Holding

The service tax on services rendered by mandap‑keepers, including the provision of premises and catering, is a tax on services and is validly enacted under Parliament’s residuary power (Entry 97 List I).

Summary

The Tamil Nadu Kalyana Mandapam Association, representing mandap‑keepers who let out halls and provide catering, challenged the levy of service tax on their services under Sections 66 and 67 of the Finance Act, 1994 and Rule 2(1)(d)(ix) of the Service Tax Rules, arguing that the tax was in substance a tax on land (a State subject under Entry 49 List II) and on the sale of goods (covered by Article 366(29A)(t)). The Madras High Court dismissed the writ petitions, holding the provisions intra‑vires. On appeal, the Supreme Court examined whether the tax was a tax on land or on goods, whether the ‘aspect theory’ applied, and whether the provisions violated Articles 14 and 19(1)(g). The Court held that the levy is a tax on services – the temporary occupation of a mandap and related catering – and therefore falls within Parliament’s residuary power under Entry 97 List I. Consequently, the provisions are constitutional and the appeal was dismissed.

Issues considered

Whether the service tax on mandap‑keepers constitutes a tax on land, a State subject under Entry 49 List II, or a tax on services within Parliament’s residuary power under Entry 97 List I.
Whether the tax on catering services amounts to a tax on the sale of goods under Article 366(29A)(t) of the Constitution.
Whether the High Court correctly applied the ‘aspect theory’ from Federation of Hotel and Restaurant v. Union of India.
Whether the impugned provisions violate Articles 14 and 19(1)(g) of the Constitution.
Whether Service Tax Notice No. 4/99, treating open land as taxable, is unconstitutional.

Legislation cited

Constitution of Indias. Article 245, s. Article 246, s. Article 366(29A)(t), s. List I Entry 97, s. List II Entry 18, s. List II Entry 49, s. List II Entry 54
Service Tax Rules, 1994s. Rule 2(1)(d)(ix)
Transfer of Property Act, 1882s. Section 3

Subjects

service taxlegislative competenceresiduary powerEntry 97 List IEntry 49 List IIland taxsale of goodsArticle 366(29A)(t)aspect theoryconstitutional validitytaxation

Judgment

A
TAMIL NADU KALYANA MANDAPAM ASSN.
v.
UNION OF INDIA AND ORS.

APRIL 15, 2004
B
[S. RAJENDRA BABU AND DR. AR. LAKSHMANAN, JJ.]

Finance Act, 1994(as amended in 1997)-Section 65(19), (20), (4l)(p)
and sections 66 and 67(0):
c
Service tax on services rendered by Mandap-Keeper-Nature of-Held:
It does not amount to tax directly on land but tax on income from land as s~ch
not a State subject under Entry 49 List II of Seventh Schedule-Hence, within
the competence of the Parliament under Entry 97 List I-Constitution ofIndia,
1950-Articles 245, 246 and Seventh Schedule, List I Entry 97, List II Entry D
49.

Services rendered by Mandap keepers and outdoor caterers-Levy of
service tax-Scope of-Held: Taxable services provided by mandap-keeper to
a customer in relation to use ofmandap includes apart from providing premis~
on temporary basis the other facilities rendered as a caterer-Transaction E
between a mandap-keeper and his customer is that of providing services.._
There is service element in outdoor catering-Hence, 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-As such within the legislative
competence of the Parliament under the residuary Entry 97 in List I of the
Seventh Schedule and not covered under Entry 18, 49 and 54 of List II-And F
levy of service tax not unconstitutional-Constitution of India, 1950-Articles
245, 246, 366(29A)(f) and Seventh Schedule, List I Entry 97, List II Entry 18,
49 and 54-Service Tax Rules, 1994-Rule 2(l)(d)(ix).

Appellant is a registered association of various Kalayana, G
Mandapams formed to protect the interest of the owners of Kalayana
Mandapams/Mandap keepers who let out the Mandaps to the clients and
provide them with the facilities like catering, electricity, water etc. By.
virtue of the Finance Act, 1997 services rendered by the Mandap Keepers .
were exigible to service tax. Appellants-association filed writ petition
169 H
170 SUPREME COURT REPORTS [2004) SUPP. l S.C.R.

A challenging the validity of sections 66, 67(C) of Chapter V of Finance Act,
1994 and Rule 2(1)(d)(ix) of Service Tax Rules, 1994 and other provisions
related to Kalyana Mandapams and Mandap Keepers. Subsequently,
Service Tax Notice was issued that any open land/ground is exigible to
service tax if the same is let out for organizing any official, social or
business function, even if no services whatsoever were rendered by
B Mandap-keepers. High Court dismissed the writ petitions holding that the
provisions in the,Finance Act, 1994 imposing service tax on the services
rendered by the Mandap-Keepers are intra vires of the Constitution. Hence
the present appeal.

C Appellant contended that the service tax levied on the mandap-
keepers for their services rendered under sections 65, 66 and 67 of the
Finance Act, 1994 is a tax on land per se, State subject under Entries 18
and 49 of List II of the Constitution; that insofar as it levies ·a tax on
catering services, it amounts to a tax on sale and purchase of goods, and
as such it is beyond the competence of the Parliament under residuary
D Entry 97 of List-I in view of the definition o( tax on sale and purchase of
goods contained in Article 366(29A)(t) of the Constitution; that the
Parliament have not devised a formula for segregating the service
component from the transaction and levied service- tax on 60% of the gross
amount charged by the mandap-keepers from their· clients, in cases where
E the mandap keepers are also providing catering services; that the service
component in the composite amount charged by the rnandap-keepers is a
very small percentage; that High Court invoked the/' Aspect Doctrine' as
evolved by this Court in the case of Federation of Hotel and Restaurant v.
Union of India and upheld the levy of service tax thus allowing the
Parliament to encroach upon the subjects specifically demarcate~ for the
F State Legislatures, even though Article 366(29A)(t) was not considered by
this Court and High Court did not distinguish between the service ?Spect
and supply aspect; and that service tax on the mandap-keepers is clearly
a colourable legislation and unconstitutional as the said tax is not on
services but is in pith and substance only a tax on 'goods' and/or 'land'.
G Respondent-Union of India contended that service tax on Mandap-
Keepers is a tax on the consideration received for allowing temporary
occupation of the Mandap for organizing any official, social or business
function and that it is not a tax on "good" and/or "iand', state subjects
under Entries 18, 49 and 54 of List II of the Seventh Schedule to the
Constitution and is very much covered under residual power of the Union
H
TAMIL NADU KAL YANA MANDAPAM ASSN. v. U.0.1. 171
Parliament under Entry 97 of List I; that the service provided bY the A
Mandap-Keeper as a Caterer is taxable and not the supply made by him
of the food or drinks etc. and thus it is clear that the levy of service tax
on Mandap-Keepers is not covered under Entry 54 of List II; and that it
is not correct that Article 366(29A)(f) was not considered by this Court
in the case of Federation of Hotel and Restaurant v. Union ofIndia and High B
Court did not distinguish between the service aspect and supply aspect.
Dismissing the appeal, the Court
HELD: 1.1. In order to constitute a tax on land, it must be a tax
directly on land ~nd by reason of Entry 49 of List 2 of the Seventh
Schedule of the Constitution, only the State Government is compet~nt to C
levy such tax. The service tax levied on services rendered by Mandap-
Keeper in relation to its use under sections 65, 66 and 67 of the Finance
Act, 1944 does not amount to tax on land but a tax on income from land
and thus the State Government is not competent to levy such tax. further,
if no Entry is found in List 2 and List 3 of the Schedule which could cover
the tax levied, the Parliament is competent to do so under the residuary D
powers. As such the service tax is made by the Parliament under the
residuary entry 97 in List I of Seventh Schedule of the Constitution.
[186-F-H; 187-A,-D)
i

