are concerned with performance based services. However, both the categories fall within the ambit of the word "services". 49. In Gujarat Ambuja Cements Ltd. v. Union of India (2005) 4 SCC 214 , it was held that service tax is not a tax on goods or on passengers but it was on the transportation itself and, therefore, it falls under residuary power of Parliament under Entry 97 of the Seventh Schedule to the Constitution. It was further held that service tax is not a levy on passengers or goods but on the event of service in connection with the carriage of goods and, therefore, it was not possible to hold that the Act was in pith and substance within the State’s exclusive powers under Entry 56 of List II. It was held that service tax came within Entry 97 of List I. In the present case, as stated above, we are concerned with Entry 60 of List II. As stated above, service tax is on performance based services itself. It is on professional advice, tax planning, auditing, costing, etc. On each of the exercise undertaken tax becomes payable. Therefore, the above judgment has no application." 23. In All India Federation of Tax Practitioners v. Union of India & ors. (supra), plea against validity of service tax on services rendered by praticising professionals as being hit by Entry 60 of List II providing for tax on professionals was repelled. On concept of service tax, it was observed : "(i) Meaning of "service tax" 22. As stated above, the source of the concept of service tax lies in economics. It is an economic concept. It has evolved on account of service industry becoming a major contributor to the GDP of an economy, particularly knowledge based economy. With the enactment of the Finance Act, 1994, the Central Government derived its authority from the residuary Entry 97 of the Union List for levying tax on services. The legal backup was further provided by the introduction of Article 268-A in the Constitution vide the Constitution (Eighty-eighth Amendment) Act, 2003 which stated that taxes on services shall be charged by the Central Government and appropriated between the Union Government and the States. The legal backup was further provided by the introduction of Article 268-A in the Constitution vide the Constitution (Eighty-eighth Amendment) Act, 2003 which stated that taxes on services shall be charged by the Central Government and appropriated between the Union Government and the States. Simultaneously, a new Entry 92-C was also introduced in the Union List for the levy of service tax. As stated above, as an economic concept, there is no distinction between the consumption of goods and consumption of services as both satisfy human needs. It is this economic concept based on the legal principle of equivalence which now stands incorporated in the Constitution vide the Constitution (Eighty-eighth Amendment) Act, 2003. Further, it is important to note, that "service tax" is*a value added tax which in turn is a general tax which applies to all commercial activities involving production of goods and provision of services. Moreover, VAT is a consumption tax as it is borne by the client." 24. There is a distinction between service tax and professional tax. Service tax is a tax on each activity undertaken by a chartered accountant/cost accountant or an architect and such activity has two aspects. From the point of view of the chartered accountant/cost accountant, it is an activity undertaken by him based on his performance and skill, but from the point of view of his client, the chartered accountant/cost accountant is his service provider. It is a tax on ‘services’. Service tax cannot be levied without service being provided whereas a professional tax is a tax on his status. It is the tax on the status of a cost accountant or a chartered accountant. As long as a person/firm remains in the profession, he/it has to pay professional tax and that tax has nothing to do with the commercial activities which he undertakes for his client. Even if the chartered accountant has no work through out the accounting year still he has to pay professional tax. He has to pay tax till he remains in the profession. In the case of All Federation of Tax Practitioners (supra), it was observed that the State legislature is empowered to levy tax on professions, trades, callings etc., as such, the word ‘service’ cannot be read as synonymous to the word ‘profession’ in entry 60. He has to pay tax till he remains in the profession. In the case of All Federation of Tax Practitioners (supra), it was observed that the State legislature is empowered to levy tax on professions, trades, callings etc., as such, the word ‘service’ cannot be read as synonymous to the word ‘profession’ in entry 60. Therefore, tax on services do not fall under Entry 60 List II and service tax would fall under entry 97 of List I. The service tax is on performance based services itself. It is on professional advice, tax planning, auditing, costing etc. On each of the exercise undertaken tax becomes payable. 25. In Western India Theatres Ltd. v. Cantonment Board ( AIR 1959 SC 582 ) , the Apex Court has clarified the dichotomy between tax on privilege of carrying on any trade or calling on one hand and the tax on the activity which entertainer undertakes on each occasion. The tax on privilege to practise the profession fall under Entry 60 List II and it is quite different from tax on services. The tax on service does not fall under Entry 60 List II and Parliament has absolute jurisdiction and competence to enact the law imposing tax on services under Entry 97 List I of the Seventh Schedule to the Constitution. 