TaxTMI 
TaxTMI 
2013 (6) TMI 586
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....t 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 entertainment has its own limitations, as refer....
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....he 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 the Tamil Nadu Entertainments Tax Act, introduced und....
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.... 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 the Constitution of India, since the tax imposed has a d....
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....s 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) of Chapter V of the Finance Act of 1994. We must herein ....
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....nt 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 Constitution of India. Defending the provision introduced under Section 4-I....
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.... 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 Section 4-I of the Act is on the aspect of entertainment offered through the DTH ....
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....e 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 are same everywhere. There are a lot more programs that one can watch on DTH which can never....
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.... 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 recreation on the television screen through VCR or cable television network, started gaining momentum. This form of enterta....
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....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 now before this Court and Section 4-E of the Act "Tax on Cable Television" with the relevant amended definitions, need to be seen. Th....
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....culated 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: "Section 4-E: Tax on television exhibition.-- (1) Notwithstanding anything contained in Sections 4 and 7, there shall be levied and paid to the State Government a tax (....
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....tion 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 raised by the Cable TV operators and upheld the validity of Section 4-E of the Act, holding that Section 4-E was not offensive of Article 19(1)(a) and Article 14 of the Constitution of India. This Court re....
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.... 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 public interest. It is not a business carried on by the Government. The revenues collected by it by permitting advertisements are only intended to defray part of the huge expenditure the Government incurs on est....
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.... 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, as we have already seen, the incidence of a tax or the measure of a tax ought not to be confused with the subject matter of the tax." It pointed out "The charging section itself makes it clear that the levy is on entertai....
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....on 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 Pradesh High Court in W.P.No.1819 of 2009 etc. batch dated 20.07.2012 Sun Direct TV (P.) Ltd. (supra) almost on similar times as are now taken. Upholding the legislative competence of the State to levy entertainment tax on DTH und....
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..... 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 before us. 44. As far as the challenge on the Tamil Nadu Entertainments Tax Act is concerned, the question that arises for consideration in W.P.Nos.25721 and 27070 to 27072 of 2011 is as to whether the State has the competency ....
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.... 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 levy of entertainment tax is not different from what is considered for service tax, namely, the provision of service to the subscribers. Thus when Parliament has the exclusive power to levy tax with respect to service under Article 246(1....
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....ely, 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 consideration under Entry 62 List II of VII Schedule to the Constitution of India. In this, there is no overlapping of the subject essentially falling under Entry 62 List II of VII Schedule to the Constitution of India, as falling under En....
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...." 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 and not its ultimate economic result, has to be seen while considering a question of the nature raised herein. He pointed out that a transaction may involve two or more taxable events in its different aspects. The fact that there is an overlappin....
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....sion, 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 reason for moving this amendment is that I consider theatres, cinemas and dramatic performances to be very important modern means of promoting adult education. In our country, if we want to bring literacy to everybody, this entry should go to List III so that there can be c....
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....ith 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 could operate only in respect of matters theatres, dramatic performances and cinemas and not with respect to other forms of entertainments and amusements. It can, however, have no control or relevance to any other matter included in the general expression "entertainment". In the decision ....
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....or 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 viewers, without the communication network service of the respondents, no entertainments can be offered or provided to the subscribers and/or viewers. " 58. Thus after the law declared by the Supreme Court, we do not find any good reason to accept the petitioners' case. Merely becaus....
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....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 the case of duties of excise to preserve the authority of the State Legislature to levy a tax on the sale of goods. 63. Holding that every Entry in the Lists in the Seventh Schedule of the Constitution of India has to be given a schematic interpretation, in the decision reported in All India Feder....
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....eme 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 considered the question as to whether the expression 'income' could be taken as fitting in within a precise general formula. The question that arose for consideration was as to whether the imposition of tax under the head of capital gains by the Central Legislature was ultra vires and whether the i....
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....er 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 the particular statute. If we hold, as we are asked to do, that the meaning of the word "income" has become rigidly crystallized by reason of the judicial interpretation of that word appearing in the Income-tax Act then logically no enlargement of the scope of the Income-tax Act, by amendment or otherwise, will be p....
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....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 in the Lists, the Supreme Court held that certain Entries in List I involve a description, amounting it almost to a formal definition. But more often, there are most general names or general topics. When the enumeration is in general terms, one has to remember that the Entries are the fields under which laws are to be made and they a....
