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CASE NO.: Appeal (civil)  7128 of 2001

PETITIONER: All India Federation of Tax Practitioners & Ors

RESPONDENT: Union of India & Ors

DATE OF JUDGMENT: 21/08/2007

BENCH: S. H. Kapadia & B. Sudershan Reddy

JUDGMENT: J U D G M E N T

KAPADIA, J.

       This is an appeal filed by All India Federation of Tax Practitioners  against the Division Bench judgment of the Bombay High Court dated  22.2.2001 in Writ Petition No. 142/99 upholding the legislative competence  of Parliament to levy service tax vide Finance Act, 1994 and Finance Act,  1998. According to the impugned judgment, service tax falls in Entry 97,  List I of the Seventh Schedule to the Constitution.

2.      The question which arises for determination in this civil appeal  concerns the constitutional status of the levy of service tax and the  legislative competence of Parliament to impose service tax under Article  246(1) read with Entry 97 of List I of the Seventh Schedule to the  Constitution. The issue arising in this appeal questions the competence of  Parliament to levy service tax on practising chartered accountants and  architects having regard to Entry 60 List II of the Seventh Schedule to the  Constitution and Article 276 of the Constitution.

Background Facts

3.      On 1.6.1998 Finance Bill, 1998 was introduced in Parliament. Clause  119 of the Notes sought to substitute Sections 65, 66 and 68 and amend  Section 67 of the Finance Act, 1994 relating to service tax so as to levy a tax  on services rendered by a practising chartered accountant, cost accountant  and architect to a client in professional capacity at the rate of five per cent of  the amount charged to the client. On 3.6.1998, Bombay Chartered  Accountants Association made a representation to the Central Government  objecting to the aforestated Bill. On 1.8.1998 the Finance Bill was however  passed and the Finance (No. 2) Act, 1998 received the assent of the  President of India. The Act came into force with effect from 1.4.1998. On  7.10.1998,  Union of India issued Notification No. 57/98 inter alia  exempting taxable services other than accounting and auditing. On  16.10.1998, Union of India issued another Notification No. 59/98 inter alia  reducing the scope of the exemption. On 20.1.1999, Writ Petition No.  142/99 was filed by the Federation in the Bombay High Court challenging  the validity of the levy of service tax. By the impugned judgment dated  22.2.2001 the Bombay High Court rejected the writ petition and upheld the  legislative competence of Parliament to levy service tax.

Reason for Imposition of Service Tax

4.      Service tax is an indirect tax levied on certain services provided by  certain categories of persons including companies, association, firms, body  of individuals etc.. Service sector contributes about 64% to the GDP.  \023Services\024 constitute heterogeneous spectrum of economic activities. Today  services cover wide range of activities such as management, banking,

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insurance, hospitality, consultancy, communication, administration,  entertainment, research and development activities forming part of retailing  sector. Service sector is today occupying the centre stage of the Indian  economy. It has become an Industry by itself. In the contemporary world,  development of service sector has become synonymous with the  advancement of the economy. Economics hold the view that there is no  distinction between the consumption of goods and consumption of services  as both satisfy the human needs.

5.      In late seventies, Government of India initiated an exercise to explore  alternative revenue sources due to resource constraints. The primary sources  of revenue are  direct and indirect taxes. Central excise duty is a tax on the  goods produced in India whereas customs duty is the tax on imports. The  word \023goods\024 has to be understood in contradistinction to the word  \023services\024. Customs and excise duty constitute two major sources of indirect  taxes in India. Both are consumption specific in the sense that they do not  constitute a charge on the business but on the client. However, by 1994,  Government of India found revenue receipts from customs and excise on the  decline due to W.T.O. commitments and due to rationalization of duties on  commodities. Therefore, in the year 1994-95, the then Union Finance  Minister introduced the new concept of \023service tax\024 by imposing tax on  services of telephones, non-life insurance and stock-brokers. That list has  increased since then. Knowledge economy has made \023services\024 an important  revenue-earner.

6.      At this stage, we may refer to the concept of \023Value Added Tax\024  (VAT), which is a general tax that applies, in principle, to all commercial  activities involving production of goods and provision of services. VAT is a  consumption tax as it is borne by the consumer.

7.      In the light of what is stated above, it is clear that Service Tax is a  VAT which in turn is destination based consumption tax in the sense that it  is on commercial activities and is not a charge on the business but on the  consumer and it would, logically, be leviable only on services provided  within the country. Service tax is a value added tax.

8.      As stated above, service tax is VAT. Just as excise duty is a tax on  value addition on goods, service tax is on value additioin by rendition of  services. Therefore, for our understanding, broadly \023services\024 fall into two  categories, namely, property based services and performance based services.  Property based services cover service providers such as architects, interior  designers, real estate agents, construction services, mandapwalas etc..  Performance based services are services provided by service providers like  stock-brokers, practising chartered accountants, practising cost accountants,  security agencies, tour operators, event managers, travel agents etc..

9.      Government of India in order to tap new areas of taxation and to  identify the hidden one appointed Tax Reforms Committee under the  Chairmanship of Dr. Chelliah in August, 1991. The recommendations made  by the Committee were accepted and the Service Tax was introduced in the  Budget for 1994-95 through the Finance Act, 1994. Under the said  enactment, Service Tax is the tax on notified services provided or to be  provided. After its introduction, the constitutional validity of the services  taxed by the Central Government was challenged before the Constitution  Bench of this Court which took the view that the Central Government  derived its authority from Entry 97 of List I of the Seventh Schedule to the  Constitution for levying tax on services provided.

10.     To provide necessary legal backup, the Government introduced a new  Article 268A in the Constitution in the year 2003 by Constitution (Eighty- eighth Amendment) Act, 2003, which provides that taxes on services shall  be charged by Union of India and shall be appropriated by Union of India  and the States. A new Entry 92C was also introduced in the Union List for  the levy of taxes on services. Section 65(16) of the Finance Act, 1994  provided for definition of \023taxable service\024 to mean any service provided by

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stock-broker, telegraph authority, and by insurer. Section 67 provided for  valuation of taxable service based on gross receipts. In cases where value of  taxable service could not be decided then the cost of providing the service  constituted the basis of the assessable value of taxable service.  

