TaxTMI 
TaxTMI 
2013 (6) TMI 586
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....rs in a nutshell are as follows: 2. Writ petitioners in W.P.Nos.25721 of 2011 M/s. Tata Sky Limited, W.P.Nos.27070 to 27072 of 2011 M/s. Dish TV India Limited and W.P. No 25873 of 2011 - M/s. Bharat Business Channel Limited, challenge the levy of entertainment tax under Section 4-I of the Tamil Nadu Entertainments Tax Act, 1939, on the ground that the service provided by the petitioners therein are in the nature of service only and hence, amenable to levy of service tax alone, as falling under Entry 92C List I of VII Schedule to the Constitution of India. Entry 62 List II of Seventh Schedule to the Constitution of India is confined to taxing public entertainment; hence, the said Entry cannot be artificially extended to include private entertainment provided through the DTH services. 3. Referring to the Constituent Assembly discussions, the petitioners in W.P.Nos.25721 and 27070 to 27072 of 2011, contend that Entry 62 List II of VII Schedule to the Constitution of India covers taxing public entertainment only. Thus, even if the Entries in the Lists are to be given a liberal meaning, the tax to be levied under Entry 62 List II of VII Schedule to the Constitution of India on ent....
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....ce tax under Entry 92C List I of VII Schedule to the Constitution of India. In the guise of taxing the entertainment provided through DTH, all that the State has done is to levy tax on service. Hence, Section 4-I of the Act is a colourable legislation and the State has no legislative competence to enact a law under Entry 62 List II of VII Schedule to the Constitution of India, taxing a service. 7. The petitioners in W.P.Nos.25872 and 25873 of 2011, viz., M/s. Bharat Business Channel Limited, contend that the services rendered by the petitioner therein cannot be subjected to entertainment tax. Contending that DTH service is essentially an activity and hence a service, the petitioner states that DTH is a form of telecommunication similar to mobile phone. Learned counsel appearing for the petitioners in these writ petitions adopted the submissions made in the other writ petitions. 8. The third set of writ petitions viz., W.P.Nos.27070 to 27072 of 2011 are filed by M/s. Dish TV India Limited; W.P.No.25987 of 2011 are filed by M/s. Sun Direct TV Private Limited and W.P.No.28978 of 2011 are filed by M/s. Reliance Big TV. The petitioners challenge the provisions under Section 4-I of....
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....f India, the petitioners pointed out that the drive in telecasting programmes today is through digitalisation. Cable TV analog services are stated to have given rise to many complaints, particularly as regards the escapement of the levy of service tax, by reason of there being no accounts maintained as to the number of subscribers catered to by the TV operators. Thus the Telecom Authority has issued directives to switch over to digital technology. In terms of the tariff treatment thus maintaining parity, the new Section 4-I, inserted by Act 25 of 2011, meeting out differential treatment, taxing DTH as distinct and separate class, is arbitrary, discriminatory and violative of Article 14 of the Constitution of India. The classification is not based on any intelligible differentia for adopting different rate of tax under Section 4-E and Section 4-I of the Act, thereby discriminating between the levy of tax on entertainment provided through Cable TV and the one through DTH. There is no rational nexus in classifying DTH as distinct and separate class from Cable TV with the object sought to be achieved by the law. Apart from that, the said levy is also violative of Article 19(1)(a) of th....
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....nments Tax Act, the levy of service tax on DTH services has to be held as bad and beyond the competence of the Parliament to levy tax on entertainment. Thus the imposition of service tax on DTH broadcasting exhibition would be unconstitutional and violative of Articles 245 and 246 of the Constitution of India, read with Entry 62 List II of VII Schedule to the Constitution of India. Entertainment tax being a State subject and DTH broadcasting being an entertainment, falling for tax treatment under Entry 62 List II of VII Schedule to the Constitution of India, the levy of service tax lacks legislative sanction. The petitioner further states that given the constitutional position, imposition of service tax as well as entertainment tax on the same subject, namely, DTH broadcasting services, is unconstitutional; hence, there cannot be two taxes levied on DTH broadcasting services and one will have to give way to the other. Thus, as far as this batch of writ petitions is concerned, we have an alternate prayer that in the event of this Court upholding the constitutionality of Section 4-I of the Act, there could be no levy under the Service Tax Act under Section 66 or Section 65(1)(105)(zk....
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....inment in character; therefore, there can be no demand for payment of service tax. The third set of writ petitions in W.P.No.25987 of 2011 and W.P. Nos. 28978 and 28979 of 2011 take a middle course, in the sense that given the legislative competence, Section 4-I of the Act, levying tax on entertainment in DTH, is a discriminatory legislation, apart from the rate as an arbitrary one and hence violative of Articles 14 and 19(1)(a) of the Constitution of India and in the event of this Court upholding the provision, the same would not attract service tax. 14. The State has filed its counter affidavit in each one of these writ petitions. 15. It is contended that entertainment tax, levied under Section 4-I of the Act, is on the aspect of entertainment content in DTH service. Referring to the provisions of Articles 245 and 246, it is contended that irrespective of the service tax levy under the Central Law, what is taxed under Tamil Nadu Entertainments Tax Act is the entertainment provided therein through DTH. Entry 62 List II of VII Schedule to the Constitution of India is not obliterated by the introduction of service tax levy under Entry 92 C List I of VII Schedule to the Constit....
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....on on tax on luxury, including tax on entertainment. Thus Entry 62 List II of VII Schedule to the Constitution of India is a specific entry for tax on luxury including entertainment. 19. In the decision reported in Purvi Communication (P) Ltd. (supra), the Apex Court had already confirmed similar contentions taken in the case of Tamil Nadu Cable TV Organisers v. Govt. of Tamil Nadu [W.Ps.Nos.16237, 16517 and 16272 of 1994 etc. Batch-judgment dated 30.11.1994 and rejected the plea of the writ petitioners on the question of competency of the State to levy tax under Section 4-E of the Act relating to tax on cable television under Entry 62 List II of VII Schedule to the Constitution of India and the question regarding violation of Article 14 as to the arbitrary nature in the rate of tax and also violative of Article 19(1)(a) of the Constitution of India. Placing reliance on paragraphs 36 and 40 of the said judgment, it is submitted that it is not open to the petitioners to agitate the self-same issue once again merely because entertainment is offered through DTH. 20. Entry 62 List II of VII Schedule to the Constitution of India is concerned about levy of entertainment tax and Sec....
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....odies and the Competition Commission had considered the two services as having wide difference and hence, cannot be treated alike. Even assuming that the technological differences are now sought to be removed pursuant to the digitization, the petitioners cannot claim that there is no difference between the content through cable TV and DTH, as on the date when the provisions were introduced. Cable TV is mostly on analog system and they are different in several features when compared to DTH. The counter narrated the subtle differences as follows: "DTH is defined as the reception of satellite programmers' with a personal dish in an individual home. An an individual Set Top Box (STB) empowers to pick & choose bundles of choice and pay for what one watch. DTH offer digital superior quality picture against cable TV of today which is mostly analog. DTH also offers digital quality signals which do not degrade the picture or sound quality. It also offers interactive channels and program guides with customers having the choice to block out programming which they consider undesirable. Programs offered by cable vary from area to area whereas satellite gives you programs that ar....
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....ord "a tax" as appearing in the preamble to the Act. Again, by Madras Act No. V of 1958, the word "entertainments" was substituted for "amusements and other entertainments". Thus the Tamil Nadu Entertainments Tax Act, 1939 is "an Act to impose taxes on entertainments in the State of Tamil Nadu". The simple enactment of taxing "entertainment", defined, under Section 3(4) of the Act, as horse race or cinematograph, was amended to levy tax on gross collection per show made by the theatres-touring, permanent and semi-permanent. The rate of tax levied varied according to the geographical location of the theatres. Thus, to start with, there was one charging Section under Section 4 of the Act, to tax entertainment provided through cinematograph exhibition in the theatres on payment for admission. The system of levy gradually underwent changes to pay a percentage on gross collection and based on theatre location. 26. Development of technology made its entry in the field of providing entertainment in the early 1990s, that apart from the traditional medium of getting entertainment through exhibition of films, entertainment through exhibition of films and other forms of information and rec....
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.... the said Act. 2. In order to mobilize additional revenue resources, the Government have also decided to increase the rate of tax for admission to any cinematography exhibition in a theatre under the said Act. " 28. Thus, while providing for taxing DTH under Section 4-I of the Act, the definition of "Entertainment" under Section 3(4) of the Act to include DTH, was also amended. The definition of "Proprietor" under Section 3(9) was also amended to include any person providing DTH service. Entry 62 List II of Seventh Schedule to the Constitution of India: 29. Before we consider the contentions raised in the respective writ petitions, the relevant provisions in Entry 92C List I and Entries 33 and 62 List II of the Seventh Schedule to the Constitution of India, the definition Section, inserting Section 3(3B) of the Act defining "direct to home service", the amendment to "entertainment" under Section 3(4) of the Act to include DTH, and Section 3(9) of the Act defining "proprietor", the insertion of the charging provision under Section 4-I of the Act to levy tax on direct to home service under Amendment Act No.25 of 2011, with effect from 27.9.2011, which is under challenge n....
