2013 (4) TMI 373 - SC - Service Tax

Supreme Court rules DTH services not subject to entertainment tax

M/s Tata Sky Ltd. Versus State of MP and others

The Supreme Court held that the Madhya Pradesh Entertainment Duty and Advertisements Tax Act, 1936, does not apply to DTH services as they do not involve ... Demand of entertainment tax on DTH (direct to home) broadcast provided to the respective customers on payment of subscriptions - whether on the basis of the provisions of the 1936 Act, it is permissible or possible for the State of Madhya Pradesh to levy on what in the lexicon of broadcasting is called direct-to-home or in short DTH - Held that:- On a careful examination of the 1936 Act as a whole, and more particularly on a conjoint reading of clauses “Admission to an entertainment”,“Entertainment” and “Payment of admission” along with section 3 creating the charge and section 4 providing the collection machinery, agreement with the submission made on behalf of the appellants that the provisions of 1936 Act are applicable only to place-related entertainment. Thus the provisions of the 1936 Act cover an entertainment which takes place in a specified physical location to which persons are admitted on payment of some charge as defined under clause (d) of section 2 of the 1936 Act. On behalf of the State the imposition of levy on DTH justified on the basis of sub-clause(4) of clause (d) of section 2 is untenable as section 2(d)(iv) is only the measure of tax and it does not create the charge which is created by section 3. Under section 3 read with section 2(d) and section 2(a), the charge or levy of tax is attracted only if an entertainment takes place in a specified place or locations and persons are admitted to the place on payment of a charge to the proprietor providing the entertainment. In the present case, as DTH operation is not a place-related entertainment, it is not covered by the charging section 3 read with section 2(a) and 2(b) of the 1936 Act. Consequently, the question of going to section 2(d)(iv) does not arise. Moreover, even if section 2(d)(iv) is to be read as an extension of section 3 and, thus, as a part of the charge, it does not make any difference at all because section 2(d)(iv) refers to “entertainment” which takes us back to section 2(b) and finally to section 2(a). The machinery for collection of duty provided under the 1936 Act has no application to DTH. It is well settled that if the collection machinery provided under the Act is such that it cannot be applied to an event, it follows that the event is beyond the charge created by the taxing statute. See: Commissioner of Income Tax v. B.C. Srinivasa Setty, (19811981 (2) TMI 1 - SUPREME COURT), Commissioner of Income-Tax Ernakulam, Kerala v. Official Liquidator, Palai Central Bank Ltd.. (1984 (10) TMI 41 - SUPREME COURT), PNB Finance Limited v. Commissioner of Income Tax I, New Delhi (2008 (11) TMI 7 - SUPREME COURT) Thus the 1936 Act cannot be extended to cover DTH operations being carried out by the appellants. Issues Involved:1. Legality of the demand for entertainment tax on DTH services under the Madhya Pradesh Entertainment Duty and Advertisements Tax Act, 1936.2. Applicability of the 1936 Act to DTH broadcasting.3. Validity of the notification dated May 5, 2008, issued by the State Government.4. Legislative competence of the State to impose entertainment tax on DTH services.Issue-Wise Detailed Analysis:1. Legality of the demand for entertainment tax on DTH services under the Madhya Pradesh Entertainment Duty and Advertisements Tax Act, 1936:The Supreme Court examined the demand for entertainment tax raised by the Government of Madhya Pradesh on DTH broadcast services provided by the appellants. The appellants argued that DTH broadcast is a 'service' chargeable to service tax under the Finance Act, 1994, and not subject to entertainment tax by the State Government. The High Court had dismissed the writ petitions challenging the demand, upholding the State's position.2. Applicability of the 1936 Act to DTH broadcasting:The Court analyzed the provisions of the 1936 Act, specifically sections 2(a), 2(b), 2(d), 3, and 4. It concluded that the Act applies only to place-related entertainment, i.e., entertainment that takes place in a specified physical location where persons are admitted on payment. The Court noted that the legislative history and amendments to the Act showed that it was intended to cover entertainments held in specific places, such as those involving video cassette recorders and cable TV operations, which required specific amendments to include them within the taxing net. The Court found that DTH broadcasting, which does not involve a specified physical location for admission, does not fall within the scope of the 1936 Act.3. Validity of the notification dated May 5, 2008, issued by the State Government:The Court examined the notification issued under section 3(1) of the 1936 Act, which prescribed a 20 percent entertainment duty on payments for admission to entertainment other than cinema, video cassette recorder, and cable service. The Court held that a notification cannot amend the Act itself and that the notification merely prescribed the rate of duty without extending the scope of the charging section or the collection mechanism under the Act. Therefore, the notification did not validate the imposition of entertainment tax on DTH services under the 1936 Act.4. Legislative competence of the State to impose entertainment tax on DTH services:The Court noted that DTH services are notified services chargeable to service tax under the Finance Act, 1994, and thus fall within the purview of the Central Government. Since the 1936 Act does not cover DTH operations, the question of the State's legislative competence to impose entertainment tax on DTH services did not arise in this case.Conclusion:The Supreme Court allowed the appeals, holding that the Madhya Pradesh Entertainment Duty and Advertisements Tax Act, 1936, does not cover DTH operations. The Court found that the provisions of the 1936 Act are applicable only to place-related entertainments and that the notification dated May 5, 2008, did not extend the scope of the Act to include DTH services. As a result, the demand for entertainment tax on DTH services by the State Government was invalid. The appeals were allowed with no order as to costs.