ALL INDIA FEDERATION OF TAX PRACTITIONERS & ORS. versus UNION OF INDIA AND ORS.

Citation: [2007] 9 S.C.R. 147 · Decided: 21-08-2007 · Supreme Court of India · Bench: S.H. KAPADIA, B. SUDERSHAN REDDY · Disposal: Dismissed
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Judgment (excerpt)

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ALL INDIA FEDERATION OF TAX PRACTITIONERS & ORS. 
v. 
UNION OF INDIA AND ORS. 
AUGUST 21, 2007 
[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.] 
Constitution of India, 1950-Articles 246(/), 276, 268A and Schedule 
VII List I Entries 92 C and 97 and List II Entry 60-Service Tax-Levy of-
A 
B 
On Chartered Accountants, Cost Accountants and Architects-By Central C 
legislation-Legislative competence of Parliament to levy the tax in view of 
Entry 60 of State List of Seventh Schedule-Held: Parliament has legislative 
competence to levy the Service Tax under Entry 97 of Union List of Seventh 
Schedule-Entry 60 of State List of Seventh Schedule refers to 'professions' 
which will not include services~onstitution (Eighty-eighth Amendment) 
Act, 2003-Finance Act, 1994-Finance Act, 1998. 
D 
Interpretation of Constitution-Interpretation of Legislative heads-
He/d: While interpreting such heads, the court has to go by schematic 
interpretation of the three lists of the Seventh Schedule and not by dictionary 
meaning of the words. 
Doctrines/Principles: 
Doctrine of Pith and Substance-Applicability of 
Principle of equivalence-Application of 
Tax/Taxation: 
Service Tax and Professional Tax-Distinction between. 
Tax on profession and tax on income-Distinction between. 
E 
F 
Words and Phrases-'Services; 'Service Tax; 'Taxable service'-Meaning G 
of 
The question for consideration in the present appeal was regarding 
constitutional status of the levy of service tax on Chartered Accountants, Cost 
147 
H 
148 
SUPREME COURT REPORTS 
(2007] 9 S.C.R. 
A Accountant and Architects by Finance Act, 1994 and Finance (No. 2) Act, 
1998, and the legislative competence of Parliament to impose service tax under 
Article 246 (1) r/w Entry 97 of List I of Seventh Schedule, in view of Entry 60
1 
B 
· of List Ilof Seventh Schedule. 
Dismissing the appe\ctl, the Court 
HELD: 1. Parliament has legislative competence to levy service tax by 
way of Finance Acts of 1994 and 1998 under Entry 97 of List I on chartered 
·accountants, cost accountants and architects. The above position now stands 
fortified by the Constitution (Eighty-eighth Amendment) Act, 2003 which has 
inserted Article 268A and Entry 92C which clearly indicates that Entry 60 
C of List II and Entry 92C of List I operate in different spheres. However, there 
is no challenge to the Constitutional validity of the said Constitution (Eighty-
eighth. Amendment) Act, 2003 before this Court. 
(Para 41) (175-G, H; 176-AI 
·Godfrey Phillips India Ltd. and Anr. v. State of U.P. and Ors., (2005) 2 
D SCC 515 and International Tourist Corporation and Ors. v. State of Haryana 
and Ors., (1981) 2 SCC 318, relied on. 
Sodan Singh and Ors. v. New Delhi Municipal Committee and Ors., 
(1989) 4 SCC.155; Tamil Nadu Kalyana Mandapam Assn. v. Union of India 
and Ors., (2004) 5 SCC 632; Gujarat Ambuja Cements Ltd and Anr. v. Union 
E of India and Anr., (2005) 4 SCC 214; Bharat Sanchar Nigam Ltd. and Anr. v. 
Union of India and Ors., (2006) 3 SCC 1 and R.R. Engineering Co. v. Zita 
Parishad, Bareilly and Anr., (1980) 3 SCC 330, distinguished. 
2. 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 
F major contributor to the GDP of an economy, particularly knowledge-based 
economy. With the enactment of Finance Act, 1994, the Central Government 
derived its authority from the residuary Entry 97 of the Union List of Seventh 
Schedule to the Constitution of India for levying tax on seriices. The legal 
backup was further provided by the introduction of Article 268A in the 
G Constitution vide 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 92C was also introduced in the Union List for the levy of service 
tax. 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 
H economic concept based on the legal principle of equivalence which now stands 
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ALL INDIA FEDERATION OF TAX PRACTITIONERS "· U.O.l. 
149 
incorporated in the Constitution vide Constitution (Eighty-eighth Amendment) A 
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
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