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.... 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 is clear that unless the expression used in the Entries enumerated has attained a legal meaning, words of general impact must have a wide application. Going by the observation of the Apex Court in the decision reported in Godfrey Phillips (I.) Ltd. (supra), we do not find any legal ground to restrict the meaning of "entertainment" as public ....
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.... 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 expression "entertainment" to public entertainment only and to treat entertainment content in DTH as in the nature of private entertainment, that it cannot be a subject matter of taxation under Entry 62 List II of VII Schedule to the Constitution of India. We hold that the Entry does not contain any such qualifying words to restrict the expression "entertai....
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....e 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 visible manifestation of the life of people. It must respond to the deep pulsation for changes from within. In the words of Justice Mathew, the generation of yesterday must know the needs of today. If yesterday is not to paralyse today, it seems best to permit each generation take care of itself - Paragraph 1563 -Justice Mathew. 85. Mr. Arvind P. Datar, lea....
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....rvice 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; hence, it is a tax on services. 88. Explaining what the aspect theory is, the Apex Court pointed out that Entry 60 List II of the VII Schedule to the Constitution of India is a tax on status and on the exercise of the activity, which is a service, service tax is leviable. Privilege of carrying on trade is not the same as the exercise of trade or profession ....
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....ing 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 case of Tata Sky Ltd. (supra). 94. Keeping the aspect theory in the background, as propounded by the Supreme Court in the decisions referred to above, as far as the pith and substance of entertainment tax on the entertainment content received through DTH is concerned, the levy herein is essentially one on the entertainment and not on the service of providing DTH. 95. ....
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....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 be applied must have a nexus to the taxable event of sale and not divorced from it ". 97. The decision referred to by the learned Senior Counsel does not, in any manner, assist the petitioner's case. Thus, when the levy operates in two different fields falling for consideration by reason of two different Entries, it is difficult to accept the case of the petitioner here....
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....s 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 Court had no occasion to consider the challenge, as had now been made. 101. In the decision reported in Purvi Communication (P.) Ltd. (supra), the Supreme Court considered the legislative competence of the State to levy tax on luxuries including taxes on entertainments, amusements, betting and gambling, falling under Entry 62 List II of VII Schedule to the Constitution of India, with re....
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....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 India, he pointed out that the levy under Section 4-I of the Act is effectively 39%, since it is on the gross charge, which included entertainment tax. When compared to the levy under Section 4-E of the Act, which, again, is exempted under G.O.Ms.No.34 dated 27.3.2008, the user of a DTH has to pay 39% towards tax. Referring to the TRAI recommendations to change over from analog system to addressable s....
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....] 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 classification and structure of levy under Section 4-I, as a class different from Section 4-E, has no rationality and nexus to the object of the Act. He further pointed out that the respondents have not denied even in their second counter affidavit that the standards of Tariff structure ordered by the Telecom Regulatory Authority of India, under several orders, maintain parity of the rate between the multi-channel telev....
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....ior 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 provision is not precise as it ought to be, it should be the endeavour of the Court to ascertain the intention of the legislature and go for a construction which would lean in favour of the constitutionality. Thus the imperfection in the drafted Section cannot be a ground for defeating the charge created under the amending provision. The rules of interpretation on a charging provision cannot be a different one from that....
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.... 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 19(1)(a) and Article 19(1)(g) of the Constitution of India. He further pointed out that the petitioners have not placed any material to substantiate their contention on the excessive nature of the rate of tax. 119. We have carefully considered the above submission in the background of the various decisions cited at the Bar. 120. As for the challenge made based on Article 19(1)(a) of the Constitution of India, we do not fin....
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....e 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 DTH) that the levy would amount to 39% of the collection, however, does not make the levy confiscatory or arbitrary to strike down the provision as violative of Article 19(1)(a) of the Constitution of India. 123. As already seen, the sum and substance of the levy of entertainment tax is on the entertainment. The tax can be imposed as either on the person entertained or the provider of an entertainment. The petitioner does not dispute....