26. In Sudhir Chand Nawn v. Wealth Tax Officer, Calcutta and ors. (supra), the Apex Court held that the power to levy tax on lands and buildings under Entry 49 List II does not trench upon the power conferred upon the Parliament by Entry 86, List I and therefore, the enactment of the Wealth Tax Act by the Parliament is not ultra vires. Considering the scope of Entry 86 List I and Entry 49 List II, the Apex Court observed thus : "3. ... The tax which is imposed by Entry 86, List I of the Seventh Schedule is not directly a tax on lands and buildings. It is a tax imposed on capital value of the assets of individuals and companies, on the valuation date. ... The tax which is imposed by Entry 86, List I of the Seventh Schedule is not directly a tax on lands and buildings. It is a tax imposed on capital value of the assets of individuals and companies, on the valuation date. The tax is not imposed on the components of the assets of the Assessee; it is imposed on the total assets which the Assessee owns, and in determining the net wealth not only the encumbrances specifically charged against any item of assets, but the general liability of the Assessee to pay his debts and to discharge his lawful obligations, have to be taken into account Again Entry 49 List II of the Seventh Schedule contemplates the levy of tax on lands and buildings, or both as units. It is normally not concerned with the division of interest or ownership in the units of lands or buildings which are brought to tax. Tax on lands and buildings is directly imposed on lands and buildings, and bears a definite relation to it. Tax o the capital value of assets bears 5 no definable relation to lands and buildings which may form a component of the total assets of the Assessee. By legislation in exercise of powers under Entry 86, List I tax is contemplated to be levied on the value of the assets. For the purpose of levying tax under Entry 49, List II the State Legislature may adopt for determining the incidence of tax the annual or the capital value of the lands and buildings. But the adoption of the annual or capital value of lands and buildings for determining tax liability will not, in our judgment, make the fields of legislation under the two entries overlapping." 27. In the Second Gift Tax Officer, Mangalore etc. v. D.H. Nazareth etc. But the adoption of the annual or capital value of lands and buildings for determining tax liability will not, in our judgment, make the fields of legislation under the two entries overlapping." 27. In the Second Gift Tax Officer, Mangalore etc. v. D.H. Nazareth etc. [ 1970(1) SCC 749 ] where competence of the Parliament to impose tax on gifts of coffee plantation, agricultural or paddy lands or buildings was challenged and the High Court allowed the writ petition holding that entry 49 of List II read with entry 18 of the same list reserved the power to tax land and buildings to the State Legislature and Parliament could not use the 5 residuary power conferred by entry 97 of List I and on appeal, the Apex Court held that it is not a tax imposed directly upon lands and buildings but is a tax upon the value of the total gifts made in a year which is above the exempted limit. There is no tax upon lands or buildings as units of taxation. Since entry 49 of the State List contemplates a tax directly levied by reason of the general 2 ownership of lands and buildings, it cannot include the gift tax as levied by Parliament. There being no other entry which covers a gift tax, the residuary powers of Parliament could be exercised to enact a law. The Apex Court allowed the appeals holding : "10. The pith and substance of Gift Tax Act is to place the tax on the gift: of property which may include land and buildings. It is not a tax imposed directly upon lands and buildings but is a tax upon the value of the total gifts made in an year which is above the exempted limit. There is no tax upon lands or buildings as units of taxation. Indeed the lands and buildings are valued to find out the total amount of the gift and what is taxed is the gift. The value of the lands and buildings is only the measure of the value of the gift. A gift tax is thus not a tax on lands and buildings as such (which is a tax resting upon general ownership of lands and buildings) but is a levy upon a particular use, which is transmission of title by gift. The value of the lands and buildings is only the measure of the value of the gift. A gift tax is thus not a tax on lands and buildings as such (which is a tax resting upon general ownership of lands and buildings) but is a levy upon a particular use, which is transmission of title by gift. The two are not the same thing and the incidence of the tax is not the same. Since Entry 49 of the State List contemplates a tax directly levied by reason of the general ownership of lands and buildings, it cannot include the gift tax as levied by Parliament. There being no other entry which covers a gift tax, the residuary powers of Parliament could be exercised to enact a law. The appeals must, therefore, be allowed but there shall be no order about costs through-out...." 28. In Union of India v. H.S. Dhillon [ 1971(2) SCC 779 ] , the Apex Court held that the tax under Entry 49, List II is not a personal tax but a tax on property. 