India Cement Ltd and Ors. v. State of Tamil Nadu and Ors., [1990) 1
sec 12, relied on. E
2.1. It is well settled that for the tax to amount to a tax on sa'le 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. Ar1icle F
366(29A)(t) 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 include the supply to services within the definition of sale ,and
purchase of goods: [187-E-F; 188-A-C)

Mis. J.K. Jute Mills Co. Ltd v. The State of U.P. and Anr., (1962) 2 G
SCR l; Mis. Gannon Dunkerley and Co. and Ors. v. State of Rajasthan 'and
Ors., [1993) 1 SCC 364; The State of Madras v. Canon Dunkerley and Co.
(Madras) Ltd, (1959) SCR 379; The Sales Tax Officer, Pilibhit v. Mis. B~dh
Prakash Jai Prakash, [1955) 1 SCR 243 and Mis. George Oakes (P) Ltd. v.
State of 1!fadras, (1962) 2 SCR 570, referred to. H
172 SUPREME'COURT REPORTS [2004] SUPP. I S.C.R.

A 2.2. As per Section 65 (19) of the Finance Act, 1994, Mandap means
any immovable property as defined in Section 3 of the Transfer of
Property Act, 1882 and includes any furniture, fixture, light fittings and
floor coverings therein let out for consideration for organizing any official,
social or business function. Mandap-keepers apart from providing the
service of allowing temporary occupation of mandap, provide a wide
B variety of services by which function is solemnized with the required effect
and ambience. The services of the mandap-keeper cannot possibly be
termed as a hire purchase agreement of a right to use goods or property
but are professional services which he alone by virtue of his experience
has the wherewithal to provide. Similarly the services rendered by out door
C caterers is clearly distinguishable from the service rendered in a restaurant
or hotel inasmuch as in the case of outdoor catering service, customer is
at liberty to choose the time and negotiates each element of the catering
service, including the price to be paid to the caterer. In such catering
services the person who participate and avail the service gives more
importance to the manner of service than the quality of food provided for
D consumption. It has an element of personalized service provided to the
customer. Cleatly the service element is more weighty, visible an<1:
predominant in the case of outdoor catering. 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,
E the Government has decided to charge the same only on 60% of the gross
amount charged by the mandap-keeper to the customer.
(191-E-H; 192-A-E)
Addition Advertising v. Union of India, (1998) 98 E.L.T. 14, referred
to.
F 2.3. The fact that tax on the sale of the goods involved in the said
service can be levied does not mean that a service tax cannot be levied on
the service aspect of catering. High Court rightly placed reliance on
Federation ofHotel and Restaurant v. Union of India case and in particular
on aspect theory and the submission that the High Court did not
G distinguish service aspect from supply aspect of food and drink cannot be
accepted. (188-D, E, F]
Federation of Hotel and Restaurant v. Union of India and Ors., AIR
(1990) SC 1637, relied on.
2.4. It is well settled that the measure of taxation cannot affect the
H nature of taxation and, therefore, the fact that service tax is levied as a
TAMIL NADU KAL YANA MANDAPAM ASSN. v. U.0.1. 173
percentage of the gross charges for catering cannot alter or affect the A
legislative competence of Parliament and also does not depend upon·
whether in fact any services are made available by the Mandap-Keepers
within the definition of taxable service contained in the Finance Act. ·
Whether in the given case taxable services are rendered or not is a matter
·- of interpretation of the statute and for adjudication under the provisions B
of the statute and does not affect the vires of the legislation and/or the
legislative competence of Parliament. In fact a wide range of services are
included in the definition of taxable services as far as Mandap-Keepers
are concerned. The said definition includes services provided "in relation
to use of Mandap in any manner" and includes "the facilities provided to .
the client in relation to such use" and also the services "rendered tis a C
caterer". Therefore, taxable services defined under section 65(4l)(p) of the
Finance Act, 1994 could include the mere providing of premises on a
temporary basis for organizing any official, social or business functions,
but would also include other facilities supplied in relation thereto.
(188-F-H; 189-A-B) D

Mis. Doypack Systems Pvt. Ltd. v. Union of India and Ors., (1988) 2
SCC 299; Renusagar Power Co. Ltd. v. General Electric Company and Anr.,
[1984) 4 SCC 679; Thyssen Stahlunion GMBHv. Steel A_uthority of India Ltd.,
[1999) 9 SCC 334 and Regional Director, Employees' State Insurance
Corporation v. High Land Coffee Works of P.FX Saldanha and Sons and E
Anr., (1991) 3 SCC 617, referred to.

2.5. It is well settled that in matters of taxation laws, the court
permits greater latitude to pick and choose objects and rates for taxation
and has a wide discretion with regard thereto. Therefore, a levy of service
tax on a particular kind of service could not be struck down on the ground F
that it does not conform to a -common understanding of the word "service"
so long as it does not transgress any specific restriction contained in the
Constitution. (191-A-C)

Mafatla/ Industries Ltd and Ors. v. Union of India and Ors., (1997) 5
sec 536, referred to. .
G
• 2.6. Making available a premises for a perio·d of few hours for the
specific purpose of being utilized as a Mandap whether with or without
other services would itself be a service and cannot be classified as any other
kind of legal concept. It does not certainly involve transfer of moveable
property nor does it involve transfer of moveable property of any kind H .
174 SUPREME COURT REPORTS [2004) SUPP. I S.C.R.

