Simplex Infrastructure Ltd v. UOI and Ors

SANJIV KHANNA, J. For detailed order see Writ Petition (Civil) No. 4107/2008 titled G.D.Builders versus Union ofIndia and Another, pronounced today. ^ ^// -- (SANJIV KHANNA) JUDGE (SANJEEV SACHDEVA) JUDGE November , 2013 VKR Vrf,/;""Writ Petition(Civil) No. .4li7/2008- - V , • •• '-Reserved onr-23'--jii-Iy, 2013; Date.ofD.ecision;'73'^oyeEiber,2013^ , ; ; n ,• • ., - ThrpughMr.IK. Mittal,Mr.VaruriPrabhakar& • ,/ ; , -••• i '• ; Mr^Varun Gaba, Advocates. v • '"'•'iv • , . •versus,. •• '• ^ ;rV-,.,. O, .,; •UQI ANlpA^. - Rcsponcients . ' -• Though Mr^itajeeYeMehxa,Addl. Solicitpr.'-;. ' 'v;./ , / : • ' General'withMr. MukeshA^nd,and . •' . \^V, - Mr. Ashishyiimani.fbr U0^ - Ms. Spnia:Sharlna^Sr. Standing Gounsel •'... '• • ^ for:respondent Np..2. I,,'-V 'V ; • ••r- ',+• , , ... . - w.-p.YC)10226/2009 . : : •. RAJ~FURNITURE•'^' '• V ^•Petitioner: ' .. ;; '.y , : ThrougiiMr:'J,R:Mittal,Mp Varun;Pr^^^^ •; vMx.Varun Gaba,Advocates:: • • ' versus . ^ \ UQI - •' • • • " • - ^ - •. ;TM:pugh Mr.RajeeveMelii-a,Addl. Solicitor • • • , , / GeneralwithMr/Mukesh Anand and •. Mr-.AshishVirm.^iiforUQJ/^^ • : . •Ms.:S:pniaSharxha,Sr;-Standing'Counsel-^ • . • • • forrespondentNo. 2.' • • •. ; W.lR:(iCV4127/2008• ••f \' " ' ciARrONPROPERTIESim ; , .....Petitioner • ^''.7., • '^rhroughMi^-VarunPra^hakai;& . > ••• ••• ',, . Mr. \^arLUi"Gaba,.Advo:cates.':-. • •,'•. ' Versus'. - : y-.j-i ' •' " / Page 1 of.si • ' "i '). • •: .ypI.AND'QRS.;;....Respqiidents ; • \,,v: 'r-v'• Through •Mi^Rajeeye Metea, Addl: Solicitor-. , ' . Gener^'withMi^;Mulcesh-v' •/'. • , ]Vli^ AsliishVimani for Ms. Sotia Sharma, Sr. Staiid,ing'Coum . • ' .for respondenf No. 2. • ^ ^ W.?.r0.'4658/200.8:-^ .. yiPULlimited'; • •o'-. ;• ••' . ^.. •..•...-Petitioner^. ••, •, Thrbug]iMr. J.K:. Mittal, Mr. Varan ' ••• ' V ^ ' Mr. VsirunGaba, Advocates.. '.r-w' ' -versus , : V •' '"UOIAND iW. • •• •• Respondents.: •.' , Tk-ougli Mi\RajeeveMelira,A.ddl.-SolicitGi; •, Geiieral witliMr. MiilceshAnand:and . -• , i' ' ;.Mr.:Asliish'ViiiXLaniforXJOI/R-l: • \Ms. SonlaSliarma,Sr. StandingCounsel forrespondent'No.-2. ,. • •• W.P.CC\5Q46/10Q8 • ' UKITHCHLIMITED ' ' P^iSio»ers . ;Tlll-oughM^^J.K.:Mitral,Mr. VamnPrabllakar . - . ; \ ~ . iMr^ VarunGaba,Adyqcatesy V. •',! •... -yersus," . , • . • • ' • • ; v\. - ./ . • -UOfANDANR. -• V'' ^,-:.'Respoiadeni;s •• . Tlarough Mr.RajeeveMek-a,Addl.Solicitor ;••• • • ..j^nefal.withMr.'MiJieshAnanda^ • Miv'-AshishYirmani forUGI/R-l;. • • \ -Ms.''SoniaSliarma,Sr. StandingGounseL ' '. ..fprrespondent No. 2. , . • •iV.' v-ir V''"''*' "y , '•w>:r.(tv6924/2008- ' ANS GONSTRUCTIONS^D; ' ' ' . . Petitioner.-;.• ••• ; .. ThroughMr.J.KMittsil,Mr: yaranPrabhakar: ^ . Mr: Vkran'Gaba;, Advocates. ,;. , ' versus , • ; ••, yOIAND^AJ®/ ; .<Respond&lts ; . rPage^ZpfSi . v.v ;1 . • V,, V' f ' i' • ' "'t ' f , . . . • • i ^; . Tliimigli'.Mr.Rajeey.&'MelTi-a,.Addi , • ' '• General with Mi. MukesliA^^ ^ • "• Mr. Ashish';YinTianlf6r.U0i/R-l. . • • Ms.'Sonia.Sharma,-Sr.^Standi^^^^^ • 'fbripspohdentNc}.;!.: •W.P.rc\4Qi/2O09.. : ' • V''''.'v-'-SA;•,: ,• -^ ,..SIMPLEXINFRASTRUOrUKELTD'.: , Petitioner- : • Through Mr;'X.ICMilM, Mr..VaiamPrabhakar'& : . ' - . • • . Mr; Varun Craba, Advobates/.. • . \ versus X•V;;:'. V, •. ...Respondents'X" •• • 'X' : ..ThroughMr.RajeeveMehra,Ad4r^,:Solieitdr;,-X ^ •.r'.'V " j•^.GeneralwithMj. MukeshAnandand j • ' -'X' : ,;Mi;-AshishVirmanifbr'UOl^ ;••• • j " Ms, SoniaSharnia,:Sr.Standing;Gpun^ ; .forrespondent No..2. .• ' ' • ^ ••'V;-;• ". '.. W.P.fQ 4Q57/:20i0:&..GM•8074/2010 '..••• J;,:-;. ' :S-SIMPLEXIMFRASTRUGTURELp Petitio^r^ , . Through MI^ J.K. Mittal,Mj--.Varuii-Prabhakar&^ ^ '.•••,•. Mr. yarun Gaba, Advocates. . . . •, . ' • ' - ' . ' versus' ... - . . • • . .V •••• ;•• UOIAisnp • ;. V^. Respondents; .V . Through Mr.Rajeeve:Mehrai..Ad(lVSohcitor'.' 0^, •'j' • I' ' . • ,Mt Ashish ViiTnani for XJG'ItR- .Ms...'Sonia.S,haniia,.Sr.vStan'dingGoUnse , . •-for respondent.No.'2. ., ' ••' •+ W.P.ra 6.658/2Q1Q&• CM.13173/2010'^ - '.-..Petitioner- : -v. .! •• • - ThroughMr.:J.K: Mittal,Mr..VanmPrabhakar&o :?• :.X . ^ . V';..- .-I^r.Varun'Gaba,Adyoea;tes;r--.•• ' '• V"-^ -. . versus ' • •UOIAND ANEL. ;Vy^l^spondents^ . • Through-Mr.Raj;eeye.Mehra,"Addl>S^^ •/ ,rx:;; " . •• !r /v //. .w.p.rci '>]Vlr:Ashish,¥irmani for 'y.'• :.'ksv Sonia Sharma,:Sr. •Standing Qounsel ,. ,; for respondent.No..2// .h. ; Mr; RuQhirMishra.8c Is^uKesh-&'Tiwari:^,. ':'^FbrUOJ.;''--, ^v''' 'di^7/2008 CM 8168/2Qfe',:' •• •--. v4- • CpTIONS(P) Ltd; , V..';;Petitioner-, •>' Mr: J.K. Mittal, :Mr. Varun Prabhakar & Mr. ¥aam G'aba,'Advocates'. ^ YISTAR CONSTRU' Through versus ' V. :• i'. '. • • .Through W>P.(.C ._: - Resppridents' "Mr,RajeeveM^a, Addl(SoM^ '; •'/.GeneralwithMr.: MukeshAhandar^d -•• ••..M\.Ashishyirinani for yOI^^ Ms..Sonia'Sharma,Sr.. StandingCounsel- •. for respondent No. 2. '• • /•••.,:yiSi;^RgONSTRU(tTIDNS (P)L^ Petitioner. " nni___ 1_ TV /T—• T T/" A/Ti* -\/o vi li-i T^I-QViln aVai" Through Mr; J.K, M:ittal,Mr.-yarunPrabhakar& ,• •-Mr: Vaixin Gab.a, Advocates'. versus , uoiane) ane. "^ • . Thi-ougl: COK^M: :.".HOE^BLEmR-WSTig: MR' justice;:^ ."•••• Respondents .Mr,R£ueeyeMehra,^Ad4i::SQhcU^^; •rGeneralwithMr! MukeshAnandand- . : .Mr. Ashish Yirmani for, XJOOJ/R-l.•', ' • Ms..Sonia Sharaaa,Sr.; Standing.Counsel, .for respondent No'.'2. ^•Mr.' ' .••ForUOI:,, • .Page 4'of-5l.- :isANJiv]imANNA,j,. ;V y : • •• : ' •••••"This eommon'judgment,will:,of tHe:'afbrementiDned\tr, ; • writ: petitions• in which ^ridentical;aijd similar 'issues ,arise ^ -• . • . cgnsiderationv.The petitiona-shefein-havedianenged'and.prayed-,f6fV/ ...quashingof Explanationto NotificationNo. •15/2PP4;^X: dated .jSeptember, andN6tiflcation'No.,1.8/2005-ST-dated7, .June,.2005 ^ anc}^NotificationNo. 1/2I).06^STdated1''March,>2006,:the challenge • "is with resjDectto column4 entriesat S. No. 5, .7 and. 10. In some Avrit ••• petitions,-'.'.assessnient•orders •have been .passed;. :arid/appetite "" -.proQeedingS-'haye'.bepn,iidti^ed.: However,,in Wri/t-pd^^ V,41P7/200Sby G.D. Builders, Writ PetitionNo:--50461/08.by Unitecji; ••,. 'V ••Limited, Writ Petition.Nos. 401/2009,/4057/20,10.-;'&.'6658/2010%.• Simplex.Infrastructure.Ltd!' ,arid Writ Petition.Nos.'41-87/2008;-,aM , 5646/2010filed by•Vistar .Constmction.l'vt.Ltd.}'showpause notices;; have,'been issued ,and--the'proceedingsare stilL;pdndingbefore th^V •; .'•/ •original:authority.: In'WritTetition'Na;4127/2008:-filedby:.Clarion ;•." ,!.••;Prop6rties.Ltd, andHWrit.Petition No. 4658/2008,;filed-by,yiptil; .•,;.sLimited, .riotia^for :appearahce,of.fiirnishing-of documents/replyhas " been,givenand evenshow causenoticehas riotbeen issued. ' . . ' Contentions of the Petitioners ;•'' '2;. ••V:0QntentionsoftM petitionerscan be crystallized,as under--. ;- ,;: 'v.-' I' " ' i, •''''"•, ,1 •S i.WW AW rj. .j-j..V .-— , t• y.,; arid subsequentamendiTientsis in-exercise•of.poWef,,uridf^^ • . •• • Page^5t)^& •'V: '• ,1 • ' . .Constitution of India. Jt'.'is-levied on:-tax-able service:as-; definedinSection'65(lb5)read'witlidefinitionclauses/' ; ^

(ii) . Servicetax is'applicable.orilyin respectvofservice elefnent. • ,• ' ^and the'Central.Qoyernmeritdoes riqi^have ariy po^^ : 'v • •• ^ • vrunder.the; residual entry to imposfe;,tax:ori entries under | The ParlianieAt-cannotimpose.serviceitax-onihatefiai.o^ •: ^oods-used in ^execution of works/composite-contra|t! Central Sales Tax is payable'.andlevied on •materialused • • ' •in.•'workfecontracfnvitheffectfrom 11'''May, 2002 after;. . aniendment of the Central Sa.les' Tax-Act, 1956 vide _• Finance Act,20'02'.-• . ' .(iv) The ''compositepr.workscontracts."are.exclyded;from,the. . ' •" .'ambit of levy of semce tax under Section,;65(105),(zzqy . . • . and(zzzh). . .... .; ,. .(v) • Section 6'5(105)'(zzq)and' (zzzh) apply; oiily to "seirvlce; •• : contracts" £md;-:not.to ''composite-;or''works'.contract",.' ' ' • therefore, exemptionunder'notification,to;-the.extferit-o'/; . 67% to set off yalue of the goods '. :involved in ; • -execution of '''composite,..contracf'^is: contrary to .'•the; • :. charging provision •and . a. nullity, •. as-jit-...aiTiqunts:td-. -. . . • enlarging and'"wideningof charging section'^d l^.avethe effect'.Qfincluding or inippsingservice.tax.even.. -• on. goods or-material' used in-a-, "cpmposite/works'. • ' cpntract", It ^is well settled'thata'notification.eaniiotV • . : , . • ' ; Page-GofS.! - - ! expand'orenlajge.tliecliarging.sectioiTor even amendthe . •' •;•• •: ^(vD' value in a "compositecontract",is abated.has',theeffect,of; •iniposing.serviee'-tax.on ''composite;;.©!:,/works coirfrapt" which is not 'covered-by-the" main-;statutory;provisife^^ •• Thus• what is.hot cpyered and'canriot be covered iDy the. f-v-y-.- ./the seryice:taxgambitby the explanations^appended-tothe ; notifications.Thus, abatenientgranted-in-thenotffic&^ '' • •• ., .is, invalid-and'.contraryto main enactment.-• T|ie'said - ,' "- ; ,• largunient is equally-^applicable to column 4'of serial ; ;numbers'5, 7 and;10 of the.'2P0.6notification../ - :f:(vii). As per Section93 .ofthe EinanceAct,;1594;,thejCentralJ.;.' Governmentis, empowered'to:-grant,exemption-frofe.leVy ' • '\. ,, • .^ofserviceta.x eitherwholly or in part-but,as.- "coripo.s.ite. " .icontracts"and-"works...contracts".are'not'covere^under,: . I •:.Section 65(rp5)^zq) or,- (zzzh);' Gphtral .Govetnpent;;r, ,(viii).Service tax has been imposed on .sei-v^es involvedsiii - ;• ' , executionof^composite/workscontract"only with effect' from 1'^ June,--.ZOO?under-Section^65(105)(zzzz^).^^^to •• -. 2A of ServiceTax (Determination•pf .',¥alue).Rule^,2.006; . , \ cletermines ' .value '.'. of services;^- ".involved.in-';. ; . "works/composite.contradts".'and-it j.is-.levied.@-2% ' • . • •. - P.?ge7.pf-51 ' ih ' • •• .-•c, # •'•"• -Mi' '-•iV : ; • .;,• enhancedto 4% with effect from'M 200,8..vthe ' /'U -said,levy is not/^piicable to'"seiviees".coveredund^^^ ••/ •; •/Section65(r05Xzzq),and;(^zh). ,> •••' ••, . ' , .•, . There is a:cohfhct.hetween:Section•SSpOSX^^

