TaxTMI 
TaxTMI 
2010 (10) TMI 930
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....providing for levy of service tax on service by a broadcasting agency in relation to broadcasting. The expression broadcasting has been defined under section 65(15) of the said Act as having same meaning as under section 2 ( c) of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 and includes receiving of signals through space or cables, direct to home (DTH) signals or other means as specified therein. 2. The petitioner in CWP No.10992 of 2010 has its broadcasting centre which downlinks signals from broad caster's satellite and uplinks the same to its own satellite for transmission through dish antennas to the subscribers. The signals broadcasted by the petitioner are in encrypted format and are decrypted/decoded by Set Top Boxes and the viewing cards inside the Set Top Boxes for the customers to receive DTH broadcasting service. The Set Top Boxes are separately sold to the customers. The subscribers are required to pay subscription charges. 3. The petitioner has licence under the Indian Telegraph Act, 1885 and Indian Wireless Telegraphy Act, 1933 in accordance with the Government of India guidelines dated 5.3.2001 for providing direct to home (DTH) broadcasting se....
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....nding anything contained in subsection (1), the Government may, by notification, levy lump sum entertainment duty at a rate not exceeding: - (a) eight thousand rupees per annum in the local area of a City constituted as such under the Punjab Municipal Act, 1911; and (b) Six thousand rupees per annum in areas other than the local areas specified in clause (a); in respect of entertainments arranged by a proprietor by replay of video cassette player or video record player and the lumpsum duty so levied shall be recoverable from the proprietor.] (2) A draft of the proposed order specifying the rate of entertainments duty referred to in sub section (1) shall be notified for the information of all persons likely to be effected thereby and it shall take effect only after the Government haws considered all objections received within a period of thirty days from the date of such publications, and has notified the same again with or without modification: Provided that if the Government consider that such an order should be brought into force at once, the final notification may issue without previous publication. Provided further that Government may impose an entertainments duty on compli....
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....ection charges or any manner, whatsoever. (aa) 'antenna' means an apparatus which received television signals which enable views to tune into transmissions including national or international satellite transmissions and which is erected or installed for exhibition of films or moving pictures or series of pictures by means of transmission of television signal by wire where subscribers television sets at the residential or nonresidential place are linked by metallic coaxial cable or optio-fibre cable to a central system called the head-end, on payment by the connection charges or any other charges collected in any manner whatsoever. aaa) 'cable television' means a system organized on payment by a connection holder of any contribution or subscription or installation and connection charges or any other charges collected in any manner whatsoever, for exhibition of films or moving picture or series of pictures by means of transmission of television signals by wire where subscriber's television set is linked by metallic coaxial cable or optio-fiber cable to a central system called the head-end, by using a video cassette or disc or both, recorder or player....
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....ement for providing cable connection from any type of antenna or cable television or for providing DTH service. Service Tax provisions: Section 65(105) (zk) "taxable service" means any service provided or to be provided to a client, by a broadcasting agency re-organization in relation to broadcasting, in any manner and, in the case of broadcasting agency or organization, having its head office situated in any place outside India, includes service provided by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programmes or collecting the broadcasting charges or permitting the rights to receive any form of communication like sign, signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means to cable operator, including multisystem operator or any other person on behalf of the said agency or organization. Explanation: For the removal of doubts, it is hereby declar....
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....adcasting service as apart from broadcasting, no other taxing event has taken place and the event of broadcasting service itself has been covered in the definition of entertainment which is the basis of the levy for entertainment duty. When there is no separate taxing event, aspect theory cannot be invoked to justify State levy on an event which is covered by Central levy. In any case, if broadcasting service and entertainment are both covered in a composite transaction, entertainment duty could be only on part of charges recovered by the petitioner attributable to entertainment. 8. On the other hand, contention on behalf of the State is that the Central levy as well as the State levy are on different aspects and by applying principles of harmonious construction, the State levy could be held not to be in conflict with the Central levy. In pith and substance, the State levy is not on broadcasting service but on entertainment and falls under Entry 62 of List II. If entertainment duty is not allowed to be levied, power of the State legislature under Entry 62 will be nullified. Entertainment is the main activity for which charges are collected by the petitioner and broadcasting servic....