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....contained in Sections 4 and 7, there shall be levied and paid to the State Government a tax (hereinafter referred to as the 'entertainment tax') calculated at the rate of thirty per cent of the gross charges excluding the service tax, received by the provider of a direct to home service. (2) The tax levied under sub-section (1) shall be recoverable from the proprietor. (3) The provisions of this Act (other than Sections 4, 7 and 130 and the rules made thereunder shall, so far as may be, apply in relation to the tax payable under sub-section (1)." 30. "Television exhibition" is defined in Section 3(11) of the Tamil Nadu Entertainments Tax Act as follows: "3(11) "television exhibition" means an exhibition with the aid of any type of antenna with a cable network attached to it or a cable television, of a film or moving picture or series of moving pictures, by means of transmission of television signals by wire where subscribers' television sets at residential or non-residential place are linked by metallic coaxial cable or optic fibre cable to a central system called the head-end. " 31. Section 4-E of the Tamil Nadu Entertainments Tax Act reads as under: ....
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.... by the petitioners therein that by reason of occupied field doctrine, the State Legislature had no power to pass the Act; that the impugned provision was violative of Article 19(1)(a) of the Constitution of India; the tax levied was not a tax on entertainment; further the petitioners challenged that the Act was a colourable legislation, since the tax levied was not on the profession or calling, falling within the scope of Entry 60 List II of VII Schedule of the Constitution of India, the petitioners attacked the Section as violative of Article 14 of the Constitution of India; that there was no nexus between the object of the Act and the provision contained in the Act; the tax levied was one on private enjoyment by people in the respective houses and not on public entertainment; the rate of tax was exorbitant and unreasonable. Hence, the State legislation had no competency to enact law under Entry 62 List II of Seventh Schedule to the Constitution of India and the rate levied was arbitrary and violative of Article 14 of the Constitution of India. 33. By judgment dated 30.11.1994 in batch of W.Ps.Nos.16237, 16517 and 16272 of 1994 etc., this Court rejected all the contentions rai....
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....The Apex Court pointed out as follows: "15. We are inclined to agree with the submission of the learned Counsel for the State of Tamil Nadu. The reason given by the State for imposing tax at the rate of 40 per cent is duly explained by the State and we do not see any flaw in it. Since the appellants also carry on business it is their duty to share the burden of the State by paying taxes like any other business. The entertainment tax is an indirect tax. It is meant to be and is passed on to the consumer i.e., subscriber. In the case of indirect taxes, levy at more than 100 per cent of the value of the goods is not unknown e.g., in the case of customs and central excise duties. As a matter of fact, even in the case of direct taxes, levy at a rate higher than 50% is a regular feature. Of course, these are instances not involving free speech right and stand upon a different plane. 16. We are also unable to see any substance in the grievance that taxes are only levied upon them and not upon the Doordarshan. We do not think that there can be any comparison between Doordarshan and the appellants. Doordarshan is a governmental organisation which is supposed to act in furtherance of p....
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....71, rejecting the contention and upholding the validity of Section 7 of the Delhi Entertainments and Betting Tax Act, 1996, held that the levy is on entertainment through DTH services. The Delhi High Court pointed out to the definition of "entertainment" in Section 2(i) as including "entertainment through cable service and DTH service". The emphasis is on "entertainment" and not on the vehicle for such entertainment. The Delhi High Court further held that the tax on DTH service contemplated under the Act is, by its nature and character, irrespective of its nomenclature, a tax on entertainment and not a tax on services" and that it cannot be said that there is any trespass into Parliament's exclusive domain of legislating on the field of "taxes on services" under Entry 92C of List I. Thus, "the tax is on the entertainment and not the manner in which the content of entertainment reaches the actual persons entertained. The tax is not on the content provider or the content transporter or the person entertained - it is on the entertainment. The subscriber may be the person on whom the incidence of the tax falls and the measure of the tax may be based on the subscription money but, a....
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....ken the place of the cinema hall or theatre and the cable TV or DTH connection has taken the place of the paper ticket. Similarly, money paid for the ticket for entry into the theatre has now been substituted by subscription money paid for the relevant connection (i.e., cable or DTH, as the case may be). Just as there could be no admission to a place of entertainment without a ticket, there cannot be admission to entertainment provided through a cable service or DTH service without a connection, for which charges are collected." Thus upholding the charge of entertainment tax on DTH, the Delhi High Court rejected the writ petitions vide Bharti Telemedia Ltd. (supra). 41. The above-said question as to whether the State Legislature is competent to levy entertainment tax on DTH, was also considered by the Allahabad High Court vide order dated 20.07.2012 made in Writ Tax No.1819 of 2009 (Sun Direct TV (P.) Ltd.. v. State of UP), Uttarakhand High Court vide order dated 26.12.2007 in W.P.No.2562 of 2007, Madhya Pradesh High Court vide [2012] 53 VST 30 (Tata Sky Ltd. v. State of M.P.), Punjab and Haryana High Court vide [2011] 37 VST 1 (Tata Sky Ltd. v. State of Punjab) and Uttar Prades....
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....ng under Entry 62 List II of VII Schedule to the Constitution of India and there is no conflict or overlapping of the subject to fall under Entry 92C List I or Entry 60 List II of VII Schedule to the Constitution of India. 43. As far as the view of other High Courts on the constitutional validity is concerned, we are in respectful agreement with the view held by the above High Courts. So too on the allegation of overlapping of the provision under Entry 92C List I of VII Schedule to the Constitution of India. However, it must be pointed out herein that the provisions of the Tamil Nadu Entertainments Tax Act, 1935, in Section 4-I are not in pari materia with the other States' legislation. Considering the fact that the validity of the charging provision in any enactment has to be considered on the strength of the provisions of the particular enactment and going by the provision contained in Section 4-I of the Act, except on the competency of the State Legislature to enact law to tax DTH, the application of aspect theory and the absence of any overlapping into the area of service tax, we do not think, the decisions of other High Courts would govern the issue raised in the cases ....
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....s, entertainments and amusements, but subject to the provisions of List I with respect to the sanctioning of cinematograph films for exhibition", the content and scope of Entry 62 List II of VII Schedule to the Constitution of India enabling the State Legislature to levy tax on entertainments, amusements, etc. has to be read as restricted to taxing public entertainment only. Applying the principle of 'noscitur a sociis', it is contended that the expression "entertainment" carries a limited meaning, referable to public entertainment in public places and not to private entertainment derived by an individual in his private capacity at a private place. 46. Drawing support from the decision reported in Hoechst Pharmaceuticals Ltd. v. State of Bihar [1985] 154 ITR 64 (SC), learned senior counsel pointed out that the intention of the Constitution makers is relevant in understanding the scope of the Entries and the discussions throw light on the scope of the subject and the understanding given to the Entry in question. 47. Learned senior counsel further submits that the taxable event considered for levying service tax is the activity of providing DTH. What is considered for l....
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....t may have effect on the understanding of different types of entertainment, yet, the entertainment referred to in Entry 62 List II of VII Schedule to the Constitution of India has to have relevance only to the places of entertainment, namely, a public place, particularly in the context of Entry 33 List I of VII Schedule to the Constitution of India, making cinematographic film exhibition subject to Entry 60 List I of VII Schedule to the Constitution of India. Referring to the decisions reported in Purvi Communication (P) Ltd. (supra) and A. Suresh (supra), learned senior counsel pointed out that the challenge to Entry 62 List II of VII Schedule to the Constitution of India with reference to the private entertainment was not considered in those judgments and hence, the said judgments could not be taken to have decided the issue. 49. Countering the said claim, Mr. C.S. Vaidyanathan, learned senior counsel appearing for the State, pointed out that Entry 92C List I of VII Schedule to the Constitution of India relates to tax on the service of providing entertainment. If the content of the service provided through the vehicle of DTH is entertainment and luxury, the same would fall for....
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....t, in the decision reported in Bharti Telemedia Ltd. (supra), the petitioners therein, which includes the present petitioner before this Court, contended that DTH service is a broadcasting service, falling within the meaning of "taxable service" under Section 65(105)(zk) of the Finance Act, 1994, amenable to service tax at 10.33%, on the gross amount paid by the subscriber for providing the DTH broadcasting services. Learned senior counsel referred to the decision of the Apex Court on the distribution of legislative powers between the Union and the State and on the interpretation of the various Entries of List I, List II and List III, that the Entries in the Lists should not be read in a narrow or pedantic sense, but must be given their fullest meaning and widest amplitude and there is no overlapping anywhere in List I and List II of Schedule VII on the enumerated entries relating to taxation. Thus learned senior counsel appearing for the State submitted that whenever an apparent overlapping had occurred, Courts have held that the Legislative Entry should be liberally interpreted; competing Entries must be read harmoniously. Thus, the true nature and character of the legislation an....
