JUDGMENT

S.H. KAPADIA, CJI

1. Leave granted.

2. In this batch of Civil Appeals, the controversy pertains to validity of Sections 65(12) and 65(105)(zm) of the Finance Act, 1994 (as amended) insofar as the said provisions seek to levy service tax on leasing and hire purchase. The appellants contend that service tax imposed by Section 66 of the Finance Act, 1994 on the value of taxable services referred to in Section 65(105)(zm) read with Section 65(12) of the Finance Act, 1994 (as amended), insofar as it relates to financial leasing services including equipment leasing and hire purchase is beyond the legislative competence of Parliament by virtue of Article 366(29A) of the Constitution. Facts in Civil Appeal @ SLP (C) No. 24704 of 2009

3. Appellant is an Association of leasing and financial companies. Finance Act sought to levy service tax on "banking and other financial services". Section 137 of the Finance Act, 2001 substituted Section 65 of the Finance Act, 1994 by a new Section 65 which defined "banking and other financial services". Subsequently, this definition also underwent some changes by way of Section 90 of the Finance Act, 2004 and Section 135 of the Finance Act, 2007. The relevant part of the definition as on date contained in Section 65(12) of the Finance Act, 1994 is as follows:

"65. In this Chapter, unless the context otherwise requires - (12) "banking and other financial services" means - (a) the following services provided by a banking company or financial institution including a non-banking financial company or any other body corporate or commercial concern namely: - (i) financial leasing services including equipment leasing and hire-purchase;"

4. Appellant had filed a writ petition under Article 226 of the 3 Constitution before the High Court challenging the levy of service tax imposed by Section 65(12)(a)(i). During the pendency of the writ petition, Union of India issued a Notification ST dated 1.3.2006 exempting 90% of the amount repayable under hire- purchase/ equipment leasing agreement(s) from service tax on the ground that the said 90% represented interest income earned by the service provider. According to the appellant, the concept of "service tax" was first introduced by the Finance Act, 1994 which came into force w.e.f. 1.7.1994 under Chapter V. No service tax was levied by the said Act or by its subsequent amendment till 2001. However, vide Finance Act, 2001 service tax was imposed on "banking and other financial services". Vide Section 137(a) of the Finance Act, 2001, Section 65 of the Finance Act, 1994 was replaced by a new Section 65 which defined "banking and other financial services" vide clause (10). By virtue of the said definition under Section 65(10)(i), Parliament has sought to bring within the service tax net, transactions in the nature of financial leasing, equipment leasing and hire-purchase. By Section 65(72), the expression "taxable service" has been defined to mean any service provided to a customer, by a banking company or a financial institution including NBFC, in relation to banking and other financial services [See Section 65(72)(zm)]. Being aggrieved by the inclusion of hire-purchase and leasing 4 services within the service tax net, the appellant herein challenged the amendment of 2001 as ultra vires the legislative competence of the Parliament. By the impugned judgment, the Madras High Court has dismissed the writ petition, hence, this civil appeal. Submissions

5. Mr. Arvind P. Datar, learned senior counsel appearing on behalf of the appellant(s), submitted that the effect of Article 366(29A) is to treat six types of transactions as deemed sales so as to enable state legislatures to levy sales tax under Entry 54, List II; that, the Statement of Objects and Reasons to the Constitution (Forty-sixth Amendment) Act makes it clear that all six transactions could have been taxed under Entry 97, List I by Parliament. However, based on the 61st Report of the Law Commission, the Const