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....lapping is not considered to be overlapping in law as the same transaction may involve two or more events in different aspects. Overlapping does not detract from distinctness of the aspects. The aspect theory, however, cannot be applied to justify encroachment in legislative fields. 13. Some of the leading judgments on the subject are M/s Hochst Pharmaceuticals Ltd. and another Vs. State of Bihar and others AIR 1983 SC 1019, Godfrey Phillips India Ltd. and another Vs. State of U.P. and others (2005) 2 SCC 515, Bharat Sanchar Nigam Ltd. and another Vs. Union of India and others (2006) 3 SCC 1 and State of W.B. v. Kesoram Industries Ltd.,(2004) 10 SCC 201. 14. We may extract observations from Kesoram Industries: "31. Article 245 of the Constitution is the fountain source of legislative power. It provides - subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of the State. The legislative field between Parliament and the legislature of any State is divided by Article 246 of the Constitution. Parliament has exclusive power to ma....
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....eral construction inspired by a broad and generous spirit and not in a narrow pedantic sense. The words and expressions employed in drafting the entries must be given the widest-possible interpretation. This is because, to quote V. Ramaswami, J., the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere simplex enumeration of broad categories. A power to legislate as to the principal matter specifically mentioned in the entry shall also include within its expanse the legislations touching incidental and ancillary matters. (5) Where the legislative competence of the legislature of any State is questioned on the ground that it encroaches upon the legislative competence of Parliament to enact a law, the question one has to ask is whether the legislation relates to any of the entries in List I or III. If it does, no further question need be asked and Parliament's legislative competence must be upheld. Where there are three lists containing a large number of entries, there is bound to be some overlapping among them. In such a situation the doctrine of pith and substance has to be applied to determine as to which entry does a give....
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....finite relation to it. Once these tests were satisfied, it was open for the State Legislature, for the purpose of levying tax, to adopt the annual value or the capital value of the lands and buildings for determining the incidence of tax. Merely, on account of such methodology having been adopted, the State Legislature cannot be accused of having encroached upon Entry 86, 87 or 88 of List I. Entry 86 in List I proceeds on the principle of aggregation and tax is imposed on the totality of the value of all the assets. It is quite permissible to separate lands and buildings for the purpose of taxation under Entry 49 in List II. There is no reason for restricting the amplitude of the language used in Entry 49 in List II. The levy of tax, calculated at the rate of a certain per centum of the market value of the urban land, was held to be intra vires the powers of the State Legislature and not trenching upon Entry 86 in List I. So is the view taken by another Constitution Bench in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality (1969) 2 SCC 283 where the submission that the levy was not a rate on lands and buildings as appropriately understood but rather a tax on capital va....
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....ssary to emphasise that courts should be careful not to upset the delicately crafted constitutional scheme by a process of interpretation." Xx xx xx xx In a nutshell 129. The relevant principles culled out from the preceding discussion are summarised as under: (1) In the scheme of the lists in the Seventh Schedule, there exists a clear distinction between the general subjects of legislation and heads of taxation. They are separately enumerated. (2) Power of "regulation and control" is separate and distinct from the power of taxation and so are the two fields for purposes of legislation. Taxation may be capable of being comprised in the main subject of general legislative head by placing an extended construction, but that is not the rule for deciding the appropriate legislative field for taxation between List I and List II. As the fields of taxation are to be found clearly enumerated in Lists I and II, there can be no overlapping. There may be overlapping in fact but there would be no overlapping in law. The subject-matter of two taxes by reference to the two lists is different. Simply because the methodology or mechanism adopted for assessment and quantification i....
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....hereby affecting the price of the commodity or goods. Entry 23 in List II speaks of regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union. Entries 52 and 54 of List I are both qualified by the expression "declared by Parliament by law to be expedient in the public interest". A reading in juxtaposition shows that the declaration by Parliament must be for the "control of industries" in Entry 52 and "for regulation of mines or for mineral development" in Entry 54. Such control, regulation or development must be "expedient in the public interest". Legislation by the Union in the field covered by Entries 52 and 54 would not like a magic touch or a taboo denude the entire field forming the subject-matter of declaration to the State Legislatures. Denial to the State would extend only to the extent of the declaration so made by Parliament. In spite of declaration made by reference to Entry 52 or 54, the State would be free to act in the field left out from the declaration. The legislative power to tax by reference to entries in List II is plenary unless the entry itself makes the field "su....