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....including the sanctioning of cinematograph films for exhibition." Shri.H.V.Kamath objected to the inclusion of entertainment in any of the Lists. The Amendment suggested by Shri. T.T. Krishnamachari and the discussion runs as follows: With your permission, I move also amendment No. 287 standing in my name, viz. "That in amendment No. 111 of List I (Sixth Week), in the proposed entry 4 of List II, for the words 'not including' the words 'subject to the provisions of List I with respect to' be substituted." The amended amendment will read thus: '44. Theatres, dramatic, performances, cinemas, sports, entertainments and amusements, subject to the provisions of List I with respect to the sanctioning of cinematograph films for exhibition." The idea that the sanctioning of cinematograph films for exhibition should be transferred to the Centre has been accepted. There is no further variation here except that 'sports, amusements and entertainments' have been added to the original entry in the Draft Constitution." Prof. Shibban Lal Saksena viewed that the proposed Entry 44 List II should be transferred to List III. He viewed: "My only re....
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....atres and dramatic performances; cinemas subject to the provisions of entry 60 of List I; sports, entertainments and amusements." Entry 60 of List I of the VII Schedule to the Constitution of India reads as "Sanctioning of cinematograph films for exhibition." 57. The Entry dealing with taxation on entertainment under List II Entry 62 corresponds to Entry 50 List II of the Government of India Act, 1935. We do not think, the decision relied on would be of any assistance to the petitioners in this case, for, the Entry with which we are concerned, is an Entry on taxation on entertainment. As is evident from the reading of Entry 33 List II of VII Schedule to the Constitution of India, entertainment and amusement is a class by itself, which is not made a subject of control under Entry 60 List I of VII Schedule to the Constitution of India. Cinemas and dramatic performances mentioned in Entry 33 List II of VII Schedule to the Constitution of India, though entertainment, are made subject to Entry 60 List I of VII Schedule to the Constitution of India relating to the sanctioning of cinematographic films for exhibition. Thus Entry 60 List I of VII Schedule to the Constitution of India cou....
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....e individual subscribers to choose the desired channels on their individual T.V. sets because of cable television technology of the respondents and of sending the visual or audio visual signals to sub-cable operators, and instantly re-transmitting such signals to individual subscribers for entertaining them through their franchise. The respondents' act is, no doubt, an act of offering entertainment to the subscribers and/or viewers. The respondent is very much directly and closely involved in the act of offering or providing entertainment to subscribers who are on his record. For the fact of offering or providing entertainment to the subscribers and/or viewers, the respondents receive charges, which are realised or collected by their franchise from the ultimate subscribers. Their franchise, called as sub-cable operator under the said 1982 Act having no independent role to offer or provide entertainments to the subscribers inasmuch as franchise have to depend entirely on the respondents communication network and this communication network of the respondents consists of receiving and sending visual images and audio and other information for preparation of the subscribers and/or v....
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.... the particular Legislature to legislate on regulatory statutes and the Entries relating to taxation, the Supreme Court pointed out that if any power to tax is clearly mentioned with reference to the subjects in List II, the same would not be available to be exercised by the Parliament based on the assumption of residuary power. The primary purpose of taxation is to collect revenue. The power of levying tax is essentially for the very existence of the Government, though may be controlled by the constitutional provisions made in this behalf. 62. Thus the golden rule of interpretation on Entries in the Lists is that words should be read in their ordinary, natural and grammatical meaning, subject to the rider that in construing words in a Constitution conferring legislative power, the most liberal construction should be put upon the expression in the Lists, so that they may have effect in their widest amplitude Refer (Navinchandra Mafatlal v. CIT [1955] 1 SCR 829. Yet, as held in Central Provinces & Berar Sales of Motor Spirit & Lubricants Taxation Act, 1938 (supra), in a given case, to prevent conflict between two exclusive jurisdictions, restrictive meaning could be given as in t....
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....he taxes on profession, trade, calling, that Entry 60, List II and Entry 92C/97 List I of schedule VII to the Constitution of India operate in different spheres. 65. In the context of understanding the width or the scope of the Entries enumerated and the expressions contained in the Entries, the Supreme Court considered the applicability of the concept of flexible construction in three landmark decisions of the Apex Court dealing particularly with Entries pertaining to taxation, one falling under Entry 54 List I of the Government of India Act, 1939 (Entry 82 List I of the Constitution of India, 1950 - Tax on income other than agricultural income) in the decision reported in Navinchandra Mafatlal (supra), Entry 48 List II of Government of India Act, 1935 (Entry 54 List II of Constitution of India, 1950) State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. AIR 1958 SC 560 and Godfrey Phillips India Ltd. (supra) in the context of Entry 62 List II of VII Schedule to the Constitution of India. These decisions lay down the principle guiding on the understanding of the expression used in the Lists. 66. In the decision reported in Navinchandra Mafatlal (supra), the Supreme Court c....
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....ular meaning by reason of any legislative practice, meaning thereby, to the judicial interpretations of the word "income", as appearing in the fiscal statutes. The Apex Court observed that while the Income Tax Act adopts an inclusive definition of the word "income" to bring to charge only such income as falling under certain specified heads, the meaning of the word "income" was ascertained by Courts in the context of the scheme of the Act. Hence, the Apex Court observed: "The truth of the matter is that while Income-tax legislation adopts an inclusive definition of the word "income" the scheme of such legislation is to bring to charge only such income as falls under certain specified heads (e.g., the 5 Schedules of the English Act of 1918 and our section 6 read with the following sections) and as arises or accrues or is received or is deemed to arise or accrue or to be received as mentioned in the statute. The Courts have striven to ascertain the meaning of the word "income" in the context of this scheme. There is no reason to suppose that the interpretation placed by the Courts on the word in question was intended to be exhaustive of the connotation of the word "income" outside....
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.... indivisible contract like the works contract was, however, got over by the 46th Amendment to the Constitution, amending the definition of "sale" under Article 366(29A). 74. In the context of tax on luxuries occurring in Entry 62 List II of VII Schedule to the Constitution of India, in the decision reported in Godfrey Phillips India Ltd. (supra), the Apex Court cautioned thus: "49.Under the three lists of the Seventh Schedule to the Indian Constitution a taxation entry in a legislative list may be with respect to an object or an event or may be with respect to both. Article 246 makes it clear that the exclusive powers conferred on Parliament or the States to legislate on a particular matter includes the power to legislate with respect to that matter. Hence, where the entry describes an object of tax, all taxable events pertaining to the object are within that field of legislation unless the event is specifically provided for elsewhere under a different legislative head. Where there is the possibility of legislative overlap, courts have resolved the issue according to settled principles of construction of entries in the legislative lists." 75. Reading the Entries enumerated....
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....ld "the expression "luxuries" in Entry 62 List II of Seventh Schedule to the Constitution of India would mean the activity of enjoyment of or indulgence in that which is costly or which is generally recognised as being beyond the necessary requirements of the average member of the society and not articles of luxury." Pointing out to the legislative history of the Entry, the Supreme Court held that given the language of Entry 62 and the legislative history, Entry 62 does not permit the levy of luxury tax on goods or articles and the word "luxuries" in the Entry refers to activities of indulgence, enjoyment or pleasure. 77. The Supreme Court pointed out that the solution as to the meaning of the expression 'luxury' must be found in the language of the Entry. Referring to the tax levied under Entry 62 List II of VII Schedule to the Constitution of India in the context of the decision of the Apex Court reported in Express Hotels (P.) Ltd. v. State of Gujarat [1989] 3 SCC 677, the Supreme Court held that "Luxuries" is capable of meaning an activity alone and has no relevance to articles or things. 78. Thus in the context of the above three decisions of the Apex Court, it i....
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.... be invoked, this Court referred to the Entertainments Tax Act first enacted in the year 1939 and to the further development thereon, wherein the definition of 'entertainment' included other forms of entertainment and not restricted to cinematographic exhibition alone and pointed out "there is nothing in the terms on Entry 62 of List II of the Seventh schedule to the Constitution that the words employed therein should be given a restricted meaning." It observed that unless the Constitution had limited the scope of the expression, the Court cannot limit the meaning of the words used under the relevant Entry. The decisions cited at the Bar on the contentions now raised were extensively considered and rejected in the above referred to decision. 81. This Court also referred to the decision of the Apex Court reported in Geeta Enterprises v. State of U.P. AIR 1983 SC 1098 and held that the word 'entertainment' has been used in a wide sense so as to include within its ambit, entertainment of any kind, including the one which may be purely educative. 82. Thus going by the various decisions cited above, we do not find any ground to restrict the meaning of the expressio....