A known to law either under Transfer of Property Act or otherwise and can
only be classified as a service. (191-D-E) ·
-.
2.7. A tax on services rendered by mandap-keepers and outdoor:
caterers is in pith and substance, a tax on services and not in the nature
of a sale of hire purchase of goods. Tlie nature and character of this service .:
B tax is evident from the fact that the transaction between a mandap-keeper
and his customer which is definitely not in the nature of a sale of hire
purchase of goods. It is essentially that of providing a service. ID' fact, the
manner of service provided assumes predominance over the providing of
food in such situations, which is a definite indicator of the supremacy of
C the service aspect. The legislature in its wisdom noticed the said supremacy
and identified the same as a potential region to collect the indirect tax.
The power to levy such tax can be traced to Entry 97 of List I of the
Seventh Schedule. [193-A-C; 193-F)

Laghu Udyog Bharati v. Union of India, (1999) 112 E.L.T. 365,
'
'

D referred to.

· CIVIL APPEL LA TE JURISDICTION : Civil Appeal No. 2727 of 2002.

From the Judgment and Order dated 30.4.~001 of the Madras High
Court in W.P. No. 1617 of 1998.
·E r
Mohan Parasaran and Krishnamurthi Swa1Di for the Appellant.

Jaideep Gupta, K.C. Kaushik and Krishan Venugopal for the
Respondents.

F The Judgment of the Court was delivered by

DR. AR.o LAKSHMANAN, J. The present appeal is directed against
the judgment.and order dated 30.04.2001 in Writ Petition No . .1617of1998
passed by the High Court of Judicature at Madras whereby the Division
Bench of the Madras High Court dismissed tlie writ petition of the appellant-
G Association and held Sections 66, 67 (o) of the Finance Act, 1994 and Rule
2(l)(d)(ix) of the Service Tax Rules, 1994 and other provisions related to
Kalyana Mandapams and Mandap-Keepers to be intr,a vires of the Constitution
of India.

· The appellant is an Association of various Kalyana Mandapams bearing
H
TAMIL NADU KALYANA MANDAPAM ASSN. v. U.0.1. [LAKSHMANAN, J.] 175

Registration No. 513 of 1992. The appellant-Association has been fonned to A
protect the interest of the owners of Kalyana Mandapams in the city of
Madras and elsewhere in the State of Tamil Nadu. The owners of Kalyana
Mandapams/Mandap-Keepers let out mandapas/premises to the clients. In
addition to letting out the Kalyana Mandaps, the Mandap Keepers also provide
other facilities such as catering, electricity, water etc. to their clients.
B
Service Tax was introduced in India vide the Finance Act, 1994. Service
Tax is legislated by the Parliament under the residuary entry i.e. Entry 97 of
List I of the Seventh Schedule of the Constitution of India. The service tax
provisions have the following scheme.

(i) Section 65 of the Act provides for taxable services; c
(ii) Section 66 of the Act provides for the charge of service tax by
the person designated as 'the person responsible for collecting
the service tax" for the Government;

(iii) Section 67 of the Act provides for the value of taxable service D
which is to be subjected to 5% Service tax, and
(iv) Section 68 of the Act provides for the collection and payment
mechanism for service tax.

Service tax is an indirect tax and is to be paid on all the services
notified by the Government of India for the said purpose. The said tax is on E
the service and not on the service provider. However, under Section 68 of the
Finance Act, 1994 as amended by the Finance Act, 1997 read with Rule
2(l)(d)(ix) of the Service Tax Rules, 1994, the service provider (in the present
case the Mandap-Keeper) is expected to collect the tax from the client utilizing
his services.
F
In 1997, the scope of the service sector was proposed to be widened
and a number of services were sought to be made exigible to service tax.
Amongst other services, Chapter VI of the Finance Act, 1997 made the
services rendered by the Mandap-Keepers exigible to service tax.

To enable the Government to widen its net of service tax, certain changes
G
were sought to be made to the Finance Act, 1994.

New clauses were added to Section 65 of the Finance Act, 1994. The
clauses which are relevant for the purposes of the present appeal are reproduced
hereinbelow:-
H

------ - - · - -·
176 SUPREME COURT REPORTS [2004] SUPP. 1 S.C.R.

A "(10) 'Caterer' means any person who supplies, either directly or
indirectly, any food, edible preparations, alcoholic or non-alcoholic
beverages or crockery and similar articles or accoutrements for any
purpose or occasion;

(19) 'Mandap' means any immovable property as defined 'in Section
B 3 of the Transfer of Property Act, 1882 and includes any furnitures,
fixtures, light fittings and floor coverings therein let out for
consideration for organising any official, social or business function;

(20) 'Mandap-Keeper' means a person who allows te_mporary
occupation of a mandap for consideration for organising any official,
C social or business function."

In Clause (41) of Section 65 of the Finance Act, 1994, few sub-clauses
were inserted and insofar as they are relevant to this appeal, they are reproduced
herein-below:-

D "(41) (p) 'Taxable Service' means any service provided to a client,
by a mandap- keeper in relation to the use of a mandap in any manner
including the facilities provided to the client in relation .to such use
and also the services, if any, rendered as a caterer."

It is relevant to mention here that some of the sub-sections of Section
E 65 were renumbered by the Finance Act 2 of 1998, which came into force
from 16.1.0.1998. Section 65(19) was renumbered as S.65(22), while S.65(20)
was renumbered as S.65(23). S.65(4l)(p) was renumbered as S.65(48)(m).
However, by the Finance Act, 1998 only the numliers were changed and the
language of the provisions remained the same.
F S.66 of the Finance Act, 1994 was sought to be replaced by a new
Section which is reproduced hereinbelow:-

"S.66(1) - On and from the commencement of this Chapter, there
shall be charged a tax (hereinafter referred to as service tax) @ 5%
of the value of the taxable services referred to in sub-clauses (a), (b)
G and (d) of Clause 41 of S.65, which are provided to any person by
the person responsible for collecting the service tax.

(2) With effect from the date notified under S.85 of the Finance Act
(No.2) 1996 there shall be charged a service tax at the rate of five
percent ofthe value of taxable services referred in sub-clauses (c), (e)
H

W'
I
TAMIL NADU KALYANA MANDAPAM ASSN. v. U.0.1. [LAKSHMANAN, J.] 177

and (t) of Clause (41) of Section 65 which are provided to any perso~ A
by the person responsible for collecting the service tax.