29. In Association of Leasing and Financial Service Companies v. Union of India & ors. (supra), the Apex Court held that the service tax imposed by Section 66 of the Finance Act, 1994 (as amended) on the value of taxable services referred to in Section 65(105)(zm) read with Section 65(12) of the said Act, insofar as it relates to financial leasing services including equipment leasing and hire-purchase was within the legislative competence of the Parliament under Entry 97, List of the Seventh Schedule to the Constitution. The Apex Court held that a tax may be levied on an object or on the event of taxation. Services tax is tax on activity whereas sales tax is tax on sale of a thing or goods. Taxable event under service tax is each exercise/activity undertaken by service provider and it is imposed every time service is rendered to customer/client. Further, service tax is a value added tax. The Apex Court further held that interest or finance charges together with lease management fee/processing fee/documentation charges are consideration for services rendered and hence, they constitute value of taxable service on which service tax is payable. The Apex Court further laid down that service tax on leasing and hire purchase financing activities is neither on material nor on sale. The Apex Court further held that interest or finance charges together with lease management fee/processing fee/documentation charges are consideration for services rendered and hence, they constitute value of taxable service on which service tax is payable. The Apex Court further laid down that service tax on leasing and hire purchase financing activities is neither on material nor on sale. It is on activity of financing/funding of equipment/asset within meaning of 'financial leasing services’ in section 65(12)(a)(i). Leasing and hire purchase financing activities are facilities extended by non-banking financial companies (NBFCs) to customers that fall under ‘banking and other financial services’ under section 65(12) of Finance Act, 1994. Taxable event in leasing and hire-purchase financing activities is rendition of service is eligible to tax. Further, tax on services is different and distinct from tax on sale of goods under Sch. VII List II Entry 54 of Constitution. By enacting Article 366 (29-A) of the Constitution, Parliament had not divested itself of the powers to impose service tax and hence, taxes on "services" is within legislative competence of Parliament under Article 248 read with Schedule VII List I Entry 97 of Constitution. 30. In Bharat Sanchar Nigam Ltd. v. Union of India [ 2006(3) SCC 1 ] upon which reliance has also been placed by the petitioners, the principal question which arose for determination was in respect of the nature of the transaction by which mobile phone connections are enjoyed. The question was whether such connections constituted a sale or a service or both. If it was a sale then the States are legislatively competent to levy sales tax on the transaction under Entry 54, List II of the Seventh Schedule to the Constitution. If it was service then the Central Government alone had the legislative competence to levy service tax under Entry 97, List I and if the nature of the transaction partook of the character of both sale and service, then the moot question would be whether both the legislative authorities could levy their separate taxes together or only one of them. It was held that the subject transaction was a service and, thus, the Parliament had legislative competence to levy service tax under Entry 97, List I. As no goods’ elements were involved, the transaction was held to be purely one of service. There was no transfer of rights to use the goods at all. It was held that the subject transaction was a service and, thus, the Parliament had legislative competence to levy service tax under Entry 97, List I. As no goods’ elements were involved, the transaction was held to be purely one of service. There was no transfer of rights to use the goods at all. Hence, imposition of sales tax on any facilities of the telecommunication services was held to be untenable in law. In SCC para 88 of the said judgment, the Apex Court observed that: (BSNL case, SCC p. 42, para 88) "88. No one denies the legislative competence of the States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction. This does not however allow the State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods." 31. The decision in Bharat Sanchar Nigam Ltd. (supra) is ultimately on the service which is provided and the same is to be considered in the facts and circumstances of each case. Thus, the said decision is of no help to the petitioners. Considering the transaction in question in the instant case of construction activities, it is definitely a service in which there is valuation addition also. When transaction in question is service, the Parliament was fully competent to levy service tax under Entry 97 List I of Seventh Schedule to the Constitution. While levying the service tax, no encroachment whatsoever was made on the legislative competence of the State. 