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....ctive Lists are to be treated as topics or categories of legislation and we must assume that legislative power is granted in regard to any given subject to cover every conceivable aspect of it. Thus an interpretation which is beneficial to the widest possible amplitude must be adopted. We hold that the ambit of the expression "entertainment" cannot be understood by reference to any other Entry. Entry 33 operates on a totally different field and has no relevance in considering the general word like "entertainment". The reference to Entry 60 List I and Entry 33 List II of VII Schedule to the Constitution of India are more on the field of regulatory laws on the exhibition of cinematograph films and have nothing to do with Entry 62 List II of VII Schedule to the Constitution of India. Thus, we reject the contention of the petitioners as to the scope of Entry 62 List II of Seventh Schedule to the Constitution of India as well as to the arguments based on Constituent Assembly Debates. 84. In Kesavananda Bharati Sripadagalavaru v. State of Kerala [1973] 4 SCC 225, the Apex Court observed that Constitution must be a vehicle of the life of a nation. It is a dynamic idea. It is the visibl....
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....ed in List II or List III including any tax not mentioned in either of those Lists and Entry 60 List II of the VII Schedule on professions, trades, callings and employments. The Supreme Court held that the word "Profession" in Entry 60 List II of the VII Schedule to the Constitution of India cannot be made synonymous with the word "service" and therefore, service tax would fall under Residuary List I - Entry 97 read with Entry 92C. It pointed out that there is a distinction between tax imposed for the privilege of carrying on any trade or calling on the one hand and the tax on every receipts, that is to say, on every incidence of exercise of the particular trade or calling. Pointing out that the tax on professions, callings, trades and employments and the tax on the service provided by professionals as two aspects of the same item, service tax is a tax on every activity, undertaken by an Architect or a Chartered Accountant. From the point of view of Chartered Accountant, Cost Accountant and Architect, it is an activity undertaken by him based on his performance and skill, but from the point of view of the client, the Chartered Accountant or Cost Accountant is his service provider; ....
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....vying the tax would not have any vitiating effect. 92. In the decision reported in Tata Sky Ltd. (supra), the Punjab and Haryana High Court considered this issue and held that levy of service tax on the providing of service and levy of entertainment tax covered by Entry 62 List II of VII Schedule to the Constitution of India can co-exist and can be harmonised on being different aspects. The transaction of providing broadcasting services and entertainment cannot be treated as an indivisible contract so as to include the aspect of entertainment by holding that the predominant transaction is broadcasting and not entertainment. It further observed that only when the transaction is treated as a composite one, the need for splitting up entertainment from broadcasting would arise. Referring to the aspect theory, the High Court held that tax is on entertainment aspect and the levy of service tax is on the providing of the service. 93. We are in entire agreement with the view expressed by the Punjab & Haryana High Court. So are the views expressed by the Uttaranchal High Court dated 26.7.2010 in the case of Tata Sky Limited v. State of Uttarkhand; the Madhya Pradesh High Court in the ....
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....t matter of tax from the character of sale of goods." In that context, the Supreme Court held "if Section 4-A is designed to bring a levy into existence, which is divorced from the "sale", it is beyond the legislative competence under Entry 54 of List II of the Seventh Schedule." 96. Referring to the decision in the case of Builders Association of India v. Union of India [1989] 2 SCC 645 as well as Bengal Immunity Co. Ltd. v. State of Bihar AIR 1955 SC 661, Govind Saran Ganga Saran v. CST AIR 1985 SC 1041 and Gannon Dunkerley & Co. (Madras) Ltd. (supra), the Supreme Court pointed out that even in the matter of introducing a fiction into the concept of sale, such fiction should be carried to its logical end; that a deemed sale is also subject to the same restrictions and conditions as in a normal sale. Referring to the decision reported in RR. Engg. Co. (supra), the Apex Court pointed out that measure of tax, though not always a determining and conclusive factor to judge the nature of levy, yet, is a relevant consideration. Referring to the decision reported in Hotel Balaji v. State of Andhra Pradesh [1993] Supp (4) SCC 536 the Apex Court held "the measure to which tax rate is to....
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....ormer; (SCC pp. 719-20, para 14)" 99. Thus, as far as the present case is concerned, the subject matter of taxation under Entry 62 List II of VII Schedule to the Constitution of India is "entertainment". As pointed out in the decision reported in Godfrey Phillips India Ltd. (supra), the taxable event or the charge under Entry 62 List II of VII Schedule to the Constitution of India is entertainment itself. Thus, the nature of machinery by which tax is to be assessed, often complicated, is left to the statue law to deal with the same and if at all it has any relevance, it is only at the stage of considering under the particular charging provision of the Act. Thus, the question as to whether entertainment tax levied is service tax or entertainment tax is a matter which has to be considered only by the taxing provision concerned and not by the measure of tax. 100. Learned senior counsel further pointed out to the decision in the case of Purvi Communication (P.) Ltd. (supra) and submitted that the said decision could not be taken as having a bearing on the challenge now made, since the said decision was much prior to the introduction of service tax levy; consequently, the Supreme ....
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....9(1)(a) and 19(1)(g) of the Constitution of India: 104. Apart from the above-said submissions, Mr. Arvind P. Datar, learned Senior Counsel appearing for the petitioners in W.P.Nos.25721, 27070 to 27072 of 2011, also made submissions on the charging provision failing to specify the taxable event as well as on the unreasonable classification made in violation of Article 14 of the Constitution of India in treating DTH as a class different from Cable TV. 105. Mr. C. Natarajan, learned Senior Counsel appearing for the petitioners in W.P.Nos.25986, 25987, 28978 and 28979 of 2011, made his submissions on the validity of Section 4-I of the Tamil Nadu Entertainments Tax Act as violative of Articles 14 and 19(1)(a) and 19(1)(g) of the Constitution of India. He also submitted that the charging provision in Section 4-I of the Act suffers from a fundamental flaw in not spelling out the subject matter of tax in clear terms and hence, the charge under Section 4-I of the Act fails. 106. Referring to the rate of tax at 30% on the gross charges excluding the service tax fixed under Section 4-I of the Act as confiscatory in character and hence, violative of Article 14 of the Constitution of ....
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....the fact that the content of entertainment provided under cable TV and DTH is one and the same, there is no rational nexus between the classification of DTH as a separate class to levy tax at 30% and the object sought to be achieved or the objects of the Act. 109. Mr. C. Natarajan, learned senior counsel, also referred to the decisions of the Apex Court reported in Aashirwad Films v. Union of India [2007] 7 VST 714 (SC) and P. Sankara Narayanan v. State of Tamil Nadu [2007] 9 VST 401 (Mad.) in support of the above contention based on Articles 14 and 19(1)(a) of the Constitution of India. 110. He further pointed out to the various rates as given under the various States' Entertainments Tax Act, that in none of the States, entertainment through the DTH system of multiple channel television is subjected to such hostile treatment and crushing rate. Irrespective of whether the entertainment is offered to rural area or urban area through DTH or cable, the content is one and the same. Pointing out that DTH is a mere phraseology and a means of delivery of the content of entertainment obtained from the same source of broadcasters to the ultimate end of subscribers, the classificat....
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....by DTH. The intention of the legislature, through the statement of objects and reasons, thus give a clear picture as to the chargeable event. Learned senior counsel, referred to the decision reported in Gujarat Steel Tubes Ltd. v. Gujarat Steel Tubes Mazdoor Sabha [1980] 2 SCC 593, particularly to paragraph 89, holding that law should be liberally interpreted, in order that the intention is preserved. Learned senior counsel submitted that when the intention on the legislation is clear, it would not be open to the Court to ignore this to hold that the charge fails. In the same breath, learned senior counsel admits that the provision could have been worded in a better manner and there exists a drafting defect. However, when the tax to be levied is on the entertainment contained in the DTH, the charge must be given effect to. Referring to the decision reported in State of Karnataka v. Hansa Corpn. AIR 1981 SC 463, he further submitted that one cannot take a superficial view of the charging provision. The policy enacting the legislation has to be kept in mind. He further submitted that there is always a presumption of constitutionality of a statute and where the language of the provisi....
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....ification is valid. The classification made on a rational basis and the nexus to the object sought to be achieved thus goes to show that there is no arbitrariness in making the classification. He also referred to the TRAI Regulations and the order of the Competition Commissioner treating cable TV and DTH as different entities. 117. In sum and substance, he submitted that the allegations based on Articles 14 and 19(1)(g) of the Constitution of India and the absence of charging provision lack merit and after the decisions of the Apex Court reported in Purvi Communications(P.) Ltd. (supra) and A. Suresh (supra), the issues raised are no longer res integra. 118. Mr C.S. Vaidyanathan, learned senior counsel appearing for the State, further submitted that on the mere allegation of the tax being excessive, there cannot be a challenge under Articles 14 and 19(1)(a) of the Constitution of India. The provider of the service has nothing to do with the production of the programme and if at all anybody could complain of the same, it could only be the broadcaster. Even viewing the tax levied as a passed-on liability, the petitioners have no locus standi to complain of violation of Article ....