(3) With effect from the date notified under Section 84 of the Finance
Act, 1997 there shall be charged a service tax at the rate of five
percent of the value of taxable service referred to in sub-clauses.
(g)(h)(i)(j)(k)(l)(m)(n)(o)(p)(l) and (4) of Clause (41) of Section 65 B
which are provided to any person by the person responsible for·
collecting the service tax."

Changes were also made to Section 67 of the Finance Act, 1994. The
relevant sub-section (i) of S.67 which is relevant for the purpose of the
present appeal is reproduced hereinbelow: C
"67. Valuation of taxable services for charging service tax.- For the
purposes of this chapter, the value of taxable services,

(i) in relation to service provided by a mandap keeper to a client,
shall be the gross amount charged by such keeper from the client for 0
the use of mandap including the facilities provided to the client in
relation to such use and also the charges for catering, if any."

The Central Government in exercise of the power conferred on it by
S.93 of the Finance Act, 1994 issued a Notification da~ed 26.06.1997. Under
the said Notification, the Central Government exempted an amount of service E
tax leviable on a mandap-keeper, in excess of the amount of service tax
calculated on 60% of the gross amount charged from the client by the Mandap-
Keeper for the use of the mandap including the facilities provided to the
clients in relation to such use and also for certain charges. The said Notification
also provided that the e?Cemption shall apply only in such cases where the F
Mandap-Keepers also provide catering services i.e. supply of food and drinks
and the bill issued for this purpose indicates that it is inclusive of charges for
catering services. The said Notification came into force on 01.07.1997.

In exercise of the power conferred on it by S.88 of the Finance Act,
1994, the Central Government issued a Notification No.19/97, whereby the G
Central Government appointed the 1st day of July, 1997 as the date on which
the service tax on taxable services specified in sub-clauses (i) and (p) of
Clause 41 of Section 65 of the Finance Act, 1994 will come into force.

On the basis of the said Notification, the Commissioner of Central
Excise, Service Tax vide Trade Notice No.9/97 dated 01.07.1997 informed H
178 SUPREME COURT REPORTS [2004] SUPP. I S.C.R.

A all the concerned persons that as per Clause 19 of S.65 of the Finance Act,
1994 'Mandap' means any immovable property as defined in S.3 of the
Transfer of Property Act, 1882 and includes any furniture, fixtures, light
fittings and floor coverings therein let out for consideration for organising
any official, social or business function. The Trade Notice further stated that
B the scope of the said Notice was very wide and it included within its scope
places like Kalyan Mandap, Marriage-Halls, Banquet Halls, Conference Halls
etc. and hotels and restaurants providing any such facilities would also be
included in the coverage of service tax.

The said Notice also mentioned that where a Mandap-Keeper was
C providing catering services i.e. supply of food, in addition to letting out of
a Mandap and charges the customer for supply of foods, service tax would
be levied on 60% of the"total amount of the Bill in such cases.

The appellant-Association submitted representations dated 29.03.1997
and 09.06.1997 to Respondent No. 2 citing out in detail the various problems
D and complication that might arise as a result of the said Notification and
requested to desist from including the mandap-keepers within the Finance
Act. Even though the said representations were duly acknowledged by
Respondent No. 2, the same were not replied to.

On 04.02.1998, the appellant filed Writ Petition No. 1617 of 1998
E challenging the provisions relating to mandap-keepers in the Finance Act,
1997 whereby the mandap-keepers were sought to be brought within the net
of service tax.

The prayer in the writ petition runs as follows:-

F · "It is prayed that this Court may be pleased to issue a Writ of
Declaration or any other appropriate Writ, order or direction in the
nature of a Writ of Declaration declaring that the provisions of Chapter
V of the Finance Act, 1994 and, in particular, Sections.66, 67(o) and
Rule 2(l)(d)(ix) of the Service Tax Rules, 1994 and other provisions
insofar as it relates to Kalyana Mandapams and Mandap-Keepers are
G illegal, ultra vires and unenforceable and liable to be struck down as
unconstitutional and pass such further or other orders as this Court
may deem fit and proper and thus render justice."

On 17 .11.1999, the Additional Commissioner - Service Tax, issued
H Service Tax Notice No.4/99 whereby it was clarified .that service tax would
TAMILNADU KALYANA MANDAPAM ASSN. v. U.0.1. [LAKSHMANAN,J.] 179

be levied on any open land/ground if the same is let out for organizing any A
official, social or business function, even if no accompanying/incidental
services were rendered by the mandap-keeper to the clients hiring the open
land/ground for any of the above-mentioned purposes.

After three years of the writ petition having been filed, respondents
filed a common Counter Affidavit on 04.12.2000. B
The Division Bench of the High Court dismissed the batch of writ
petitions including the writ petition filed by the appellant-Association herein
vide order dated 30.04.2001.

Aggrieved against the dismissal of the writ petition, the present appeal C
was filed.

We heard the arguments of Mr. Mohan Parasaran, learned senior counsel
assisted by Mr. Krishnamurthi Swami, learned counsel for the appellant and
Mr. Jaideep Gupta, learned senior counsel assisted by Mr. K.C. Kaushik, D
learned counsel for the respondents.

Mr. Mohan Parasaran, learned senior counsel appearing for the appellant,
submitted that -

(a) Service tax on the mandap-keepers is clearly a colourable
legislation and unconstitutional as the said tax is not on services E
but is in pith and substance only a tax on 'goods' and/or 'land'.;
(b) The very definition of 'Mandap' and 'Mandap-Keepers' would
amply demonstrate that the impugned provisions are not within
the domain of the Union and that only the State Legislatures
have the competence to levy taxes of this nature in exercise of F
its legislative powers under Entries 54, 49 and 18 of List II of
the Seventh Schedule read with Article 246 of the Constitution;
(c) The definition of 'Mandap' and 'Mandap Keepers' are reproduced
hereinbelow:-

Sec. 65(19) 'Mandap' means any immovable property as defined
G'i
in Section 3 of the Transfer of Property Act, 1882 and includes
any furnitures, fixtures, light fittings and floor coverings therein
let out for consideration for organizing any official, social or
business function.
H
180 SUPREME COURT REPORTS [2004] SUPP. I S.C.R.