(zzq) ' and (zzzh) andwhat is'.coveredby Sectron,6;5(105)(zz?za) caimo't be covered by Section,65(105)(zzq);'and,(zzzh); The two sets of provisionscarinot co'-exist;:Subs,eq^^^^ ••, legislationshows that the eajriierlegislation/willnotcoyer , • , •"composite or worlcs contract".-. -' • --^ •^: ,"(x) Section 66 -is;the".chargingsection/,imd;,proyisionsC;o.f , -..SeGtion67 are the valuationprovisioi^isV;yaiueoftaxabie / • servicesunder;Section67 is'the gross/aitiount'chargedby', the service,providerfor;such "servicesprovidedor to-be •' provided",' SeiVice,tax can be .chargddvonly for •the-. ;, .-., • •specified"taxable,services"as' defined'.in,sub-clauses'of ' / Section;65(1Q5};.V Tax can'be-only/.on the, value: of;• ' services and not beyond. There is no p.rbvision.for .-a,' ^ notional valufe'or to enable'the authorities to-reduce or.-subtract value of nfiaterialor goods. 'The gross amount : 'chargedor, the value o.f service cannot,iJnclude'value of' . '1; ' g0Q.ds and materialsupplied/used. ., ' /' '^(xi) '^guenessor uncertaintymakesalevy'invalidand illegkl. •iLegisjative History '"f.-'/: lection6'5(105)(zzq)imjposedservicetaxwith,effect.fromlO"---^•is^pt^ber,.2QQ4 on;.anyserviceprovidedby acommercialconcern-in ' Z;;' Page8of51'> '•:|l •if .^relationtoconstruction'semce.\Tteterm•construction:;,service was •'definedin;.Sectron.6iclauseX304 Aci^^^q.2),;of:''.•^.' • 2Q'Q4as;i'; ; • ^^ •' •^.;..'• ^'•••,^' ' •••;'' "con^ructionservice" me^ns,-" ' . -

(a)Cpnstructiori:Gfnew buildingor eivil-structure , •;- , • •• • a part thereof; or, . i, • •.. • \ ;;i;V"(b).repair,/alteriiation"or restoration of;'or simiiar ;• ; -•->•• V''.. V•(-'•;.:'^;seryi jn-.'ryafen'to,.biiilding or-civil,structure,, . lSn\ . • ^ •. • v •:?> V'r": '''v;\''(ijused, or to lie^sed,-primaryfor; 0 ;"'x: r '? % , ' (ii) occupied,.orto be occupied,prinikrilywith; or- .; •-V,

(iij) engaged,, or to' be .engaged; primarily-.in, . , /, • cbnimerce /.or industry,.,'or -worlc inteuded. foi. , • • ;,•• ' •• .commerce or. industry, but does hot include lOad, '.li-,;. .• •. ;• •• ' •,' v'A " airport,:railway,'transporterminal;'bridge,,tunnel, ;•• / longdistance'pipelineand darn;" •• ••; '.. • \ :4: . 'By;;FinarleeAct 2005 serA^cetax A^as imposed,under Section;;.; i:.\:/ • 65(105X2^^) serviceprdvidedor to be proYid:ed3to any person.^ ; •• .by;a QorniTierciai.concern in.relation•to "commercialor industrial ^ •, ••v-:6Qns«ti0n service".-' The''expression^'commercial.,or..industrial;;• . •: ^itruetiQA-sgryice'lwas"^separatelydefined in;Section 65(25bj^^,j .;; •. '- • ;. '••;underi='. • ': ;''••••• -^ 'A'V'• .' v- •'V'"'^ '. "comiTiercial or industrial.'construction seiyic^r. . • ^ ^ means-?- '-i .: , • • . '(a) Constrqctionof..a-new.bui.lding.Qr.;acivilstructure ' : 'V'.' , , .: • •• ; ora partthereof;or. , • .• .,.;•••.' ••.."•'. , ''V'-V •' •• • . :'••

(b) construction-ofpipelineor conduit;or , . •' • '

(G)'cqrnpletionand.firiishihgs^ervicesuch;.asgla.zing,;••••, • vJ- . '- • . .plastering;^.painting,''"floor.and .wall., tiling,,-,w,all..... .. •'>.••-; • • coveringand wall p.apering,'woodand metaljoiiieiy, . • ... .- .• ..... ' v . • ' .- ••- and carpentry, fencing and railing, constructiono£ ' . •. 4.' . , •:. •-, •s; . ' . -s; • • Page.9'0f.S.l • -• • . I •.' swimmingpools',;acoustic•applications or fi^ings:and' •other "similar'services,-,.inrelation'to buildiiag'or G'ivil structure; or ' ; ' -; :•' • ' ' -•

(d) repair, alterati'on,renovationor restorationof,-or' similar,services:'in relation\te,. building.-or.'";Civil structure,pipeline^orconduit,whic&as-;'^.-

(i)aised,or'to he used, primarily,for; or .. (ii) occupied,or .to be^occ'upied,primarily^vith• at/ .

(iji) engaged, or to be engaged, priitariiy.in, coiTimerce or industry, or; work, intended for commerce or .industry,,hut doe? not include,such services provided in respect of roads,'•.•airports, railways,,transport,terminals, bridges,....tunnels...and dams;"' . . . ... , ' • ,, '.r-Tl'-FinanceAct 2005 aisb.,saw , 65(Ip5)(zzzh).witheffectfrom• The,term, ;; :• •••60n§|ructiQn.p-f cpmplexe^^^ definedin..Sectrop;65(30a)as un^er: "Gonstmction of complex" means- "• •' • '••; '(a) constructionof a iiew residentialcomplex or a •. ' • / part thereof; or . •.• , • • ...•,••••.' ' (bf completion.and;finishingservices in•reliatioh "to • Tesidential'complexsuch;,.as',glazing, .postering, "V.. •;.: . papering, wood;,and'metal journey and .carpentry, •, acoustic applic0ons.Qi"'fttingsarid other 'sjiniblar . 5eryices;;0P . ' ^ 0;^. ;/• ,

(c):repair,alternation,'ren6,vationor restor'atiorio.f"-or , similar'services-in relationto,,residentia!,complex;."i. , , - ...' " I.- . • .Theexpression"residential.Gomplex"was.de£ned'in..Section6501a) '. butwe neednot referto'the'saidd^nitior^;:asitis.ixotr^levant. ;:v. ' ^^ T'; ••.' •• . Page 10'^•fSi".^ ^5(lp5)(;zzzza)'iiitio(iuced.s t^x in:/;fespect ^ •• • •'^/wofM^SntraCtservicewith,effectfrom.1'' June^ 20D7 byFiipnce^ •\ - • •',•-•/•2I)9tandf@ads•"•• .4 L^,i ^'Taxableservice"means aiiy servicesprovided ,:••• • •• • ortabe'providedtd'an5/,per«;byanyoth^^ ;in relation to"the execution-ofa'•wdrIffi^.c@gfe^ -. • ' ^^ •excluding,works-.,contract in;.:respect.of-roads, : , ; v .^z.: " ' , airports/.,'railways,:transport termin^^^^ - tunnefe and dams.; .v" Explanation.—4^orthe'purpoSes;-bftMf^ - 7-;^;,. ^ VorksGonti-act'4T:ieans'a;conti:actwl|ereih,-- •. •

(i).feansferof property,in gopds ,i^olvedmthe.;, ^. executionof s\ic]i'ebrfract^is,leviabletd ; , ofgoods^ and - ^ •

(ii) such contract is. for-the .jDurpo.ses of.canymg- ;

(a) erection,coimiiissioning,orinstallation'-.ofp-lant, •• machinery, equipment or sttuptures.whethep,pre-, .. . fabricatedor otherwise,'installationofelectricaland , .i '\ , electronicdevices-,;^plmibiag./drainlaying:or other . . installatiori%,..fQr,vtransport;;of.:.fh^^^ ^ ' . ventilatibii, or -air-cohditioninginchidmg, i^elated, ; pipework, ductworkand:sheet:met^Work^thennal ^• insulation,sound-insulation,•fire proofingor ;Water ' ';;V proofing,.liftand escalator,.fire.escapestaircases^or• eley^ors; or... -•-.-Vr

(b)'construction,ofa,nev/'buildingor,acivil-stractureor apartthereof,or ofapipelme01 • . . GQMuit,,primari]y'fbrthe purposesofcommerceor ^ ^ .• industry; or ' • v, . . ' '. ' - . ; ;; ; , '• (c|constructionofanew residentialcpmplexor a- •- ^, 'p^ thereof;or : .•(3-completion" and finishing -services,. ,repair,- • . al^ration,^renovationor restoration'of,'-orsimilar.; • •• • se|yices,dhfelationta'(b)and:(c);or •• .. y ^ ^ •, '• (e'j ' turtilcey. projects-, includihg - engmsenng, •; - procrfement.and''constixiction,or commissioning• • •r(Bip0.projects;'.'; -j "IP Y-. •;;v • - .... • • ,1 • t'.. ; ' •'.'t I • •' . • • : . •' S'. \ . L.^ , - .-7^ I•" ; '• ii- 'Notifications • ,...- • . . :•• ^- " "i.• ' ' • '" •• • •-• •••••- •; ; ; • -r: j ^ reafeas • •; :: • ^.u• S'" • :/ ,:?v •. /•'', ".'i ^ • • ; ' ; •• I • . ' • • . . -i ' V '•'.. 'i. ' '• • -i " •i:':-, "In cxtercise of .the povyers. conferred by sub- •section(1) ofisection93-of the FinanceAct,•1994 ; (32 of' 1994),' tlie Central" Goveynmmit being satisfiedthat'it is necessaryin,tlie p.ublic;mterest • . :so to do; hereby.'exempts-thetaxable....servrce. . . providedby a,comm'ercialconcenTto.any .person, •• in relationtocommercialor.Industrialconstruction, •service,- from,so much of the service,tax leyiable. •thereon under,,section66 ofthe said.A'et,.as i? in • excess of th6'•servicetax calculated.oil a.value .. -which is equivalentto'thiity^thre'eper cent of the gross amount-(Chargedfrom^ any.pers0nby-'such ••,;•: commercialconcernfor providing,thesaid;taxable ••• service; ' - • gPrdvided that'this exempti,on shall not-; apply in'. : -such cases where - ' "• '' '• ' ' ' ' ^

(i) .the credit-,of duty paid on inputs^or-capital -. • •goods has .been takenamd.er the;provisioiis-ofthe .,•'•• • CenvatCrediJRules,2004-.or -; . :... . 'xV -. '/ -

(ii) the commercial.concern.has- ''availed,.,the .. - JV .benefit under,the notificationof the-Government.. • -.. ,• • ,• o'fIndia,"in the MinistryofFinance,.(Department ; -of Revenue) No.12/2003-ServiceTax,,date.dthe v . -• : 20"' June,,20.03:.[G.S.R. 503 (E), dated;the-20 •_ ;• ^'.^ ,- . •. June, 2003]; or ' •, ' .

(iii). the taxable services, providedare .only ••:••.; •\ -.completion and finishing-services in relation to ' -'/ ; ; .' -j' .- buildingor civilstructure,•referredto ill sub-clause , . •• •• ' •.