11.     At this stage, we may state that the above discussion shows that what  was the economic concept, namely, that there is no distinction between  consumption of goods and consumption of services is translated into a legal  principle of taxation by the aforestated Finance Acts of 1994 and 1998. Scheme of the Finance Act, 1994 and Finance Act, 1998

12.     Chapter V of the Finance Act, 1994 referred to Service Tax. It defined  \023assessee\024 to mean a person responsible for collecting the service tax. Under  the Act, \023service tax\024 was defined to mean tax chargeable under Chapter V.  Under the Act, \023taxable service\024 was defined to mean any service provided  by a stock-broker to an investor in connection with the sale or purchase of  securities listed on a recognized stock exchange; services rendered to a  subscriber by the telegraph authority; and services rendered by an insurer to  a policy holder. Under the Act, it was clarified that words and expressions  not defined in Chapter V but used therein shall bear the same meaning as  given in the Central Excise Act, 1944. Section 66 stated that service tax shall  be levied at the rate of five per cent of the value of taxable services provided  to any person by the service provider who was responsible for collecting the  service tax. It was similar to Section 3 of Central Excise Act, 1944. Section  67 dealt with valuation of taxable services. Section 68 dealt with collection  and recovery of service tax. Section 71 dealt with assessment. Section 72  dealt with best judgment assessment. Section 73 dealt with value of taxable  services escaping assessment. Section 83 inter alia stated that Section 9C,  9D, 11B etc. of the Central Excise Act shall apply also to collection and  recovery of service tax. Further, it may be stated that the administration of  service tax is given to the authorities under the Central Excise Act.

13.     Broadly, to the same effect, is the Finance Act of 1998. The said Act  has increased the list of notified services so as to include advertising  agencies, travel agencies, architects, caterers, clearing and forwarding  agents, credit rating agencies, customs house agents, practising chartered  accountants, practising cost accountants, real estate agents, security agencies  etc.. We are concerned in this case with the services provided by architects,  chartered accountants and cost accountants covered by the Finance Act,  1998. Relevant Provisions of the Constitution of India 14.     The relevant provisions of the Constitution of India are as follows:

\023Article 246.  Subject-matter of laws made by  Parliament and by the Legislatures of States.\027 (1)  Notwithstanding anything in clauses (2) and (3),  Parliament has exclusive power to make laws with  respect to any of the matters enumerated in List I in the  Seventh Schedule (in this Constitution referred to as the  \023Union List\024.

xxx

Article 265. Taxes not to be imposed save by authority  of law.\027No tax shall be levied or collected except by  authority of law. xxx

Article 268A. Service tax levied by Union and  collected and appropriated by the Union and the  States.-  (1) Taxes on services shall be levied by the  Government of India and such tax shall be collected and  appropriated by the Government of India and the States

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in the manner provided in clause (2).

(2) The proceeds in any financial year of any such tax  levied in accordance with the provisions of clause (1)  shall be\027

(a) collected by the Government of India and the States;

(b) appropriated by the Government of India and the  States,

in accordance with such principles of collection and  appropriation as may be formulated by Parliament by  law.

Article 269. Taxes levied and collected by the Union  but assigned to the States.\027(1) Taxes on the sales or  purchase of goods and taxes on the consignment of goods  shall be levied and collected by the Government of India  but shall be assigned and shall be deemed to have been  assigned to the States on or after the 1st day of April,  1996 in the manner provided in clause (2).

Explanation.\027For the purposes of this clause,-

(a)     the expression "taxes on the sale or purchase of  goods" shall mean taxes on sale or purchase of  goods other than newspapers, where such sale or  purchase takes place in the course of inter-State  trade or commerce;

(b)     the expression "taxes on the consignment of  goods" shall mean taxes on the consignment of  goods (whether the consignment is to the person  making it or to any other person), where such  consignment takes place in the course of inter- State trade or commerce.

(2) The net proceeds in any financial year of any such  tax, except in so far as those proceeds represent proceeds  attributable to Union territories, shall not form part of the  Consolidated Fund of India, but shall be assigned to the  States within which that tax is leviable in that year, and  shall be distributed among those States in accordance  with such principles of distribution as may be formulated  by Parliament by law.

(3) Parliament may by law formulate principles for  determining when a sale or purchase of, or consignment  of, goods takes place in the course of inter-State trade or  commerce.

xxx

Article 276. Taxes on professions, trades, callings and  employments.\027(1) Notwithstanding anything in article  246, no law of the Legislature of a State relating to taxes  for the benefit of the State or of a municipality, district  board, local board or other local authority therein in  respect of professions, trades, callings or employments  shall be invalid on the ground that it relates to a tax on  income.

(2) The total amount payable in respect of any one person  to the State or to any one municipality, district board,

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local board or other local authority in the State by way of  taxes on professions, trades, callings and employments  shall not exceed two thousand and five hundred rupees  per annum.

(3) The power of the Legislature of a State to make laws  as aforesaid with respect to taxes on professions, trades,  callings and employments shall not be construed as  limiting in any way the power of Parliament to make  laws with respect to taxes on income accruing from or  arising out of professions, trades, callings and  employments.\024

Entry No. 92C of List I of the Seventh Schedule to the  Constitution is as follows:

\02392C. Taxes on services.\024

Entry Nos. 53, 60 and 62 of List II of the Seventh  Schedule to the Constitution are as follows:

\02353. Taxes on the consumption or sale of electricity.\024

xxx  

\02360. Taxes on professions, trades, callings and  employments.\024

xxx

\02362. Taxes on luxuries, including taxes on  entertainments, amusements, betting and gambling.\024

Entry 38 of List III of the Seventh Schedule to the  Constitution is as follows:

\02338.  Electricity.\024

Arguments:

15.     The basic argument advanced on behalf of the appellant-Federation  before us was on Entry 60 of List II of the Seventh Schedule reproduced  above. The said Entry refers to taxes on professions, trades callings and  employments. The argument advanced by Shri Shyam Divan, learned  counsel on behalf of the appellant, was that every entry in the Lists in the  Seventh Schedule represents a field of legislation. Therefore, it should be  read in a broad sense. The appellant did not dispute before us the proposition  that the service tax was a tax on service and that it was not a tax on the  service providers. The basic contention of the appellant was that the State  Legislature alone has an absolute jurisdiction and legislative competence to  levy service tax. It was submitted that service tax was a tax on profession. It  was submitted that service tax fell within the ambit of Entry 60 of List II. It  was submitted that the word profession in the said Entry was not limited by  any restriction/qualification and, therefore, it must be read with the widest  possible sense. It was submitted that the word \023profession\024 has been defined  in Black\022s Law dictionary to mean a vocation requiring advance education  and training. It was submitted that the word \023profession\024 has been defined in  the English dictionary by Collins to mean an \023occupation\024 requiring special  training in the liberal arts or sciences, especially one of the three learned  professions, law, theology, or medicine. It was contended on behalf of the  appellants that there was no difference between tax on profession and tax on  services. According to the learned counsel, the word \021profession\022 in Entry 60  List II was synonymous with the word \021service\022 and, therefore, tax on  profession would include tax on service, which tax could be levied only by