A Section 65(20) 'Mandap-Keeper' means a person who allows
temporary occupation of a mandap for consideration for
organizing any official, social or business function;
(d) Under Service Tax Notice No.4/99, any open land/ground is
exigible to service tax if the same is let out for organizing any
B official, social or business function, even if no services whatsoever
are rendered by the mandap-keeper. Therefore, the service tax
levied on the mandap-keepers, is in fact a tax on land per se
which is a subject specifically earmarked for the State Legislatures
under Entries 18 and 49 of List II of the Constitution.

c (e) Furthermore, on a bare perusal of the yardstick prescribed in the
Finance Act, 1994 for charging service tax from the mandap-
keepers, it would become amply clear that in the garb of taxing
services, the Parliament has in fact imposed a tax on sale of
goods including food items, drinks etc., over which the Parliament
does not have the Constitutional sanction to legislate particularly
D in the light of the 46th Amendment to Article 366(29A)(t) of the
Constitution.
(t) Had the Parliament intended to k\ y a tax on the services rendered
by the mandap-keepers, then the Parliament would have devised
a formula for segregating the service component from the
E transaction and levied tax on that component alone~ However,
under the formula contained in the Finance Act, 1994, service
tax is levied on 60% of the gross amount charged by the mandap-
keepers from t~eir clients, -in cases where the mandap keepers
are also providing catering services.
F (g) The amount charged by the mandap keepers from their clients is
a composite amount which consists mainly of the expenses
towards food, electricity, furniture, tents etc. and the services
incidental thereto;
(h) The service component in the composite amount charged by the
G mandap-keepers is a very small percentage of the same and cannot
be segregated.
(i) Article 366(29A)(t) of the Constitution deems any service in any
manner whatsoever related to providing food, articles for human
consumption and drinks, to be only a sale of goods. It recognises
H the fact that there is an element of service in it but still it deems
TAMIL NADU KALYANA MANDAPAM ASSN. v. U.0.1. [LAKSHMANAN, J.] 181

that transaction only to be transaction of 'Sale of Goods'. Hence A
no question of service tax being imposed when by a specific
amendment of the Constitution such service has been deemed to
be sale of good. Furthermore, no recourse can be had to the
residuary Entry 97 of List-I, for imposing such a tax, in light of
the several pronouncements of this Court. Article 366(29A)(t) of
the Constitution is reproduced hereinbelow:-
B

"Article 366(29A) "tax on the sale or purchase of goods"
includes - (t) a tax on the supply, by way of or as a part 'of
any service or in any other manner whatsoever, of goods,
being food or any other article for human consumption or
any drink (whether or not intoxicating), where such supply
c
or service, is for cash, deferred payment or other valuable
consideration.

and such transfer, delivery or supply of any goods shall
be deemed to be a sale of those goods by the person making
the transfer, delivery or supply and a purchase of those goods
D
by the person to whom such transfer, deliver or supply is
made;"

G) Though the High Court appreciated this position, it erroneous}~
invoked the 'Aspect Doctrine' as evolved by this Court in the
cas= of Federation of Hotel and Restaurant v. Union of India
E
and Ors., AIR 1990 (SC) 1637 and upheld the levy of service
tax thus allowing the Parliament to encroach upon the subjects
specifically demarcated for the State Legislatures under the
Constitution.
(k) If the reasonings given by the High Court were accepted, then it F
would empower the Parliament under Entry 97 of List-I to
legislate even on the legislative fields specifically demarcate<:t;
for the state legislatures in the Constitution, merely because such
transactions have some element of providing service aspect in
them. Therefore, this would lead to a violation of the federal G
taxing structure as envisaged in the Constitution.
In conclusion, he submitted that the Division Bench of the Madras
High Court is not correct in its conclusion in the light of the scheme in the
Constitution and has erroneously dismissed the batch of writ petitions, which
compelled the appellant-Association approaching this Court by way of this H
appeal.
182 SUPREME COURT REPORTS [2004) SUPP. I S.C.R.

A Mr. Mohan Parasaran, learned senior counsel for the appellant placed
strong reliance on the following decisions in support of his contention.

l. Mis Khandelwal Metal and Engineering Works and Anr. v.
Union of India and Ors., [1985] 3 SCC 620 at 641.
2. Mis Ujagar Prints and Ors. (II) v. Union of India and Ors. etc.,
B [1989] 3 sec 488 at 513.

3. S.P Mittal v. Union of India and Ors. etc., [1983] 1SCC51, 78,
79, 82.

4. Goodyear India Ltd and Ors. v. State of Haryana and Anr. etc.,
c [1990J 2 sec 11.

5. Synthetics and Chemicals Ltd and Ors. v. State of U.P. and
Ors., [1990] I SCC 109.
6. Shri Prithvi Cotton Mills Ltd and Anr. v. Broach Borough
Municipality and Ors., [1969] 2 SCC 283.
D
7. Ra/la Ram v. The Province of East Punjab, AIR (1949) FC 81.
8. The Government of Andhra Pradesh and Anr. v. Hindustan
Machine Tools Ltd, [1975] 2 SCC 274.
9. K. Damodarasamy Naidu & Bros. and Ors. v. State ofT.N. and
E Anr., [2000] I sec 521 para 8 and 9.

Countering the argument of learned senior counsel for the appellant,
Mr. Jaideep Gupta, learned senior counsel for the respondents submitted that
the levy and collection of service tax by the Union Parliament on Mandap-
Keepers is correct and is in accordance with law and not violative of Articlesl4
F and 19(g) of the Constitution. It is submitted that service tax on Mandap-
Keepers is a tax on the consideration received for allowing temporary
occupation of the Mandap for organizing any official, social or business
·function and that it is not a tax on "good" and/or "land", both of which are
state subjects under Entries 18, 49 and 54 of List II of the Seventh Schedule
G ·to the Constitution.
It is also contended by learned senior counsel that the Entry 49 of List
II, tax on land and/or building does not concern with levy and collection of
service tax on Mandap-Keepers, because the tax on land/or building is charged
because such land and/or building exists irrespective of the fact whether they
H are used or not. Their very existence is taxable, whereas it is the use of the
TAMIL NADU KAL YANA MANDAPAM ASSN. v. U.0.1. [LAKSHMANAN, J.] 183

immovable property in a particular manner, which amounts to providing of A
service has been made taxable.

