LexTAMIL NADU KALYANA MANDAPAM ASSN. versus UNION OF INDIA AND ORS.
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TAMIL NADU KALYANA MANDAPAM ASSN. v. UNION OF INDIA AND ORS. APRIL 15, 2004 [S. RAJENDRA BABU AND DR. AR. LAKSHMANAN, JJ.] Finance Act, 1994(as amended in 1997)-Section 65(19), (20), (4l)(p) and sections 66 and 67(0): Service tax on services rendered by Mandap-Keeper-Nature of-Held: It does not amount to tax directly on land but tax on income from land as s~ch not a State subject under Entry 49 List II of Seventh Schedule-Hence, within A B c the competence of the Parliament under Entry 97 List I-Constitution of India, 1950-Articles 245, 246 and Seventh Schedule, List I Entry 97, List II Entry D 49. Services rendered by Mandap keepers and outdoor caterers-Levy of service tax-Scope of-Held: Taxable services provided by mandap-keeper to a customer in relation to use of mandap includes apart from providing premis~ on temporary basis the other facilities rendered as a caterer-Transaction E between a mandap-keeper and his customer is that of providing services.._ There is service element in outdoor catering-Hence, tax on services rendered by mandap-keepers and outdoor caterers is in pith and substance, a tax on services and not a tax on sale of goods-As such within the legislative competence of the Parliament under the residuary Entry 97 in List I of the Seventh Schedule and not covered under Entry 18, 49 and 54 of List II-And F levy of service tax not unconstitutional-Constitution of India, 1950-Articles 245, 246, 366(29A)(f) and Seventh Schedule, List I Entry 97, List II Entry 18, 49 and 54-Service Tax Rules, 1994-Rule 2(l)(d)(ix). Appellant is a registered association of various Kalayana, G Mandapams formed to protect the interest of the owners of Kalayana Mandapams/Mandap keepers who let out the Mandaps to the clients and provide them with the facilities like catering, electricity, water etc. By. virtue of the Finance Act, 1997 services rendered by the Mandap Keepers . were exigible to service tax. Appellants-association filed writ petition 169 H 170 SUPREME COURT REPORTS [2004) SUPP. l S.C.R. A challenging the validity of sections 66, 67(C) of Chapter V of Finance Act, 1994 and Rule 2(1)(d)(ix) of Service Tax Rules, 1994 and other provisions related to Kalyana Mandapams and Mandap Keepers. Subsequently, Service Tax Notice was issued that any open land/ground is exigible to service tax if the same is let out for organizing any official, social or business function, even if no services whatsoever were rendered by B Mandap-keepers. High Court dismissed the writ petitions holding that the provisions in the,Finance Act, 1994 imposing service tax on the services rendered by the Mandap-Keepers are intra vires of the Constitution. Hence the present appeal. C Appellant contended that the service tax levied on the mandap- keepers for their services rendered under sections 65, 66 and 67 of the Finance Act, 1994 is a tax on land per se, State subject under Entries 18 and 49 of List II of the Constitution; that insofar as it levies ·a tax on catering services, it amounts to a tax on sale and purchase of goods, and as such it is beyond the competence of the Parliament under residuary D Entry 97 of List-I in view of the definition o( tax on sale and purchase of goods contained in Article 366(29A)(t) of the Constitution; that the Parliament have not devised a formula for segregating the service component from the transaction and levied service-tax on 60% of the gross amount charged by the mandap-keepers from their· clients, in cases where E the mandap keepers are also providing catering services; that the service component in the composite amount charged by the rnandap-keepers is a very small percentage; that High Court invoked the/' Aspect Doctrine' as evolved by this Court in the case of Federation of Hotel and Restaurant v. Union of India and upheld the levy of service tax thus allowing the Parliament to encroach upon the subjects specifically demarcate~ for the F State Legislatures, even though Article 366(29A)(t) was not considered by this Court and High Court did not distinguish between the service ?Spect and supply aspect; and that service tax on the mandap-keepers is clearly a colourable legislation and unconstitutional as the said tax is not on services but is in pith and substance only a tax on 'goods' and/or 'land'. G Respondent-Union of India contended that service tax on Mandap- H Keepers is a tax on the consideration received for allowing temporary
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