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the State Legislature. It was submitted that there cannot be a profession  without service. It was submitted that service rendered by a chartered  accountant/cost accountant to his client is the service rendered as a  professional. It was urged on behalf of the appellant that it was not the case  of the appellant that services cannot be taxed. The only argument advanced  on behalf of the appellant was that the tax on profession was the State Entry  and, therefore, Entry 97 of List I cannot be invoked and that Parliament had  no legislative competence to levy service tax. It was submitted that under the  Finance Acts, taxability was limited to rendition of professional services  and, therefore, tax on profession under Entry 60 of List II would include tax  on service. In short, according to the learned counsel, the word \021profession\022  in Entry 60 of List II was nothing but service and, therefore, levy of service  tax came within the competence of State Legislature alone. Placing reliance  on Article 276(1), learned counsel on behalf of the appellants submitted that  the words used in Article 276(1), namely,  no law of the State Legislature  relating to taxes in respect of professions, callings etc. were words of widest  amplitudes and, therefore, the word \023profession\024 would cover every aspect  connected with it; that the word \023service\024 was not an aspect of the word  \023profession\024 it was in fact synonymous to each other; that they were  inseparable and, therefore, tax on services could be levied only by State  Legislature. Learned counsel urged that the expression \023relating to\024 and the  expression \023in respect of\024 are the two expressions which have linkage to  levy of taxes on profession, calling etc. and to the words profession, trade,  calling etc. in Article 276(1) and, therefore, if the aforestated two  expressions are read in their proper context, they indicate the intention of the  Constitution framers in incorporating taxes on profession under a separate  Legislative Head. According to the learned counsel, therefore, this Court  must give a wide interpretation to the words taxes on professions, trades,  callings etc. Learned counsel submitted that the words in respect of  professions, trades, callings etc. in Article 276(1) indicate amplitude  and the  wide field open to the State Legislature to make laws imposing taxes on  professions, trades, callings etc.. It was urged that the above two  expressions, namely, \021relating to\022 and \021in respect of \021 are known in law as  words of widest amplitude and if the significance of the said two expressions  is kept in mind, then it becomes clear that the Constitution framers intended  the State Legislature  alone to be competent to impose taxes on professions,  trades, callings and employments and that they did not intend to give such a  power to Parliament. Learned counsel submitted that if due weightage is  given to the aforestated two expressions then the word \021profession\022 in  Article 276(1) and Entry 60 of List II would cover every aspect of the  concept of professions, trades, callings and employments. It was submitted  that profession cannot exist without service as service is the core of  profession. Learned counsel submitted that if the above two expressions in  Article 276(1) are given due weightage then there would be no difference  between the words \023profession\024 and \023service\024; that these two words would  be interchangeable and if used interchangeably, it is clear that the State  Legislature alone has the absolute competence to levy tax on services as  there was no difference between the two words, namely, \023service\024 and  \023profession\024. Reliance was also placed on Article 276(3) in support of the  contention that the Constitution itself had made a dichotomy between taxes  on professions, trades, callings and employments on one hand and taxes on  incomes arising out of professions, trades, callings and employments on the  other and that the said dichotomy between tax on profession (service) vis-a- vis the tax on income arising out of professions, trades, callings etc. itself  indicates that a separate field is demarcated for Parliament to enact laws  imposing tax on incomes arising out of professions and, at the same time,   the State Legislature alone shall have the competence to impose tax on  professions, trades, callings etc.  

16.     Shri V. Shekhar, learned senior counsel for the Department, placing  reliance on judgments impugned of various High Courts, submitted that  \023service tax\024 was a tax on activities undertaken for consideration; that it was  a tax on services and not on the service-provider; that the tax on profession  was essentially a tax on the professional and, therefore, Parliament had the  legislative competence to levy service tax under Entry 97 of List I. It was

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further submitted that with the Constitution (Eighty-eighth Amendment)  Act, 2003 by which Entry 92C is inserted, the controversy is closed and,  therefore, there is no question of going behind the said entry which has  accepted the validity of the impugned judgments by Constitutional  Amendments.  

Findings:

(i)     Meaning of \023Service Tax\024:

17.     As stated above, the source of the concept of service tax lies in  economics. It is an economic concept. It has evolved on account of Service  Industry becoming a major contributor to the GDP of an economy,  particularly knowledge-based economy. With the enactment of Finance Act,  1994, the Central Government derived its authority from the residuary Entry  97 of the Union List for levying tax on services. The legal backup was  further provided by the introduction of Article 268A in the Constitution vide  Constitution (Eighty-eighth Amendment) Act, 2003 which stated that taxes  on services shall be charged by the Central Government and appropriated  between the Union Government and the States. Simultaneously, a new Entry  92C was also introduced in the Union List for the levy of service tax. As  stated above, as an economic concept, there is no distinction between the  consumption of goods and consumption of services as both satisfy human  needs. It is this economic concept based on the legal principle of equivalence  which now stands incorporated in the Constitution vide Constitution  (Eighty-eighth Amendment) Act, 2003. Further, it is important to note, that  \023service tax\024 is a value added tax which in turn is a general tax which  applies to all commercial activities involving production of goods and  provision of services. Moreover, VAT is a consumption tax as it is borne by  the client.  

18.     In Moti Laminates Pvt. Ltd.  v.  Collector of Central Excise,  Ahmedabad 1995(76) E.L.T.241(SC) we get a clue of an important  principle, namely, \023principle of equivalence\024. In that judgment, this Court  was required to explain the words \023excisable goods\024 and \023produced or  manufactured\024. It was held by this Court that the expression \023excisable  goods\024 has been defined in Section 2 of the Central Excise Act, 1944 to  mean goods specified in the Schedule. It was held that the object for having  a schedule in the Act was to fix rates under different entries including  residuary entry. At this stage, we may say that the object of the Finance Act  is also to fix rates of duty under different entries. However, the question  which arose before this Court in Moti Laminates (supra) was the meaning  of the word \023goods\024 in Central Excise Act, 1944. This Court noticed that  Section 3 of the 1944 Act levied duty on all excisable goods mentioned in  the schedule provided they are produced and manufactured, therefore, this  Court laid down the test that where goods are specified in the schedule they  are excisable goods but whether such goods can be subjected to duty would  depend on whether they were produced or manufactured by the assessee.  This Court further explained that the expression \023produced or manufactured\024  would mean that the goods produced must satisfy the test of  saleability/marketability. The reason being that the duty under the 1944 Act  is on manufacture/production but the manufacture/production is intended for  taking such goods to the market for sale. It was observed that the obvious  reason for levying excise duty linked with production or manufacture is that  the goods so produced must be a distinct commodity known in the market.  We quote hereinbelow para 7 of the said judgment, which is as follows:

