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TMI Blog2010 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant Reperesented by : Mr. Vikrant Kackria, Adv JUDGEMENT Per : Adarsh Kumar Goel 1. This petition seeks declaration that explanation to Section 65(zzzh) of the Finance Act, 1994 ('the Act') and CBEC Circular No.334/3/2010-TRU dated 1.7.2010 are unconstitutional. 2. Case of the petitioner is that it is engaged in development and sale of residential flats and enters into agreement for construction of flats with the contractors. The said flats are ultimately sold to the customers. Service tax is leviable as per the provisions of the Act on taxable services as defined under Section 65. Section 65 (zzzh) includes service in relation to construction of a complex. Definition of construction of a complex under Section 65(30a) refers to construction of a new residential complex and other activities mentioned therein. Residential complex is defined under Section 65(91a) as comprising of buildings, common areas and other facilities. As per the impugned circular, service tax is leviable on the builders even when they enter into an agreement for sale and receive payment without issuance of completion certificate. As per explanation added to Section 65(zzzh), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout and the said construction of such complex is intended for personal use as residence by such person. Explanation to Section 65 (zzzh): Explanation- For the purposes of this sub-clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorized by the builder before the grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer. 6. Service tax has been introduced by Finance Act, 1994. As observed in All India Federation of Tax Practitioners and others v. Union of India and others, ( 2007) 7 SCC 527, the source of the concept of service tax lies in economics. It is an economic concept. It has evolved on account of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions thereafter including in Imagic Creative (P) Limited v. CCT, (2008) 2 SCC 614 . Parameters applied to Entry 92C read with Entry 97 of List I are different from those applied to Entry 54 List II. Taxation power of the Union Legislature extends to any matters not covered by taxing entries in List II and is not limited by specified entries. As held in T.N.Kalyana Mandapam Association v. Union of India, (2004) 5 SCC 632 that service tax is tax on service and not on service provider. Quantification of tax should not be confused with the nature of tax. In Union of India v. Bombay Tyre International Limited, (1984(1) SCC 467 , it was observed:- 13. While the levy in our country has the status of a constitutional concept, the point of collection is located where the statute declares it will be. We shall return to this later when it is necessary to consider a submission in regard to the effect of transactions to or through related persons ....... 14...... The point was considered by this Court again in D.G. Gouse and Co. v. State of Kerala, (1980) 2 SCC 410 where reference was made to the measure adopted for the purpose of the levy of tax on buildings under the Kerala Bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e test of the nature of the tax. Therefore, while determining the nature of a tax, though the standard on which the tax is levied may be a relevant consideration, it is not a conclusive consideration,.... The principle was reaffirmed by this Court in Hingir-Rampur Coal Co. , Ltd. v. State of Orissa, AIR 1961 SC 459 where the form in which the levy was imposed was held to be an impermissible test for defining in itself the character of the levy. It was observed: ... the mere fact that the levy imposed by the impugned Act had adopted the method of determining the rate of the levy by reference to the minerals produced by the mines would not by itself make the levy a duty of excise. The method thus adopted may be relevant in considering the character of the impost but its effect must be weighed along with and in the light of the other relevant circumstances.... It is apparent, therefore, that when enacting a measure to serve as a standard for assessing the levy the Legislature need not contour it along lines which spell out the character of the levy itself. Viewed from this standpoint, it is not possible to accept the contention that because the levy of excise is a levy on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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