(c) of clause:(25b) of section 65 of the Finance' ;: •. ; Act;.1994.- ,> . :v'; :. ^•^ .' -Explanation--: For 'the-purposes^of notifibationrthe"gross amount charged" shall ' . • -^ include the .value,of goods and material-'supphed ' .- ; , • . or .provided.or'-.usecl^by the pabvider of the .; , - ••• Pag.e.lSof . ! •commercial or industrial-:construcfioirserviceIfer• •providing such service." - . 8,. For the purposeofclarity,we record;tHatclauses'.and(iir) of •• the-proviso werfe '.added by -way of ••/•amendment;.-^^^^^ •';'No.19/200^STd^ted7"-'.Jurie, WhafVis-'sirfyectvm^terC^^ •• •challengebeforeus are two-pronged;the explanationW-claiuseO^^^ - Vthg proviso.-.The effectofclause^Ciii).to.theprovisowas/is;-th£^benefit •gf the\said,notificationwould'ttot-be-availa^^^in case;-die service; ;provfd?!/W&sproviding:"completionand fiiiisHiiigservices'.;iii relation^: --no bUiidin|.or civil structurereferred:to:;in, sub-clause,(c)-.ofclause - • QfJietion65 of thd Act.: the secondchailenge-:-before,us is-•tp-i ^ \:X]^e^mplQmtion, 'r • •' " : -g-;;,.'•l^tiflcationNo:18/2005-ST/dated.7"-June,.2005 was,issuedm /--v-^respegt/pflection65(10^)(zzzh),wiii.chreads>s ibllows;- "In exercise'of-th^ vpowers con-ferred by, sybr section(I) ofsqction,^3 ofthe FinanceAct, 1994 V ^gt)ithe/Central;"Governraent,..on. being satisfied . , that it is 'iiecessary-i!n the public interestso'to.do-, : hereby exempts the" taxablg service.provided,to, . any person by any other-persbnjin.relation to constructionof coiiipleXi.referred.to^insub-clause- • •,

(zzzh)ofclause(105) ofsection.;65oftI;ie.Fina . •Act, from so much, of the seryipe';tax-leytable' • thfcreonunder'section66 ofthB .saidfinanceAct, . • as is'in excess of the service tcix'cafculated on'a ,;j "value which is equivalentto thuly'-threeper, certt; of"the gross amoiinfcharged from'any.person By such service provrder.'for' providing the said " taxable service:^ • :Provided timt this"exemption shall not, apply in', svich eases where - ' " , • . Page 13 .of 5,1. ..'S :' "i • : -• ' -v' ' "V-" H \ ' '•• '• • •

(i); thexmdit. of,duty-paid-oh i • . goods,usedIdr^prpvidingsttcf-taxablesgrvfeie'-fas.. , Credit Rules,or' V•• •i .-(ii) 'the service,provider'hasi,availed:the"heiTefit \;f:in ';the •Ministry;;idf,.Finan^^ (Deparl:rriert;''^6f,' ^ •. Keyenue)iSfb;-f2/2;003rServi:eeTax,'datedtHe.2pth v • •" :Jurii'2003 f&S.Ei:-503(E),.daied,th&2^1.fee,:;-/ V.' v>^:v '^oos];orv;;-;fvv ^,-f; ". (iiif ' the. taxable services, provided.''•.art :"ohly " ' f--'f' ••• '" ••completion anduflnishing' services in\,rdlatfoh,.'to . f'.'V'Vm..- • /residential cdrnpie^,- re'ferred to- •^ih; .sub- -• / ' ••'" f,'i / .clause(b) of:clause.(3,0aJ:oi;section- •'65' of ihe ^ •"f ri •_ :Finance Act-f'.'-'. • • .; , 'f".';'.?''; • "f. fhe_ purposesofthis-notifi^ " ''^V. 'f,• v •'the''gross aiUounVcha;rged"shall'include the vatte - . •• . . of goods^and'ma/tei-ialssupplied or provided or 'V • used for providingthdsaid'taxableservic-fe''by•the, . . • ' .i . ' ,. :. ' ./- siaid.serviceprovider. • ' -:f • ,• -f' ^ " 2: '.. '<' '.This hpti:$cationshall-come,into',for,c.e on the .libthdaylofjunp^-20GS:"f,'\ • ••• |||^ .'f'-f.; y

(iii):&f;thepppyisof.• f:-':; , lO.s/ Notifigatipn. NoJ5/20,04-STfas;'.amended; and.:; Notifipa'tion ••.•^Ng^8/(2;0G5==ST'. :wer? sufesequ^tly'" replaced:. : A'. ^ 1^' March,;2006/and.the refey^t portiona. 'f 'S&id^riQtificatiQn ^/ :.. '• • - . •• '. • "Notificationko.l/20()6^STtP.No.3i4/3/2006itRU],, " f'.- ••dafedl-3^2006-. Vftf ^ '• f,'. .,0;S.R.•(£••). Jife>cercise.;pfthe:po>versGonfeife^^^ ' f- # • .• ':\v ' .. section(1) ofs.eation93 .ofth.e :FinanG.e,i^cf.;t954 "r ^-f .' r ;.1994)'(hereiriafter.referred;to as-th&.Finah^ the .-/ .- f- •• •'• ' .• \ 'I'; • ' -i-V' •' •-- V '' .'.f." •."Page 14';pf5k • " ' '"-C •• " ' ' • V!'- -rt • •• ' CehtraL/Government,•pn being jatisfied that •it; is 'necessai-y'in the publicinterest,sato'do,,hereby,,exenrpt? the taxableserviceof the description-specified,.jn col-umn ^

(3) of the Table below and specified jn the relevaht-.sub- •;clauses-ofclauseXlOS)ofsection ofthe Finance;Act, -r. ,-.'. • specifiedin the correspondingentry in column-(2)ofthe • said-Table, from so much of the-Seryice tax -leviable •; • thereonunder section 66 ofthe saiid.-FinanceAct, as is in .• excess .ofthe seryicetax,calculatedon a .value v^lieh-:is : • , equivalentto a percentagespeei-fied-in the corresponding '• entiy-inQoluiTin(5) of.thesaid Table,-ofthe gioss amount; ,' • charg^'by such'serviceproviderfor•providing-the; said ,- • taxable service^ subject -to -the-,-relevant conditions / specifiedin-thecbrrespondingentry in column (4) ofthe Table aforesaid: ' • ' v;'., - '• ; .' §,Mo Sub-clause of i clause (105) of Section 65 . W 'M I • '•%

(zzq) • Table • ,- •Descnptioii of. taxable, service

(3). Erection, "commissioning .or ,installation, under a contract for supplying a plant,maphinei-y, equipment or -structures';,and• erection,. • " .commissioning, or installation of such plant, - macllinery, .equipment or struetures. - Commercial or •Conditions

(4) • This- '...exemption , is. optioiiafto.the ;• commissioning' ' and instaiiation .- - agency, • , Exp^lcmatidn,^. Th® gross'",imo'Luit " charged' '..-from .. the, cusfomer shall- '- ,r'.' V include'..'the vak^e ' of the:plant,' - ^ machinery,-equipmeht, structures paits and ' • apy othermaterial'Sold, by,the pom'missioning';• ^ and; Installation i-,-'' agency, "during 'the course of providing . erection, commissioning . ; . or.Jnstallation'service. This exeniptioh shall: . a PerGeW-tages;.:' 33-lU-page 15 df 5i . ,-;'V iq:

(zzzh) industrial . construction service .Construction of complex • • not apply in. •• •, s uch cases whe re th e taxable ' services prpvided ai-e y completion aiid ., ftnishing services in relation to building or civil ' • , .' • structure, referred to in sub-clause

(c) of clause (25b.) of section 65 of ' • . _ the. Finance Act. . " • Explanation.-. gross-amount , • • charged shall include ; •the value of goods and materials' supplied pr.providedv, or used by the provider of,.' tlie;construction . service for' ' ^• providing such,'- , •service. • This exemptiqn shall ' not apply in f ^ cas'es where the ' . taxable services. •' ;. ••' . provided ai-e gnly ,' - completion and fini'shing.services in •' relation to \ residential complex.' ' • refe'rred to in . sub-clause (b) of',•• ' clause (30a) of. section 65 of the . Finance Act.. Explanation.-% •gross amount \'. c|iargedshalljinclude the valueof | ' goods and male.ri.als \A: Page.16ofsi •• im supplied,or Rrpvided or used for providing / the . . v • , , • taxable service by the • service provider. •• ProYided tiiat this, notification-shall'^not,apply,in, where,- ,• ' , • , • ' . •'

(i) the CENVATcreditofduty on inputsor capitalgoods or , •, : -•.• ' •, the CENVAT,cred.itof servi.cetax on" input-services,,used, • • . ' ' for-providingsuchtaxableservice;has'beentalcen under-'the , -'••• provisionsoftheCENVATCredit-Rules,2004;.or : vV - ! •

(ii) the service provider has'.availed.the benefit,uhde^ the • ••"notification ,ofthe GovernmentofIndia in the Mini.stryof: . • '/Finance, ('Department-of•Revenue):, "No.12/2qp3-Seryice.. , Tax, dated the 20th'Jtvifc;''2003[G.'S..R.503 (E)-, .,date'dthe " - 20th June, 2003],-. ; ' ' yExplancition.-For the. purposes of this notification, the • • " -expression"food" means.,a•,sui:stantialand satisfyiji&meal . •' V • - and the expression"catering serviqe'-' shall .be.construed . ,' • .accordingly." - , - • ; : •H. "The"challenge,as noticedabove, is'to the stipul-ationsin column Service Tax and Compiitaition , ' 12. '•• ^ value add'ed tax which was/is imposed and • leviedby theParlimsrtby way ofFinanceAct, 1994. •in phaais'anflpresenfly-itis.Imposedon all taxableservicesas defmed, ^eXQeptfpr,tlignegati^^list.,' d§termined.in aGCQ'rdanee with the .said-clauses,,ofclause (105) O'f •• ^eQtion 65 and wfe for any reason, ataxabieserviceis prima facici ' Page I'^of 51 K •• ^•'?. •.. ,1 "! classifiableuncier two or more sub-clausesof clause (105) of section ,63, classificationshallbe effectedas follows .. , .

(i) Specific description shall be preferred to more .general descriptiqn;

(ii) Composite services consisting of a• combinationof different,, serviceswhichcannotbe classifiedas per clause(i), shallbe classified • as if they Qpnsist of a service which gives them their essentiai •character,inso far as this criteriais applicable;-'

(Hi). Where aservicecannotbe classifiedas specifiedin clauses (i) , and (ii) above, it shall.beclassifiedunderthe sub-clause.Avhichoccurs first amongthe sub-clauseswhichmeritequalconsideration. 14, Section67 stipulatesthat the value of any taxable,'.serviceshall ; be the gross amount'chargedby service"provider for such services providedor to be providedby him.. Thus, it. sets .put the mannei of valuationoftaxableservicesfor chargingservicetax. Section67 is not the charging section as elucidated and relates to •mannei of computation or value which can be subjected to seivice•tax.. By Finance Acti.200i.with effect from 16^'' July, 2001, Section-67was substitutedby a new comprehensive'section. The said' section,has undergoneforther amendmentsfrom time to time and prior to its re-enactmentwith effectfrom 18"'April, 2:006 vide FinanceAct 2006. As on 17"' April,.2006, explanation1 of Section 67 for the purpose,of remQY^ gf.dQubt, was deemed tk3 include.the aggregate,amountsas. • spegifiedin clauses(a) to (g) but^pdnotincludethe amounts/deposits specified'in',(i)to (viii). Explanation3for removalof doubt,declared that the gross amount charged for taxable sei-vice shall include the aiiiQuntreceivedbefore,duringor af|;erprovisionof.suchservices. ' •• . , 1-5. Seetion67 as.amended-with:effectfrdffl 18"'April','2006 reads as; 'tinder:= ^ ^•SECTION 67. Valuation of taxable services ' •; • : for charging sen'ice tax.

(1) Subject to the prqyisions 'of this Chapter,,, . •; : where seiyice tax is chargeable "on any '.taxable, • ser\?icewith referehce'io itsyaliie, thensuch vdhie. -• : . shall, , . : •, . , ' ^ ay in a case where the:provisionofsej-viceii'for • .. . • a consideration iri money, "be the-gi'oss ~ainpurit ' • charged by the sendee provider for such service / . , provided or to beprovided byhim; • ' ,.

(ii) ina dasewhkretheprovisionofserviceisfor ' ; , a honsiderdtionnotwholly,orpartly,consistingof. ,; ' '/ money, be such-dmount'in'money as, with the. addition of semce tax,charged,'is equivalentto:" the consideration; ' ;

(iii) in a case where the provision,ofsendee isfor -a considerationyvhich is hot ascertainable, be the. •. amount as may be determined .in .the prescribed. , . manner. • <•'

(2) Where the gross'amountchargedby.a 'service ' . provider, for the s'eiyice' provided.or to be, [ provided is inclusive'of,service-laxpayabie,"the -• ' • value ofsuch taxahle.service shall'be'\such. am.ount ' as, with the.additionoftax.payable, i's equal to the •, gross amount.chargeid., •

(3) The gross am'ount chargedfor .the ,taxable. , service shall include any amount received toM'ards,.. •.the -taxable Service-before, during - or- .after-y provision ofsuch service.. . - ; • . •

(4) Subject to the •provisions'ofsub-section's(1),.-'

(2) and (3), the value shall b'e detennined-in such •' manner as may be.prescribed. •Explanatwii. —iForthe purposesof this section., • Page 1? of Si <: - '. . • i' ;• (a) "consideration"includes any amount that is\ i . .• payablefor the taxable-services,•provided or : , to beprovided; ' .

