Law:

Section:

Section 116 of the Finance (No. 2) Act, 1998, read with articles 14 and 19(1)(g) of the Constitution of India - Service tax - Whether under article 246(1), Parliament has exclusive power to make laws with respect to any matters and that includes power to impose tax enumerated in List I of Seventh Schedule of Constitution - Held, yes - Whether if tax does not fall either in State List or Concurrent List, Parliament has residuary power under Entry 97, List 1 - Held, yes - Whether tax under section 116 of Finance (No. 2) Act, 1998 is essentially based on service and not on profession which falls within State power - Held, yes - Whether classification between qualified professionals like Chartered Accountants and architects on one hand and non-qualified persons rendering similar services is reasonable and classification has reasonable nexus with object sought to be achieved in collection of revenue - Held, yes - Whether apprehension that professionals will be required to pay service tax even if their clients do not pay their fees, is completely misplaced as according to section 68, in case clients pay amount less than that billed to them, assessee has to only amend bill, either by modifying existing bill or by issuing a revised bill and by properly endorsing such change in billed amount to extent of such non-payment by client - Held, yes - Whether, however, in this process even if it is assumed that few individuals suffer hardship, it will be no ground for declaring 1998 Act, which has imposed service tax, as violative of article 19(1)(g) of the Constitution - Held, yes FACTS The petitioners who were associations of tax practitioners, chartered accountants and architects challenged the constitutional validity of section 116 of the Finance (No. 2) Act, 1998. The Act envisages service tax at the rate of 5 per cent of the value of taxable service provided to any person by the person responsible for collecting service tax. The persons providing service are liable to recover tax and pay the same to the Central Government under section 68. The service tax was introduced by the Finance Act, 1994. The ambit of the Act was widened by the Finance Act, 1998 substituting…

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