    \023The duty of excise being on production and  manufacture which means bringing out a new  commodity, it is implicit that such goods must be  useable, moveable, saleable and marketable. The duty is  on manufacture or production but the production or  manufacture is carried on for taking such goods to the  market for sale. The obvious rationale for levying excise

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duty linking it with production or manufacture is that the  goods so produced must be a distinct commodity known  as such in common parlance or to the commercial  community for purposes of buying and selling. Since the  solution that was produced could not be used as such  without any further processing or application of heat or  pressure, it could not be considered as goods on which  any excise duty could be levied.\024

Therefore, even if an item is manufactured or produced, it will not fall in the  concept of goods till the test of marketability is satisfied. In the case of Moti  Laminates (supra) the \021solution\022 was an intermediate product produced in  the course of manufacture of laminated sheets. It had a short shelf life. It was  not marketable, therefore, this Court took the view that the solution was not  \023goods\024 and, therefore, not dutiable.  

19.     The importance of the above judgment of this Court is twofold.  Firstly, applying the principle of equivalence, there is no difference between  production or manufacture of saleable goods and production of  marketable/saleable services in the form of an activity undertaken by the  service provider for consideration, which correspondingly stands consumed  by the service receiver. It is this principle of equivalence which is in-built  into the concept of service tax, which has received legal support in the form  of Finance Act, 1994. To give an illustration, an Event Manager  (professional) undertakes an activity, namely, of organizing shows. He  belongs to the profession of Event Manager. As long as he is in the business  or calling or profession of an Event Manager, he is liable to pay the tax on  profession, calling or trade under Entry 60 of List II. However, that tax  under Entry 60 of List II will not cover his activity of organizing shows for  consideration which provide entertainment to the connoisseurs. For each  show he plans and creates based on his skill, experience and training. In each  show he undertakes an activity which is commercial and which he places  before his audience for its consumption. The tax on service is levied for each  show.  This situation is very similar to a situation where goods are  manufacture or produced with the intention of being cleared for home  consumption under the Central Excise Act, 1944. This is how the principle  of equivalence equates consumption of goods with consumption of services  as both satisfy the human needs. In the case of Internet Service Provider,  service tax is leviable for on-line information and database provided by web  sites. But no service tax is leviable on E-commerce as there is no Database  Access.

20.     On the basis of the above discussion, it is clear that service tax is VAT  which in turn is both a general tax as well as destination based consumption  tax leviable on services provided within the country.

(ii)    Object of enacting the Finance Act:

21.     Finance Act is passed every year to fix the rate of tax. This is the  primary object for enacting the Finance Act. But it does not mean that a new  distinct charge cannot be introduced by the Finance Act. For example, what  is not \023income\024 under the Income Tax Act (\023IT Act\024) can be made income  by the Finance Act. This is, however, subject to the Finance Act complying  with the Constitutional limitations. Additional tax revenue can be collected  either by increasing the rate or by levy of a fresh charge. All levies through  the medium of the Finance Act may either enhance the rate or levy a fresh  charge. The Finance Act can also make an extensive modification in an Act.  

22.     In the case of The Madurai District Central Co-operative Bank  Ltd.  v.  The Third Income Tax Officer, Madurai reported in AIR 1975  SC 2016 this Court held that the IT Act, 1961 and the annual Finance Acts  are enacted by Parliament in exercise of the power conferred by Article  246(1) read with Entry 82 of List I. It was further held that though it was  unconventional for Parliament to amend the taxing statute by incorporating

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the amending provision in an Act of a different pith and substance, such  course would not be unconstitutional. It was held that though the IT Act,  1961 was a permanent Act while Finance Acts are passed every year to  prescribe the rates at which the tax has been charged under the IT Act, 1961  still it would not mean that a new and distinct charge cannot be introduced  under the Finance Act. Therefore, what is not income under the IT Act, 1961  can be made \023income\024 by a Finance Act. Similarly an exemption granted by  the IT Act can be withdrawn by the Finance Act. Similarly, subject to  Constitutional limitations, additional tax revenue could be collected by  enhancement of the rate of tax or by the levy of a fresh charge vide the  Finance Act. Parliament, through the medium of Finance Act, may do what  the amendment to the IT Act, 1961 by a separate Amendment Act, can do. It  was further held that, the Finance Acts, though annual Acts, are not  necessarily temporary Acts as they may contain provisions of a general  character which are of permanent operation. Thus, Parliament is competent  to introduce a charging provision in a Finance Act. In the said judgment, it  had been further held that even an additional charge (surcharge) can be  levied by Finance Act for the purposes of the Union.

23.     The aforestated judgment was in the context of the IT Act, 1961.  However, the ratio of that judgment would apply equally to the Finance Acts  enacted annually for enhancement of the rate of excise duty by levy of a  fresh charge under that Act. Applying the test laid down in the aforestated  judgment of this Court, we hold that a new charge by way of service tax or  tax on service came to be levied statutorily by the said Finance Act, 1994,  which has subsequently attained Constitutional status by virtue of the  Constitution (Eighty-eighth Amendment) Act, 2003.

(iii)   Interpretation of Taxing Entries in the Seventh Schedule           to the Constitution:

24.     Constitutional law, like taxing law, essentially concerns concepts and  principles.

25.     In the present case, it has been vehemently urged on behalf of the  appellant that legislative Entries in the Seventh Schedule are legislative  heads/fields and, therefore, they should be given widest interpretation. There  is no dispute regarding the said proposition. However, there are two groups  of entries in each of the three Lists in the Seventh Schedule. In List I, Entries  1 to 81 refer to several matters over which Parliament has authority to  legislate. But Entries 82 to 92 enumerates the taxes which could be imposed  by a law of Parliament. An examination of these two groups of entries shows  that while the main subject of legislation finds place in the first group, a tax  in relation thereto is separately mentioned in the second group. For example,  Entry 22 in List I refers to \023Railways\024 whereas Entry 89 refers to \023Terminal  taxes on goods or passengers, carried by railway\024. If Entry 22 is construed as  involving taxes to be imposed, then Entry 89 would be superfluous.  Similarly, Entry 41 of List I refers to \023Trade and commerce with foreign  countries; import and export across customs frontiers\024, however, Entry 83  refers to \023Duties of customs including export duties\024. If Entry 41 of List I,  which refers to trade and commerce with foreign countries and which refers  to import and export, is to be interpreted as including duties of customs  under that Entry, then Entry 83 would be rendered superfluous. Similarly,  Entries 43 and 44 of List I relate to incorporation, regulation and winding up  of corporations whereas Entry 85 provides for \023Corporation tax\024. If Entries  43 and 44 are to cover taxes then Entry 85 would be rendered superfluous.