(b) 'Unoney" includes \any-currency,'cheque; •••• • promissorynote/.letter-of.credit, drdft,-pay' •• • 'order,'travelerscheque, m.oney,,order,postal • .re^nittanceand-Othersimilar-instrumentsbill ' • .doesnot include currencythatyis heldfor its: ' ' :• "• v . •• numismaticvahd (0mitted by FinanceAet, •• • 2012w.eX 1®'Juiy:2Qi2),':. '•-

(c) "gi:x)SSmnountcharged"includes'paymenthy^ ^ cheque, creditcard, dedilctionfrpm.,accowi-tand anyform-ofpayment by issue.,.ofcredit notes debitnotesand bookadfiistment. ' or effect from 19"' April. 2006, Swice T£K.(Detwnnn^^ • Value)Mes,2006havebecome^plicable., • , • ;:: • • g^jfere be delye further into--1±ie^qu^tiohs, we waulci-hketo • repfpduee^thestatementmadeby^thepounsd'asrecordedin'theorddf.,..y; i; " "..r •teamed,counsel'appearingfor the petitionei- ' ' apcepts -and states'that.'^service'component'^in: •• compositecontracts.Qan.betaxedybut not dswoilcs , contractper se^ Leiarnedcounselfor the petitioner . • ftirther states that the respondentsare also ; competent, to bifurcate and •tax the service.- , , component, alone. -He, submits tliat the^ ^ notificationsdated 07M2005 arid 0^03:2006are^ ; . ' • •bad in law because'theyhave b.een issued under; , Section 93(1)!of-the Finance.Act, as .if • respondentshaye grantedexeiTiptioilto the;extert , of67% ofacompositecontract.This is contraryto . , " Sections65,.66.;and,67, of the FinanceAct^ as the -.- seryice.componentalone is taxable and.not the - entire cousideration'payableuiider the .poniposite• •• contractwhich'.includes,paymenttowardsgoods or ; , mQveable" . ^ :Pa^e.20of . ; : • 'i • . • . rh •v.-';':' ; .i'.' - r •1 I ? • . • During-the-coursp..,of.hearing,.tlie le'arn,ey. ; -Additibnaf SolicitorGeneral' appearing..fbr:^;);h4; ; I;;:'' respondents. hassubmitted -. that the/|;,t^p.••.; '• notifications dated,O-^r.OS^ZOOSand 01.03;2006'.are. optional and it"is open and an assessee.need noi, . talce benefit of the said; hotiflcatidns,. if'.he'- • ' •desiresvHowever/seiT'ieetax is tG'-be lev.ied andMS: ^ , ; jjayable: on the-seiryice component-,o,fthe ,• •. :coifiposite'contract^-can be computed^ ' •^.y ;it' is:.submitteSyt% .an'-a:ssessee'cann^^^ bifuEc^e''two'notifica|iions-dated',07.06:2005.,$^ _ '• r • '

0.1,Q3;^06;andtake,:beiiefit,of:the;notifi^ ' ,. .. yet . claim'- that thev\explaiat;i6n''^ V. T- ' , notificatiohs sh.puldvnot.:be.applied:.Explanation^;'- ^ ; ' • stipulatesthat the grpss!;amount.fbrthe piirpos'rpf; • ' .. compiifatiPn-.includes..th^entire-v^iu.gof'thpgopd^ • ' , . .. used inthe.constructipny; A y'' .. • . : ^ ^ ^ , Learned.Additipkal•Spricitpr Genefaf;states-' A; .-.Vy,-' '• ; V,\ ••• ' th^ he-Sypuld like^to'%ke written-Jnsti-uctipns; •_ • ^ ; - • -• before the said^statemeiTtus ta:ken/pn;record,and:'', . ; y y .. . • ;thecourtprpceedsfurliier.", • ' •^ ;; . :;-\ y-- ;; ,r' ' 17, :. It Wfts accepted-.andstate^,.oninstructionsby the,;respondents.\:- • the, notifications.in:questidfir;^or:rathei?;partly^i^^^^^^^ ,£ire- , optional an^ r:> \ ' •' -i •. ,. .1 y ;'i -; if'hQ sg degires, t is^'payfbleon the -. '• g'gryic§-CQmpon§nt-of-,a. composite,contract,:which cgri be 'computed. ^-fhg-'hQti^bationsalso specifically,stipiilate,when they..apply,and^tlie:^. can be applied.- \ 1,3,;';^Siryieetax in'thcfacts ih.^:c]^estipQhasthree ..y . . stages^ smiud-taxwas imposedori-^co^striictiori-of:,y ^ el)mplex&. In the second^stage,::service;te^^

1.- : y-,, was.iapQ§§don residentialcomplexes;,of12"ormore-residentialunits • •- '• ^ " md in th^^'thkdstage;servifeetax:;was iniposed;ein:.^vdrks,contractsof-; •I" I. - •f r- .• • , any nature-except for, the exclusion in rqspect of roads,. airports, • ' railways, transport terniinals, bridgeSj Ixinnels and dams. ; Eacli' ';'proyision,of4evy has its own.scope',and ambit,.whilig'tliefirst-two' • / 'prgyisigns werepriniarilyspecific'andtEffgeted^'thethird mcl^^^^ ' • ' . • • is very broadand wide•terni'.and'will.includewithinli^: : a^bit and §Qope constructionof industrialand cornmercia|complexor .* . .. Constructionof residential complexes'.asspecified. Introduction and.' ,; . . , .' •..,Jmp9sitiQn.,Qfseryicetax on works contractby.FinanceAct,',2007does. ^ '•• ngt mean.-.that we have to'read do.wn, the .-scope, and aiiibit of.the. proyisigns,enactedlevy tax on contractsrelating.to"coimnercialand ;; - A : . •' •, industrial,•.cgnstructign", service .or. "construction of^ (residential) ' •cgmplexeg."servicesas specifiedby FinanceAct 2004 and FinanceAct;. . . V • 2005 respectively, The new levy;imposedby.Finance,Act 2007 does r ; ' ngt indicate'orshgw that worics'.contractrelating-to'•constructign of ; • ,\indu§tdaland coimiiercialcomplexes"or "constructignof (residential)... V ;• • cgrnplexes'^asspecified,would.beonly;applicable'whenthexontractgr .; ; • was-providinglabour,or service'andwas"paid^for the sam? and not to• • •, .- ' • ' compositecontractswhen|he cgntractor.was-providingrabour/serviges :,;: ••.: as. well'-as goods used for •construction'of in.d,ustrial.adid,commercial. .^ / cgmplexes:grresidentialcgniplexes,as.specified'.It wguld-coverany;' andevery,contract,whenthe co'ntractorwas gnly supplyi..nglabour.or,. -. undertakingconstructignservice's,-whether:with or without,supply of ;• ; ' '; • • material,i.e.,compositecontract/Thelevy is validwhen the provisions , •'. -. of§ectign;65(105)(zzh)and65(10S)(zzq)^oftheAct.afe'satisfied.The '. "•• • gnly'ggnditign'andrequirementis'thatthe servicetax shouldbe--levied'.' •' • • •, afid'impgsgdon the "service"jelemehtand not levied and-chargedon ^ ;; .. -' 1, _, ".;.Page22 of 5-1 '.f. •' : ' material'ofused' as^the'iDOwei:to -leyy sales-tax;^f,yalue,added.; tax on. [19, ^ The said legal.principleis:4ioJonger:res-integra,;as^ae • and coricept;.underlining..se;:vice',t.£pc .".•wa& M / • . 'elucidated:'byFuH''Behch of tliis;,xolirtiH -; ••, : (India)Ltd, vs. •U(^ (FHji'wherein;afleir.^>^ : •"52, From the ^foresaid'pronouiicdrneirts in the L: the followirigprineipjes.regardingservicetax;can.be fruitfully cul]^ , V: i

(i) The measure taxation and, jherefbre,' ' thV manner r o.f • • '•'• "N.- quantification'of theteyy of •serylce tax has':nq ' bearingon the facWtf-ofiegislatiye'competence.'.,' • :>

(ii) Taxable;,services. can^.include-•providing "of ' premises on a temporary basis for drganizing;,any • ; ^ ' yf 'K' official, sbcial. op business,flinction/but-also-b&er . •. ' ij-,.'''''faciljtieissiippliedin reilatibnthereto:"'; ; •; >'--;,/i;;.(iii)'.Levyof sdrvicei;^axon. a particular kind , service cannot be struClc down on the,ground that:. : \ , does;not.conform^tba,'.common,und,erstaiidingdf the,;- ••- '"word ^service"as Idng'as^it does-not transgress;any , .'.-r

(iv) S^ryicetax isa levy:,pnthe eyentpf seryice.;' ;,'s; '-J; ' ,• (v) The'^'cohCept of^ ^rvice''.tax'^is^an' economic^V-'-- TV-" -• V: 'concept; ^ .. •. ,

(vi) r"Consumptioh,:of•^service?"' -^^ jri. ,case\ of••: .^ ^ ' ' "consumptionofgdod^"'satisfieshuman needs.;. f;' ;, ' ' ; • ,'r' : (vii) Servicetax,is;a;va|ue•added'ta'x;^yhic;h,, • ' ,• a ': general tax 'appiicable'to-'all. cqmm^^ ' ' • activities inyblving provisibn of sei-yice... :,f'- • , • ./. , ' -' .V '••'iPage 23 of51 f " 1 • ' .

(viii) Value added tax is a general'tax as well as;, •.destination based consumption tax' leviable .on .' services provided within the country.

(ix) The principleof equivalenceis in-built into the '• concept of service tax. ,

(x) The activityundertakenin a transactioncan have • two components, namely;,activity undertaken by a ' . person pertainingto his performanceand skill and, •secondly'the personwho availsthe benefitofthe said performanceand skill.'In the said context, the tv/b ; concepts,"namely, activity and the service provider. ;. , • and service recipient gain'significance," • 20, In Tamil Nadu KalyanaMandapamAsscn. vs. UOI and Ors.

(2004) 267 ITR 9 (SC), challenge was made and rejected by the SupremeCourt'onimpositionof servicetax on Kalyan.Mandapam.or' Mandap keepers who providedfurniture, fixtures, floor coverage,etc .• for orgaiiizingsocial or businessfurictions. The tax on 'service, was .. defined as any service provided to a client by a mandap keeper in , relationto use ofmandap in any.manner,includingfacilitiesprovided •to the clientin relation.tosuch use and also the service,,if rendered,,as a caterer.. The SupremeCourt made referenceto the 46";.amendment i.e. Ailicle,366 (29A)ofthe Constitutionand refeiTedto the fact thatas per the formulaprescribedin the FinanceAct 1994, servicetax was ' levied on 40% of the gross amount charged by the mandap keepers .from the client where mandap keepers were-providing catering sei-vices,.Thus,in the case ofmandapkeepers,servicetax was,,payable' , ^on compositecontractwherethe mandapkeeperswere to also provide fbod, furniture, electricalfittings, tents etc. The contentionthat th^, servicetax imposedon mandapkeepersM'as tax on land or tax on sale! . or purchase of goods was rejected. It..was observed that Article - i - - • • . . Rage 24 btSl' 366(29A) (f) does not include supply of services, within supply of.' goods, The two were separate aspects..Concept of catering includes' concept pf rendering service; though sale of goods is involyed. Parliament is competent to" levy service 'tax on the sei-vice aspect. , • - • . ^ . i ^ ; Reference was made to sub-clause (f) to Article 366(29A)' but in the # presentcase clause (b) to Article366(29A)would be appropriateand applicable, 'Clause (b) uses .the-term "works contract"'as the said 'expressipn or term had gained acceptabilityin light of the earlier judgmentsgf the SupremeCourt, where contractsfor constructionof building, along witH labour and material'were described as "works, contract" in contradiction or as antitheses to contracts for supply of material,withoutlabouror constructionservices.The,.saidterm is also used in the Central Sales Tax Acf, 1956. The said clause,enabled the legislatureto bifurcatethe works contractinto separateiDarts,i.e,;saleof .goods or materialsinvolvedin the constructionand supply of labour and service and attribute values to, the two parts/aspects. There is no standardformulato distinguisha contractfor sale of goods' from the. works contracts and it largely depends upon, the'- facts and..' circumstances of .each case. Sale-of goods im^olves transfer-of moyablepropeityand deliveiyofpossessionof movable-propertybut' in Qase pf contractfor works, there is work and labour alone. Works• ,contract are composite and have elements of both service'and' sale/consideration for use of goods; ] '21, In K, .Raheja Development Cor^j^n.: Vs_. State of Karnataka

(2005) 5' S|iGk462,'the Supreme Court examined the term''works cgntmct' as,definedin KarnatakaSales Tax Act, 1957 to mclude any ' ,-P^ge 25 of sSl •v- • agreement for ban-ying out for valuable considerationetc. buildiiig • construction, fabrication,, erection, • installation,, -fitting . out, improvement,modificationof any nipyeableor immovable.pioperty.. It was observedthatthe.definitionwas.notrestrictedto Works contract• ;...-as commonly understood i^e. ^contract to work on behalf of V' ' somebodyelse. It was further observ.edthat the definitionmakes no •. distinQtionbetweencontractfor residentialflat or commeicialiunitanji •. would,therefore,includeconstmctionofcommercial-units,As long as;. , •. the. agrggment-was '.entered:int9 :befbre,,the •construction, was "complete",4t would be a works .contract'(we are not required,to ' ... . . interpretand'construethe-expres^on.'.'complete"in the presentcase).••, .Tlius th§-i.definition clauses. in the Act ;for . applying .section ... 65(105)(zzq)and (zzzh)haveto be givenfull effect. - •. . • 22, •Affirming.the judgment-in'the o&st:ofRaheja:Development • : (gupra),.the'SupremeCourt in its.receirtdecision •• JLimited versus State'of.Karnataka, Civil A.ppeal•Nd:86-.72/2013. •• elucidated.the efffectofArticle3.66 (29A) as conferringpower on tlje: •. Statesto tax "works contract"by taxingtransferofpropertyin :goods .• ; whetheras goods, or in the form ofgoods involvedmthe executionof. . ,. . ^ "works contracts",..,The:expression^:"works.contract"is'verywide and, v' \ eriQQrapasses.several types.ofcontract and,-shouldnpf-be given,a-; restrictivemeaning,'the earliertest,i;e., "dominantpui^osetest'^asno;;: : v •longervalid; Referringto the aspecttheory,it has:bepn'observedas,. .-> . tinder:- .' , \ , • . " .' ' - f / ." ''1.0^0/Wehave no doubt that the State,legislatureslack-. • ^ •••.legislative .power to levy"tax on. the ti-ansfei ,o.i-.- "- ; ' immovable propeity.under Entry 54;of List II o'f ^he ' •.'..• • . • -Page 26 of,51 .. .sp: Seventh Schedule. However, the States •.do '.have' . " competenceto levy sales taxion the sale of goods in an /•.agreement of sale.offlat which also has a componentof • • . • •• , ..Meeined sale of goods. Aspectstheorythough does not , •allow the State legisiatureto entrench upon the Union • ; ' Ust and tax'services by including'thecost;of.such •• : • service in the value of goods but that does not detract.the • State to tax the sale of goods element/.involvedip the ••• •execution of works contract in a composite contract like. •contract for. construction of-buildi.ng,and sale of a. flaf •. therein,In para 88 ofMara/'''S'i:ff7G/7a7:5,the .G.ourtstated; . / •; ••.'-theaspectstheory does hot however'allDw the.State^6.• ' ^ ' . • entrench'.-upon the Union List and tax •services-by includingthe cost of siich service,in the value of the/ , goods, Even in those (Compositecontracts^whichare,.by , legal' fiction, deemed^to be, divisible, under Article : • • ' •366(29-A), the.value|of the goods involved••in the execution of the whole transaction cannot.be assessed to ; , ' • salestax". Having,said that,the Court-alsostatedthat the • . States were not competentto includethe cost of service . . in the value of the goods'sold (i.e. the sim cm-d) nor the ... - ' - Parliament .could include thb value of the sim card in the • . : .-gostof.services.'Butthe statementin para 92(C) ofthte'- • -• • . f^ReportIs clearthatit is upto the Statesto tax the.salefef • . •••.-goods element in a composite contract of sal,e. and . - .• •'service, iJawc/wJIthus suppo.rts the vievy that , '• ,' ', -^taxation.of differentaspetts-of the same trarisactibnas , , • •/•. ,separatetaxableeventsis permissible."• . .^•"^ The'fbUgwing-propositions,which aj-^..relevantfor the present case, . ' . " haY.g alsg fegen enmiciatedin r5'Mi7raj:- -• • , .• ' "(i)'For.Sustainingthe levy-oftax on the goo.ds.. ••..,'' . , deemedto'havebeen soldin.executionofa works . . • ' ' • • contract,three conditionsmust be fulfilled:.(one) , • ' • •there must be a works•contl•act, (t-^yo)• the'goods • , ' should have been involvedin the executionof a/ works contract and'(three> the property in-those, "' l '• ! • '• V? . goods must be traiisfeiTedto a third party•either^..' •' as goods:orin some other fcjrm.- ,"(ii) xxxxx' . V ^ '