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....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 of any express link between the subject of levy and the incidence to the measure of levy, the Section fails. While Section 3(3b) defining "entertainment" focuses itself on DTH service as an activity, Section 3(14) defining "entertainment" refers to DTH service, which is nothing but an activity. Given the fact that the subject matter of the levy under the Entertainments Tax Act is 'entertainment' only, the tax under Section 4-I of the A....
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....ied, 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 entertainment, which is the content derived through DTH. He referred to the intention of the legislature in enacting Section 4-I of the Act and looking at the body of the provision, there can be no doubt that the charge is on entertainment. Thus, the provisions are clear enough to reject the claim of the petitioners. In this connection, he placed reliance on the decisions reported in Gujarat Steel Tubes Mazdoor Sabha (supra), at paragraph 38 Hansa Corp....
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....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.) Ltd. (supra), the Supreme Court pointed out that what are taxed are the "entertainments", which is very much within the ambit of Entry 62 List II of Seventh Schedule to the Constitution of India. Observing that it is within the legislative competence of the State to choose the persons from whom the tax levied on entertainment is to be collected, the Supreme Court referred to the decision of the Constitution Bench reported in Western India Theatres Ltd. v.....
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....t 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 admissible in a taxing statute where you can simply adhere to the words of the statute. Viscount Simon quoted with approval a passage from Rowlatt, J. expressing the principle in the following words: In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. (at p. 635)"....
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.... 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 connection charges or any other charges collected in any manner whatsoever or an amusement or a recreation parlour where a game such as bowling, billiards, snooker or the like is provided or direct to home service or a cricket tournament conducted by the Indian Premier League." 138. As in Section 4-I, Section 4-E also begins with a non-obstante clause to exclude the operation of Sections 4 and 7 of the Act. Thus, Cable TV, being a television exhibition with the type of antenna wi....
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....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, subscription, installation or connection charges or any other charges collected in any manner whatsoever for entertainment through direct-to-home (DTH) broadcasting service or distribution of television signals and value-added services with the aid of any type of addressable system, which connects a television set, computer system at a residential or non-residential place of subscriber's premises, directly to the satellite or otherwise; Section 7. Tax on cable, video service and direct-....
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....ve 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 determine what would be taxed, but also the manner in which the tax may be imposed. This includes the machinery specified for recovery too. 145. None of the decisions relied on by the State relate to the issue relating to a charging provision in the taxing enactment. The intention of the legislature in a taxing statute is to be gathered from the language of the provisions and it is not possible to assume any intended charge and incidence of tax by the economic results sought to be obtained by enacting the prov....
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....irement 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 provide for all the components, namely, a taxable event, the taxable person, the rate and the measure of tax. If any one of these components is absent in the charging provision, then the charge fails. The use of the words in the Section that "there shall be levied and paid to the State Government", cannot be construed as referable to a charge created under the said provision to tax the entertainment. As had been held by the Supreme Court, 'levy' has to be construed as referable to the process of assessme....
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.... 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 terms that the Section is confusion-free in all its intent and purpose, to levy tax on the entertainment provided through DTH. 150. Touching on the role of headings to the Section, in the decision reported in Frick India Ltd. v. Union of India [1990] 1 SCC 400, the Apex Court held as follows: "8. It is well settled that the headings prefixed to sections or entries cannot control the plain words of the provision; they cannot also be referred to for the purpose of construing the provision when the words used in ....
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....ng 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 of tax is on the basis of charges recovered for providing entertainment. The provisions under the Punjab Entertainment Duty Act under Section 3(3C) reads as under: "(3C) Notwithstanding anything contained in this section, in the case of entertainment, provided with the aid of dish relating to direct-to-home television, the proprietor of such entertainment shall pay entertainment duty at the rate of 10 per cent of the charges, received by such proprietor from the subscriber. The entertainment duty shall be paid by the propr....
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....f 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 Haryana, Delhi, Uttar Pradesh and Madhya Pradesh High Courts, show a marked difference that while the Tamil Nadu Act stops with the measure of levy and the rate of tax and there is no chargeable event specified, the other States' enactments show the comprehensive definition on entertainment as well as the charging Section levying entertainment tax on entertainment through Direct to Home (DTH) made through cable television network or addressable system or otherwise. 156. Thus, with the total absence of a taxable event and the inci....