26.     Turning to List II, Entries 1 to 44 form one group mentioning the  \023subjects\024 on which States could legislate. Entries 45 to 63 in that List form  another group, and they deal in with taxes. At the relevant time, Entry 18  referred to \023Lands\024 whereas Entry 45 referred to \023Land Revenue\024. If land  revenue was to fall under Entry 18 then Entry 45 would be rendered  superfluous. The above analysis is not exhaustive. However, the above  analysis shows that taxation is not intended to be compromised in the main

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subject in which an extended construction can be given as that test cannot be  applied to taxation. Taxing entries are distinct entries. This distinction  between the abovementioned two groups of entries is also manifest in the  language of Article 248 clauses (1) and (2) as also in the language of Entry  97 in List I of the Seventh Schedule to the Constitution. [See M.P.V.  Sundararamier & Co.  v.  The State of Andhra Pradesh and anr.   AIR1958SC468 para 51]

27.     The above distinction between the group of general entries and the  group of taxing entries to the Lists in the Seventh Schedule has also been  highlighted in the case of  Southern Pharmaceuticals & Chemicals  v.   State of Kerala reported in (1981) 4 SCC 391 in which this Court took the  view that enactment of the Medicinal Act, 1955 by Parliament under Entry  84 List I does not prevent the State Legislature from making a law under  Entry 8 List II as Entry 8 was a general entry whereas Entry 84 List I was a  taxing entry. This distinction has been brought to light in another judgment  of this Court to which one of us, Kapadia, J., was a party in the case of State  of Bihar and ors.  v.  Shree Baidyanath Ayurved Bhawan (P) Ltd. and  ors. reported in (2005) 2 SCC 762 (para 28), which is quoted hereinbelow:

\02328. Before concluding, we may point out that in the  case of Southern Pharmaceuticals & Chemicals, Trichur  and Ors. v. State of Kerala and Ors. (1981) 4 SCC 391   this Court has taken the view, which we have taken  hereinabove. In that case, this Court held, that, by  enactment of Medicinal Act, 1955 by Parliament under  Entry 84 List-I of the Seventh Schedule of the  Constitution or by the framing of rules by the Central  Government thereunder for recovery of excise duty on  manufacture of medicinal and toilet preparations  containing alcohol, a State Legislature is not prevented  from making a law under Entry 8 List II with respect to  intoxicating liquor or a law under Entry 51 List II levying  excise duties on alcoholic liquors for human  consumption. In that case it was held that the Abkari Act  of Kerala is relatable to the State’s power to make a law  under Entry 8 and Entry 51 List II of the Seventh  Schedule to the Constitution. There is a difference  between the word "on" and the expression "with respect  to". When we refer to levy on excise duty under Entry 84  List I, we emphasize the word "on". On the other hand,  when we refer to Entry 8 List II, which is a general entry,  relating to "intoxicating liquor", we refer to a wider  activity. The words "in respect of or the words "with  respect to" used in the aforestated judgment in the  context of Entry 8 List II bring out the above difference.  Entry 8 List-II is an entry on general subject unlike Entry  84 List-II which deals with taxation. Keeping in mind the  difference between the two, we hold that the State law  under Entry 8 List-II covers a wider field of use,  consumption, possession, diversion etc. vis-a-vis Entry  84 List I, which deals with duty on manufacture of  medicinal preparation, as such. This difference is lost  sight of by the High Court in the impugned judgment.\024                                                            (emphasis supplied)

28.     Applying the above tests laid down in the aforestated judgments to the  facts of the present case, we find that Entry 60 of List II, mentions \023Taxes on  professions, trades, callings and employments\024. Entry 60 is a taxing entry. It  is not a general entry. Therefore, we hold that tax on professions etc. has to  be read as a levy on professions, trades, callings etc., as such.  Therefore,  Entry 60 which refers to professions cannot be extended to include services.  This is what is called as an Aspect Theory. If the argument of the appellants  is accepted, then there would be no difference between interpretation of a  general entry and interpretation of a taxing entry in List I and List II of the

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Seventh Schedule to the Constitution. Therefore, \023professions\024 will not  include services under Entry 60. For the above reasons, we hold that  Parliament had absolute jurisdiction and legislative competence to levy tax  on services. While interpreting the legislative heads under List II, we have to  go by schematic interpretation of the three Lists in the Seventh Schedule to  the Constitution and not by dictionary meaning of the words \021profession\022 or  \021professional\022 as was sought to be argued on behalf of the appellants  otherwise the distinction between general entries and taxing entries under  the three Lists would stand obliterated. The words \023in relation to\024 and the  words \023with respect to\024 are no doubt words of wide amplitude but one has to  keep in mind the context in which they are used.

(iv)    Meaning of the words Taxes \021on\022 professions:

29.     As stated above, Entry 60 List II refers to taxes on professions etc.. It  is the tax on the individual person/firm or company. It is the tax on the  status. A chartered accountant or a cost accountant obtains a licence or a  privilege from the competent Body to practise. On that privilege as such the  State is competent to levy a tax under Entry 60. However, as stated above,  Entry 60 is not a general entry. It cannot be read to include every activity  undertaken by a chartered accountant/cost accountant/architect for  consideration. Service tax is a tax on each activity undertaken by a chartered  accountant/cost accountant or an architect. The cost accountant/chartered  accountant/architect charges his client for advice or for auditing of accounts.  Similarly, a cost accountant charges his client for advice as well as doing the  work of costing. For each transaction or contract, the chartered  accountant/cost accountant renders professional based services. The activity  undertaken by the chartered accountant or the cost accountant or an architect  has two aspects. From the point of view of the chartered accountant/cost  accountant it is an activity undertaken by him based on his performance and  skill. But from the point of view of his client, the chartered accountant/cost  accountant is his service-provider. It is a tax on \023services\024. The activity  undertaken by the chartered accountant or cost accountant is similar to a  saleable or marketable commodities produced by the assessee and cleared by  the assessee for home consumption under the Central Excise Act.  For each  contract, tax is levied under the Finance Acts, 1994 and 1998. Tax cannot be  levied under that Act without service being provided whereas a professional  tax under Entry 60 is a tax on his status. It is the tax on the status of a cost  accountant or a chartered accountant. As long as a person/firm remains in  the profession, he/it has to pay professional tax. That tax has nothing to do  with the commercial activities which he undertakes for his client. Even if the  chartered accountant has no work throughout the accounting year, still he  has to pay professional tax. He has to pay the tax till he remains in the  profession. This is the ambit and scope of Entry 60 List II which is a taxing  entry. Therefore, Entry 60 contemplates tax on professions, as such. Entry  60 List II refers to \023Tax on employments\024. In one case, the question arose  whether Parliament was entitled to impose income tax on pension under  Entry 82 of List I. The controversy was that \023pension\024 is a retiral benefit. It  was argued that pension was an incident of \023employment\024 and, therefore,  Parliament had no legislative competence to impose income tax under Entry  82 of List I and that the State Legislature alone had absolute jurisdiction to  make a law imposing tax on pension. This argument was rejected on the  ground that Entry 60 of List II refers to \023Tax on employments\024, as such. So  long as a person is in the employment, he does not earn pension. He earns  pension only on retirement. On retirement, he ceases to be in the  employment, therefore, on retirement the receipt of pension constitutes  \023income\024 in the hands of the pensioner and, therefore, Parliament had  legislative competence to enact Income Tax Act, 1961 under which pension  was taxable as income. This example demonstrates the meaning of the word  \023Taxes on professions, callings, trades and employments\024. It also indicates  two aspects of the same item, namely, pension. One aspect falls in the  category of \023employment\024, the other falls in the category of \023income\024.  Therefore, there is no merit in the contention advanced on behalf of the  appellant that the widest possible interpretation should be given to the word  \023profession\024 in Entry 60 List II. We have to keep in mind while interpreting