It is also further submitted that the inclusion of the service rendered as
a caterer in the definition is clearly beyond the "legislative competence" of
the Parliament as that subject is covered in Entry 54 of List II. The learned ,
senior counsel submitted that it is the service provided by the Mandap-Keeper B
as a Caterer which is taxable and not the supply made by him of the food or
drinks etc. and thus it is clear that the levy of service tax on Mandap-Keepers
is not covered under Entry 54 of List II as contended by learned senior
counsel for the appellant.

He would further urge that the term "Mandap" under service tax has C
been defined to mean any immovable property as defined in Section 3 of the
Transfer of Property Act, 1882. Accordingly, any open land or ground is also
an immovable property qualifying as mandap and when the same is let out
for a specified purpose, service tax is chargeable and that the levy of service
tax is not a subject matter covered under List II and is very much covered D
under residual power of the Union Parliament under Entry 97 of List I and
Union Parliament is competent to levy service tax by virtue of Entry 97 of
List I. It is also contended that Entries 18, 49 and 54 of List II of Seventh '
Schedule to the Constitution are not at all concerned with the levy of service
tax on Mandap-Keepers and the same is imposed by the Parliament by virtue
of the residual powers vested with it by Entry 97 of List I of Seventh Schedule E
to the Constitution.

In reply to the argument of the learned senior counsel for the appellant ,
that this Court in the case of Federation of Hotel and Restaurant v. Union
of India and Ors., (supra) has not considered Article 366 (29A) (t), which 'F
case was relied upon by the High Court of Madras and applied the aspect
theory to distinguish the service aspect from the supply aspect of food and
drink etc. Learned senior counsel for the respondents invited our attention to
para Nos. 31 and 32 of the Judgment of the High Court in which the service
aspect was distinguished from the supply aspect. In view of this, it is submitted
that the contention of the appellant that Article 366 (29A) (t) of the Constitution G
was not considered by this Court and the High Court has not differentiated
between service and supply is not at all correct. In conclusion, he submitted
that the Mandap-Keepers are required to pay the service tax during the
following month or the quarter, as the case may be, depending upon whether
they are limited company or individual/partnership, of the month during which H
184 SUPREME COURT REPORTS [2004) SUPP. I S.C.R.

A the service was rendered. So, the question of payment of service tax even
before reJtdering the service does not arise and hence the cancellation of
bookings, if any, will not affect the appellant in any way. Further, refund in
terms of Sec. l l B of the Central Excise Act, 1944 as well as suo moto
adjustment of excess service tax paid by the appellants themselves on fulfilling
B certain conditions are ~ery much available under sub-rule 3 of Rule 6 of the
Service Tax Rules, 1994.

Learned senior counsel for the respondents, relied on the following
judgments in support of his arguments:-

1. India Cement Ltd and Ors. v. State of Tamil Nadu and Ors.,
c [1990] l sec 12.
2. Mis J.K. Jute Mills Co. Ltd v. The State of Uttar P,radesh and
Anr., [1962] 2 SCR 1.
3. Mis Gannon Dunkerley and Co. and Ors. v. State of Rajasthan
and Ors., [1993] 1 SCC 364.
D
4. The State of Madras v. Gannon Dunkerley & Co., (Madras) Ltd,
[1959] SCR 379.
5. The Sales Tax Officer, Pilibhit v. Messrs. Budh Prakash Jai
Prakash, [1955] 1 SCR 243.
E 6. Mis George Oakes (P) Ltd v. State of Madras, [1962] 2 SCR
570.
7. Doypack Systems Pvt. Ltd. v. Union of India and Ors., [1988]
(Supp.) sec 792.

F 8. Regional Director, Employees' State Insurance Corporation v.
High Land Coffee Works of P.F.X Saldanha. and Sons and Anr.,
[1991 3 sec 617.
9. Renusagar Power Co. Ltd. v. General Electric Company and
Anr., [1984] 4 sec 679.
G 10. Thyssen Stahlunion GMBH v. Steel Authority ofIndia Ltd, [1999]
• 9 sec 334 .
11. Laghu Udyog Bharati v. Union of India, (1999) 112 E.L.T 365
12. Mafatla/ Industries Ltd. and Ors. v. Union of India and Ors.,
[1997] 5 sec 536.
H
TAMIL NADU KAL YANA MANDAP AM ASSN. v. U.0.1. (LAKSHMANAN, J .] 185

On the above factual and legal submissions made by both the parties, A
the following questions of law would emerge for our consideration:-

(i) Whether the High Court was correct in coming to the conclusion
that the provisions in the Finance Act, 1994 imposing service tax
on the services rendered by the Mandap-Keepers are intra vires
of the Constitution? B
(ii) Was the High Court correct in not construing the specific ent~ies
in List II viz. Entries 18, 49 and 54 by giving the widest amplitude,
particularly when the Union was seeking to justify the levy under
the residuary Entry 97 in List I of the Seventh Schedule of the
Constitution? C
I

(iii) Has not the impugned judgment of the High Court virtually
rendered the 46th Amendment of the Constitution, creating a
deeming fiction of a transaction which otherwise is not a sale
transaction, to be a sale transaction, redundant, in particular,
Article 366(29A)(t) of the Constitution? D
(iv) Whether the High Court was correct in applying the 'Aspect
Theory' laid by this Court in the case of Federation of Hotel and
Restaurant v. Union of India and Ors. (supra) to the facts of the
present case, when it is amply clear that the application of ~he
E
...- 'Aspect Theory' to the facts of the present case would break
down the Federal Taxing Structure provided for in the
Constitution?
(v) Whether the High Court was correct in coming to the conclusfon
that the impugned provisions in the Finance Act, 1994 are hot
violative of Articles 14 and 19(1 )(g) of the Constitution? F
(vi) Whether the High Court has correctly appreciated the SerYi~e
Tax Notice No. 4/99, whereby the Parliament under the garb of
levying service tax has in fact imposed a tax on land pen se
which is a subject specifically earmarked for the State Legislatures
under Entry 18 of List II of the Constitution?
G
We have carefully analysed the rival submissions made by learned
senior counsel for the respective parties with reference to the pleadings ~nd
the judgments cited by both the parties.

In regard to Legislative competence, Mr. Mohan Parasaran, learned
senior counsel for the appellant, relied on Mis. Khandelwal Metal & Engg. H
186 SUPREME COURT REPORTS [2004) SUPP. I S.C.R.

