Case: Tamil Nadu Kalyana Mandapam Association Vs. Union Of India

cannot possibly be termed as a hire purchase agreement of a right to use goods or property. The services provided by a mandap-keeper are professional services which he alone by virtue of his experience has the wherewithal to provide. A customer goes to a mandap-keeper, say a star hotel, not merely for the food that they will provide but for the entire variety of services provided therein which result in providing the function to be solemnized with the required effect and ambience. Similarly the services rendered by out door caterers is clearly distinguishable from the service rendered in a restaurant or hotel inasmuch as, in the case of outdoor catering service the food/ eatables / drinks are the choice of the person who partakes the services. He is free to choose the kind, quantum and manner in which the food is to be served. But in the case of restaurant, the customers choice of foods is limited to the menu card. Again in the case of outdoor catering, customer is at liberty to choose the time and place where the food is to be served. In the case of an outdoor caterer, the customer negotiates each element of the catering service, including the price to be paid to the caterer. Outdoor catering has an element of personalized service provided to the customer. Clearly the service elements is more weighty, visible and predominant in the case of outdoor catering. It cannot be considered as a case of sale of food and drink as in restaurant. Though the Service Tax is leviable on the gross amount charged by the mandap-keeper for services in relation to the use of a mandap and also on the charges for catering the Government has decided to charge the same only on 60% of the gross amount charged by the mandap-keeper to the customer. 57. In the case of Addition Advertising vs. Union of India (1998 (98) E.L.T. 14 (Guj. HC DB), the High Court of Gujarat rejected the contention that levy of tax on advertising services is ultra vires and observed that the tax is not on advertisement but on the services rendered. It results in an advertisement which can be published and republished and copied". Extending the same analogy, it is submitted that there is a difference between the food and beverages supplied by outdoor caterers and outdoor catering services. As a result of the outdoor catering services rendered, the food and beverages desired by the customer, are caused to be prepared or procured, transported to the place specified by the customer at the time desired by him and served in the manner required. Therefore, the contention of the appellant that there is no service element in outdoor catering is not based on fact. In such catering services the person who participate and avail the service give more importance to the manner of service than the quality of food provided for consumption. 58. 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. Section 65 clause 41 sub clause (p) of the Finances Act, 1994, defines the taxable service (which is the subject matter of levy of service tax) as any service provided to a customer by a mandap-keeper in relation to use of a mandap in any manner including the facilities provided to a customer in relation to such use also the services, if any, rendered as a caterer. The nature and character of this service tax is evident from the fact that the transaction between a mandap-keeper and his customer is definitely not in the nature of a sale of hire purchase of goods. It is essentially that of providing a service. In fact, as pointed out earlier, the manner of service provided assumes predominance over the providing of food in such situations which is a definite indicator of the supremacy of the service aspect. The legislature in its wisdom noticed the said supremacy and identified the same as a potential region to collect indirect taxes. Moreover, it has been a well established judicial principle that so long as the legislation is in substance, on a matter assigned to a legislature enacting that statute, it must be held valid in its entirety even though it may trench upon matters beyond its competence. Incidental encroachment does not invalidate such a statute on the grounds that it is beyond the competence of the legislature (Prafulla Kumar vs. Bank of Commerce). Article 246(1) of the Constitution specifies that the Parliament has exclusive powers to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to the Constitution. As per Articles 246(3), the State Government has exclusive powers to make laws with respect to matters enumerated in List II (State List). In respect of matters enumerated in List III (Concurrent List) both Parliament and State Government have powers to make laws. The service tax is made by Parliament under the above residuary powers. 59. The impugned Act was challenged on the ground that it infringed on the States power to levy tax on luxury vide Entry 62 of the State List. 60. It would be appropriate to quote Mr. Justice Venkatachelliah who ruled that the law with respect to a subject might incidentally affect another subject in some way, but that it not the same thing as the law being on the latter subject. The might be overlapping but the overlapping must be in law. The transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detect from the distinctiveness of the aspects. The consequences and facts of the legislation are not the same thing as legislative subject matter." 61. For the foregoing reasons, the appellants have not made out any case either on facts or on law and there is no merit in this appeal.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]With regard to the first aspect, it is submitted that in order to constitute a tax on land, it must b a tax directly on land and a tax on income from land cannot come within the purview of the saidour view, if no Entry is found in List 2 and List 3 of the Schedule which could cover the tax levied, the question of Parliament lacking legislative competence to do so would not arise. Tax on catering services does not amount to tax on sale & purchase of goods43. As far as the above points is concerned, 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.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.45. The concept of catering admittedly includes the concept of rendering service.Mohan Parasaran, learned senior counsel for the appellant submitted that the High Court before applying the aspect theory laid down by this Court in the case of Federation of Hotel and Restaurant vs. Union of India and others (supra) ought to have appreciated that in that matter Article 366 (29A) (f) of the Constitution was not considered which is of vital importance to the present matter and that the High Court ought to have differentiated the two matters. In reply, our attention was invited to paras 31 and 32 of the judgment of the High Court in which service aspect was distinguished from the supply aspect. In our view, reliance placed by the High Court on Federation of Hotel and Restaurant (supra) and, in particular, on the aspect theory, is therefore, apposite and should be upheld by this Court. In view of this, the contention of the appellant on this aspect is not well founded.65 clause 41 sub clause (p) of the Finances Act, 1994, defines the taxable service (which is the subject matter of levy of service tax) as any service provided to a customer by a mandap-keeper in relation to use of a mandap in any manner including the facilities provided to a customer in relation to such use also the services, if any, rendered as a caterer. The nature and character of this service tax is evident from the fact that the transaction between a mandap-keeper and his customer is definitely not in the nature of a sale of hire purchase of goods. It is essentially that of providing a service. In fact, as pointed out earlier, the manner of service provided assumes predominance over the providing of food in such situations which is a definite indicator of the supremacy of the service aspect. The legislature in its wisdom noticed the said supremacy and identified the same as a potential region to collect indirect taxes. Moreover, it has been a well established judicial principle that so long as the legislation is in substance, on a matter assigned to a legislature enacting that statute, it must be held valid in its entirety even though it may trench upon matters beyond its competence. Incidental encroachment does not invalidate such a statute on the grounds that it is beyond the competence of the legislature (Prafulla Kumar vs. Bank of Commerce). Article 246(1) of the Constitution specifies that the Parliament has exclusive powers to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to the Constitution. As per Articles 246(3), the State Government has exclusive powers to make laws with respect to matters enumerated in List II (State List). In respect of matters enumerated in List III (Concurrent List) both Parliament and State Government have powers to make laws. The service tax is made by Parliament under the above residuary powers.59. The impugned Act was challenged on the ground that it infringed on the States power to levy tax on luxury vide Entry 62 of the State List.60. It would be appropriate to quote Mr. Justice Venkatachelliah who ruled that the law with respect to a subject might incidentally affect another subject in some way, but that it not the same thing as the law being on the latter subject. The might be overlapping but the overlapping must be in law. The transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detect from the distinctiveness of the aspects. The consequences and facts of the legislation are not the same thing as legislative subject matter."61. For the foregoing reasons, the appellants have not made out any case either on facts or on law and there is no merit in this appeal. We, therefore, have no hesitation in dismissing this appeal by confirming the judgment of the High Court for our own reasons recorded in this judgment. No costs.