Vibhu Bakhru, J.

1. The Petitioners are individuals who have entered into separate agreements with a builder (M/s Sethi Buildwell Pvt. Ltd. hereafter 'the builder') to buy flats in a multi-storey group housing project named “Sethi Group -Max Royal” being developed by the builder in Sector 76, Noida, Uttar Pradesh.

2. The builder has in addition to the consideration for the flats also recovered service tax from the Petitioners, which is payable by him for services in relation to construction of complex and on preferential location charges.

3. The Petitioners are aggrieved by the levy of service tax on services 'in relation to construction of complex' as defined under Section 65 (105)(zzzh) of the Finance Act, 1994 (hereafter 'the Act') and inter alia impugn the explanation to Section 65(105)(zzzh) of the Act (hereafter ‘the impugned explanation’) introduced by virtue of Finance Act 2010 as being ultra vires of the Constitution of India. The Petitioners also impugn Section 65(105)(zzzzu) of the Act which seeks to subject preferential location charges charged by a builder to service tax. The Petitioners state that their agreement with the builder is a composite contract for purchase of immovable property and contend that in absence of specific provisions for ascertaining the service component of the said agreement, the levy would be beyond the legislative competence of the Parliament.

4. The controversy involved in these petition relates to the question whether the consideration paid by flat buyers to a builder/promoter/developer for acquiring a flat in a complex, which under construction/development, could be subjected to levy of service tax. According to the Petitioners, the agreements entered into by them with the builder are for purchase of immovable property and the Parliament does not have the legislative competence to levy service tax on such transaction. The Petitioners further claim that the Act and the rules made thereunder do not provide any machinery for computation of value of services, if any, involved in construction of a complex and, therefore, no such tax can be imposed.

Submissions

5. Mr. Puneet Aggarwal, the learned counsel appearing for the Petitioners contended that the entries relating to taxation in List I and List II of the Seventh Schedule to the Constitution of India were mutually exclusive and the Parliament did not have the power to levy tax on immovable property; thus, the levy of service tax on agreements for purchase of flats was beyond the legislative competence of the Parliament.

6. He referred to the decision from the Supreme Court in Larsen & Toubro Ltd. and Anr. v. State of Karnataka and Anr., (2014) 1 SCC 708 and on the strength of the said decision contended that 'works contracts' have been interpreted in an expansive manner and would include an agreement entered into by a flat buyer with a builder. Thus, the State Legislatures would have the power to tax the element relating to transfer of property in goods which are involved in such contracts. Consequently, the power of Parliament to levy tax would be limited to only on the service component after excluding the value of goods as well as the value of land from such contracts. He submitted that since neither the Act nor the rules made thereunder provide any machinery provisions for ascertaining the service component of such composite contracts, the levy of service tax must fail. Mr. Agrawal relied on the recent decision of the Supreme Court in Commissioner Central Excise and Customs, Kerala and Ors. v. Larsen & Toubro Ltd. and Ors., (2016) 1 SCC 170 in support of his contention that in order to levy tax, the Statute must clearly specify the three elements of taxation, namely, (i) the subject of tax; (ii) the person who is liable to tax; and (iii) the rate and measure of tax. He earnestly contended that since Section 65(105)(zzzh) read with Section 66 of the Act did not restrict the levy of service tax only to the service element of composi