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the Entries in the three Lists the distinction between the general entry and  the taxing entry.

30.     In the case of Western India Theatres Ltd.  v.  Cantonment Board  reported in AIR 1959 SC 582 the appellant was a public limited company. It  was a lessee of two cinema Houses. It was an exhibitor of cinematograph  films. A notice was issued to the appellant by the Cantonment Board under  Section 60 of the Cantonments Act, 1924 imposing tax on entertainments.  The said levy was challenged on the ground that under Section 100 of the  Government of India Act, 1935 (\023GOI Act, 1935\024) read with Entry 50 in  Schedule VII, the Provincial Legislature had power to make law with respect  to \023Taxes on luxuries, including taxes on entertainments, amusements,  betting and gambling\024.  It was urged on behalf of the appellant that Entry 50  was not applicable since Entry 50 contemplated enactment of a law  imposing taxes on persons who receive or enjoy the  entertainments/amusements and, therefore, the said entry did not authorize  imposition of tax on assessees/persons who provide entertainments or  amusements. According to the appellant, Western India Theatres were  entertainment providers; that they were not entertainment receivers; that they  simply carried on their profession, trade or calling and, therefore, Entry 50  was not applicable. It was further urged that entertainment-providers fell  under Entry 46, which Entry is similar to Entry 60 of List II in the present  case and which referred taxes on professions, trades, callings and  employments. This argument advanced on behalf of the appellant was  rejected by this Court. It was held that Entry 50 contemplated a tax on  entertainment and amusement as objects on which a tax is to be imposed  and, therefore, it was not possible to differentiate between the entertainment- provider and the entertainment-receiver. It was held that entertainment was  trade or calling of Western India Theaters and, therefore, the tax imposed on  entertainment under the Cantonment Act came within Entry 50 of the  Provincial List. The importance of this judgment lies in the fact that this  judgment makes a distinction between tax imposed for the privilege of  carrying on any trade or calling on one hand and a tax on every show that is  to say on every incidence of the exercise of the particular trade or calling. It  was held that if there was no show, there was no tax. It was further observed  that a lawyer has to pay tax to take out a licence irrespective of whether he  actually practices or not. That tax is a tax for the privilege of having the right  to exercises the profession    if and when the person taking out the license  chooses to do so. It was held that the impugned tax on entertainment levied  by the Cantonment Board was a tax on the act of entertainment resulting in a  show and, therefore, the impugned law imposing tax on entertainment fell  under Entry 50 of the Provincial List in Schedule VII to the GOI Act, 1935  and not under Entry 46 (similar to Entry 60 of List II). Therefore, it was held  that Bombay Legislature had power to enact the law imposing tax on  entertainment which had nothing to do with the law imposing tax on the  privilege of carrying on any profession, trade or calling under Entry 46.  (similar to Entry 60 of List II in the present case.) Therefore, this Court has  clarified the dichotomy between tax on privilege of carrying on any trade or  calling on one hand and the tax on the activity which an entertainer  undertakes on each occasions. The tax on privilege to practice the  profession, therefore, falls under Entry 60, List II. It is quite different from  tax on services. Keeping in mind the aforestated dichotomy, it is clear that  tax on service does not fall under Entry 60 List II. Therefore, Parliament has  absolute jurisdiction and legislative competence to enact the law imposing  tax on services under Entry 97 List I of the Seventh Schedule to the  Constitution.  (v)     Significance of Article 276:

31.     Learned counsel for the appellants in support of his argument that the  words \021professions\022 and \021services\022 are synonymous for the purposes of  deciding the question of legislative competence of the State Legislature  under Entry 60 List II, placed heavy reliance on Article 276, which has been  quoted hereinabove.

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32.     Article 276 corresponds to Section 142A of the GOI Act, 1935.  However, under a large number of laws enacted before the 1935 Act came  into force, power was conferred on local Governments and local authorities  to impose taxes on certain activities which broadly came under the Heads  \023Taxes on professions, trades etc.\024 on one hand and \023Taxes on income\024 on  the other hand. This resulted in the enactment of Section 142A by British  Parliament, which saved the power conferred by pre-existing laws to impose  tax on professions, callings etc. but limited the amount payable to a specified  amount. At that time, it was Rs. 50.00, which was the tax payable on  profession. That was in 1935. Article 276 was, therefore, preceded by  Section 142A of the GOI Act, 1935. The limit has been subsequently  enhanced. The States\022 power to tax professions etc. is founded on Entry 60  of List II and the purpose of Article 276 is not to amend that power but to  provide that such tax on professions, trades etc. shall not be invalidated on  the ground that it relates to a tax on income. Once the State seeks to  exercises its power under Entry 60 List II, it has to comply with the  provisions of Article 276. Where, however, the exercise of power by the  State overlaps with its power under some other Entry, then the limitation  under Article 276(2) shall have no relevance. Thus, Article 276 will not  apply to levy of tax on \023circumstances and property\024 which is referable to  Entry 49 and Entry 60 of List II and amongst other Items to Entry 58, taxes  on cinematograph shows, taxes on entry of goods. A tax on profession can  be imposed if a person carries out a profession whereas a tax on income can  be imposed only if there is income. Therefore, a tax on profession is  irrespective of the question of income. Article 276 enables the State  Legislature to make laws for imposition of taxes on profession, for the  benefit of the State, Municipality, District Board etc. by stating that such law  shall not be invalid on the ground that it relates to a tax on income. There is  a distinction between a  tax on professions, trades, callings and employments  and a tax on income arising out of such professions, trades etc.. In the former  case, it will have to be paid by any person practising that trade, profession  etc., whether he derives any income from it or not. This is where the above  example of pensioner becomes relevant. A pensioner does not carry out any  profession, trade, business or calling. A tax on profession is not a tax on  employment. At the time, the tax is levied, the pensioner is not in  employment, but he receives an amount of pension that receipt constitutes  his income though it might be for past services from an employment.