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....ax imposed was heavy and was intended to drive them out of the business with a view to help the cinema theatres. Thus the contention made based on Article 19(1)(a) was rejected. 121. The Apex Court further held that the rate of tax was brought down to 20% and even otherwise, the rate of tax at 40% on cable TV under Section 4-E which was also there on cinema theatres is not impermissible, the levy of entertainment tax at the same or lesser rate on cable television could not be held to be bad. It further viewed that the guarantee of freedom of the Press does not forbid the taxation of money or property employed in the publishing business, or the imposition of a reasonable licences and licence fees on trades or occupations concerned with the dissemination of literature or ideas - vide Corpus Juris Secundum (Vol. 16) page 1132. 122. A reading of the above-said decision thus shows that unless the levy is of a confiscatory character, for which an assessee must produce necessary materials, on a general allegation, it is difficult to hold that the levy of tax at 30% of the gross amount violates Article 19(1)(a) of the Constitution of India. The working given by the petitioner (SUN DT....
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....refers to the rate of tax and the measure of tax, it nowhere touches on the subject of levy, namely, entertainment. Thus, except for identifying the person for recovery, rate and measure, Section 4-I of the Act does not identify the important component in a charging provision, namely, the subject of levy. In this connection, he placed reliance on the decisions reported in Govind Saran Ganga Saran v. CST [1985] 60 STC 1 (SC), Mathuram Agrawal v. State of M.P. [1999] 8 SCC 667, Kesoram Industries Ltd. (supra), Federation of Andhra Pradesh Chambers of Commerce & Industry v. State of Andhra Pradesh [2000] 6 SCC 550 as well as Gujarat Ambuja Cements Ltd. v. Union of India [2005] 1 STT 41 (SC). He submitted that it is no doubt true that the Tamil Nadu Entertainments Tax Act seeks to levy tax on entertainment. Given the nature of the DTH operation, the Section must specify which aspect of DTH is now sought to be taxed under the impugned Section. The mere fact of the Act being an enactment made by reason of Entry 62 List II of VII Schedule to the Constitution of India, per se, is not sufficient to fill up the gap or provide for the link absent under Section 4-I of the Act. In the absence o....
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....annot be lost sight of, when reading the provision contained in Section 4-I of the Act. The principles relating to liberal construction or literal construction or equitable construction are not available while reading a charging provision. Borrowing the oft-quoted statement from Rowlett, J, learned senior counsel pointed out that in a taxing Act, one has to look only at what is clearly said and nothing is to be read in and nothing is to be implied, and one can only fairly look at the language. 128. Countering the claim of the petitioners, learned senior counsel appearing for the State of Tamil Nadu submitted that the principles of interpreting a charging provision and other provisions in a taxing enactment cannot be different, and in reading a charging provision, superficial view cannot be adopted. Thus, a purposive interpretation has to be given to the charging provision under Section 4-I of the Act. While admitting that there is a defect in the provision contained in Section 4-I of the Act and that the Section could have been happily worded, he nevertheless cautioned that what is sought to be taxed under Section 4-I of the Act is not on the providing of a service but on entert....
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....072 of 2011, 25987, 28978, 25873 and 25927 of 2011. 131. The petitioners herein are carrying on business as Direct to Home operators in receiving and providing TV signals to the viewers. In the decision reported in Express Hotels (P.) Ltd.(supra), V. State of Gujarat and another), the Apex Court pointed out that once the legislative competence and the nexus between the taxing power and the subject of taxation is established, the other incidents are matters of fiscal policy behind the taxing law. In the decision reported in Aashirwad Films (supra), the Apex Court pointed out that given the field of legislation, the State undoubtedly enjoys a greater latitude in the matter of a taxing statute to pick and choose persons and objects for levying tax. The Apex Court pointed out that it may impose a tax on a class of persons while it may exclude some from the purview of the operation of the Act. 132. Upholding the provisions under Section 4A(4a) of the West Bengal Entertainment-cum-Amusement Tax Act as within the legislative competence of the State Legislature under Entry 62 List II of Schedule VII to the Constitution of India, in the decision reported in Purvi Communications (P.) L....
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....ples of Statutory Interpretation (8th Edition 2001), which may usefully be extracted herein too, as under: "105. Justice G.P. Singh in Principles of Statutory Interpretation (8th Edn., 2001) while dealing with general principles of strict construction of taxation statutes states: A taxing statute is to be strictly construed. The well-established rule in the familiar words of Lord Wensleydale, reaffirmed by Lord Halsbury and Lord Simonds, means: The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words. In a classic passage Lord Cairns stated the principle thus: If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable construction, certainly, such a construction is not admissi....
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....o do with the charge under Section 4-I 'Tax on Direct-to-Home Service". Section 4 of the Act is concerned about tax on payment for admission to entertainment provided through any cinematograph exhibition in theatres. Section 7 of the Act is concerned about the manner of payment of tax. Thus, the levy under Section 4-I of the Act has nothing to do with Sections 4 and 7 and the charge under Section 4-I is distinct from Section 4 of the Act; Sub Section (2) to Section 4-I of the Act states that the tax levied under Sub Section (1) shall be recoverable from the Proprietor. As already noted Section 4-E of the Act is the only other charging provision dealing with television exhibition. Section 3(3B) of the Act defines "Direct-to-Home Service" to mean distribution of multi-channel television programmes by using a satellite system by providing television signals direct to subscribers' premises without passing through an intermediary such as cable operator. Entertainment is defined in Section 3(4) of the Act, to mean among other enumerated forms as ".... television exhibition for which persons are required to make payment by way of contribution, or subscription, or installation or c....
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....nd nothing beyond. If the Section has been worded explicitly to indicate the taxable event and the incidence of tax, then as had been done in the other Courts, certainly there could be no difficulty in upholding the charge. The defective drafting of the Section in not stating the taxable event, thus compels us to agree with the petitioners that as an imperfect charging provision, Section 4-I of the Act cannot be enforced. 139. Mark the difference in the language of the provisions under the Delhi Entertainments and Betting Tax Act which defines "entertainment" in Section 3(i), "payment for admission" under Section 3(m) and the charging provision under Section 7: "Section 3(i) entertainment means any exhibition, performance, amusement, game, sport or race (including horse race) or in the case of cinematograph exhibitions, cover exhibition of news-reels, documentaries, cartoons, advertisement shorts or slides, whether before or during the exhibition of a feature film or separately, and also includes entertainment through cable service and direct-to-home (DTH) service; Section 3(m) payment for admission includes - (vi) any payment made by a person by way of contribution, su....
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....ay the tax and the rate at which the tax is to be paid and the measure of tax. If there is any ambiguity regarding any one of its ingredients in a taxing statute, then it is for the legislature to do the needful in this regard to fill the lacuna, so that the charging provision could stand for its enforceability. 143. As has been observed by the Apex Court in the decision reported in Gujarat Ambuja Cements Ltd. (supra), the point at which the collection of tax is to be made, is a matter of legislative convenience and part of the machinery for realisation and recovery of tax. The manner of collection has been described as "an accident of administration; it is not the essence of the duty". 144. As rightly pointed out by Mr. C. Natarajan, learned senior counsel appearing for the writ petitioners in W.P.Nos.25986 and 25987 and 28978 and 29979 of 2011, Section 4-I(2) of the Act does not speak on the essential nature of the tax and the person on whom the incidence falls. The sub-section speaks about the machinery for recovery from the provider of the DTH. Given the complexity of the diverse elements in the field of levying tax, the legislature has the discretion not only to determin....
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....ly, one of providing the service and the other, the content or result of service provided, namely, "entertainment". Insofar as the tax on entertainment is concerned, the same is referable to the State List while, the transaction of providing a service is referable to the Union List under Entry 92C on levy of service tax. Thus, in understanding the charging provision contained in Section 4-I of the Act, in the context of Entry 62 List II of VII Schedule to the Constitution of India, it is of fundamental requirement that the Section must specify which aspect of the transaction is charged to tax under Section 4-I of the Act. If the legislature has failed to clarify by use of an explicit and clear language, the benefit thereof must go necessarily in favour of the tax payer. - Refer Federation of Andhra Pradesh Chambers of commerce & Industry (supra). 147. Thus, as is evident from a reading of the Section, except for giving the rate of tax and the measure of tax, sub section (1) of Section 4-I speaks nothing about what the taxable event is and where the incidence of tax would fall. As already seen in the preceding paragraph, a charging Section must be clear in its intent and must pro....
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....ncidence falls. As has been repeatedly held, one has to simply adhere to the words of the statute and the question of the Court undertaking any ironing out of the deficiencies does not arise. 148. The contention that the incidence of tax can be presumed by reference to the objects or the Heading, again deserves no consideration and has to be rejected by reason of the decisions referred to above. If the argument of the State is to be accepted, then there is no necessity at all to have any separate Section for the different entertainments to speak on the charge, but rest content with just the heading alone to indicate the charge created under the Act to the various forms of entertainment sought to be taxed under the Act. 149. Thus the heading to the Section cannot do the act of filling up of the gap and the lacuna in the charging Section to provide for the taxable event. The Heading to the Section indicates what the Section is about. As such, at best, it may give us a clue as to what the Section proposes to say. Beyond that, one cannot borrow the terms under the Heading to supply all those omissions, which, out of sheer statutory necessity, ought to have been specified in clear....
