2011 (10) TMI 582 - HC - VAT and Sales Tax

Court upholds amendments to Cinemas Rules regulating DTH services; license fees deemed reasonable.

Sharad Traders & Anr. Versus State of U.P. & Ors.

The court dismissed all writ petitions challenging the amendments to the U.P. Cinemas (Regulation of Exhibition by means of Video) Rules, 2011, upholding ... - Issues Involved:1. Constitutionality of Amendments: Whether the amendments to the U.P. Cinemas (Regulation of Exhibition by means of Video) Rules, 2011, are ultra vires to the Indian Telegraph Act, 1885, and the Constitution.2. Legislative Competence: Whether the State Government has the legislative competence to regulate DTH services.3. Licensing Requirements: Validity of the requirement for Television Signal Receiver Agencies to obtain licenses.4. Nature of Fees: Whether the license fees imposed are regulatory or compensatory and if they violate constitutional provisions.Analysis of the Judgment:Constitutionality of Amendments:The petitioners challenged the amendments to the U.P. Cinemas (Regulation of Exhibition by means of Video) Rules, 2011, asserting that they were ultra vires to the Indian Telegraph Act, 1885, and the Constitution, specifically Articles 14, 19(1)(g), 246, and 265. The amendments brought DTH services under the purview of licensing and regulation by the State Government, which the petitioners argued was beyond the State's legislative competence, as telegraph and broadcasting fall under the Union List.Legislative Competence:The court examined the legislative competence of the State Government under Entry 33 of the State List, which includes theaters, dramatic performances, cinemas, sports, entertainments, and amusements. The court held that the State has the legislative power to regulate entertainment, including modern means of entertainment achieved through technological advancements such as DTH services. The court emphasized the distinction between the regulation of telegraphy (a Union subject) and the regulation of entertainment (a State subject), concluding that the State's amendments were within its legislative competence.Licensing Requirements:The petitioners argued against the requirement for Television Signal Receiver Agencies to obtain licenses, as mandated by the U.P. Cinemas (Regulation of Exhibition by means of Video) (4th Amendment) Rules, 2011. The court upheld the licensing requirement, stating that the State Government has the authority to regulate the place of business where these agencies operate, maintain records, and ensure compliance with entertainment tax provisions. The licensing was deemed necessary to regulate entertainment activities and ensure proper tax collection.Nature of Fees:The petitioners contended that the license fees imposed were excessive, arbitrary, and amounted to a tax rather than a regulatory fee. The court distinguished between regulatory and compensatory fees, stating that the license fees in question were regulatory in nature, intended to control and supervise the entertainment activities of Television Signal Receiver Agencies. The court held that the fees were not compensatory, and thus, the State was not required to justify them on the principles of quid pro quo. The fees were deemed reasonable and not violative of Articles 14 and 19(1)(g) of the Constitution.Conclusion:The court dismissed all the writ petitions, upholding the legislative competence of the State Government to amend the U.P. Cinemas (Regulation of Exhibition by means of Video) Rules, 2011, to include DTH services within its regulatory framework. The licensing requirements and the nature of the fees imposed were found to be valid and within the State's authority to regulate entertainment activities. There was no order as to costs.