2002 (4) TMI 15 - HC - Service Tax

Constitution validity - service offered by the chartered accountants, real estate agents (property dealers) and the architects brought under service tax net Held that provisions of the Finance Act by which service offered by the chartered accountants, real estate agents (property dealers) and the architects have been brought under the tax net are constitutionally valid

Summary

Issues Involved:
1. Constitutional validity of service tax on chartered accountants, real estate agents, and architects.
2. Legislative competence of Parliament to levy service tax.
3. Alleged discrimination in the imposition of service tax on certain professions.

Detailed Analysis:

1. Constitutional Validity of Service Tax:
The judgment addresses three writ petitions challenging the constitutional validity of the Finance Act provisions that brought services offered by chartered accountants, real estate agents, and architects under the tax net, charged at 5% of the value of taxable services. The common ground for challenge is the alleged lack of legislative competence of Parliament and discrimination in picking certain professions while excluding others.

2. Legislative Competence:
The core question is whether Parliament has the legislative competence to impose the service tax. The respondents argue that the service tax does not fall under entry 60 of List II of Schedule VII to the Constitution of India but can be imposed by Parliament under the residuary entry, entry No. 97 of the Union List of Schedule VII, and article 248 of the Constitution of India. The court agrees, stating that the service tax is distinct from a tax on profession, trade, calling, or employment, which is within the State Legislature's competence under entry 60 of List II but subject to a maximum limit of Rs. 2,500 per annum as per article 276(2) of the Constitution of India.

The court further elaborates that the service tax is levied on services rendered by professionals and is not a tax on the profession itself. The judgment references the legislative history of the Finance Act, 1994, which introduced the service tax, and subsequent amendments that expanded the tax net to include various services, including those provided by chartered accountants, architects, and real estate agents.

3. Alleged Discrimination:
The petitioners also argue that the imposition of service tax is discriminatory as it selectively targets certain professions. The court rejects this contention, emphasizing that the Legislature has wide latitude in selecting subjects for taxation and that the tests for discrimination in taxing laws are less stringent. The court cites several precedents, including *Jaipur Hosiery Mills (P.) Ltd. v. State of Rajasthan* and *State of Gujarat v. Shri Ambica Mills Ltd.*, to support the view that the Legislature can classify and tax different professions differently without it being considered discriminatory.

Conclusion:
The court finds no merit in the petitions and dismisses all three writ petitions, upholding the constitutional validity of the service tax on chartered accountants, real estate agents, and architects. The judgment concludes that Parliament has acted within its jurisdiction under the residuary entry 97 of List I, and the imposition of service tax does not violate the principles of non-discrimination.