IMPORTANT POINT
The amendment to Clause (g) of Section 66D of the Finance Act, 2014, was unconstitutional as it infringed upon state legislative powers over advertisement taxation.

JUDGMENT :

This writ petition challenges the constitutional validity of Clause (g) of Section 66D of the Finance Act, 1994, as amended by the Finance Act, 2014.

2. The brief facts of the case are as follows:

The petitioner is a Private Limited Company, engaged in the manufacture and in trading of goods. In connection with its business, the petitioner places advertisements in various media. The petitioner is aggrieved by the fact that, following an amendment made to Clause (g) of Section 66D of the Finance Act, 1994 (the Negative list of services) with effect from 01.10.2014, by the Finance Act, 2014, the exemption from service tax has been restricted to the ‘selling of space of advertisements in print media’. It is the case of the petitioner that, till the amendment to Clause (g) of Section 66D, the selling of space or time slots for advertisements other than the advertisements broadcast by radio or television, was exempted from service tax under the provisions of the Finance Act, 1994 (by inclusion in the negative list) and after the 2014 amendment, such exemption was restricted to advertisements in the print media.

3. Sri. Jose Jacob, the Learned counsel appearing for the petitioner would submit that the petitioner places substantial advertisements through hoardings and the amounts paid by the petitioner for such advertisements would, with the amendment introduced with effect from 01.10.2014 by the Finance Act, 2014 to the negative list of services under Section 66D (Clause (g) of Section 66D), be subjected to service tax under the provisions of the Finance Act, 1994. It is submitted that the Finance Act 1994 is legislation traceable to Entry 97 of List I of the Seventh Schedule of the Constitution of India [Any reference to List I, II or III in this judgment is to the Lists under the Seventh Schedule of the Constitution of India] which is a residual entry and it is obvious that legislation with reference to the residual entry under Entry 97 of List I, cannot impose a tax on a subject that is covered by any of the taxing entries in List II. It is submitted that Entry 55 of List II indicates that taxes on advertisements other than taxes on advertisements published in the newspapers and advertisements broadcast by radio or television can be imposed only by authority of law made by the State legislature. It is submitted that, with the amendment brought about with effect from 01.10.2014, only advertisements in print media have been exempted from the levy of service tax and if service tax is levied on all other forms of advertisements, the same would be a direct encroachment on the power of the State legislature to impose taxes on advertisements in Entry 55 of List II. Learned counsel places substantial reliance on the judgment of the Supreme Court in State of West Bengal V. Kesoram Industries Ltd. and Others, (2004) 10 SCC 201 in support of his contention.

4. Smt. I. Sheela Devi, the learned Standing Counsel appearing for the respondents would submit that the petitioner has not made out any case for the grant of the reliefs sought in the writ petition. It is submitted that it is settled in law that there can be different aspects for taxation in every transaction and while some of those aspects may be taxed under a law made by the State Legislature with reference to a taxing entry under List II, the other aspects can be taxed under a Legislation made with reference to the residual entry under Entry 97 of List I. The learned Standing Counsel placed substantial reliance on the judgment of the Supreme Court in Federation of Hotel and Restaurant Association of India, Etc. v. Union of India and Others, (1989) 3 SCC 634 in support of her contention. The learned counsel submitted that the judgment in Federation of Hotel and Restaurant (supra), the question that arose was whether expenditure tax under a central law would in substance be a tax on luxury under Entry 62 of List II. It is submitted that on the application of the ‘Aspect Theory’ t