33.     As stated above, every Entry in the Lists has to be given a schematic  interpretation. As stated above, Constitutional law is about concepts and  principles. Some of these principles have evolved out of judicial decisions.  The said test is also applicable to taxation laws. That is the reason why the  Entries in the Lists have been divided into two Groups, one dealing with  general subjects and other dealing with taxation. The entries dealing with  taxation are distinct entries vis-‘-vis the general entries. It is for this reason  that the doctrine of pith and substance has an important role to play while  deciding the scope of each of the entries in the three Lists in the Seventh  Schedule to the Constitution. This doctrine of pith and substance flows from  the words in Article 246(1), quoted above, namely, \023with respect to any of  the matters enumerated in List I\024.  The bottom line of the said doctrine is to  look at the legislation as a whole and if it has a substantial connection with  the Entry, the matter may be taken to be legislation on the topic. That is why  due weightage should be given to the words \023with respect to\024 in Article 246  as it brings in the doctrine of \023pith and substance\024 for understanding the  scope of legislative powers. Competence to legislate flows from Articles  245, 246 and the other Articles in Part XI. A legislation like Finance Act can  be supported on the basis of a number of Entries. In the present case, we are  concerned with the Constitutional status of the levy, namely, service tax.  The nomenclature of a levy is not conclusive for deciding its true character  and nature. For deciding the true character and nature of a particular levy,  with reference to the legislative competence, the court has to look into the  pith and substance of the legislation. The powers of Parliament and State  Legislatures are subject to Constitutional limitations. Tax laws are governed  by Part XII and Part XIII. Article 265 takes in Article 245 when it says that  the tax shall be levied by the authority of law. To repeat, various entries in

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the Seventh Schedule show that the power to levy tax is treated as a distinct  matter for the purpose of legislative competence. This is the underlying  principle to differentiate between the two Groups of entries, namely, general  entries and taxing entries. We are of the view that taxes on services is a  different subject as compared to taxes on professions, trades, callings etc.  Therefore, Entry 60 of List II and Entry 92C/97 of List I operate in different  spheres.  

(vi)    Discussions of Judgments cited on behalf of the appellants:

34.     In the case of Godfrey Phillips India Ltd. and anr.  V.  State of  U.P. and ors. reported in (2005) 2 SCC 515 the assessees/appellants, who  were either manufacturers, dealers or sellers of tobacco, had challenged the  levy of luxury tax on tobacco and tobacco products by treating them as  \023luxuries\024 within the meaning of the word in Entry 62 of List II of the  Seventh Schedule to the Constitution of India. Uttar Pradesh Tax on  Luxuries Act, 1995 and certain other State enactments imposed  luxury tax  on tobacco by treating it as \023luxury\024 within the meaning of the word in  Entry 62 of List II.  It was held by the Constitution Bench of this Court that  the word \023luxuries\024 in Entry 62, List II refers to activities of enjoyment,  indulgence or pleasure and since none of the impugned enactments had  sought to tax any activity and since the impugned enactments sought to tax  \023goods\024 as luxuries it was held that the said U.P. Tax on Luxuries Act, 1995,  Andhra Pradesh Tax on Luxuries Act, 1987 and West Bengal Luxury Tax  Act, 1994 were beyond the legislative competence of the State Legislature.  In this connection, it was observed, vide para 57, by the Constitution Bench  of this Court that a tax on a thing or goods can only be with reference to a  taxable event but there is a distinction between such a tax and a tax on the  taxable event. In the first case, the subject-matter of tax is the goods and the  taxable event is within the incidence of the tax on the goods. In the second  case, the taxable event is the subject-matter of tax itself. In our view, para 57  supports the reasoning given by us hereinabove. As stated above, service tax  is a value added tax. Value addition is on account of the activity like  planning, consultation, advising etc.. It is an activity, which provides value  addition as in the case of manufacturer of goods, which attracts service tax.  In the present case, tax falls on the activity which is the subject-matter of  service tax. In other words, we are substituting the word \023service\024 in place  of \023goods\024 by applying the principle of equivalence. Under the Act, the  Taxable Event is each exercise undertaken by the service-provider in giving  advice on tax planning, auditing, costing etc.. It is the said principle of  equivalence which equates \023service tax\024 to the Central Excise Duty, one  taxes the provision of services and other production of goods. See para 2.14  of the recommendations made by Tax Reforms Committee headed by             Dr. Chelliah which has stated that from the economic point of view, there is  little difference between the taxation of commodities and taxation of  services. 35.     In the case of International Tourist Corporation and ors.  v.  State  of Haryana and ors. reported in (1981) 2 SCC 318 the appellants were  transport operators. The State of Haryana levied a tax on passengers and  goods under the  Haryana Passengers and Goods Taxation Act, 1952. The  appellants questioned the vires of Section 3(3) insofar as the levy of tax on  passengers and goods carrying by their vehicles plying along the National  Highway. It was urged on behalf of the appellants that there was nothing in  the Constitution to prevent Parliament from combining its power to legislate  with respect to any matters enumerated in Entries 1 to 96 of List I with its  power to legislate under Entry 97 of List I and, if so, then the power to  legislate with respect to tax on passengers and goods carried on National  Highway was within the exclusive legislative competence of Parliament and,  therefore, Section 3(3) of Haryana Passengers and Goods Taxation Act,  1952 was beyond the legislative competence of the State Legislature. This  argument was rejected by the Division Bench of this Court, which took the  view that before exclusive legislative competence can be claimed for  Parliament by resort to Entry 97 List I, the legislative competence of the  State Legislature must be established. Entry 97 itself was specific. In that, a

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matter can be brought under that Entry only if it is not enumerated in Lists II  or III, and in the case of a tax, if it is not mentioned in either of those Lists.  We do not dispute the above proposition. That proposition is well settled.   This Court is concerned with the application of the said principle in this  case. In the present matter, as stated hereinabove, the State Legislature is  empowered to levy tax on professions, trades, callings etc., as such and,   therefore, the word \023services\024 cannot be read as synonymous to the word  \023profession\024 in entry 60. Therefore, tax on services do not fall under Entry  60 List II. That, service tax would fall under Entry 92C/Entry 97 of List I.