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....cerned, the Punjab and Haryana High Court held that the expression "entertainment" in Punjab Entertainment Duty Act of 1955 is used in a very wide sense to cover entertainment of any kind. Independent of service tax on broadcasting service, which is a different aspect of the transaction, levy of entertainment duty on entry aspect was thus held as fully justified. Thus, the High Court held that levy of entertainment duty under Section 3(3C) of the Punjab Entertainment Duty Act, 1955 for providing entertainment by broadcasting signals on TV sets is intra vires the powers of the State Legislature. A reading of the judgment shows that the question that came up for consideration therein was as to whether the levy of entertainment tax is covered by Entry 62 List II of VII Schedule to the Constitution of India or is a tax on broadcasting service covered by Entry 92C of List I of VII Schedule to the Constitution of India. After referring to the decisions of the Apex Court on the principle of interpretation on the scope of taxing entries, the Punjab and Haryana High Court pointed out that the tax on DTH under the Punjab Entertainment Duty Act is on entertainment aspect and the calculation o....
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....taken the place of cinema hall or theatre and the cable TV or DTH connection has taken the place of paper ticket. Each connection to a subscriber is an admission for entertainment. Thus, a licensed DTH service provider is only a collector of an entertainment tax on behalf of the Government. He is not the receiver of tax nor is a service provided by him, viz., the subject matter of entertainment tax. The tax is on the activity of entertainment. The true nature and character of the tax, therefore, is within the legislative field of Entry 62, List II of VII Schedule to the Constitution. Hence, there is no scope for confusing the levy of service tax under Entry 92C List I for the levy under Entry 62 List II, namely, entertainment tax. They are two separate distinct taxable events in respect of each of the two aspects. In respect of the service aspect, the taxable event is same through DTH system, whereas, in respect of entertainment tax aspect, the taxable event is the entertainment in the content. 155. Thus, a comparative reading of the provisions of the Tamil Nadu Entertainments Tax Act in Section 4-I and the provisions of other States, which were considered by the Punjab and Hary....
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....i-channel television programmes by using a satellite system by providing television signals direct to subscribers' premises without passing through an intermediary such as cable operator, may pass the test as a good definition for the purpose of service tax levy. The definition of entertainment under Section 3(4) referring to DTH services, in all probability, may refer to the service aspect rather than to the content of entertainment. Thus whatever be the strength of Section 3(3B), the definition of entertainment in Section 3(4) of the Tamil Nadu Entertainments Tax Act, insofar as inclusion of DTH service on the entertainment aspect of DTH is concerned, is again imperfectly worded and makes no reference to the aspect of DTH service required for inclusion under this definition. Thus, even though we have upheld the power of the legislature to enact law to tax entertainment through DTH, in the absence of clear and explicit words to indicate the taxable event and on whom the incidence falls under Section 4-I of the Act, the charge fails. Although the State contended that the heading to the Section provides the taxable event, we fail to understand how the heading can supplement the ....
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....hold the levy as one saved by Entry 62 List II of VII Schedule to the Constitution of India. The present form of Section 4-I deals more on the side of service tax rather than as an enactment for taxing entertainment to fall under Entry 62 List II of VII Schedule to the Constitution of India. ARTICLE 14: 165. Shri. C. Natarajan, learned senior counsel appearing for the writ petitioners in W.P.Nos.25986, 25987, 28978 and 28979 of 2011, also questioned the amended provisions as violative of Article 14 of the Constitution of India. He pointed out that the differentiation made being one on technology, the same fails to have any reasonable relationship with the object of the Act sought to be achieved. Commenting on the averments in the counter that there is no case made out by the petitioners in treating DTH as different from cable TV, he submitted that the entertainment through DTH, though based on the technology development, in the absence of any entertainment difference shown in DTH, Article 14 stands attracted to the case and hence, the Section has to be held as discriminatory in character. Referring to the reliance placed on the decisions of the Supreme Court reported in Expre....
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....source content and the broadcasters are the same for cable TV and DTH; the content that goes for telecasting does not undergo any change or differ on account of socio-economic and geographical aspects, nor the language a good basis for differential tax treatment; the fact that the State has the absolute authority to fix the rate of tax, by itself, would not be the end of the enquiry on Article 14 of the Constitution of India. 166. Referring to the decision reported in Aashirwad Films (supra) holding "the extent of reasonability of any taxation statute lies in its efficacy to achieve the object sought to be achieved by the statute", he submitted that the classification made only on the basis of the technology difference without anything more, is ex facie arbitrary, particularly when the State has not proved that in imposing different rate of tax, the State intends to achieve an avowed object envisaged under Part IV of the Constitution of India. Referring to the decision of the Supreme Court reported in State of Karnataka v. Drive-in-Enterprises AIR 2001 SC 1328 that luxury of watching the movie was considered as an attribute of enjoyment and that the levy is on the person enterta....
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.... cable TV, DTH, IPTV and Terrestrial TV are different players and one is not the perfect substitute for the other. In terms of technology, price, reach, network and quality, cable TV is different from DTH. The Commissioner had noted that cable TV is a distinct mode and is not a perfect substitute of other platforms of TV channel transmission such as DTH, IPTV, etc. The classification made has rational basis with substantial distinction and nexus to the object of the enactment. Thus he submits that there are no merits in the contention based on Article 14 of the Constitution of India. 169. Learned senior counsel appearing for the State pointed out that in considering the issue on Article 14, one has to look at the nature of the industry and the technology development therein. From cable television network, advanced technology has taken one to receipt of signals through satellite. He contended that cable TV operators generated substantial employment to persons apart from providing self-employment to several cable operators. Pointing out that though the quality of service and the number of channels offered in Cable TV might not be of high definition as in the case of DTH, yet, the ....
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....the decision reported in Kerala Hotel & Restaurant Association (supra), the Supreme Court observed "no economic measure has yet been devised, which is free from all discriminatory impact and in such a complex arena, when no perfect alternatives exist, the Court does well not to impose too vigorous a standard of criticism under the equal protection clause while reviewing fiscal enactments." 173. Given the wide variety of diverse economic criteria that go into the formulation of a fiscal policy and the wide latitude enjoyed by the legislature in the matter of selection of persons, subject-matter, events, etc. for taxation, the tests on the vice of discrimination in a taxing law are less rigorous - Federation of Hotel & Restaurant Association of India (supra). Even with the inherent complexity of the fiscal adjustment of diverse elements and a larger discretion recognised in the legislature to pick and choose objects of taxation, the Apex Court pointed out "The classification must be rational based on some qualities and characteristics which are to be found in all the persons grouped together and absent in the others left out of the class. But this alone is not sufficient. The diff....
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....evance to a luxury tax, as it is neither a property tax, nor an income tax but a tax on the provision for luxury. In case of tax on provision for luxury different aspects peculiar to the tax have to be borne in mind. ... What, exactly is meant by equality in taxation may have to be looked at from different angles in different kinds of taxes." While upholding Section 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972, levying luxury tax at flat rate on air-conditioned floor space in hotels and restaurants irrespective of locality, quality, standard, size of hotels and restaurants, the Apex Court held that the concept of equality has to be viewed in the context of distributive justice and perfect equality cannot be achieved in taxation. The Apex Court pointed out that the provisions of luxury tax, to be equal and uniform, has to be interpreted in the light of its characteristics. The Act requires luxury tax to be in proportion of or proportional to the air-conditioning spaces and it requires the tax to be uniform upon the same class of owners of air-conditioned hotels and restaurants, which means that all similarly situated owners shall be treated....
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....d out that as in the case of Entry 62 List II of VII Schedule to the Constitution of India, there is no instance in any of the legislative lists of a tax being leviable only with reference to the attribute. "If luxuries is understood as meaning something which is purely for enjoyment and beyond the necessities of life, there can be no doubt that entertainments, amusements, betting and gambling would come within such understanding." The Apex Court pointed out "the coupling of these entries under one head was not fortuitous but because of these common characteristics." 180. The Apex Court, in the above-said decision, pointed out to the distinct entries dealing with tax on a person or thing or activity and held that when the Entry lists the field of legislation as tax on activity, the taxable event is the activity itself and the subject matter of tax itself is the taxable event. Thus under Entry 62 List II of VII Schedule to the Constitution of India - Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling, the taxable event and the subject matter of tax are one and the same namely, luxury, entertainments, amusements, as the case may be. Comparing En....
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....eme Court considered the classification and the arbitrary treatment meted out by adopting different rate of tax based on language. Reiterating the principle that taxing laws must also pass the test of Article 14 of the Constitution of India and the taxing statute can pick and choose persons and articles to tax on, the Supreme Court held that classification must bear a nexus with the object sought to be achieved. The extent of reasonability of any taxation statute lies in its efficiency to achieve the object sought to be achieved by the statute; that the classification must not be arbitrary, artificial or evasive and there must be a reasonable, natural and substantial distinction in the nature of the class or classes upon which the law operates. Emphasizing the need for reading the taxation statute on the touchstone of social values as mentioned in the Constitution of India, the Supreme Court held that an adverse conclusion can be drawn when a taxation statute disturbs the social fabric. Thus, the Supreme Court held that having regard to the difference in the rate of tax, a classification made only on the basis of language without anything more, is ex facie arbitrary. The Supreme Co....