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....nder Entry 62 of List II. Stand of the Central Government was that expenditure aspect was different from luxury aspect and expenditure aspect could be held to be excluded from the luxury aspect. The plea was upheld. It was observed:- "26......Wherever legislative powers are distributed between the Union and the States, situations may arise where the two legislative fields might apparently overlap. It is the duty of the courts, however difficult it may be, to ascertain to what degree and to what extent, the authority to deal with matters falling within these classes of subjects exists in each legislature and to define, in the particular case before them, the limits of the respective powers. It could not have been the intention that a conflict should exist; and, in order to prevent such a result the two provisions must be read together, and the language of one interpreted, and, where necessary modified by that of the other. 27. The Judicial Committee in Prafulla Kumar Mukherjee v. Bank of Commerce, AIR 1947 PC 60, referred to with approval the following observations of Sir Maurice Gwyer 'C.J.' in Subrahmanyan Chettiar case4: "It must inevitably happen fro....
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....ost interesting and important principles which have been evolved by judicial decisions in connection with the distribution of legislative power is that subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power". Learned Author says: "... that by 'aspect' must be understood the aspect or point of view of the legislator in legislating the object, purpose, and scope of the legislation that the word is used subjectively of the legislator, rather than objectively of the matter legislated upon." In Union Colliery Co. of British Columbia v. Bryden, 1899 AC 580, Lord Haldane said: "It is remarkable the way this Board has reconciled the provisions of Section 91 and Section 92, by recognising that the subjects which fall within 31. Indeed, 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 subject. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its differe....
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....y under the State law and tax on income under the Central law:- "38. Indeed, as an instance of different aspects of the same matter, being the topic of legislation under different legislative powers, reference may be made to the annual letting value of a property in the occupation of a person for his own residence being, in one aspect, the measure for levy of property tax under State law and in another aspect constitute the notional or presumed income for the purpose of income-tax." 17. In All India Federation of Tax Practitioners v. Union of India [2007] 9 VST 126 (SC) ; [2007] 7 SCC 527, challenge was to the levy of service tax on service rendered by practising chartered accountants, cost accountants and architects by the Central Legislature and objection thereto was based on entry 60, List II providing for power of State Legislature to tax professions, trades, callings and employment. Repelling the challenge, it was held that entry 60 of List II did not include tax on services. Tax on profession was different from tax on professional service. It was observed (at pages 166, 169, 170 and 171 of 9 VST):- "34. As stated above, entry 60, List II refers to....
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....rs enumerated in List I'. The bottom line of the said doctrine is to look at the legislation as a whole and if it has a substantial connection with the entry, the matter may be taken to be legislation on the topic. That is why due weightage should be given to the words 'with respect to' in article 246 as it brings in the doctrine of 'pith and substance' for understanding the scope of legislative powers. Xx xx xxx xxx 44. Competence to legislate flows from articles 245, 246 and the other articles in Part XI. A legislation like the Finance Act can be supported on the basis of a number of entries. In the present case, we are concerned with the constitutional status of the levy, namely, service tax. The nomenclature of a levy is not conclusive for deciding its true character and nature. For deciding the true character and nature of a particular levy, with reference to the legislative competence, the court has to look into the pith and substance of the legislation. The powers of Parliament and the State Legislatures are subject to constitutional limitations. Tax laws are governed by Part XII and Part XIII. Article 265 takes in article 245, when it says....
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....d as synonymous to the word 'profession' in entry 60. Therefore, tax on services does not fall under entry 60, List II. That, service tax would fall under entry 92C/entry 97 of List I. Xx xx xxx xxx 48. In Tamil Nadu Kalyana Mandapam Assn. v. Union of India [2005] 1 VST 180 (SC) ; [2004] 135 STC 480 ; [2004] 5 SCC 632, the Division Bench of this court held that service tax is an indirect tax and is to be paid on all the services notified by the Government of India. It has been further held that the said tax is on 'service' and not on the service provider. In para 58 (in paragraph 56 of 135 STC) it has been observed that under article 246(1) of the Constitution, 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 article 246(3), the State Government has exclusive powers to make laws with respect to matters enumerated in List II (the State List). In the said judgment, it has been held that service tax is made by Parliament under entry 97 of List I. In our view, therefore, the point in issue in the present case is squarely covered by the judgment of this ....
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....elating to the handset, if any. That and any other accessory supplied by the service provider in our opinion remain to be taxed under the State sales tax laws. We have given the reasons earlier why we have reached this conclusion. Xx xx xxx xxx 88. ...No one denies the legislative competence of States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction. This does not however allow the State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods. Even in those composite contracts which are by legal fiction deemed to be divisible under article 366(29A), the value of the goods involved in the execution of the whole transaction cannot be assessed to sales tax. As was said in Larsen and Toubro Ltd. v. Union of India [1993] 88 STC 204 (SC) ; [1993] 1 SCC 365 (at page 234 of STC ; SCC page 395, para 47):- "The cost of establishment of the contractor which is relatable to supply of labour and services cannot be included in the value of the goods involved....