32. In Ajoy Kumar Mukherjee v. Local Board of Barpeta (supra) relied upon by the petitioners, the question which arose for consideration was about constitutionality of an annual tax levied by local boards for the use of any land for the purpose of holding markets as provided by Section 62 of the Assam Local Self Government Act. The question arose whether the impost is a tax on land within the meaning of Entry 49 of List II of the Seventh Schedule to the Constitution. The Apex Court observed that it is well settled that the entries in the three legislative lists have to be interpreted in their widest amplitude and therefore, if a tax can reasonably be held to be a tax on land, it will come within entry 49. The Apex Court observed that it is well settled that the entries in the three legislative lists have to be interpreted in their widest amplitude and therefore, if a tax can reasonably be held to be a tax on land, it will come within entry 49. Further, it is equally well settled that tax on land may be based on the annual value of the land and would still be a tax on land and would not be beyond the competence of the State Legislature on the ground that it is a tax on income. In the light of the settled proposition, the Apex Court negatived the submission that State Legislature has no power to impose tax on market because there is no provision in List II of the Seventh Schedule for imposing a tax on markets. The tax being on land would clearly be within the competence of the State Legislature. However, the Apex Court at the same time observed that there was no tax on any transaction that may take place within the market which was situated on the land. Occupier of land has to pay certain tax for its use. The said decision is of no help to the petitioners. What is being taxed in the instant case is not on the land. The service tax is being imposed on the construction activities, which was within the legislative competence of the Union. 33. Reliance has also been placed on Entry 54 List II of Seventh Schedule to the Constitution which relates to sale and purchase of goods. Service and sale may both be included in a transaction. The said entry is source of levy of tax only on transaction of sale and not in a composite transaction of sale and service or transaction of service. There may be various aspects of transaction which may be subject to payment of tax. Service tax is levied on services and not on service provider. Quantification of tax should not be confused with the nature of tax. The ambit of the expression taxable service in relation to construction service or, as the case may be, the construction of a complex has undergone a material change by bringing within the fold of service tax construction services provided by builders to buyers. Tax is not imposed on land and building. The ambit of the expression taxable service in relation to construction service or, as the case may be, the construction of a complex has undergone a material change by bringing within the fold of service tax construction services provided by builders to buyers. Tax is not imposed on land and building. Merely because construction activities are taking place on the land, it cannot be said to be a tax on land. 34. Thus, we are unable to accept the submission that Union of India has no authority or power to levy service tax under the impugned provisions. The imposition of service tax was within the legislative competence of the Parliament and it does not fall within the legislative competence of the State under entry 49 of List II of the Seventh Schedule to the Constitution. 35. It was also submitted relying upon the provisions of Articles 245, 246 and 265 of the Constitution that Union of India was not competent to impose service tax. Article 265 provides that no tax shall be levied or collected except by authority of law. Service tax is being collected by the Union of India under the authority of law and it is not a case where tax is levied without authority of law. Article 246(3) deals with the power of the State Legislature to make laws for the State or any part thereof. There is no encroachment made by the Union of India while levying service tax under the impugned provisions. 36. In M/s G.S. Promoters v. Union of India (supra), the Punjab and Haryana High Court has upheld the validity of explanation to section 65 (zzzh) holding inter-alia that element of service of construction involved in a builder selling a flat. Whether or not service is involved has to be seen not only from the point of view of the builder but also from the point of view of the service recipient. What is sought to be taxed is service in relation to construction which is certainly involved even when construction is carried out or got carried out before construction and before flat is sold. It was further held that activity sought to be subjected to tax has to be as per the statutory scheme and unless there is any encroachment in the field of State Legislature, the competence of the Union Legislature cannot be questioned. 37. It was further held that activity sought to be subjected to tax has to be as per the statutory scheme and unless there is any encroachment in the field of State Legislature, the competence of the Union Legislature cannot be questioned. 37. In Maharashtra Chamber of Housing Industry and anr. v. Union of India & ors. (supra), the Bombay High Court has also upheld the validity of explanation to (zzq) and (zzzh) of Section 65 (105) and also new clause (zzzzu) of Section 65(105). 38. In D.B. Civil Writ Petition No. 16660/2011 M/s Purshottam Das Malpani v. Union of India & Ors. (decided on 22.3.2012 along-with connected matters), this Court has upheld the levy of service tax on renting of immovable property which is being realised by the Union of India under the provisions of Section 65(105) (zzzz), 65(90a) read with section 77 of the Finance Act, 2010. There was no encroachment made by the Union of India on the legislative power of State while levying service tax on renting of immovable property. 39. For the reasons stated above, there is no merit in these writ petitions and the same are dismissed. The stay applications are also dismissed.Writ Petition dismissed. *******