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2014 (4) TMI 447 - HC - Service TaxConstitutional validity of levy of service tax on service provided or to be provided to any person by a restaurant having the facility of airconditioning in any part of the establishment - Sub clause (zzzzv) of clause (105) of Section 65 - power of state government to levy Sales Tax / Value Added Tax (VAT) - Subclause (f) of Clause (29A) of Article 366 - Held that:- When the State imposes or levies the sales tax on goods, it is not charging or taxing the services, but sale thereof. The service tax does not charge or tax the sale of goods. It charges or taxes the services and which may or may not be provided in sale of goods. It was argued and prior to the Constitution (FortySixth Amendment) Act, 1982 that the State cannot impose the sales tax on the establishments like restaurants or hotels because they do not sell goods. They only provide services and while rendering and providing such services, they may be incidentally selling the goods. However, their predominant activity is rendering services and not selling the goods. While selling, supply thereof is contemplated and covered by Article 366(29A) (f) of the Constitution of India. It does not mean that the service during the course of or while supplying the goods is taxed, but the tax is and remains on sale of goods. That is why the State Legislatures were held to be empowered to impose, levy, assess and recover a tax on sale of articles of food and drink which have been termed as “goods”. Once the observations of the Honourable Supreme Court and the Constitutional definition is understood in this context, then, we do not feel that any assistance can be derived by the Petitioners from the judgment in K.Damodarasamy Naidu [1999 (10) TMI 598 - SUPREME COURT OF INDIA]. This judgment of the Honourable Supreme Court in no way decides the controversy before us far from holding that the Parliament is incompetent to impose and levy a tax on services provided in an airconditioned Restaurant. The Parliament cannot be said to have transgressed into leave alone encroached upon the power of the State Legislature to impose a tax on sale or purchase of goods vide Entry 54 of List II. The taxing power of the Parliament and traceable to Article 248 of the Constitution of India r/w Entry 97 of List I of the Seventh Schedule enables it to impose a service tax. So long as there is no prohibition against imposition of service tax on the services rendered, then it must be held that the Parliament is competent to impose a service tax in question. In the case of Association of Leasing and Financial Service Companies v/s Union of India [2010 (10) TMI 4 - SUPREME COURT OF INDIA], apex court elaborately discussed the imposition of tax on hirepurchase/ leasing of goods. Equally, same also discussed the imposition of service tax on the services rendered by the Banks and Financial Institutions during the course of such leasing. Levy of service tax on service provided or to be provided to any person by a restaurant having the facility of air-conditioning is not unconstitutional - Decided against the assessee.
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