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....e 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 absence of a chargeable event being prescribed in the text of the Section. If heading alone would be sufficient to act as a charging provision, the Act could have stopped just with a heading alone with a table prescribing the rate of tax and the measure of tax. 159. In the light of the decision of the Apex Court referred to above, we reject the contention of the State that the principles of interpretation of a charging provision have to be the same as regards other provisions. 160. It is a matter of record that even prior to the introdu....
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....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 Express Hotels (P.) Ltd. (supra). Elel Hotels & Investments Ltd. (supra), he submitted that these decisions have no relevance in deciding the issue on entertainment tax and are distinguishable. He submitted that with all the technology difference, the tax is on entertainment. Thus, when the broadcasters and programmes are one and the same and subscribers are all similarly situated, as far as entertainment is concerned, the tariff order under TRAI treats them as forming one single class and there is no basis for classifying DTH with different rate structure. R....
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....ies 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 entertained, who takes the car inside the theatre and watches the film, AND NOT on the admission of the car or motor vehicle, learned senior counsel submitted that the pith and substance of the levy under DTH and cable TV being on one and the same entertainment, the differential treatment under Section 4-I of the Act is violative of Article 14; the theory propounded by the State on the ability to pay and the capacity to pay, fails. Thus the manifestly excessive rate of tax is also arbitrary and offensive of Article 14 of the Constitution of India. 167. Mr. C. Na....
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....e 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 target group, which are catered by the cable operators, cannot be, in any manner, ignored. The niche provided by channels through DTH is certainly not available in a cable TV system. Thus DTH is a class apart from the cable TV which are run by large industrial houses. DTH is capable of employing few, which reaches the consumers directly. The nature of competition between DTH and cable TV is totally different; so too the subscriber's capacity to subscribe to DTH is vastly different from persons who opt for cable TV. He further pointed out that the industry, t....
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.... 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 differentia must have a rational nexus with the object sought to be achieved by the law. ... The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience." 174. Thus, in the decision reported in S.K. Dutta, ITO v. Lawrence Singh Ingty AIR 1968 SC 658, the Apex Court held that a taxation law will be struck down as violative of Article 14 of the Constitution of India, if there is no reasonable basis behind the classification made by it or if the same class of property, similarly situ....
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....rd, 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 alike; the question that different proportions of air-conditioned spaces are used in different hotels and restaurants earning different proportions of income is also not relevant, as the tax is not based on use of the space. The kinds of air-conditioning or the implements used are also not relevant. It is a tax on the mere provision for luxury and not on the hotel property or equipments. Pointing out to the decision reported in East India Hotels Ltd. v. State of West Bengal AIR 1990 SC 2029 holding that taxable event need not necessarily be the actual utilisation and consumption o....
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...., 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 Entry 62 List II of VII Schedule to the Constitution of India with other Entries where the tax is on objects or person, the Apex Court pointed out in the context of the luxury tax, Entry 62 List II of VII Schedule to the Constitution of India does not permit the levy of tax on goods and articles and luxury refers to activities of indulgence, enjoyment or pleasure itself is the subject of taxation and the incidence of tax falls on the subject itself. 181. Thus, guided by the above two decisions, when the taxable event under the Act itself is the subject matter falling under the legislative E....
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....tificial 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 Court held "Different rates of entertainment tax had not been levied having regard to the nature of theatre, the area where they were situated or extent of occupancy, etc. ... Although the Legislature enjoys a greater freedom and latitude in choosing the person upon whom and suggest upon which it can levy tax, it is trite that taxing legislations are not immune from attack based on article 14." Pointing out that the State had not explained as to why the same theatre where films in different languages are exhibited would be a class apart, only because at different times it exhibits films from dif....
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.... 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 geographical locations classifying theatres into different classes and as semi-permanent, permanent, and touring and temporary theatres, alteration in the mode of levy as compounding system of levy of tax, on gross collection or per payment of admission was upheld by the Apex Court in the decisions reported in Venkateshwara Theatre v. State of Andhra Pradesh [1995] 96 STC 130 and Srinivasa Theatre v. Govt. of Tamil Nadu AIR 1992 SC 999. The Apex Court pointed out that there can be no dispute on the principle that it is for the legislature to decide the particular mode of levy to be adopted. However, as far a....
