2025 (2) TMI 942 - HC - VAT / Sales Tax

DTH service provider wins case on entertainment tax calculation excluding service tax component under Section 4G

Dish TV India Limited (Formerly Known As M/s. ASC Enterprises Ltd.) Versus The Joint Commissioner Of Commercial Taxes (Appeals) -3, Bangalore, The Deputy Commissioner Of Commercial Taxes (Enforcement) -I, Bangalore, The State Of Karnataka.

Karnataka HC ruled in favor of DTH service provider regarding entertainment tax levy under Karnataka Entertainment Tax Act, 1958. Court held that service ... Valuation - Invocation of revisional jurisdiction of this court u/s. 8F of the Karnataka Entertainment Tax Act, 1958 - inclusion of service tax component in the ‘amount received or receivable’ while levying entertainment tax, in terms of Sec. 4G of the Act Whether the service tax collected by the Petitioner from the subscribers under the provisions of the Finance Act, 1994 against the DTH broadcasting services shall from part of consideration for the levy of Entertainment Tax under Section 4G of the 1958 Act? - HELD THAT:- The entertainment tax is levied and collected ‘on the amounts received or receivable’ by a Multi System Operator or Direct To Home service provider [DTH]. These amounts are nothing but the consideration which the customers would pay towards providing television signals under the DTH scheme. The transaction would obviously include both entertainment and service. Since both are discernible independent of each other, they are taxable separately; the entertainment is taxed under the provisions of 1958 Act whereas, the service is taxed under the provisions of Finance Act, 1994. The text, content & intent of section 4G leaves no manner of doubt that for the purpose of levy of entertainment tax, the ‘amount received or receivable’ cannot include service tax component. Had the legislature intended inclusion, the text of this provision would have been a bit different. Therefore, the first question of law is answered in the negative and in favour of the Assessee. The above view gains support from the decision of Apex Court in M/s Anand Swarup Mahesh Kumar vs. Commissioner Of Sales Tax [1980 (9) TMI 238 - SUPREME COURT] wherein, Assessee therein had argued that the market fee payable under the UP Krishi Utpadan Mandi Adhiniyam, 1964 being a sum which could be collected from the purchaser under the provisions of the said statute by the commission agent for being remitted to the market committee, could not be considered as forming part of the consideration payable by the purchaser of the goods to the commission agent and therefore, it could not be included in the ‘turnover of purchases’ for the purpose of levy of tax under section 3-D of the UP Sales Tax Act, 1948. Whether in the absence of definition of ‘invoice’ in the 1958 Act, the bills/statement of accounts containing the itemized details/segregation of the basic value of DTH broadcasting services, service tax, license fee etc. will be considered as ‘invoice’? - HELD THAT:- Abundant evidentiary material is produced even in the paper book of the petition. The Assessee had placed before the authorities the Statement of Account showing itemized billing and separate collection of service tax amount which aspect has been discussed by a Coordinate Bench of this Court in Assessee’s earlier STRP No. 436/2017 disposed off on 10.12.2021 [2022 (1) TMI 443 - KARNATAKA HIGH COURT]. True it is that the word ‘invoice’ is not defined in the 1958 Act nor in the Mysore General Clauses Act, 1899. However, Black’s law dictionary, 5th edition, gives the meaning of this word. “A written account or itemized statement of merchandise shipped or sent to a purchaser, consignee, factor, etc., with the quantity, value or prices and charges annexed. Document showing details of a sale or purchase transaction…The new International Webster’s comprehensive dictionary, 2004 edition, defines ‘invoice’ to mean a list sent to a purchaser, etc., containing the items and charges of merchandise.” Both the authorities at their level and the Tribunal in its domain would have treated this aspect of the matter in a satisfactory way. This having not happened, it is required to upset the finding in this regard so that even this aspect of the matter would be considered afresh. Conclusion - i) The 'amount received or receivable' for entertainment tax does not include the service tax component. ii) The absence of a statutory provision authorizing the passing on of tax to consumers affects the consideration for tax levy. The impugned order of the Tribunal is set at naught; matter is remitted to the domain of the Tribunal for consideration afresh in the light of the observations hereinabove made and in accordance with law - Petition allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the service tax collected from subscribers forms part of the 'amounts received or receivable' for levy of entertainment tax under Section 4G of the Karnataka Entertainment Tax Act, 1958. 2. Whether bills/statements of accounts containing itemized details (basic value, service tax, license fee) qualify as 'invoice' for purposes of assessing entertainment tax under the 1958 Act in the absence of a statutory definition of 'invoice'. 3. Whether the Tribunal erred in holding that invoices showing separate collection of service tax were not submitted, thereby justifying reconsideration of that factual finding. