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TMI Blog2002 (4) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... vices provided by them are being disposed of. Since the question involved in all the three writ petitions is identical, all the petitions are being disposed of by this common judgment. The first writ petition being D. B. Civil Writ Petition No. 4018 of 1998 has been filed by the Jodhpur Chartered Accountants Society. The society is aggrieved by the levy of service tax on persons belonging to the profession of chartered accountants. The second writ petition being D. B. Civil Writ Petition No. 4263 of 1998, has been filed by an association of property dealers in Jodhpur known as the Jodhpur Property Dealers Association. It is claimed that the members of the petitioner-association are doing property business without rendering any service to the customers. They simply introduced purchasers, sellers, if anybody approaches them. The third writ petition has been filed by Annu Mridul, an architect practising at Jodhpur. According to the petitioner the service or work undertaken by the practising architect cannot be categorised as service much less a taxable service which may attract service tax. The common ground of challenge in all the three writ petitions is the constitutional validit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alers are concerned. However, we propose to give reasons in brief for the view we have taken. (A) Emergence of concept of service tax: It was felt that while on the manufacture of goods tax is levied in the name of excise duty and on sale of goods tax is levied in the name of sales tax, still there are number of activities falling in the category of service sector which constitutes 40 per cent. of national GDP not subjected to tax. This has kept a number of activities, which in fact are an important part of the national economy, outside the tax net. It is of course true that the persons rendering such services are subjected to income-tax covered by entry 83 in List I, but that itself is not sufficient as the persons manufacturing goods pay excise duty on the manufacture of goods and pay sales tax on the sale of goods and also liable to pay income-tax on the income earned by them. The professionals rendering services for remuneration and similarly other persons rendering service in a larger number of fields for remuneration can only be subjected to professional tax by the State Legislature by virtue of entry 60 in List II but subject to the maximum limit of Rs. 2,500 per ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (real estate agents), market research agencies, etc. Section 65(31) has been substituted which defines practising chartered accountants as a person, who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provisions of the Chartered Accountants Act, 1949, including any person engaged in rendering services in the field of chartered accountancy. The expression taxable service has been defined in section 65(48) which means any service provided to a client by a chartered accountant in his professional capacity in any manner has been included in sub-clause (s) of section 65(48) as substituted by the Act of 1998. Section 66 continues to be the charging section. Section 66(4) provides that with effect from the date notified under section 116 of the Finance (No.2) Act, 1998, there shall be levied a service tax at the rate of 5 per cent. of the value of the taxable service, inter alia, referred to in sub-clause (s) of clause (48) of section 65. Sections 68 to 71 as originally enacted by the Finance Act, 1994, have also been substituted by the Finance (No.2) Act, 1998. The substituted sections 68 to 70 are reproduced a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance (No.2) Act, 1998, are extracted as follows: 65. Definitions. - In this Chapter, unless the context otherwise requires,-... (5) 'architect' means any person whose name is, for the time being, entered in the register of architects maintained under section 23 of the Architects Act, 1972 (20 of 1972), and also includes any commercial concern engaged in any manner whether directly or indirectly, in rendering services in the field of architecture; . . . (31) 'practising chartered accountant' means a person who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provisions of the Chartered Accountants Act, 1949 (38 of 1949), and includes any concern engaged in rendering services in the field of chartered accountancy; . . (35) 'real estate agent' means a person, who is engaged in rendering any service in relation to sale, purchase, leasing or renting of real estate and includes a real estate consultant; . . . (48) 'taxable service' means any service provided, -. . . (g) to a client, by a consulting engineer in relation to advice, consultancy or technical assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax at the rate specified in section 66. Section 69 requires every service provider to pay service tax to register with the appropriate authority, the Superintendent of Central Excise. Section 70 provides for rendering of periodical returns. Sections 71, 72, 73 and 74 provide for the procedure for assessment and rectification of assessment. Section 75 deals with interest for delayed payment. Sections 75A, 76, 77, 78, 79 and 80 provide for penalties; section 81 fixes the liability for offences by companies. Section 82 deals with the powers to search premises. By virtue of section 83 the provisions of sections 9C, 90, 11, 11B, 11BB, 12A, 12B, 12C, 120, 12E, 14, 15, 35F to 35-0, 35Q 36, 36A, 36B, 37 A, 37B, 37C, 370 and 40 of the Central Excise Act, 1944, as in force from time to time have been made applicable, so far as they relate to service tax as they apply in relation to a duty of excise. It is significant to notice that as section 12B has been made applicable in relation to the impugned service tax, the direct, legal consequence is that there is a presumption that service tax has been passed on to the customer, who is the beneficiary of the service, and that is the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... List I in the Seventh Schedule (in this Constitution referred to as the 'Union List'). (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the 'Concurrent List'). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the 'State List'). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List. 248. Residuary powers of legislation. -(1) Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List. (2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists. 276. Taxes on professions, tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay tax under entry 60 in the State List and also liable to collect and pay tax on sale of goods under entry 54 in the said List is one and the same person in both the cases. In the instant case, a practising chartered accountant has been defined under section 65(31) to mean a person, who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provisions of Chartered Accountants Act, 1949, and includes any concern engaged in rendering services in the field of chartered accountancy; so as the architect and real estate agent has been defined under sub-clause (5) and sub-clause (35), respectively, of section 65. Sub-clause (48) defines a taxable service as meaning the service provided to a client by an architect or by a practising chartered accountant in his professional capacity in any manner. Section 66 is the charging section, which provides for levy of service tax at the rate of 5 per cent of the value of the taxable service provided in sub-clauses (g), (h), (i), (j), (k), (l), (m), (n) and (o) of clause (48) of section 65. Section 2(2) of the Chartered Accountants Act lays down as to when a member of the Insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is clear from any manner of doubt that a tax on profession can be imposed if a person carries on a profession and that such tax on profession is irrespective of the question of income. This clinches the issue in so far as the nature of the profession tax is concerned, which is covered by entry 60 of the Act. Even if the service tax is linked with the professional income or the professional service even then, it had a distinct aspect of the services. A tax which the professional had to pay because he has had the privilege to carryon the profession or because he was carrying on the profession in a particular State is totally distinct and separate from the tax which he has to pay on service and which tax he would be able to pass on to the customer who has had the advantage of his professional services. Thus, a profession tax covered under entry 60 cannot be transferred in sharp contradiction with the present service tax, which is capable of being transferred to the customer, who has the advantage of enjoying the services. A profession tax has to be paid whether a professional actually has given the professional service or not whereas, the service tax will not be payable if a prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling or employment, and to immunize it against challenge on the score of being a law relating to tax on income, a subject in the exclusive purview of the Central Government. Clause (2) of article 276 imposes a ceiling of Rs. 2,500 on such tax. The Kerala High Court in All Kerala Chartered Accountants' Association v. Union of India [2002] 258 ITR 679, while applying the doctrine of aspect legislation has observed as follows : The confusion arises because of not keeping in mind the distinction' between the 'taxable event' and the 'measure of tax' contemplated under a taxing statute. The taxable event determines the true nature of the tax, while the measure of tax does not determine the nature of the tax but the quantum of tax which can be levied and collected. . . . The apparent conflict in interpreting the tax entries results from the fact that the tax has two elements; the person, thing or individual on which the tax is imposed (taxable event) and the amount of the tax. The quantum of tax may be measured in many ways, but a clear distinction between the subject-matter of tax and the standard by which the quantum of tax is measured must be maintained i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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