A Works and Anr. v. Union of India and Ors., [1985] 3 SCC 620 at 641.
"With respect to" brings in the doctrine of pith and substance, he placed
reliance on Mis. Ujagar Prints and Ors. v. Union of India and Ors., [l 989]
3 SCC 488 at 513 and S.P. Mittal v. Uni6n of India and Ors., [1983] I SCC
51, 78, 79 and 82.
B
The case of Goodyear India Ltd and Ors. v. State ofHaryana and Anr.
[1990] 2 SCC 71 was relied upon by learned senior counsel for the appellant
for the proposition that nomenclature of tax not conclusive for determining
the true character or nature of a particular tax and that the Court will look
C into its pith and substance. He also relied on Synthetics & Chemicals Ltd and
Ors. v. State of UP. and Ors., [l 990] SCC 109 at 153, 154 for the proposition
that the taxing power can be derived only from specific taxing entry in the
legislative lists.

The following three decisions were cited on Entry 49, List II Taxes on
D Land and Buildings :-

1. Shri Prithvi Cotton Mills Ltd and Anr. v. Broach Borough
Municipality and Ors., [l 969] 2 SCC 283.
2. Rafla Ram v. The Province of East Punjab, AIR (1949) FC 81
3. The Govt. of A.P. and Anr. v. Hindustan Machine Tools Ltd,
E
[I975J i sec 214.

The judgment in the case of K. Damodarasamy Naidu & Bros. and
Ors. v. State of T.N. and Anr. reported in (2000] I SCC 52 l at 528 para 8
and 9 was relied on for the proposition 'Sale' Article 366 (29A) (iJ).
F In the present case, service tax levied on services rendered by Mandap-
Keeper as defined in the said Act under Sections 65, 66 and 67 of the
Finance Act has been challenged by the appellants on the following tWo
grounds:

(a) That it amounts to the tax on land and, therefore, by reason of
G Entry 49 of List 2 of the Seventh Schedule of the Constitution,
only the State Government is competent to levy such tax and;
(b) Insofar as it levies a tax on catering services, it amounts to a tax
on sale and purchase of goods and, therefore, is beyond the
competence of Parliament, particularly in view of the definition
H
TAMIL NADU KAL YANA MANDAPAM ASSN. v. U.0.1. [LAKSHMANAN, J.] J87
of tax on sale and purchase of goods contained in Article 366 A
(29A) (t) of the Constitution.

With regard to the first aspect, fr is submitted that in order to consti«ite
a tax on land, it must be a tax directly on land and a tax on income from land
cannot come within the purview of the said Entry. This was affirmed by a
Seven-Judge Bench of this Court in India Cement Ltd and Ors. v. State pf B
Tamil Nadu and Ors., [1990] l SCC 12 para 22 relying upon several judgments
of this Court including S.C. Nawn v. W.T.O., Calcutta, [1969) 1 SCR lOS;
Asstt. Commissioner of Urban Land Tax v. Buckingham & Carnatic Co. Ltd.,
[1970) l SCR 268 at 278; Second Gift Tax Officer v. D.H. Nazareth, [1971]
l SCR 195; Union of India v. HS. Dhillon, [1971] 2 SCC 779 at 792; C
Bhagwan Dass Jain v. Union of India, [1981) 2 SCR 808 and Western India
Theatres Ltd v. Cantonment Board, Poona Cantonment, [1959] Supp. 2 SCR
63 at 69. The proposition has been followed in several judgments· of this
Court.

In our view, if no Entry is found in List 2 and List 3 of the Schedul~, D
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
goods

As far as the above point 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. The following judgments and the principles laid down therein' F
can be very well applied to the case on hand.

I. Mis. J.K. Jute Mills Co. Ltd v. The State of U.P. and Anr.,
[1962] 2 SCR l;

2. Mis. Gannon Dunkerley & Co. and Ors. v. State of Rajasthan G
and Ors., [1993] l SCC 364;

3. The State of Madras v. Ganon Dunkerley & Co. (Madras) Ltd,
[1959] SCR 379;

4. The Sales Tax Officer, Pilibhit v. Mis. Budh Prakash Joi Prakash,
[1955] l SCR 243; H
188 SUPREME COURT REPORTS {2004] SUPP. I S.C.R.

A 5. Mis. George Oakes (P) Ltd v. State of Madras, [1962] 2 SCR
570.

In regard to the submission made on Article 366(29A) (t), 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
B 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 ofthose goods."
In other words, the operative words of the said sub-article is supply of goods
C 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.

Tl}e concept of catering admittedly includes the concept of rendering
service. The fact that tax on the sale of the goods involved in the said service
can be levied does not mean that a service tax cannot be levied on the service
D aspect of catering. Mr. 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
v. Union of India and Ors., (supra) ought to have appreciated that in that
matter Article 366 (29A) (t) of the Constitution was not considered·which is
of vital importance to the present matter and that the High Court ought to
E 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 ofHotel and Restaurant (supra) and, in particular,
on the aspect theory is, therefore, apposite and should be upheld by this
F. Court. In view of this, the contention of the appellant on this aspect is not
well founded.

It is well settled that the measure of taxation cannot affect the nature
of taxation and, therefore, the fact that service tax is levied as a percentage
of the gross charges for catering cannot alter or affect the legislative
G competence of Parliament in the matter. .

The legislative competence of Parliament also does not depend upon
whether in fact any services are made available by the Mandap-Keepers
withm the definition of taxable service contained in the Finance Act. Whether
in the given case taxable services are rendered or not is a matter of
H interpretation of the statute and for adjudication under the provisions of the
TAMIL NADU KALYANA MANDAP AM ASSN. v. U.0.1. [LAKSHMANAN, J.] 189

statute and does not affect the vires of the legislation and/or the legislative A
competence of Parliament. In fact, a wide range of services are included ii,
the definition of taxable services as far as Mandap-Keepers are concerned.
The said definition includes services provided "in relation to use of Mandap
in any manner" and includes "the facilities provided to the client in relation
to such use" and also the services "rendered as a caterer''. The phrase "in B
relation to" has been construed by this Court to be of the widest amplitude.,
In Mis. Doypack Systems Pvt. Ltd. v. Union of India and Ors., [ 1988] 2 SCC ·
299 at 302, this Court observed as under :

"The expressions 'pertaining to', 'in relation to' and 'arising out of,
used in the deeming provision, are used in the expansive sense. The C
expression 'arising out of has been used in the sense that it comprises
purchase of shares and lands from income arising out of the Kanpur
Undertaking. The words "pertaining to" and "in relation to" have the
same wide meaning and have been used interchangeably for among
other reasons, which may include avoidance of repetition of the same
phrase in the same clause or sentence, a method followed in good D
drafting. The word 'pertain' is synonymous with the word 'relate'.
The term 'relate' is also defined as meaning to bring into association
or connection with. The expression 'in relation to' (so also 'pertaining
to'), is a very broad expression which presupposes another subject
matter. These are words of comprehensiveness which might have
both a direct significance as well as an indirect significance depending E
on the context."