(iii) Where acontractcomprises,of both aworks contract'-and-atransfer of immovable property; •, . .• such.cpnti-actdoes-not denude;it of its character. . '' •. , as works contract.The term;-"workscontiact in Article 366,(29-A)(b) takes within its fold. all. genre of works contract and^ is not restricted,to; one specie of conti-actto provide,for labour and -": services'alone. Nothing in'Article.3'66(29-A)(b>, •limits the tei-rn"works coiitracf';. • , .,• ••

(iv).Buildingcontracts,are species of the works •; . ^ . : contract. ; . ' , • \ V:" ^

(v) A contract may involve both'a contra:ct pf work md labour and a contract.for sale. In such; ..composite contract;M.the^ distinction' between. , conti-actfor sale of goods'and.contract'forwork . . (or service)is virtuallydiminished,.; ' •• • .: ;.

(vi) The dominantnature testjias.ho,,application.. •• and the traditionaldecisionswhichhave held.that•• the substanceof the contractmust be seen,hav^' .z . •• lost their significmcewhere,transactionsare, of, ; the nature contemplated.-inArticle 366(29-A)-,. . • • Even if the dominant"intentionof,the contractis _, . '• not to'-traiisferthe properlyin'goodsaiid'rather " is renderingofservice,or the.ultimatetransaction.. . is transferofimmovableproperty,then also.itis' , ,' . open .to .the 'States:to: levy sales tax. on' the: • materials'used in. such contract if such contract .. othemise has elements of works contract. The • 'enfprceabilitytestis also not determinative... -

(vii) XXXXX . (viii) Even in a:'.single and indivisible works . , . contract;byvirtue.bftheaeg^.fictionintfoducec^ • by Article366(29-AXh),there.is;a.deemedsa^Jc.of.. goods which are involvedin the execirtion.of the . works contract. Such a deemed sale has. air:-.the., , =_ •' incidents of tlie.sale of goods;.involvedm-the- . executionof aworks^contractwhere the,contr^t,. '. is -divisibleinto one for^.thesale of goods and the ^ ,, . ' , •. . "., Page 2,8 of 51 v:.: . '?<•. F . .r- ••• ' Other for supply of .labour and semces. In,.other,. . • • yvords,the single and indivisible; contract,aiow by • , Forty-sixth Amendinent has been,brought-on par • - • ' .••with, a contract\ containing two separate • • . • •..agreementsand States-have n.o.w power to. levy ' sales tax on the value of the, material .in.' the execution of works-contract. ' ' ::'j

(ix) .XXX^CX^ :v ' ,

(x) XXXXX . - ' • •

(xi) Taxingthe sale of goods elementin a.works.: .contract under.,Articie..3;66(2.9-A^(b).rea.d;'.with- -,. '. • Entry 54 List, If "is.-permissible even.-.•'after. •; . • incbrporatipnof goods providedtax is directedto ^ . ' '• the value of goods and does not-purportto tax tlie-. transfer of,iminOvableproperty.-Theyalue.pf the - • goods which can constitutethe measure,for the• levy of the tax has tp be the value of.the.gbods at • • • • ' • the .time of incorporatipn of the goods,in works ' . , even though propprty,•.passes.,;.as between the^. developer' and . •.tlie ^-' fia.t• purchaser'••••: .. incorporation of goods." ... ~ ; •23, In Gannon Dunkerley:, and.:Co:- Stafe see 364 it was Sixth Amendmenthas'to be carried'to its logical end and.even single, indivisible.Qontractscan be biforcatedinto, contractfor; sale of gpod.s and other for supply,of labom",and sei"vices at par with the contract containingtwo separateagreements'.The State legislatureare competent^ to 'impose tax on transfer of propeiiy. in, goods involved:dn "works:- -coiitract",The Parliament'canenact laws which,can specifyrestriction^; and conditiQiigiregardingthe systemoflevyy.ratesor incidenceoftax, But .-;;.this.is nQt-aOT^ .Itmeansthatifthe Parliamentenactsalaw, the , •,, BxerQige..9f,,:le^^ power-of the State would' be suBject to -a- -Page 29 6f$i, •• ( • systemof levy, rates or incidence,oftax.'.Mostimportantly.k•has ' . ' observed that.measure of levy of tax contemplated by Article 366 (29-' .A)(b) is the value of the goods involved in execution of "works • ^ ^ • , ;cpntracf\ . Since the taxable event.is the transfer of property in goods, ^the said transfer takes:place.when the godds are mc^rporated in thfe • • -' ' works, the-value of goods, which can, constitutethe measure for the .^ ^ • // •' ..leyy:hasto:be'the^yalue.of goods at the.tir^eof incoipQration;of:tte • : ' • •. goods inth§ works,: , . . ) • _ ;v,:' • ; • , •24, ^hjiile^xlyin'Mahiip Patfam'(P)'Lid: •vs. .Umoit of.India • .()r-§, (20Q7)'3see t68,'t'hd§uprem,eCourtrefeiTedto;thedecisionof Gannon jjlunkerley and Co. vs...State of Rajasthan.^ . Ql3§§ry§4{='=:"' • • ' 'T' ' .. J-" '''• '' • V-. .••r'-'^-5. It.was, howeVer, held while laying dovVn ; ' ' that in the absence of law by Parliament so' ^ providing,..itwas not.permissible-fbrthe State , Legislaturesto impgbe such a tax; it-did-,not ;. mean that-thelegislativepo>ver.-;of the State- ., , .'ilaW under sub-clause,.,(Z5.)--ofclause (3)-,:6f . • ^ Article "-2816 by •Parliament^', observing:; . • (GarinonDunkerleycase [(1993) 1 SCC 3-64 : ,,,SG.Gpp;390-91^para39) / i' :. .• "It only means"that-in the:event of a law ,' haying been-made by. Parliament miider Article 286(3)(&^ the exercise of the .; • •-, • legislativepoWei: of the State;underEntry ., ; 54 in List-II to. impose a tax. of the nature-..;-, . refen-ed,to in sub^clauses (6), ,(c) and (J) - - , • of clause;(29-A).of Article 36.6 would be . • - : subject,•.to restridtions and-.-conditions..in.,.v ' regard'.,-to the system-of levy.rates-and;, - • . . r iPage 30 of 51 • y • li '• ,•otheriiici^entsof;tax'contained'inthe said, laW; The,existence.ofa'law..enactedunder , /u1;icle/286(3)(^)^.^^cannot,^therefore,•|)e reg^ded: as'a ,CQnditionpre^ • exercise^(|f:lfce.tajdng;'power©f the State; underEn^ 54 in List Ilvto;.inippse:^ of the nature' referrfedto in,sii]3,-clauses , • (c) and (c/) ofclause(2^A),of:^icle 366. : • This .; does-,'.npt;;; .^howey^r, ^absolve:^ • ' Parliamentfrom >. ;enactihg' -a: ;law --^as , V. envisaged;.by4^clc;^6(3):(^j)...:Keep^ iii view..the grifevmce.pf'the contractor.S; ,, th^ .thereis wide'disparityini^thesale&:fe., legislation';6f-the,,'yarious' States,•in"the, •matterof irnposit'i.on,.mode,:.of..assessmen't', fates,, etc."• of'^^tbevtax jon^;;deemed•.sales. • resulting.from.::t!msfe '! of goods-,'mvolvedc'iiT the ,execution;• Of works,;coi^ract referred;;io:.iri,;sub-clau^ , (6)•of'clause.(;29^A)'of •Arl;icle',.g6,6,;^ need for .the-laAV' ienvisaged by :•Arii'cl.e-286(3)(Z?)cannotbeminimised '25';'ThLereafterin'MahimPairan^scass (Supra),the SupremeCourt; "6.This .Court noticfed the,, matters which are, eiiYis^gfedfor impositiSil^oftax on-sale or ,purchase. 'of goods'after the Constitution'46thAmendment;,It;: furthermore'considered:-thedeductions which ..were' required to be made/from.the.value-'of..the.entire ' contracl.inorder to"arrive at the.valueof the gobds-. •:involved in.theexecutionofa works contract:-K;was/. held; (Garinon:i;)w?7/i:er?.g^case [(1.993)'1,SCC:-364J,• ,SCC P:'39i5,para47):-.> . ;/ • ' "The-value of, the'- goods, involved .in., the • ejcecution^ofa works contractwih, therefbre^ ' have to.be deteniT.inedby,,taldng into aQcoiint •'P.age,^lliif,S1 •. •; the vaIue,:Qf the^ entire works':contractand;: '; ^ •/ deductingtherefronithe chf^rgestowards-labour^ ; , r'" V and serviceswhichwouldcover— • :;r>•• \ V(a) labourchargesfor,e&cutionofthe worlcs^ ' (Z?) amount-paidto. a sub-contractor.for labQur;.,V, ^ ^ , • ' ^ and services; \ : ; • • '• - •' [c) charges'- for .planning,; ' architect's fees;, . (4) charges for obtainingon hire or otherwise; ; - ^ machineryand tools used for the executipn9^:;; : tl\eworlcs^contract; ' • ' • • (e) cost' of consumables•such;;;• as wateV;,,;; •, ' electricity-foel,^etc:;ajs^^ . - • . the works,contract1#e propertymwhich IS: r^ot,., V•••/; r transferred in the course.9f execution,of ; works-contract;and: •/ ^ -• ••" '

(f) costofestablishmeritofth& contractor.to'the^. .,• •• . -Sctent ,it;is;relataWerfo.^supply of labourand.,,.^^ '' V;,:',' services;/; •/-v • •V (gj.othersiraUar.expenses-.relatable:to,supplym.; • •^ labourandservices;',^ • v • ' ' . -••V r/O profitearned by the contractorto the extent>, -Y' ;, •: . it is relataMeto..snpply.0flabour.and;services. .. • . ' The amountsdeductibleunder these,jieadswill •• V' -haveto be/determinedan-thelightofthe.facts,, a particular.case;.0h.the basis;of, ;;produced'bythe contractor.";:;.V , , ' : ,v;.v,. y•. 2^: It' was' forther:ohseryed in• to,:i;t|e;'iforesaid Gannon ^JDunkem^md '.tam§dan:x§gard.tQ inannqr'.m,wkicbtHe sale pncevof^suplitia^sfe^^^ "cQulib§^Qaiq^lated-andit.waste^ ,, • '. : " . ::"27,We are, liowever,not,oblivious,:o,£(he decision , ,.,>i • . . • -oftiiisCoilrtwliereintlw.measui:eorYaluetowiOT^^^. ::\^::-'theraKWillbeappliedfi;ircomputingtlietaxli^^^^^^ consideredto be one-offfle . . " .i^rkeOovW&W.0««g. . >. .V'^'gcc2051 1985 see (fttx)447] ..see para ; . 'i'.-r •- Page 32,,of$i-t " r , j. V' .. then measure.orvalue-to.whichrate would be applied is one thing, but how 'the turaover' would:' be" •; determined is another. Computation provisions may bear a relationship with.,the nature of .charge and •constitute:~ ah integrated',. .code-.. as • was ' held;- In CITy.B.C. SrinivasaSet(y.l(l9'8i%^^SCC 4.60';':' ' • •1981 SCG (Tax). 1.19] (SCC at p.: 465);•buMds •;equallywell settled that'only.because;rliles had' not, j.been framed under the'Central Act; the.'same. pe7-we would not mean that no tax is leviable. 28, In Sudhir Chandj'a Na\m\. WTO [AIR 1969 SC 59; (1969) 1 SCR 108] this Court rejected, the' • was unconstitutional as no Rules had been framed to ' : value the asset for the 'purpose of the Act stating.: ' (AIR p. 63. para 10) "/O. The plea that,Section.•7(l'):oftheWealth'. Tax Act is ultra vires Parliament is also wholly without substance. That clause proyide's:' ; •Subject .to any rules made iii this behalf, the:/, value of any asset, :• other'than cash, for the. purposesof this Act, shall be estinu.atedto be thfe '. price which in the opinion of the.Wealth .Tax' , . Officer it would fetch if.sold in'the open market^ ' , ' on the valuation date.' •.•. '. • ^ It was urged that no rule's were framed in respect of" •:, •' .the valuation of lands and buildings.'But Section 7: only directs that the valuation of any asset other,than ; • cash'has to be made-subject to the rules. It does riot • '. contemplate that there'shall be rules' before an asset - can be valued. Failuiie.to.makerules for valuation^of" a type of asset canifet thereforeaffect the vires.^f Section

¶7It was also said that Section•?(!) which.'- , . requires that the asset''shallbe valued at'the price ' ., which it would-fetch-if sold in the open market on the,-.. ^ y.aluation date^ was.'expropriatory.'This xonteiition.' ... •.wasnot raised in'the,';j)etition,and no ground is niade . out for holding that'lhe rate at which wealth tax'.:is• leviedis expropriatoi|'.,"; •. <. '