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....in Aashirwad Films (supra), the classification based just on language to impose a different rate of tax was held as ex facie arbitrary. When we look at the entertainment tax levied under the Act as a whole, we find from the definition of "entertainment" and the charging provisions, the various kinds of entertainments sought to be taxed, such as horse race, cinematographic exhibition to which persons are admitted on payment, television exhibition for which persons are required to make payment by way of contribution or subscription or installation or connection charges, amusements, recreation parlour, or direct to home services or cricket programme conducted by IPL. The incidence of tax on every form of entertainment is on the taxable event of entertainment. Hence, being different subjects of entertainment, this Court upheld the levy of tax on cable TV under separate charging Section 4-E as valid and not offensive of Article 14 of the Constitution. The classification based on geography, the nature of comfort offered and the place of entertainments thus were recognised, give a good rational basis for classification and the provisions made to tax theatres situate at different geographi....
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....eiterate the difference in technology and quality of presentation and the number of channels available. The pattern or content of entertainments remaining the same but under Sections 4-E and 4-I, we do not think, the mere choice of more number of channels, or finer picture quality, would, in any manner, bring about a difference in the entertainment content from the standpoint of the viewer. 187. We do not find any justifiable ground in the counter or in the arguments of the learned Senior Counsel appearing for the State or any rationality on the differential tax treatment meted out to DTH. The choice available to a viewer to go for more number of channels or the possibility of a recording facility or a payment facility, per se, are not legally sustainable grounds for this differentiation made by the Statute. 188. In this connection, the decision reported in P. Sankara Narayanan (supra) needs to be seen, wherein, this Court considered the differential tax treatment between films originally produced in Tamil and films originally produced in any other language, but subsequently dubbed in Tamil. This Court pointed out that from the point of view of a movie-goer, it makes no diffe....
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.... higher rate of tax adopted under Section 4-I of the Act, in any manner, does not advance any of those laudable objects of Part IV of the Constitution of India. The contention based on the reach of cable TV to distant remote villages does not appear to be a correct one, since, even as per the current policy of the Central Government, digitization of cable TV with the addressable system to have a better reach to the rural areas, has been made a mandatory requirement. Thus, looking at from the point of classification, the objects sought to be achieved, the rationality of such a classification and the nexus to the object sought to be achieved thus absent and writ with arbitrariness, there being no difference in the content of the entertainment offered in DTH from the one through cable television, we have no hesitation in agreeing with the contentions of the petitioners that apart from Section 4-I suffering from an inherent defect of not providing the chargeable event and the object of taxation, it also suffers from the vice of arbitrariness and hence, hit by Article 14 of the Constitution of India. Once there is a classification on the form of entertainment through television, there c....
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.... of one hundred free to air channels as basic service tier including the channels of Prasar Bharati. It is open to the subscriber to choose any combination of free to air channels upto one hundred channels, in lieu of the basic service tier offered by the multi-system operator on a minimum monthly subscription, not exceeding Rs. 100/- per subscriber. If a digital addressable cable TV subscriber subscribes to the pay channels, in a-la-carte or bouquet or a combination of a-la-carte and bouquet, with or without free to air channels, it shall be open to the multi-system operator to specify a minimum monthly subscription, not exceeding Rs. 150/-. 195. Referring to private DTH operators competing among themselves, the Explanatory Memorandum pointed out to the non-level playing field between the upcoming addressable systems vis-a-vis the incumbent analog systems and the need for regulating the tariff for addressable system. It pointed out that out of a single tariff framework, the different addressable systems can be accommodated with suitable provisions. Based on the information submitted by the stake-holders to TRAI, an analysis was carried out to assess the price at which broadcast....
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.... 235 Z Class Cities Rs. 139 171 198 214 [**] X class Cities covering Bangalore and Hyderabad, but excluding Metro cities as covered by CAS. Price for pay channels not separately fixed. But a composite of free and pay channels rates are fixed with minimum pay and free channels Free Channels plus Nos.20 30 plus 30 plus 30 plus 30 Pay channels [**] channels) Nos. Not fixed 20 30 45 >45 (60 channels) Metro Cities [*] Rs. 82 189 243 323 403 [*] X Class cities covering Chennai, New Delhi, Mumbai and Kolkata but excluding Hyderabad and Bangalore. [**] Pay Channels @ Rs. 5.35 per channel and @ Rs. 82 for 30 Nos. Of Free Channels as per Order No.5 of 2008, dated 26.12.2008, as amended. Hence, pay channels worked on the basis of mandated free and pay for Non-CAS area. 201. The contention of the petitioners herein is that the Central Authority treated cable TV Operator and a DTH provider alike in fixing the tariff with effect from 30.4.2010, i.e., for free channels, the minimum being fixed at Rs. 100/-; for pay channels it is at Rs. 150/-, be it a DTH or Cable TV. Thus, while the rate for ....
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.... cassette recorder or through cable television network was inserted, as a separate charging section distinct from Section 4 and was subsequently amended under Act 37 of 1994, effective from 1.9.1994. Section 4-E - Tax on television exhibition was inserted first under Amendment Act 37 of 1994 from 1.9.1994 with the object of levying tax on entertainment through cable television, but sought to levy tax at 40% of the amount collected by way of contribution or subscription or installation or connection charges or any other charges collected in any manner whatsoever for television exhibition. The rate of 40% was subsequently reduced to 20% from 1.4.1995 by Section 2 of the Amendment Act 21 of 1995. The provisions were further substituted by Amendment Act 38 of 1997, with effect from 1.4.1997 and again substituted under Act 18 of 2000, with effect from 12th June, 2000, enabling the local authorities to determine the rate of tax subject to the maximum rate prescribed in the table under the Section. The substitution with effect from 1.4.1997 prescribed the rates in the municipal areas, industrial townships, town panchayats and village panchayats. Thus, from a system of levy based on collec....
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....rs' premises without passing through an intermediary such as cable operator or any other distributor of TV channels. 207. Dealing with the general provisions relating to non-discrimination in interconnect agreements, in the Explanatory Memorandum annexed thereto, that the broadcaster shall provide, on request, signals of its TV channels on non-discriminatory terms to all distributors of TV channels which may include but not limited to cable TV operator, DTH multi-system operator, head-ends in the sky operator, it was pointed out that DTH platform would have to compete on the strength of the quality of service, tariffs and packaging of the TV channels and not on the content. The Authority viewed that being the most effective competitor for cable TV, the competition between cable TV and DTH would be enhanced if all the contents are available on both platforms. It pointed out that it would be illogical for a consumer to establish arrangements to view the differing content of the two platforms, when he has access to the entire content through the cable TV. Taking note of the interests of the consumers, it was viewed that all channels are to be available on all platforms on a non....
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....ition and Section 7 regarding the manner of payment of tax. If the State intended that Sections 4-E and 4-I are to act on different fields, then Section 4-I should have made a reference to this too, apart from Sections 4 and 7, in the non-obstante clause. The reason why Section 4-E has not been included as by way of a non-obstante clause has not been explained. Apparently, conscious of the content of entertainment under Section 4-E and Section 4-I being one and the same, there is a conscious omission to include Section 4-E in the non-obstante clause along with Sections 4 and 7 of the Act. As far as the consumer is concerned, what matters is the entertainment content and not the mode. The number of channels available also matters very little to a consumer, particularly in the context of the fact that be it a cable service or a DTH, there is a compulsion on the part of the DTH provider to give free channels too, apart from the choice of the channels that the consumer may pay for. Thus the parity of treatment and the content in each of the channels are from the broadcaster, who happens to be the same person in cable TV and DTH. 210. Learned senior counsel appearing for the State wa....
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....a tax on the enjoyment of certain types of benefits, facilities and advantages on which the legislature wishes to impose a curb. 212. The decision reported in Express Hotels (P.) Ltd. (supra) related to Gujarat Tax on Luxuries (Hotels and Lodging Houses) Act; Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act; Karnataka Tax on Luxuries (Hotels and Lodging Houses) Act and West Bengal Entertainments and Luxuries (Hotels & Restaurants) Tax Act. The decision reported in Elel Hotels & Investments Ltd. (supra) related to Hotel Receipts Ac, 1980 falling under Entry 82 List I of VII Schedule to the Constitution of India. The decision reported in East India Hotels (supra) related to Jammu & Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980. 213. In the light of the law declared in the decision reported in Spences Hotel (P.) Ltd. (supra), we do not think, the decisions in Elel Hotels & Investments Ltd. (supra) Federation of Hotel & Restaurant Association of India (supra) and East India Hotels (supra), relied on by the State, would be of any assistance to them. 214. In the decision reported in Godfrey Phillips India Ltd. (supra), the Apex Court considered the ....