In Renusagar Power Co. Ltd v. General Electric Company and Anr.,
[1984] 4 SCC 679, this Court observed as under:

"Expressions such as "arising out of' or "in respect of' or "in F
connection with" or "in relation to" or "in consequence of' or
"concerning" or "relating to" the contract are of the widest amplitude
and content and include even questions as to the existence validity
and effect (scope) of the arbitration agreement."

In Thyssen Stahlunion GMBH v. Steel Authority of India Ltd., (1999]
d
9 SCC 334, this Court observed as under:

"The phrase "in relation to arbitral proceedings" cannot be given a
narrow meaning to mean only pendency of the arbitration proceedings
before the arbitrator. It would cover not only proceedings pending H
190 SUPREME COURT REPORTS (2004) SUPP. I S.C.R.
~
A before the arbitrator but would also cover the proceedings before the
court and any proceedings which are required to be taken under the
old Act for the award becoming a decree under Section 17 thereof
and also appeal arising thereunder. The contention that if it is accepted
that the expression "in relation to arbitral proceedings" would include
proceedings for the enforcement of the award as well, the second
B limb of Section 85(2)(a) would become superfluous and cannot be
accepted."

The phrase "including" has also been construed to expand the definition
as held by this Court in Regional Director, Employees' State Insurance
C Corporation v. High Land Coffee Works of P.F.X Sa/danha and Sons and
Anr., [ 1991] 3 SCC 617 at 618 observed as under:

"The word "include" in the statutory definition is generally used to
enlarge the meaning of the preceding words and it is by way of
extension, and not with restriction. The word "include" is very
D generally used in interpretation clauses in order to enlarge the meaning
of words or phrases occurring in the body of the statute; and when
it is so used, these words or phrases must be construed as
comprehending, not only such things as they signify according to
their natural import but also those things which the interpretation
clause declares that they shall include."
E
Taxable services, therefore, could include the mere providing of premises
on a temporary basis for organizing any official, social or business functions,
but would also include other facilities supplied in relation thereto. No
distinction from restaurants, hotels etc. which provide limited access to property
for specific purpose.
F
It may be noted that in recent times the service sector has grown
phenomenally all over the world and, therefore, it was recommended by Dr.
Raja Chelliah Committee in the early 90s that it should be taxed. Pursuant
thereto, service tax was first levied in 1994 by way of the Finance Act. The
G power to levy such tax can be traced to SI.No. 97 of List I of Seventh
Schedule and this Court in Laghu Udyog ~harati v. Union of India, (1999)
112 E.L.T. 365 found no lack of legislative competence as far as the levy of
service tax was concerned.

It is also emphasized that a tax cannot be struck down on the ground
H of lack of legislative competence by enquiring whether the definition accords
TAMIL NADU KAL YANA MANDAPAM ASSN. v. U.0.1. [LAKSHMANAN, J.] 19 t

what the layman's view of service. It is well settled that in matters of taxation, A
laws, the court permits greater latitude to pick and choose objects and rates
for taxation and has a wide discretion with regard there to. We may in this
context refer to the decision of Mafatlal Industries Ltd and Ors. v. Union of
India and Ors., [1997) 5 SCC 536 para 343 at page 740.

"In the matter of taxation laws, the court permits a great latitude to B
the discretion of the legislature. The State is allowed to pick and
choose districts, objects, persons, methods and even rates for taxation, ·
if it does so reasonably. The courts view the laws relating to economic
activities with greater latitude than other matters."

Therefore, a levy of service tax on a particular kind of service could C
nor be struck down on the ground that it does not conform to a common
understanding of the word "service" so long as it does not transgress any
specific restriction contained in the Constitution.

In fact, making available a premises for a period of few hours for the D
specific purpose of being utilized as a Mandap whether with or without other
.services would itself be a service and cannot be classified as any other kind
of legal concept. It does not certainly involve transfer of moveable property
nor does it involve transfer of moveable property of any kind known to law
either under the Transfer of Property Act or otherwise and can only be
classified as a service. E
In fact, mandap-keepers provide a wide variety of services apart from
the service of allowing temporary occupation of mandap. As per Section 65
(19) of the Finance Act, 1994, Mandap means any immovable property as
defined in Section 3 of the Transfer of Property Act, 1882 and includes any
furniture, fixture, light fittings and floor coverings therein let out for F
consideration for organising any official, social or business function. A
mandap-keeper apart from proper maintenance of the mandap, also provides
the necessary paraphernalia for holding such functions, apart from providing
the conditions and ambience which are required by .the customer such as
providing the lighting arrangements, furniture and fixtures, floor coverings G
etc. The services provided by him cover method and manner of decorating
and organising the mandap. The mandap-keeper provides the customer with
advice as to what should be the quantum and quality of the services required
keeping in view of the requirement of the customer, the nature of the event
to be solemnized etc. In fact the logistics of setting up, selection and
maintenance is the responsibility of the mandap keeper. The services of the H
192 SUPREME COURT REPORTS (2004) SUPP. t S.C.R.

A mandap-keeper 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
B 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
C food is to be served. But in the case of restaurant, the customer's 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.
D. Clearly the service element 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 Ieviable 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
E the same only on 60% of the gross amount charged by the mandap-keeper
to the customer.

In the case of Additon Advertising v. 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
F 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 servi~es. 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 fo the
G 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.
H
TAMIL NADU KAL YANA MANDAPAM ASSN. v. U.0.1. [LAKSHMANAN, J.] 19]
A tax on services rendered by mandap-keepers and outdoor caterers is A
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 Finance
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 B
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 C
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 bey~nd its competence. D
Incidental encroachment does not invalidate such a statute on the grounds
that it is beyond the competence of the legislature (Prafulla Kumar v. 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 E
Article 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 fOwers to make laws. The service tax is made by Parliament under the
above residuary powers.
F
The impugned Act was challenged on the ground that it infringed on
the State's power to levy tax on luxury vide Entry 62 of the State List.

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 is not the same thing as the law being on the latter G
subject. There 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." H
194 SUPREME COURT REPORTS (2004) SUPP. l S.C.R.

A For the foregoing reasons, th~ 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 ju_dgment. No costs.

N.J. Appeal dismissed.