¶29The questionwhich, in'our opinibn, is required-to - .• be posed and answered, is as to whether there'exist ••. 'Page 33 of,51 .i ,• . • sufficient guidelines for determination' of ' the •, turnover'in, the. hands of the assessing.authorityfox . , ,the puiposeoflevy oftax. The 1956 Actprovidesfor •' ' levy oftax. Works contracthas beenbrought,within; the purviewofsale. Whereverthe said words haypj • ' 'been used, the new defuiition,therefore,would,be- •. •.applied,Section8providesfor'ratesoftax on sales-dn'/ •; •' the course of inter-Statetrade or commerce.Bection .. •8-A providesfor determinationofturnover.Section'9 • providesfor levy and coliectionoftax and penalties'.'' ' . The s.aidprovisionwould, thus, be appliedinrespect;' , . of transfer of. property;in goods involved in tire . ; 'execution.of•works, contract.'The19.56-Act,provides, ..' for grant"ofexemjptio'hs.and various provisionse.g:, proviso appended to. Sections 6(1) and 6(2} ,bf the- • Act. " . " (EmphasisSupplied^ • 27, 'Thm''ea-fterreference-wasmade to th'e pr.ovisions-of U.P. Irade • ,• ••••'..,-^T^x Agt,-1948andthe Central.SalesTaxAct1956,whetherthereexist: '• ;:;:gui^eline§,.f9rd.etermmationofthe turnoverfor the pmposeof-levyof ;.v ••• V.tax,as worl^^sGoiitraets-had.heenbroughtwithinthe pur^aev^.ofsak..It " , ' was obseryedthatCentralSalesTax (U.P.)Rules,1957;was ap^^^ •. ••: •r'.,;•••,. :Clau§§'3'9fArt286 ofthe Constitutionhas--alsobeenamendedtoajlow • • ,y; Farliament.to specify by law. restrictions-and. conditions.with ' regaiMrto'the system of levy of rates and other.incidence.Oftax oh, 'transferpf goods involvedin the executionof works contract, l^t h^: beenliiglilightedin theMahimPatram's-case(Supra),as,follows.:-;. , -15. Clause (3) ofArticle.285ofthe-Constitutionwas. ; : also amended,to.enableParliamentto specify'by law . " .' --'c,• '• ',.; - ,. restrictions-andconditionsin regard to the system,of .levy rates: and. other-mcidents.of-the .tax .on,-the, , •• : transferof goods involvedin the executionofworl^ . •.. •: rcontraet. Pursuant to or in furtherance of the said;,;• ; '' enabling provision, as. noticed-hereinbefore,aiid. in deference ' to observations, .made-" in:Gannon- . ,^\pw«A:erfeyI(1993>lSCC,364],;.Glaus:e(g)-ofSection:. > P^ge-34 of51 - ' was.substituted by a new clause'defining "sale-in : . - ".the following terms: , • • "2. (g) 'sale', with its..grammaticar'variatiQnsand;, ••cognate expressions, means any transfer of propei^y ' in goodsvby one perspn to •another for cash '; or. ^ ,• v.-•.'.(deferred payment or-, for . any other.•valuable •••;'Sii'';Gonsider^ion, and includes,—^ ,;::y a transfer,. otherwise; than-in; pursuance, of a. • contract,ofpropeityin any goods^for cash, deferred- • •'•• ,;paymei:itor othervaluableconsideration; '• • • (//).atrmisfefof propei1y,:i.ngoods (whetheras .goods; .•'• or in some otherform). involvedin.the executionof a •• . . works,contract; - ' ^ T, •••'^ •'•.•(/7z) a delivery,of goods',on hire -purchase or ,any .systemofpayinentby instalment^;;. : •. ' ,' (/v) a transfer'of the right to,, use any goods for any •. purpose, (whether.,or not for a specified period) for •" cash, ..deferred, payipent^ or . ..other valuEtbie, consideration; - •^ " . "

(v) a supply' ,of ,goods;;,.by'any ^unincoriiorated. "; associationof body of-personstO; a membertheieof-' ' -.for c^sh, deferred -payment or-^other; valuable;; •• consideration; ' • ' ' ^ r - ' '

(vi).a supply,by way..ofor as partofany servic.e-or:!in' any other-manner.whatsoever,of goods, being.'food ,• or any other article for.'.humanconsumptionor aiiy. .drink• (whether or not intoxicating),.where such — supply or service, is'for.cash, deferred-payment.or •, ';othervaluablecohsideration,,; •' •'••• . • ..but does iiot includea mortgage:orhypothecationof or or.i; 2§, Comingbaelcto th^ case 6 (gupra),itWas'.pbseiVed: • Page 35 6fk' .'v; • T'r •• k.- , "In regard to tlie. s.u.6missiDn,m|icleon Article, 366(29-/^)(/), we are of tRe .view that ,it does not •, •• provide to the contrary. It only permits the State to" • impose a tax on the supply of food' and drink by• whatever mode it may be made. It does not conceptually or. otherwise include the supply' 'of services within the definition of sale and'purchase,of goods, .Tliis is particlilarly. apparent from ' the. foHovying phrase contained•in. the., said•sub-articlc. •- ' •; •'•' ^'siichtransfer,,deliveiyor supplyofanygoods,shall ' deemed to be a sate of those goods": In other , words; the oper^ativewords of the.said sub-articleare : :supply.of goods and it is only" supply of food and drinks mid. other articles for human :donsumption that; • is deemed to.be a sale or purchase ofgoo,d?. . j The conceptofcatering,admittedly,,includes-i ,. .;' the conceptof renderingservice.The fact that tax.dn 'r,'.'.'" the sale,ofthe goods inVoIved'inthe'saidservicecan • ;• . be levied does,not mean'that a service tax cannot, be' levied on the service aspect of catering-Mr Mohan • Parasaran, learned.Senior Counsel for the appellant . submitted that, the High. Court before applying the aspect theory .laid down by this Court in the case ,• ofFederation of Hotel and-Restaurant Assn. of : India y. ilniQh of India [{19^9).3 SCC 634,;. AIR • 1990 SC 1637] oughtto:hfive'appreciated.that in th.jit: V• matter Article 366(29-A)00' of the,,Gonstitutio.nvva'S:. . not considered' which is of vital importance to the presentmatter and thatthe High Court oughtto have differentiated the two matters..'In reply, our attention was invitedto paras 31 and32 ofthejudgmento.f.the . , High Courtinwhiphserviceaspectwas distinguishe.d from the supply aspect. In our view, reliance placed;' by the High Comt .onFederatiojr of Hotel ..and, •" Restaurant{i\9'&9)3SCC;634':AIR4990SC l537t: and, in particular,-on.the aspect theory is, therefore,,. •' appositeand should be upheld by this Court. Inview ' of this, the contention.ofthe appellant,on this.aspect. is not well founded.. . ! f.. • V ; • . ~ ^ •- -J w-i:, rrr-TT?;_T-T--—r--. . ; -'•f Page36 of 5>; • •, 'v • It is well settled that the measure of taxation . • . . ,i • cannot affect the natLh-e'oftaxation and, tlierefore, •; • > , the fact that service tax is ieVied as a percentage'of • .the-gross charges for cateringcannot alter.or affect .. the legislative competence of .ParliaiTient;.in 'the' ;' matter." ' . ^ . ; V ^ - - V. • . ••' 'i.'. • xxxx xxxx A ,tax on services rendered by-niandap-keepers. and'- ' ; •; • outdoor caterers is in pith and-substance,' ata^-on • ' , services and not a tax on sale of goods or on hire-'.; , ; ' ,' • purchaseactivities.Section65 clause(41)sub-claus,e /, .• ••ip) ofthe FinanceAct, 1994;..definestaxableservice ; , ; : ; • ' ^(whiGh.isthe subject-nmtter;oflevy ofservicetax) as •• • ' • ^ny service provided to a .customer-byauiiandap- - keeper in relation to the us.e of a mandap in any' -' '.'manner including--the.,facilities provided to [a. • . i , . . ; .customer] in relation tosuch use and also the .• , • "'j'services, if any, rendered-^S-acaterer:, •• . '• ' ,fhenatureand'chafacte.i0fthis servicetax is evident r •; 'tornthe'factthat the traftfectionbetweena mandap-. i :lceeperand his customeri's definitelyndt intlie nature• ;: '. •' •' of a sale or hire-purchasi;of good's:.It is essentially - that of providinga servibe. In fact, as,pointedout, . '• earlier, the mariner of service provided' assumes ' , predominanpeover-.the providing of,food in such ,• . situations which is a definite indicator ,of the , • • supremacyofthe service,aspect.Tile legislaturein its, •• •, •• :,wisdom noticed the said' supremacyand identified, •• the same as a potential region to coillect indirect • ,i taxes, Moreover, if has been a well-established. v";judicialprinciple.that so long as,the legislationis ;in,', .- , ' '• •.' 'substance,.,on, a matter assigned to a .legislature• , , • enacting,.thatstatute, it.'must be held valid hi, its .• ' • ,,. entirety even though.it may trench.-upon,matters/ • • • • ; beyond its competence. Incidental encroachment; • ,, 'does not invalidatesuch a statute on,the,grounds that,- it is beyond the .competence of-the legisiatLire^; • • ', {Prafulla Kumary. Bank of Commerce[AIR .1947?, ,- . , - PC 60 : 74: lA .23]^:, Ai-ticle..246(1) of the • "v, ' '• ConstitutionspecifiesthatParliaraent',has,exclusive . powers, to make laws with respect to any of tlie • mattersenumeratedin List,I in the SeventhSchedule -. • to the Constitution.As per..Article246.(3), the. State - ., ., ; • V; : - ; ; ;, • • •• page37of5i': r; • •: • •. .'v I - K:' ; ,•••Government has exclusive",powersto make laws with ^ ^ ^ respectto matters enumeratedin List ir (State Lis,t).'c :• ; ••'In respect",of matters.'enumerated in List IlL'-'. • (Concurrent List) both Parliament-and-State-Governmentshave poy/ersto make laws.,Theservice . , • " • "tax is.made by Parliament/underthe above-residuary" • :; - . powers." ; . _ 'The impugnedActwas.challengedon the groundthat it infringedontheState'spowerto levytax on luxury;- • • •' • vide Entry 62-ofthe State List'^ :29, In All India FederationofTax Pmctioners& Ors.. Vs. Union '•: ; " • •• ofIndia hi 7(2007)-7 SCC 527;the..SupremeCourtupheldlevy o£, '. service on^CharteredAccountantsand;Architect! It was..observed^ - thattherewas no distinctionofconsumptiono± goods and con'suraptioil ' of service as both satisfy liunian .needs. , Semce is an economic . • conceptbased;onthe legalprincipleof equivalencewhich now starids . .^' -. ^ ' ... incorporatedin the Constitutionby.the;86!'',amendment. Servicetax,- • waraV&lue addedtax or ageneraltax whichappliesto all commercial-v.,^" agtivitiesVinvolving,productionof goods,-and provision of servipes. ; ... •, Reference was made to the•principles of equivalence:^dit Was; ,• observed;' ' V' . | - ••.-, "35. For' each contract, tax is levied under the • • "' •; Financekcts, 1994 and ,199'8. Tax cannot,belevied• -..-T" ' . • • ' '..under th^- Act without service.being'provided-r-. \ - • • , ,v/hereasa professionaltax underEntry 60 is a tax"on" . .. his stMus. It is the tax.',on the-status of ,a cost, - • ' •accountant-ora charteredaccountant;As long as a • ' . , • , ' person/firmremains in the-profession,"he/it has to' , ,- pay professionaltax. That tax has nothingto do.with _ - the commercialactivitieswhich,lie.undertakes"for:l;iis- -. ^ • " ' client. Even ifthe charteredaccountant-hasno woi'lc - , ; throughoutthe accountingyear,, ^till he has-.to pay'- , ,-. ",. professionaltax, He has to i^aythe.taxtill he remauTS" - V ;• , "..'v-;- ; ' : •' " ' . 'PageSS-of Si ' in the profession. Tliis is the ambit.and-scope of. : • -Entry 60, List II which,:is.a,taxingentry. Therefore,^. Entry 60 contemplatestax on professions; ^wc/i... . • • Enti7 60, ListII refersto "tax go employments".'• xxxx xxxx ; ••

¶39It was further observed.that,a: lawyer has to pay tax to take out a licence irrespective,of whether he actually practises or not;'^That,tax is a tax'for the .-privilege of having ,the; right to 'exercise. the ' ..professionif and when the pers6.n taking o.ut the, licence chooses to do so. It-was. held that the. impugned tax on entertainment levied .by, the. Cantonment' Board was. a • tax . on' the act .: of. entertainmentresulting-ina-show arid, therefore,-•the • - < Impugned law imposing tax. on entertaim-nent.fell. underEntry,30ofthe.ProvincialListin Schedule;^!! to.,the,GOI Act,"1935 and not',under'Entry46 (similar.- to Entry 60 of List 11). Therefore, it was held that - Bombay-Legislature-hadpower, to enact the law' iipposingtax on entert.aihmentwhich had nothingto do with-.the law imposirigtax' on the privilege,of , cai-rying.on any -profession;tradq or calling un.der-.- Entry46 (similarto Entio;' 60 ofList II in the present.,, case), Therefore, thjs, -Court has .clarified -,the\ dichotomy between tax on-privilegeof carryingoir.. any trade or calliiig-onone hand'and the tax on-the activity which an entertainer"undertakes on' each occasion. The tax' on, privilege ,to practise, the professi(:Hi,thereforey;fa.lls,underEntry 60^ List H. If is quite different from tax on sen'ices. Keeping: in-mind the aforestateddichotomy,it is clearthat tax on' -service-does not fall ,under ,-Entry '60, ,List 11'. Therefore, Parliamenthas absolute'jurisdiction.,ai^d legislativecompetenceto. enactthe.iawimposingtax on services under Entry 97,. List I of the Sfeventh . Scheduletothe Constitution.",.''- ,, ' ' • I Psge.39 df.M . I • •• - -r-i'' '.s-: 30, IxiApociationofLeasing.qjitdFmanctalServicer.CQmpa^i^svs,- - ;'j7«<Vn ,2 see-35?,the Supreme-G •• • differencebetweenservicetax and sales tax and othertaxes,observing.'; thatservicetaxisavalueaddedtManddestinationbased.co%mptipn.. tax i,e. levied on commercial activitiesy but it is .not a charge pn. . •business,.but, on a. consumer. It is an ^economic.concept on the • .,/i •:;:priricipl^ gf'equiv^encein the'sense thatconsumptionof gopda and; • :cQijsumpU are similar/Therefore,it: is atax.onactivit^^'J •'/ i,e.:to-Yalue'^ addedor thevalueaddition,which:ismadeby a•. personprgvidingservices. Sometimes,the.dividingIme b^lentte., • .sale,an^.,serviceniay b& very thin,, espBciahy in.-cases;where,value V ^•'additign:is'.%'.thegoods manufactured,producedor sx5ld,.l^t liieie.is ^ 'distinatiQn^b^^ the two,. Servicetax i^ atax on.activitywhereas., ••'' ;^e§ is4tax'onsale,of goo& (2^A),itwa§.observed: . • 1' . . J'Scope ofArticle366(29-4),