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Inclusion of service tax in 'amounts received or receivable' under Section 4G Legal framework: Section 4G levies a tax on 'amounts received or receivable' by a Multi System Operator or Direct To Home service provider towards distributing satellite television signals and providing television signals under the DTH scheme. Distinct statutory regimes tax entertainment (State Act) and services (Finance Act governing service tax); Constitutional entries allocate competence between State and Centre. Precedent treatment: The Court relied on authoritative apex-level reasoning establishing that where a dealer is statutorily authorised to recover a tax from a purchaser, that recovered tax does not form part of the consideration for a separate tax levy; conversely, where no statutory authorisation exists, recovered tax forming part of price could constitute part of consideration. The Court followed this principle. Interpretation and reasoning: The Court construed the phrase 'amounts received or receivable' in Section 4G as referring to the consideration for providing television signals under the DTH arrangement, distinct from the separate statutory levy of service tax. Because entertainment and service elements are discernible and taxed under separate legislations, the legislative text and intent indicate that service tax component should not be included within the 'amounts received or receivable' for entertainment tax. The Court rejected reliance on textual difference between Section 3 (which expressly excludes 'amount of tax') and Section 4G to import an opposite inference, holding that the maxim expressio unius est exclusio alterius cannot be applied mechanically where it produces inconsistency or injustice and where statutory context demonstrates contrary intention. The Court also addressed the constitutional/competence argument: although taxation of tax is not per se constitutionally barred, inclusion of a separately statutorily imposed service tax within the base for State entertainment tax would amount to tax-on-tax absent clear legislative language authorising such inclusion; no such clear intent was found. Ratio vs. Obiter: Ratio - Where a statutory regime authorises a separate tax (service tax) recoverable from customers, that separately imposed tax does not form part of the 'amounts received or receivable' under Section 4G for entertainment tax unless the legislative provision clearly indicates such inclusion. Obiter - Observations on the broader permissibility of tax-on-tax and examples of cess/tax levied on taxes were discussed but not determinative. Conclusion: The service tax collected from subscribers shall not be treated as part of the 'amounts received or receivable' for levy of entertainment tax under Section 4G; the first issue is answered in the negative and in favour of the taxpayer. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Whether itemized bills/statements qualify as 'invoice' in absence of statutory definition Legal framework: The 1958 Act lacks a definition of 'invoice'. The question is whether itemized billing showing segregation of basic value, service tax and similar charges constitutes an 'invoice' for assessment purposes under the Act. Precedent treatment: The Court referred to general authoritative dictionary definitions of 'invoice' and applied principles governing evidentiary sufficiency in fiscal assessments; no binding statutory definition within the Act was available, so extrinsic meanings were considered. Interpretation and reasoning: The Court accepted established dictionary definitions that characterize an 'invoice' as a written, itemized account showing items and charges of a transaction. Given that the assessee produced bills/statements of account with itemized particulars and separate collection of service tax, those documents meet the ordinary meaning of an 'invoice.' The Tribunal and authorities were expected to adequately examine such material; summary rejection without satisfactory treatment was found to be impermissible. The Court emphasized that, in taxation statutes, plain and unambiguous language governs liability, but where statutory silence on terminology exists, ordinary commercial meanings and documentary evidence should be considered by the fact-finding authority. Ratio vs. Obiter: Ratio - Itemized bills/statements reflecting separate components of the transaction can constitute invoices for assessment purposes where the Act does not define 'invoice' and where the documents disclose the requisite transaction particulars. Obiter - Reliance on specific dictionary editions and their definitions is descriptive support rather than determinative statutory interpretation. Conclusion: The bills/statements of account containing itemized details and separate service tax should have been treated as invoices; the Tribunal's failure to consider them satisfactorily warrants remand for fresh consideration. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Tribunal's factual finding that invoices were not submitted and propriety of remand Legal framework: Revisional jurisdiction and standards for interference with concurrent findings of fact require demonstrable error apparent on the face of the record or failure to consider material evidence. The fact-finding authority must consider evidentiary material produced by the assessee, especially documentary evidence such as invoices/statements. Precedent treatment: The Court applied settled principles that appellate/tribunal findings may be upset where a material evidentiary aspect was not adequately considered, and ordered remand for fresh consideration where necessary. Interpretation and reasoning: The Court found abundant evidentiary material-itemized statements and prior adjudicatory consideration by a coordinate bench-was placed before the authorities but not satisfactorily adjudicated by the Tribunal. The Tribunal's conclusion that invoices were not submitted was therefore found to be inadequately reasoned. Given the documentary record and absence of a statutory definition of 'invoice,' the appropriate course is to remit the matter to the Tribunal for fresh consideration in accordance with the Court's observations and legal conclusions on Issues 1 and 2, with an opportunity of hearing and an outer time-limit for disposal. Ratio vs. Obiter: Ratio - Where material documentary evidence relevant to tax assessment is on record and was not properly considered by the Tribunal, interference and remand for fresh adjudication is warranted. Obiter - Comments appreciating counsel and procedural directions are ancillary and non-binding. Conclusion: The Tribunal's finding that invoices were not submitted is set aside; the matter is remitted for fresh consideration of whether the itemized bills/statements constitute invoices and for reassessment consistent with the Court's conclusions on inclusion of service tax in the tax base, to be decided within three months with opportunity of hearing. CROSS-REFERENCES Refer to Issue 1 conclusions when re-assessing amounts assessable under Issue 3; refer to Issue 2 conclusions as governing evidentiary treatment of bills/statements in the remanded proceedings.