IMPORTANT POINT
A tax on services rendered by mandap-keepers and outdoor caterers is in pith and substance, a tax on services and not a tax on sale of goods or on hire purchase activities.

Headnote:Finance Act, 1994-Sections 66 and 67(o)-Service Tax Rules, 1994-Rule 2(1)(d)(ix)-Validity of-Service rendered by Mandap-Keepers made exigible to Service tax-Writ petition filed by an Association of various Kalyana Mandapams-Owners of Kalyana Mandapams/Mandap-Keepers let out mandapas/premises to the clients-Mandap Keepers also provide other facilities such as catering, electricity, water etc. to their clients-Service tax levied on services rendered by Mandap-Keeper challenged-Legislative competence of Parliament-Whether tax on catering services amounts to tax on sale and purchase of goods-(No)-High Court held justified in dismissing the writ petition of appellant-Association while holding Sections 66, 67(o) of the Finance Act and Rule 2(1)(d)(ix) as intra vires of the Constitution of India-Constitution of India-Article 366(29A)(f), Entry 97, List I; Entries 18, 49 and 54 of List-II of Seventh Schedule-Transfer of Property Act, 1882-Section 3.
       Held : It is well settled that for the tax to amount to a tax on sale of goods, it must amount to a sale according to the established concept of a sale in the law of contract or more precisely the Sale of Goods Act, 1930. Legislature cannot enlarge the definition of sale so as to bring within the ambit of taxation transactions, which could not be a sale in law. (Para 42)
       In regard to the submission made on Article 366 (29A) (f), we are of the 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 includes the supply to services within the definition of sale and purchase of goods. This is particularly apparent from the following phrase contained in the said sub-article "such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods." In other words, the operative words of the said sub-article is supply of goods and it is only supply of food and drinks and other articles for human consumption that is deemed to be a sale or purchase of goods. The concept of catering admittedly includes the concept of rendering service. The fact that tax on the sale of the goods involved in the said service can be levied does not mean that a service tax cannot be levied on the service aspect of catering. (Paras 43 and 44)
       In fact, making available a premises for a period of few hours for the specific purpose of being utilized as a Mandap whether with or without other services would itself be a service and cannot be classified as any other kind of legal concept. It does not certainly involve transfer of moveable property nor does it involve transfer of moveable property of any kind known to law either under the Transfer of Property Act or otherwise and can only be classified as a service. In fact, mandap-keepers provide a wide variety of services apart from the service of allowing temporary occupation of mandap. As per Section 65 (19) of the Finance Act, 1994, Mandap means any immovable property as defined in Section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixture, light fittings and floor coverings therein let out for consideration for organising any official, social or business function. A mandap-keeper apart from proper maintenance of the mandap, also provides the necessary paraphernalia for holding such functions, apart from providing the conditions and ambience which are required by the customer such as providing the lighting arrangements, furniture and fixtures, floor coverings etc. The services provided by him cover method and manner of decorating and organising the mandap. The mandap-keeper provides the customer with advice as to what should be the quantum and quality of the services required keeping in view of the requirement of the customer the nature of the event to be solemnized etc. In fact the logistics of setting up, selection and maintenance is the responsibility of the mandap keeper. The services of the mandap-keeper cannot possibly be termed as a hire purchase agreement of a right to use goods or property. (Paras 54 and 55)
        A tax on services rendered by mandap-keepers and outdoor caterers is in pith and substance, a tax on services and not a tax on sale of goods or on hire purchase activities. (Para 57)

JUDGMENT

Dr. AR. Lakshmanan, J.-The present appeal is directed against the judgment and order dated 30.04.2001 in Writ Petition No. 1617 of 1998 passed by the High Court of Judicature at Madras whereby the Division Bench of the Madras High Court dismissed the writ petition of the appellant-Association and held Sections 66, 67(o) of the Finance Act, 1994 and Rule 2(1)(d)(ix) of the Service Tax Rules, 1994 and other provisions related to Kalyana Mandapams and Mandap-Keepers to be intra vires of the Constitution of India.

2. The appellant is an Association of various Kalyana Mandapams bearing Registration No. 513 of 1992. The appellant-Association has been formed to protect the interest of the owners of Kalyana Mandapams in the city of Madras and elsewhere in the State of Tamil Nadu. The owners of Kalyana Mandapams/Mandap-Keepers let out mandapas/premises to the clients. In addition to letting out the Kalyana Mandaps, the Mandap Keepers also provide other facilities such as catering, electricity, water etc. to their clients.

3. Service Tax was introduced in India vide the Finance Act, 1994. Service Tax is legislated by the Parliament under the residuary entry i.e. Entry 97 of List I of the Seventh Schedule of the Constitution of India. The service tax provisions have the following scheme.

(i) Section 65 of the Act provides for taxable services;

(ii) Section 66 of the Act provides for the charge of service tax by the person designated as the person responsible for collecting the service tax" for the Government;

(iii) Section 67 of the Act provides for the value of taxable service which is to be subjected to 5 Service tax, and

(iv) Section 68 of the Act provides for the collection and payment mechanism for service tax.

4. Service tax is an indirect tax and is to be paid on all the services notified by the Government of India for the said purpose. The said tax is on the service and not on the service provider. However, under Section 68 of the Finance Act, 1994 as amended by the Finance Act, 1997 read with Rule 2(1)(d)(ix) of the Service Tax Rules, 1994, the service provider (in the present case the Mandap-Keeper) is expected to collect the tax from the client utilizing his services.

5. In 1997, the scope of the service sector was proposed to be widened and a number of services were sought to be made exigible to service tax. Amongst other services, Chapter VI of the Finance Act, 1997 made the services rendered by the Mandap-Keepers exigible to service tax.

6. To enable the Government to widen its net of service tax, certain changes were sought to be made to the Finance Act, 1994.

7. New clauses were added to Section 65 of the Finance Act, 1994. The clauses which are relevant for the purposes of the present appeal are reproduced hereinbelow:-

"(10) `Caterer means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crokery and similar articles or accoutrements for any purpose or occasion;

(19) Mandap means any immovable property as defined in Section 3 of the Transfer of Property Act, 1882 and includes any furnitures, fixtures, light fittings and floor coverings therein let out for consideration for organising any official, social or business function;

(20) Mandap-Keeper means a person who allows temporary occupation of a mandap for consideration for organising any official, social or business function."

8. In Clause (41) of Section 65 of the Finance Act, 1994, few sub-clauses were inserted and insofar as they are relevant to this appeal, they are reproduced hereinbelow :-

"(41(p) `Taxable Service means any service provided to a client, by a mandap-keeper in relation to the use of a mandap in any manner including the facilities provided to the client in relation to such use and also the services, if any, rendered as a caterer."

9. It is relevant to mention here that some of the sub-sections of Secti

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2004 Supreme(SC) 483

IMPORTANT POINTA tax on services rendered by mandap-keepers and outdoor caterers is in pith and substance, a tax on services and not a tax on sale of goods or on hire purchase activities.

Cases Referred (28)

IMPORTANT POINT
A tax on services rendered by mandap-keepers and outdoor caterers is in pith and substance, a tax on services and not a tax on sale of goods or on hire purchase activities.