¶49If one examinesA'rtiele366(29-A)carefully, • •• one finds that clause(29-A)providesfor an inclusiye' • • ^ ' -definitionpnd has two limbs..Thefirstlinibsays|iat ,: ; . . , • " • • .thetax on sale or purchaseofgoods includesatayon •' • • •• ,ti-ansactionsspecifiedin -sub-clauses{a) to (J): The. ,. • •- ' " "second limb providesthat such transfer,deliveiy.o'l . - • ' supplyof goods referredto.in.thefii;st limb shallTe- . deemed to be. a sale of,those goods,by the person,,,.., y- . •-^laking-thetransfer,deh-y'eryor supplyand purchase^ . .. ofthose goods by the person,to vvhoip such trahsfei,,,. • . • • delivery or-,supply is-made. Now, ii\.K.L. Johar • V . • •,ase [AIR 1965 SC 108,2.;-(1965>.2SCR.112] ,^this. . . . 'Court'heid that the States .can tax hire-puichase, • . .transactionsresultingin sale but only to the extent.to ,, , . • -Which, tax is levied-on the sale, pnee.. This led • , V-Parliament.to,say, in the Statement;of,0,bjectsa.nd , • • - ' ' ; page.46of 5l . S.;' J • -i-. - W-"-;- - - . .... . Reasons to the Amendment) Act, •Constitution (Forty-sixth "though-practically the purchaser in a hire-purchase , transaction gets the goods on the date of entering into; • the hire-purchase contract, it has'.been held,by-the' . Supreme Court mK.L. Johar case [AYR. 1965 SC.-. 1082 ; (1965),2 SCR 112], that there is a. sale Only when the purchaserexercisesthe optionto purchase which is, at-a later -date-and therefore only the depreciated value of the goods involved in such, transaction at the-time the option is exercised ,; becomes assessable to sales tax which position has resulted in avoidance of tax in various ways". • Thus, we find from tire Statement pf .Objects and • Reasonsthatthe conceptof "deemedsale" is brought in by the Constitution(Forty-sixthAmendment).Act only in the contextof impositionof salestax and,that the words "transfer, delivery or. supply" of goods is referred to in the second limb of Article 366(29-A) to broaden the.tax base.and that as indicated in the • Reportofthe Law Commissionpriorto the judgment• of this Court in Gannon Dunkerley case [AIR 1958 SC560 : 1959 SCR 379]',works contractwas always taxed by the .States as part of the word" "sale";in . Entries 48/54 of List 11. . • , • Sd. The object behind enactment of Article 366"(29-A) is to tax the compositeprice so that the full valud of the hire-purchaseprice is taxed and .to avoidthejudgm'entin/C.Z.Joharcase [AlR 1965 SC 1082 : (1965) 2 SCR 112] whose implicationwas to narrow the tax base resulting in seepage of.sales tax , revenue. It is in that sense ^'splitting"of the contract, needs to -be unders^Dod.Thus, it cannot be said that Parliament divesteS itself of the power to .jeyy ' service tax vide enactment of the Constitution (Forty- , sixth Amendment) Act. Even in the Report of the Law Commission,'it has been observed that' "if a hire-purchasetransactionresults,in a sale, sales tax is undoubtedly"leviableby the States.No doubt, it is difficult ,to determine the .'sale price' for the ; purposeofthe sales tax law but this has no bearing .• on the questionoflegislativecompetence."(P. 26) ; 3h The contention of the petitioners that the impugned notificajtions, override the statutory provisions contained in Section 65(105), which defines the term "taxable service", Section 66, which it is claimed is a charging section, and Section 67, tile valuation provisions of the • l^inance Act, 1994, has to be rejected. We have, as already stated above, rejected the argument of the petitioners on bifurcation/vivisect and held that as per the provisionsof Section 65(10,5)(zzq)and (zzzh), • service tax is payable and chargeable oh the service element of the contract for construction of industrial and commercial .complexes and' contract .for construction of complexes as specified and in case of a composite contract, the service element-should be •bifurcated-and •; ascertained and then taxed. The contention that the petitioners are paying sales tax or VAT on material in relation-to execution of the ^ contract under composite . contracts , for construction • of industrial/commerciar complexes'• and construction contracts as , ,. specified under Section 65(105),(zzq) and (zzzh) therefore',fails. The contention that there was/is no valid levy or the charging se.ction.is not • apphcable to composite contracts under clauses (zzq) and (zzzh). of Section 65(105) stands rejected. But the petitioilers have rightly submitted that only the service co.nlpohent can-be brought to tax, as pef proyi.sionsgf Section 67 which stipulates that value of taxable service. - is the "gross amount charged" by the service provider for such services ' provided or to be provided by him and not the value of the goods provided by custoi^ersof serviceproviderand the servicetax caiinot be charged ©n the value of the goods used in the contract. Page,42bf5i , '. 'f: ' r'l K • ; • • ; •v\32,' .Similarly,the contentw^that'exemptionnotificationcould be^ ,, 'V''. :x:i§§ue4iunde^§ectipn-93-oftheTinaiice AcHirrespectof any'''taxable service'' deflned in-Section,65(105), misses the legal position and has;.•' •••. . to be rejected. The notificationsin questions,dated 10th September, - ' .20:04, 7th June, 2O05.andlst March, 2006;grantingexemption.of67%: .•towards the value of the materialused, for computing.the servicetax ; •. payable'ensurethat the-serviceeleiirientis taxable. It.is.alternative .' to' an othei^isesubjectivedeteri&iationin. each case,•which' may be/'.. •cumbersoine and require a detailed examinationfor.ascertaiiTi'iientof . the service element • The -formula, prescribed is not, ma;hdatory or • compulsory,.Further,it willapply at the option of an assesee. ,It will. .• :"^bg-^appUcable,only when'therequiredparariieters.are met and is. not ^ \ - - .. illegaland.ultravires:theAct, i.e. the Finance-Act,1994;^.Itis alsonot . y. contrary to the charging section/provisions of the ;Finance.Act •• imposing levy of.service tax. ' The' aim and purpose of the said ; • .. . notificationsis to.-provideaconvenient,alternative,optionaland hassle'.. - ' ' I '.l.fjpge..m^ payment,of service tax,:,provided'the'requiiements •- mentloned-':% nQtificationsare;satisfied.'•- While dealing,with '.a ; -;. V.;,. •. 'I ="^.similaf'3itu^tion,the SuprerneCourtin ' \ BuildemMsPciatwnofIndm SC€ 1'83' .has - '.. ••^•.?\'QV§ei7e4:=^, ' . •: v... ^ ... \,;!"The main ground upon which•the.'High' Court,,.,,' •;- ; ^'4has h^d sub-sections(7), and,(7-A).ofSection7 .'I.;';';"; 'r. - ; be void is that.theylevy'taxattwo per cento^,, ^ v'-' V'' '• ^ • •' • ' "the whSt &mouiit of the contract [sub-section:^ '. V '

(7)] oy ^ ,a particular.rate applied,to the .entire ' •, : value qI.contract.[siib-section(7-A)]-and•• not • \ • jnerelyuponthe value.ofthe goods.r.n-ansferredin - - ^ - "' .• ' ' the course of exeisutionof the works.coiltfactas' •' .' .Mge 43 pf.5j •IV' i'/" • • • • : • • : -"i • I', - 'V ^ ••; ... i "..•-'contemplated by sub-clliuse (b) of clause (29-A)- . •.• •' ^'in;|Article 366. The CqUrt-also npticed that the. •, • ' goods which are translerred in the com-se of • executionof a .works contractmay be "declared'. ., , \•••goods"; theymay be goldswhichare liableto be . •' taxed'Lmdertiie CentralfealesT.ax.Act, 1956/ithq.. ,. ...goods so transfen-edmay also be taxable mider • different •.Schedules to the Kerala Act which •prescribedifferentrates..In.such a situation,it is •-^ . •;held, levying tax on the entire, value of the ^ •;• ,contract means' levy of •tax •contrary to the .' ...provisionsof the Central-Sales Tax-Actand the . • , •..ferala GeneralSales TaxAct. It also mea;ns,th^ . •r- • /.Qqurt^held,takmgthe non^taxable.components-of :; - , •:' • ' v.'vWQrkscori-fract,e.g".labourand servicesetc. For;• .••, ' . ; , .•/all these reasons,it is held, the said'sub-sections' •; : . -- • ai^e clearlybeyond the legislativecompetence-of • •the. State Legislature.'With great respe,ct, we are • . iinableto agree. The first".featureto be npticedis that the.alternatemethodoftaxationprovided'by-,, ' ••^sub-section (7) or (7-A) ofSection7 is optional.'; : , The sub-sections expressly provide that the . method of taxation provided thereunder is ,, ' . /'3.pplicableonly to a contractor'vVho elects to be ,. .. governed by the -said, alternate method of, . ; taxation, -There is "no...compulsion •upon any • contractor tP opt for the, method of taxation •' providedby sub-section;(7;),oi:sub-section(7-A)- , • ./i; •...Itis whollywitlainthe choice and pleasureofthe, , .contractor':If he thinlcs it is beneficialfor him to .••_ - ' • .,'.•30 opt,, "he-will opt; otherwise, he will be, ,governed-by the normal method of-taxation provided by Section.'5(l)(iv).Sub-section (8) ;, • • ' provides that the option to come under subr^ \ ',-section(7) ,or (7-A) has to be exercisedby the '• -:, contractor"either,by am express-provisionin the-.' ; . • , .- .••agreement for.thecontractor by an applicationto; -. . •'- , ;•. , the assessingauthorityto permit him to pay the ; ..-taji -in accordance•with any, of-the-said sub- • • ;• ••.••'sections": In;5these circumst^ces,it is evident- •-• . . 'that a c@nti-a:ctor ,who-'had,not opted to this,. 'alternate metliod of taxation" cannot complain. ^ • , • •,, Page 44 of 5-1 • .s-n/' Ai w :••• ;••/ • V •, ^ ^ A-. -v againstthe said sub-sections,for he is in-no way affectedby theiTi.Nor can the contractorwho has opted-to the said alternate method of taxation,• complain, Haying vokmtarily,-.andwith the'full \ laiowledgeof the features.ofthe alternatemethod - . , of taxation, opted to be •governed• by it, a:.; ;• eontractor camiot be ' heard to question the --; • ; ' yalidityof the'relevantsub-sectionsor the rules.. •• .•;Svib-seGtions (8), (11) and (12) of Section'7 are . : ^ 'incidental and ancillary to sub-sections (7),and / . (T-A) and cannotequallybe faulted. Secondly,it, is true that the goods transferredin the course of , •'•execution of .the-works/ contract •may ,be •• ;-•••' •••.'chargeable at different rates, under, different,/ ••'- ,,.•• •gchedule;? appended,to the Kerala'Act; it may,- - ' •^••.alsQ be that some of them may be- "declai-ed.'•. • ••.•• igogds",the levy oftax upon which is.subjectto ;• ':' .• certainrestrictionsspecifiedin. Seetidns..14 and r 'i'S ofthe'Central Sdes Tax Act; it^ may also-be ' ' ' that sale of some of the goods ma.y also be .- • ^ . subject, to Central sales tax. It must yet be '.'remembered .that the-method of ,•. taxation . .introduGedby sub-sections(7) and (7-A) is in the .• •': • •••. natiire of' composition'of tax payable under .- •^'./•-.giction 5(l)(iv). The impugned sub-sections .' ..• ,';'h£iye evolved, a Gonvenieht,.hassl.e-fi-ee,and: , , . • simple method ofassessmentjust as the system. • ... .pf.levy of entertaimnent tax on-; the gross . , •collection capacity of the cinema theatres. By ' \ •i .••opting to this alternate method, the contractor .. saves hiruselfthe:botheration•of book-keeping,, ,-. • . •.. assessment,appealsand allthat it.means.Itis riot' . ".•'.necessaiy to enquireand.determinetlie extent,or...- •,. • yalue of goods which have been transferredin • . .. .. , !th? course of execution.of a vyprks contract,the, , • , - rate applicable.to-them,and.son. .For example,. under sub-section (7), the contractor pays two per . •;; • ' cent of-the,total value ofthe contract'byway of • tax and he is donewith^allthe above-mentioned; • . botheration,;The rate o^/two.per cent.prescribed- • •;. ijpy subrsection(7) is far lower than the rates" in . •• ".Ichedules 1, 2-arid -5-refeixed .to. in .Secti.o.n• . ' S(l)(iv)(a),In short, sub-sections(7) and (7-A>'-. :; r.-, ' • . - Page.45 .of 5.1 •i--; . •" • .f, . ; / i "••. 5K). •t" ••!•••(. ,' • . • evolve a rough and ready method of assessment , pf tax, and leave it to.the contractor'either to opt . fpr it or be governed by the normal mediod." (Emphasis supplied) ' •. 33, When the charging provisions are attracted, question of computation or measure to compute tax would arise cind value of taxable service has to be determined. There is a well settled distinction between subject matter or •object of tax; and the measure-or computationof the tax imposed. The distinctionbetweenthe two has to be kept in mind (see Gujarat Ambi^Ja CementsLtd. Union of W/a AIR 2005 SC 3020). 34: A Division Bench of Andhra Pradesh High Court in Nagarjuna Construction CompanyLtd. Vs. Union of India, (2Q)\Q) 19 STR 321

