Case Details: Ballal Auto Agency Versus Union of India (2025) 30 Centax 147 (Kar.)
Judiciary and Counsel Details
- Krishna S. Dixit & G. Basavaraja, JJ.
- S/Shri Chandranath Ariga K. & Shakeer Abbas, Advs., for the Appellant.
- Shri H. Shanthi Bhushan, DSGI Smt. Vanitha K.R., Adv., for the Respondent.
Facts of the Case
The petitioners, engaged in providing services through restaurants with air-conditioning facilities, hotels, inns, guest houses, clubs, and campsites, challenged the constitutional validity of clauses (zzzzv) and (zzzzw) inserted in sub-section (105) of Section 65 of the Finance Act, 1994, providing for levy of service tax on such services. The petitioners contended that these provisions sought to impose tax on transactions that were already taxed under Entry 54 of List II of the Constitution of India as sale or purchase of goods.
It was submitted that the service tax levy under these clauses overlapped with sales tax, which was applicable under Article 366(29A) of the Constitution of India. The petitioners contended that Parliament was not competent to levy tax on such composite transactions which were already deemed as sales, and that the impugned provisions were unconstitutional. The matter was accordingly placed before the Karnataka High Court.
High Court Held
The Karnataka High Court held that Parliament was competent to insert clauses (zzzzv) and (zzzzw) to sub-section (105) of Section 65 of the Finance Act, 1994, to levy service tax on restaurants with air-conditioning facility, hotel, inn, guest house, club or campsite. It was observed that Entry 97 of List I derives its powers from Article 248 of the Constitution of India, which empowers Parliament to make laws imposing tax not mentioned in List II or List III.
It was held that different aspects of a single transaction can be taxed under different statutes if the taxable events are distinct. Tax on sale or purchase of goods is envisaged under Entry 54 of List II, and the taxable event is the transfer of property in goods as per Article 366(29A) of the Constitution of India. It was held that service tax is not levied on the transaction when the sale of goods occurs, and the insertion of clauses (zzzzv) and (zzzzw) intended to levy tax on the service aspect only, which Parliament is competent to do. The petitions were dismissed in favour of the Revenue.
List of Cases Reviewed
- Ballal Auto Agency v. Union of India — 2015 (40) S.T.R. 51 (Kar.) — Affirmed [Para 1]
List of Cases Cited
- All India Fed. of Tax Practitioners v. Union of India — 2007 (7) S.T.R. 625 (S.C.) — Relied on [Para 4.1]
- Imagic Creative Pvt. Ltd. v. Commissioner — 2008 (9) S.T.R. 337 (S.C.) — Relied on [Para 4.5]
- Indian Hotels and Restaurant Association v. Union of India — 2014 (34) S.T.R. 522 (Bom.) — Relied on [Paras 2, 4.8]
- Indore Development Authority v. Manoharlal — 2020 (8) SCC 129 — Noted [Para 3]
- K. Damodaraswamy Naidu & Bros v. State of T.N. — (2000) 1 SCC 521 — Relied on [Para 4.6]
- Tamil Nadu Kalyana Mandapam Assn. v. Union of India — 2004 (167) E.L.T. 3 (S.C.) = 2006 (3) S.T.R. 260 (S.C.) — Relied on [Para 4.6]
- Union of India v. Kerala Bar Hotels Association — 2014 (36) S.T.R. 1205 (Ker.) — Dissented [Paras 2, 4.8]