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.... of the Kamataka Sales Tax Act. 17. The Tribunal as also the High Court opined that the contract was an indivisible one. The effect of such an indivisible contract, visa-vis works contract came up for consideration before this Court in State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd. [1958] 9 STC 353 (SC) ; AIR 1958 SC 560 wherein it was clearly held (at page 387 of STC ; AIR page 578, para 48):- '48. To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the learned Judges of the court below to be. The several forms which such kinds of contracts can assume are set out in Hudson on Building Contracts, at page 165. It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done.' Xx xx xxx xxx 19. The question came for consideration again in Builders Association of India v. Union of India [1989] 73 STC 370 (SC) ; [1989] ....
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....ment and delivers it to his/her client ? strictly speaking, with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both cases. 45. The reason why these services do not involve a sale for the purposes of entry 54 of List II is, as we see it, for reasons ultimately attributable to the principles enunciated in Gannon Dunkerley and Co. (Madras) Ltd. case [1958] 9 STC 353 (SC) ; AIR 1958 SC 560, namely, if there is an instrument of contract which may be composite in form in any case other than the exceptions in article 366(29A), unless the transaction in truth represents two distinct and separate contracts and is discernible as such, then the State would not have the power to separate the agreement to sell from the agreement to render service, and impose tax on the sale. The test therefore for composite contracts other than those mentioned in article 366(29A) continues to be : Did the parties have in mind or intend separate rights arising out of the sale of goods? If there was no such intention there is no sale even if the contract could be disintegrated. The test for deciding whethe....
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....d amusements as objects on which the tax is to be imposed. If the words are to be so regarded, as we think they must, there can be no reason to differentiate between the giver and the receiver of the luxuries, entertainments, or amusements and both may, with equal propriety, be made amenable to the tax. . ." The above observations have been reiterated in Express Hotels Private Ltd. v. State of Gujarat [1989] 74 STC 157 (SC) ; [1989] 3 SCC 677. 23. In State of West Bengal v. Purvi Communication P. Ltd. [2005] 140 STC : 154 ; [2005] 3 SCC 711, it was observed (at page 170 of STC):- "35. ....Under the legislative field exclusively reserved for the State Legislature, the levy of tax by more than one statute on different taxable objects and taxable persons is not prohibited by the Constitution of India. The Bengal Amusements Tax Act, 1922 and the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 are two statutes which have been enacted under the same legislative field, i.e., entry 62 of List II of the Seventh Schedule to the Constitution of India, and the two statutes apply admittedly to levy of tax on amusements, entertainments and luxuries ....
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.... is he who receives the signal of performance, film, and any programme which is transmitted or given to a large number of sub-cable operators (although they call them as cable operator). The viewers enjoy, or are entertained by such performance, film, or programme because of receiving and transmitting video or audio-visual signals through coaxial cable or any other device by the respondents. No entertainment can be presented to the viewers unless a cable operator transmits the video and audio signals to a sub-cable operator for instantaneous presentation of any performance, film or any programme on their TV screen...... Xx xx xxx xxx 41. We also see no substance in the submission that the impugned legislation impinges on the field occupied by the Central legislation. The aforesaid Central legislation has been enacted to regulate the operation of cable television network in the country and matters connected therewith or incidental thereto whereas the State legislation is for levy of entertainment tax on entertainment within the legislative field exclusively assigned to the State Legislature under entry 62 of List II of the Seventh Schedule to the Constitution. Thus th....
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.... '"Entertainment" denotes that which serves for amusement, and "amusement" is defined as a pleasurable occupation of the senses, or that which furnishes it, as dancing, sports, or music.' Likewise, in Reader's Digest Family Word Finder at page 264, 'entertainment' has been denned thus:- 'Entertainment-amusement, diversion, distraction, recreation, fun, play, good time, pastime, novelty, pleasure, enjoyment, satisfaction.' In Webster's Third New International Dictionary the word 'entertainment' has been defined at page 757 thus:- '"Entertainment"-the act of diverting, amusing or causing someone's time to pass agreeably. "Something that diverts, amuses, or occupies the attention agreeably." "A public performance designed to divert or amuse." &....