(AP) had examinedthe threeprovisionswhich'aresubjectmatterofthe ^ presentwrit petitionincluding2007 Rules enactedunder Section94 of the FinanceAct; After referringto the compositionschemestipulated- •in Rul§ 3 which is optional, it-was held that where a person has.- exercisedthe option under Rule 3(3) of 2007 Rules, he vvillihaveto; complywiththe conditionsstipulatedtherein. Further,disqualifrcation. -for exerciseof such optionwhere stipulated,is bindingand camiotbe ignored, 35,, The Supreme Court in Nagarjuna Construction Co. Ltd. vs.' Union ofIndia andAnr. (2013) 1 SCC 721, has.affirmedthe:,decision ofthe AndhraPradeshHigh Court. It has been observedthatRule 3(3:) of the Works Contract(CompositionScheme for Payment of'Service Tax) Rules,'2007was lucid that the assesseeAvho want to:a.vail the ' • Rage 46 of 51 r< , • • r' ' > •

¶1M'/' .... ' "/s '•..vr : L-il •Ijenefit, must opt to pay service tax in respect of the'works contract, : - / Ipefore.payment of service tax in j-esp^t of works and the ; .option'.so=exercise(iis to be appliedfor all or entireworks;.-contractof • : •the assessee and furtlier change of option will not be permitted; till the . •; • smd wQrl?§..contract are completed. The Supreme Court rejected the,, contention :of the assessee that they-should be allowed to opt for Rule - . 3(3) of the.'Rules,eyen if they hadpaid senacetax on works,contracts'' , prior to l?,'7uly,2007, when the i-ule was enforced. The contention that . , • th§. laile-was .discriminatory was ;rejected on the.-gromd that the ..•• classification based upon those already,paying sei-vice.tax on works • 'contract; and others,,was not illegal or,'contrary to Article ••14 ..of the. Constitution.' The said decisio.ii takes care of the argument .and- . '' Qonterjtion'thatthe c.oritracto'rsproviding-taxable seiidces' in nature'of, ' ''•completion.andfinishingsei-vices";are excludedfrom the nOtificatioii.. - '• Their.exclusioncmi be justifiedfor thd reasbn that "completionand- • .finishingservices",sometimeshave a substantial'elementof "service", and only a limitedamount/valueis -paid foiVtowardsm'aterial-Or,goods;. ' used, Their exclusiondoes not-mean or imply discrimuiation'as such -,., ,' contractors'-are to be taxed-only for the sei-vice element:in, works, . contractfor "completionand fmishingsei-vices"andnot forthe goods- . or m^tenal used, 3,6, \ The aforesaidjudgmentsand-'discussionhighlightthe,following- . , feQets/principles; : - . .: -i, . . ; .y , ^•;-ifl)After46"' Amendmentto the Constitution,composit^-contracts- ; ; " '. can be bifyrQatedto computevalue ofthe goods sold/Supplied-ifa contracts-for Qohstrnqtioh'of buildings,with labotu-and material .'• ... - 'Page 4.7 of 51 i. - •• 'I •• ..J ••• ^ '• . •*. , -'v • r / V , ••- ' ' • • . i' '( \ The service poi-tion of the edliipqsite^eontraGts,can be made . subject matter of.'service,tax..Aspect'doctrine •is .applied for bifurcating/vivisecthe compdsfte.contract -. ^ ;^(2)Service;-to.can be levied on the service•component of any. •contract.-involyingservicewith sale of goods etc:; Computation • of service component is a matter of detail .and riot.a matter ' • .1:61^1111:^0Validityof impositionof servicetax. It is procediirah: ; and a matterofcalculation.'Merely;becaus6,no rules are framed ' fbr CQliputatipn,itdoes not followthatho tax is leviAble.^j ;

(3)Thenotificationsin questionare iii alternativeand optional. An-r • ;• assegsee'may take advantage:or benefit:ofthe notifications,but • ^'oOTQi,becompelledto pay service-taxon the^proportion,o^ •• ; valueriof a cqniposite.Qontfact'as.pen the notification..This lis-'; ••• • because,the fbrrnula-framedby way of delegated,legislationjis: presumptuousand basedon assurription. !

(4)However,ifa;n assesseewants,totake'benefitofthe notificatidn,• • he. must comply' and/adhere to the/ terms and conditioris . .'.'stiputo^as perthe notification, ' v;: j. /. •(5)An assesseetO. claim benefitor. advantage-as per:a.notification. : must meet the preconditionsor stipulationsstatpd therein. All assessee .cannot take benefit or advantage•of:;a part of a.; • notifle^ionbut ckim that-the-other'.-part•of'the •notification... ••• •' •' 'shouldbe ignoredandthus not actedupon.Notificationhas to:t^: ; , appU§diri entirety. " • r. '. Page 48 bl .• ; ; • ' ,• ..A, v'• -^ I • •T' (0 Notification has to be read as a whole keeping; in •mind its objective and purpose. Notification ma}^ provide a convenient, • hassle free and adopt a non-discretionary formula-for comiDUting: value of the service element in a /composite contract. . This curtails litigation, ambiguity, ensures clarity and consistency;.A notification cannot be declared as invalid or ultra vires for this reason, provided it is optional.-

(7) Authorities cannot compel and force an assessee tp accept'^the notifications in question and pay -tax accordingly,' as seeking • QQverage under the notification is voluntary. An assessee. can state that the service component of a composite contract should be computed in a fair and reasonable manlier aiid accordingly.

(8)The notifications meet the tests laid down under Section 93 and. 94 sf the Act because they relate to manner and. mode .of-computation of service tax'in a composite 'Contract. -The objecjt. and purpose is not to. tax as non-service element or to include ' non=taxabIe part of the composite contracts.

(9)It has not been shown and establishedthat the formula or! the value prescribed in the notifications is absurd or irrational. The said' notifications are-not per se an arbitrary exercise ,and contrary to. data of formula for computing service element.; ha taxation matters, classification should not be struck down a.s' discriminatory unless there are strong and compelling reasons " , P'age'49,of 53: V # , • that show absurdity and, therefore,v.iolation,ofArticle'14,ofthe ' Constitution. • • ; • ' :

37.1 ifcearagd' cou^§el for the.: petitioners have , relied ;• upon tWo , judgments of this./ Court,• in Gdmultants -\Ar TechnQcrats Pvt. Ltd. Vs. Union, ofIndia 20,13.(29) STR 9 .(Del.)-and. JDeUti Chit-FundAssociationVs.iUnionofIndia, 20i3'p0)' STR ;47'

(Del), The.'Said judgments have .no application' to the facts of:.the present: case, ' In the case • Intercontinental C()nmitants \&^ Technogrdts Pvt. Ltd (supra) if was held that'the Rule in question-was beyond the-scope and .ambit of the charging section of the main' enaQtment, . ,The quantification .^of the value /of -service .can hever "exceed, what. Qan be brought to charge.. The-said jud'gment has iio,- •application as the notifications are not beyond.and do-not:extend the scope of the' charging section. "An asse.ssee need not seek and can; reject the option available under the notifications and can claim and: opt before the; authoritiesthat he.:sh'ou!dnot,be taxed on'the basis pf, .quantification or measure which-is mentioned,in the'notifications, but ,on the basis Qf seryiQe component which may be.calculated/computed. • Thus, the nQtlficatioiiLSdo not seek to overwrite and expand its scope:' and are not beyond the charging, section. .Similarly, in Delhi Chit Fund Association (supra), .a:Division B.ench of this .Gpurt.examined • the-VstatutQry='-provision and. came to the: conclusion, that, the. trarisaetioiri/lifeiM.ce-in. questiori Was; exempt and thus,. the noti-fication .issued was. contrary•to .the•principal enactment as it taxed servic'es, beyondthe chap.-gingsection. The notiiication.-vvas accordinglystruck dOWHi The saiddecisignhasno application.-;. ...j • | .. Page 50 of pi":'• -i _i4i nv r! • 38. In view oftlie aforesaiddiscussion,we do not fmd any meritin the present writ petitions and the same are dismissed-butwith the obseiTatiQnand finding'recofdedabove. No costs.. November(3 ,2013 Kkb/NA/VICR JUDGE. Page'51of5i I

* IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 10226/2009 Reservedon: 23'^''July, 2013 % Date of Decision: November, 2013 RAJ FURNITURE Petitioner Through Mr. J.K. Mittal, Mr. Vamn Prabhakar & Mr. Varun Gaba, Advocates. versus ^ UOI .. Respondent Through Mr.Rajeeve Mehra, Addl. Solicitor General with Mr. Mukesh Anand and Mr. Ashish Virmani for UOI/R-1. Ms. Sonia Sharma, Sr. Standing Counsel for respondent No. 2. W.P.(a 4127/2008 CLARION PROPERTIES LTD. Petitioner Through Mr. J.K. Mittal, Mr. Varun Prabhakar & Mr. Varun Gaba, Advocates. Versus ^ UOIANDORS. ....Respondents Through Mr.Rajeeve Mehra, Addl. Solicitor General with Mr. Mukesh Anand and Mr. Ashish Virmani for UOI/R-1. Ms. Sonia Sharma, Sr. Standing Counsel for respondent No. 2. W.P.(C) 4658/2008 VIPUL LIMITED Petitioner Through Mr. J.K. Mittal, Mr. Varun Prabhakar & Mr. Varun Gaba, Advocates. versus UOI AND ANR. .. Respondents Through Mr.Rajeeve Mehra, Addl. Solicitor General with Mr. Mukesh Anand and Mr. Ashish Virmani for UOI/R-1. Signed By:RAM DATT Certify that the digital and physical file have been compared and the digital data is as per the physical file and no page is missing. Ms. Sonia Sharma, Sr. Standing Counsel for respondent No. 2. W.P.(C) 5046/2008 UNITECH LIMITED Petitioners Tiirough Mr. J.K. Mittal, Mr. Varun Prabhakar & Mr. Varun Gaba, Advocates. versus UOI AND ANR. .. Respondents Through Mr.Rajeeve Ivlehra,Addl. Solicitor General with Mr. Mukesh Anand and A Mr. Ashish Virmani for UOI/R-1. Ms. Sonia Sharma, Sr. Standing Counsel for respondent No. 2. W.P.(C) 6924/2008 ANS CONSTRUCTIONS LTD. Petitioner Through Mr. J.K. Mittal, Mr. Varun Prabhakar & Mr. Varun Gaba, Advocates. versus UOI AND ANR. .. Respondents Through Mr.Rajeeve Mehra, Addl. Solicitor General with Mr. Mukesh Anand and . Mr. Ashish Virmani for UOI/R-1. y- Ms. SoniaSharma,Sr. StandingCounsel for respondent No. 2. W.P.(C) 401/2009 SIMPLEX INFRASTRUCTURE LTD Petitioner Through Mr. J.K. Mittal, Mr. Varun Prabhakar & Mr. Varun Gaba, Advocates. versus UOI AND ANR. ..Respondents Through Mr.Rajeeve Mehra, Addl. Solicitor General with Mr. Mukesh Anand and Mr. Ashish Virmani for UOI/R-1. Ms. Sonia Sharma, Sr. Standing Counsel for respondent No. 2. W.P.fO 4057/2010 & CM 8074/2010 SIMPLEX INFRASTRUCTURE LTD Petitioner Through Mr. J.K. Mittal, Mr. Varun Prabhakar & Mr. Varun Gaba, Advocates. versus UOI AND ANR. .. Respondents Through Mr.Rajeeve Mehra, Addl. Solicitor General with Mr. Mukesh Anand and . Mr. Ashish Virmani for UOI/R-1. Ms. Sonia Sharma, Sr. Standing Counsel for respondent No. 2. 4- ^ W.P.(C) 6658/2010& CM 13173/2010 SIMPLEX INFRASTRUCTURE LTD Petitioner Through Mr. J.K. Mittal, Mr. Varun Prabhakar & Mr. Varun Gaba, Advocates. versus UOI AND ANR. .. Respondents Through Mr.Rajeeve Mehra, Addl. Solicitor General with Mr. Mukesh Anand and Mr. Ashish Virmani for Resp-1. Ms. Sonia Sharma, Sr. Standing Counsel for respondent No. 2. Mr. Ruchir Mishra & Mukesh Kr. Tiwari For UOI. W.P.(C^ 4187/2008 & CM 8168/2008 VISTAR CONSTRUCTIONS (P) LTD Petitioner Through Mr. J.K. Mittal, Mr. Varun Prabhakar & Mr. Varun Gaba, Advocates. versus UOI AND ANR. .•Respondents Through Mr.RajeeveMehra, Addl. Solicitor General with Mr. Mukesh Anand and Mr. Ashish Virmani for UOI/R-1. Ms. Sonia Sharma, Sr. Standing Counsel for respondent No. 2. W.P.fC^ 5646/2010 & CM 11101/2010 VISTAR CONSTRUCTIONS (P) LTD Petitioner Through Mr. J.K. Mittal, Mr. Varun Prabhakar & Mr. Varun Gaba, Advocates. versus UOIANDANR. ..Respondents Through Mr.Rajeeve Mehra, Addl. Solicitor General with Mr. Mukesh Anand and Mr. Ashish Virmani for UOI/R-1. Ms. Sonia Sharma, Sr. Standing Counsel for respondent No. 2. Mr. Ruchir Mishra & Mukesh Kr. Tiwari ForUOI. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE SANJEEV SACHDEVA IP