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....e provisions as not violative of Article 14 of the Constitution of India. On the contention that the channels provided through DTH through the choice exercised by the customer is not available to the customers of cable TV and that the DTH is done by large industrial units, we do not find any logical reason in differentiating these two class, i.e., DTH and cable TV as a source of entertainment, for, entertainment is a pleasurable occupation of the senses, and that which occupies the attention agreeable to the viewer. 218. In the decision reported in Twyford Tea Co. Ltd. (supra), in paragraph 18 the Apex Court observed: "18. What is meant by the power to classify without unreasonably discriminating between persons similarly situated, has been stated in several other cases of this Court. The same applies when the Legislature reasonably applies a uniform rate after equalising matters between diversely situated persons. Simply stated the law is this: Differences in treatment must be capable of being reasonably explained in the light of the object for which the particular legislation is undertaken. This must be based on some reasonable distinction between the cases differentially t....
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....VII Schedule to the Constitution of India. However, considering the provisions of the Punjab Entertainment Duty Act, 1955, different from the Tamil Nadu Entertainments Tax Act, 1939, for the reasons already stated, on the wording of Section 4-I, we have no hesitation in rejecting the contention of the State and thereby allowing the contention of the petitioners. 222. As far as the decision of the Delhi High Court reported in Bharti Telemedia Ltd. (supra) is concerned, here again, the Delhi High Court considered that tax on service under Entry 92 C List I and Entry 62 List II of VII Schedule to the Constitution of India providing for taxing on luxury including tax on entertainment, amusements, betting and gambling operate on entirely different field and there is no overlapping in so far as two entries are concerned. The decision of the Delhi High Court thus rested on the terms of the charging Section under the Delhi Entertainments and Betting Tax Act. 223. As far as the decision of the Allahabad High Court dated 20.07.2012 made in Writ Tax No.1819 of 2009 Sun Direct TV (P.) Ltd. (supra) is concerned, the writ petitioners herein were also writ petitioners before the Allahabad H....
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....ng a satellite system by providing television signals direct to the subscriber's premises without passing through an intermediary such as cable operator, which makes the levy more akin to a service tax levy, which is beyond the competence of the State legislature to levy tax. The providing of machinery for recovery, or providing of the rate of tax and measure of tax cannot fill the vacuum seen in the charging Section by the absence of the taxable event and where the incidence of tax falls. Hence, we are constrained to hold that the charging provision under Section 4-I, insofar as it fails to prescribe the taxable event and where the incidence fall, fails in its purport and in the absence of an explicit charge laid in clear terms, the Section cannot be enforced. Even otherwise, the discrimination in the classification and the arbitrary character of the rate of tax levy therein are violative of Article 14 of the Constitution of India. Entry 62 List II of VII Schedule to the Constitution of India provides for levy of tax on entertainment as a concept, which is a general term and not a legal term. Hence, being a subject of pleasurable occupation of the senses, which occupies the at....
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....14, we allow W.P.Nos.25721, 27070 and 27071 of 2011 holding Section 4-I of the Tamil Nadu Entertainments Tax Act as unconstitutional. In the light of the above-said reasoning, we also allow W.P.No.27072 of 2011, filed for declaring the notice dated 11.11.2011 demanding the furnishing of security deposit of Rs. 46,50,000/- as perverse and arbitrary and without jurisdiction and also declare the proposition notice dated 14.11.2011, as without authority and jurisdiction. 231. For the reasons stated above and on the grounds stated above, particularly regarding the imperfection in the charging Section 4-I of the Tamil Nadu Entertainments Tax Act, and on the challenge made under Article 14, we allow W.P.Nos.25987 and 28978 of 2011. We however, reject the prayer made on Article 19(1)(a) and 19(1)(g) of the Constitution of India. As far as service tax levy is concerned, no serious argument or grievance was made in the course of the hearing of the writ petitions, even though separate writ petitions were filed. In the circumstances, W.P.Nos.25986 and 28979 of 2011 stand dismissed. 232. We also allow the W.P.Nos.25927 and 25873 of 2011 challenging the entertainment tax levy as in the cas....
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....the service tax provisions, it being within the ambit of State Legislative Authority. Drawing support from the decision of the Delhi High Court reported in Bharti Telemedia Ltd. (supra), the counter states that there is no constitutionality of taxing the service aspect under the Finance Act of 1994 read with Entry 92C List I of VII Schedule to the Constitution of India. 238. It may be seen that the petitioners, namely, Bharati Telemedia Limited and Bharat Business Channel, filed Writ Petitions before the Delhi High Court along with other Writ Petitioners herein. Dealing with the rival contentions, in the decision reported in Bharti Telemedia Ltd. (supra), the Delhi High Court stated as follows: "2. Mr Ganesh, senior advocate, appearing for Bharti Telemedia Ltd and Mr Aman Lekhi, senior advocate, appearing for Tata Sky Ltd and Bharat Business Channel Ltd, contented on behalf of the petitioners that the DTH service is a broadcasting service falling within the meaning of taxable service under section 65(105)(zk) of the Finance Act, 1994 and is amenable to service tax @10.33% on the gross amount paid by a subscriber for providing the DTH broadcasting service. The service tax is i....
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.... writ petition filed before this Court is concerned, the petitioners in W.P.Nos.25928, 25929 and 25872 of 2011, who have also challenged Section 4-I, stated in the affidavit in paragraph No.4, that the questions raised as to whether the activity of the petitioner would attract service tax liability and whether the levy by the State under the Tamil Nadu Entertainments Tax Act would amount to transgression of powers under Entry 62 List II of Seventh Schedule to the Constitution of India. When the contrary stand taken as regards the challenge on service tax was pointed out to the attention of the learned senior counsel, initially, we were informed that the petitioner had filed a Writ Petition before the Delhi High Court in July, 2012 questioning the levy of service tax. When the petitioner was asked to file an affidavit explaining their conduct in not disclosing the above-said facts of taking diametrically opposite stand from the one conceded before the Delhi High Court, the petitioner had filed an affidavit stating that realising that 88th Constitution Amendment introducing Entry 92C of List I of VII Schedule to the Constitution of India was not notified, the imposition of service ta....
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....igh Courts which had rejected the petitioners' cases, one of whom happens to be the present petitioner too. In the above-said background, when the petitioner was questioned as to the suppression of these material facts and the arguments advanced without even disclosing these facts and the contra stand taken, the petitioner sought to explain its stand that the issues raised before this Court and the Delhi High Court were not the same and that Entry 92C List I of VII Schedule to the Constitution of India had not been notified. Learned counsel submitted that the petitioner may even withdraw their appeal before this Court. The petitioner was directed to file an affidavit, explaining the conduct. Paragraph 3 of the affidavit shows the admitted factual position that before the Delhi High Court, they had not challenged the imposition of service tax and they had conceded that by virtue of Entry 92C List I of VII Schedule to the Constitution of India, the Union of India has the exclusive power to impose service tax. The affidavit states that the lapse in not specifically referring to the stand taken before the Delhi High Court was unintentional and bona fide. The petitioner further stat....
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....ent aspect; that DTH services, which are telecommunication services, have been brought under the ambit of broadcasting services and made liable for levy of service tax under Entry 92C List I (Union List) of the VII Schedule (Article 246 of the Constitution). "Thus the NCT of Delhi in colourable exercise of Legislative Power under Article 239 AA- clause 3(a) of the Constitution of India in enacting the Delhi Act No.2 of 2010 has played fraud so as to transgress its legislative limits and encroach upon the field exclusively within the domain of the Union Government." Further, the contention of the petitioner is that no State can levy entertainment tax on services covered under Section 65(15) of the Finance Act, 1994 and 2001, as amended from time to time in respect of the same taxable event, i.e., provision of broadcasting services just by describing these services as entertainment. 247. As already pointed out, one may note from the affidavit in the Writ Petition filed before the Delhi High Court that there is hardly any challenge made to the service tax provision. 248. As far as the second Writ Petition filed before the Delhi High Court is concerned, the same was filed before ....
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....we had already extracted in the preceding paragraph. The affidavit filed before this Court does not offer any convincing explanation as to the suppression of the facts regarding the admitted stand taken as stated in the judgment of the Delhi High Court and the stand taken now before this Court and the appeal filed before the Supreme Court questioning the correctness of the order of the Delhi High Court upholding the levy of Delhi Entertainments and Betting Tax Act. The grounds before this Court at page 11, while attacking the State legislative power to levy entertainment tax and overlapping of Entries in Lists II and I, questioned Section 4-I of the Act. The prayer contains a declaratory relief on Section 4-I of the Tamil Nadu Entertainments Tax Act as violative of Entry 62 List II of VII Schedule to the Constitution of India and hence, ultra vires and violative of Articles 14, 19(1)(g) and 265(1) of the Constitution of India and a declaratory prayer to declare Section 65(105)(zk) of the Finance Act, 1994 as ultra vires. The affidavit makes no mention about Entry 92C List I at all as the basis for the challenge. The petitioner, as a corporate entity, cannot plead ignorance of the s....