36.     In the case of Sodan Singh and ors.   v.  New Delhi Municipal  Committee and ors.  reported in (1989) 4 SCC 155 the appellants claimed a  right to engage in trading business on the pavements of Delhi city. In that  context, it was held by the Constitution bench of this Court that, the  guarantee under Article 19(1)(g) extends to practise any profession, or to  carry on any occupation, trade or business. In that case, the word  \023profession\024 had been defined to mean an occupation carried on by virtue of  specialized qualifications, personal qualifications, training or skill. We do  not find any relevance of this judgment to the present case. As stated above,  we are concerned with interpretation of legislative heads under the three  Lists in the Seventh Schedule to the Constitution. As stated above, we have  to go by the schematic interpretation of those entries. Moreover, we are  concerned with a distinct taxing entries and not general entries. Hence, the  judgment in the case of Sodan Singh (supra) has no application to the  present case.

37.     In the case of Tamil Nadu Kalyana Mandapam Assn.  v.  Union of  India and ors. reported in (2004) 5 SCC 632 the Division Bench of this  Court held that service tax is an indirect tax and is to be paid on all the  services notified by the Government of India. It has been further held that  the said tax is on \023service\024 and not on the service-provider. In paragraph 58  it has been observed that under Article 246(1) of the Constitution,  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 Article 246(3), the State Government has exclusive powers to make laws  with respect to matters enumerated in List II (State List). In the said  judgment, it has been held that service tax is made by Parliament under  Entry 97 of  List I. In our view, therefore, the point in issue in the present  case is squarely covered by the judgment of this Court in the case of Tamil  Nadu Kalyana Mandapam (supra). Of course, in the present case, we are  not concerned with the services rendered by a Mandap-keeper, who  performs what is called as property based services. In this case, we are  concerned with performance based services. However, both the categories  fall within the ambit of the word \021services\022. 38.     In the case of Gujarat Ambuja Cements Ltd. and anr.  v.  Union of  India and anr. reported in (2005) 4 SCC 214 it was held that service tax is  not a tax on goods or on passengers but it was on the transportation itself  and, therefore, it falls under residuary power of Parliament under Entry 97 of  the Seventh Schedule to the Constitution. It was further held that service tax  is not a levy on passengers or goods but on the event of service in  connection with the carriage of goods and, therefore, it was not possible to  hold that the Act was in pith and substance within the State\022s exclusive  powers under Entry 56 of List II. It was held that service tax came within  Entry 97 of List I. In the present case, as stated above, we are concerned  with Entry 60 of List II. As stated above, service tax is on performance  based services itself. It is on professional advice, tax planning, auditing,  costing etc.. On each of the exercise undertaken tax becomes payable.  Therefore, the above judgment has no application.

39.     In the case of Bharat Sanchar Nigam Ltd. and anr. v.  Union of  India and ors. reported in (2006) 3 SCC 1 the question which arose for  determination before this Court was whether a telephone service (mobile or  fixed) would attract liability to service tax. It was held that in order to attract  the liability under the service tax there has to exist what is called as \023goods\024.  Since goods in question consisted of electromagnetic waves or radio

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frequencies, which carries voice, messages or other data, a telephone service  was nothing but a service. We are not concerned with such a controversy in  the present case. In the present case, we are concerned with the legislative  competence of Parliament to legislate in respect of service tax under Entry  97/92C of List I. In the present case, we are concerned with the period  covered by the Finance Acts of 1994 and 1998. However, learned counsel  for the appellants has relied upon para 82 of the said judgment in the case of  Bharat Sanchar Nigam Ltd. (supra) in which it is observed that the  residuary powers of Parliament under Entry 97 of List I cannot swamp away  the legislative Entries in the State List. Entry 54, List II read with Article  366(29-A), therefore, cannot be whittle down by referring to the residuary  provision. As stated above, we are concerned with the application of the  above principles. In the present case, as stated above, we are concerned with  the Constitutional status of the levy. As stated above, we have to examine  the nature of the levy. We have done so and we have come to the conclusion  that the word profession in Entry 60 List II cannot be made synonymous  with the word service and, therefore, service tax would fall under the  residuary Entry 97 read with Entry 92C after 2003. This position is also  made clear by Article 268A, inserted by the Constitution (Eighty-eighth  Amendment) Act, 2003. 40.     Lastly, in our view, the judgment of this Court in the case of R.R.  Engineering Co.  v.  Zila Parishad, Bareilly and anr. reported in (1980) 3  SCC 330 has no application to the facts of the present case. In that case this  Court observed that there was a basic distinction between a tax on \023income\024  and a tax on \023circumstances and property\024. If there is no income, there can  be no income tax. In contrast, in the case of a tax on \023circumstances and  property\024 there can be a tax on the total turn-over of the assessee from his  trade or calling or on his having an interest in the property. It was held that  whereas Entry 49 of List II relates to taxes on lands and buildings, Entry 60  relates to taxes on professions and, therefore, the true nature of the tax in  that case was not a tax on income but it was a tax referable to Entry 49 and  Entry 60 of List II. It was held that the impugned tax was a composite tax,  one of its components being the \023circumstance\024, namely, the financial  position of the assessee. It may be clarified that in the case of R.R.  Engineering Co. (supra) the validity of the levy was under challenge and  that levy constituted what is called a composite tax. We do not see any  relevance of the judgment in the case of R.R. Engineering Co. (supra) to  the facts of the present case. In the present case, we are not concerned with a  composite tax. Hence, the judgment of this Court in the case of R.R.  Engineering Co. (supra) has no relevance to the facts of the present case. Conclusion:

41.     For the above reasons, we find no merit in Civil Appeal No. 7128 of  2001 filed by All India Federation of Tax Practitioners and ors.. We hold   that Parliament has legislative competence to levy service tax by way of  impugned Finance Acts of 1994 and 1998 under Entry 97 of List I on  chartered accountants, cost accountants and architects. We further hold that  the above position now stands fortified by the Constitution (Eighty-eighth  Amendment) Act, 2003 which has inserted Article 268A and Entry 92C  which clearly indicates that Entry 60 of List II and Entry 92C of List I  operate in different spheres. However, we make it clear that before us there  is no challenge to the Constitutional validity of the said Constitution  (Eighty-eighth Amendment) Act, 2003.  

42.     Accordingly, the civil appeal is dismissed with no order as to costs.