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.... 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 difference to him, whether a film, good, bad or indifferent, is made originally in Tamil or such a film made in any other language is subsequently dubbed in Tamil. This Court pointed out that in making the classification, there is no basis, far less any reasonable basis nor there is any nexus between the classification and object to be achieved. If the object is to discourage people from watching dubbed Tamil films mainly because such films are ordinarily produced by outside producers, such a provision cannot stand the test of Article 14 relating to equality, nor can it be construed as a reasonable restriction....
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....he 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 could be no further sub-classification on the basis of technology or in any manner of providing of the entertainment. 191. The issue on classification between State owned Television Channel and Cable TV was considered and rejected already by this Court in the unreported decision dated 30.11.1994 in the case of Tamil Nadu Cable T.V. Organisers (supra) in W.Ps.Nos.16237, 16517 and 16272 of 1994 etc.), and affirmed by the Apex Court in the decision reported in A. Suresh (supra). In the circumstances we do not find any ground to accept the plea of the petitioners as regards the allegation of discrimination on acc....
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...., 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 broadcasters provided TV channels to DTH operators. 196. The Explanatory Note was thus presented as treating the cable television network and DTH as pari-materia. Secondly, the intention of the Government of India to make it mandatory for cable operator to transmit/re-transmit programmes of every pay channel through addressable system in the metropolitan cities within six months from 15th January, 2003, which was subsequently amended. This led to the Government of India amending the Act to include in the expression "telecommunication services" the "broadcasting and cable services also". The Telecom Regulatory Authority of Indi....
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....nels 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 DTH remain as before, cable addressable system is now brought on par with DTH, learned Senior Counsel pointed out that the tariff arrived at by the Central Authority was the result of a consultation process among the various stakeholders. The equiry tariff maintained on the pricing of services show DTH and Cable TV operators have to be placed on the same level playing field by reason of the nature of services offered, being one and the same. 202. A reading of the documents in this regard, thus establishes that as far as the Telecommunication (Broadcasting and cable) Services Interconnection Regulation Act as well as the Tariff Order issued by the Telecom Regulatory Authority of India are concerned, no discrimination i....
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....stituted 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 collection by the Cable Operator made for each connection, the levy was substituted fixing the rate based on the geographical location on the entertainment offered. The definition of entertainment was amended to include 'cable television' under Section 3(2B). So too the definition of 'proprietor' under Section 3(9) and 'television exhibition' under Section 3(11). The present provisions under Section 4-I of the Act now seeks to treat DTH as a class by itself distinct from Cable TV. Admittedly, the entertainment through DTH is received through satellite; that the petitioners herein, who are limited companies, are awarded licence by the Government of India under Section 4 of the Indian Telegraph Act, 1885 and ....
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.... 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-discriminatory basis. This would promote competition amongst different platforms and thus would be beneficial to the consumers. 208. The petitioners have Signal Broadcasting Centres, which downlinks the signals from satellite and then uplinks to the designated transponders for transmission of signals in Ku band. The signals are received by the dish antennas installed at the subscribers' premises. The TV signals transmitted from the Broadcasting Centres are in encrypted format. They are decrypted/decoded by the set top box with the help of the viewing card inside the set top box for the customers to be able to view the service. To receive the entertainment through satellite, the subscribers have to pay monthly charges. Apart ....
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....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 was quick to point out that as the taxes are for raising revenue and for getting a better revenue, the State is entitled to treat the DTH as a class by itself. We do not think that raising revenue, per se, could be a good ground for differentiating Section 4I from Section 4-E of the Act. As already noted in the preceding paragraphs, the decision of the Apex Court reported in Spences Hotel (P.) Ltd. (supra) clearly points out that the question as to whether a particular tax is discriminatory or not must necessarily be considered in the light of the nature and incidence of the particular tax and cannot be judged by what has been held in the context of other taxes. The ability or capacity to pay, no doubt, has been regarded as a test in dete....
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....axation 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 above three decisions and clarified that as far as Luxury Tax on goods is concerned, the Supreme Court pointed out that given the language of Entry 62 List II of VII Schedule to the Constitution of India and the legislative history, it is held that Entry 62 List II of VII Schedule to the Constitution of India does not permit the levy of tax on goods or articles. The word "luxuries" in the entry refers to activities of indulgence, enjoyment or pleasure in that which is costly or which is generally recognised as being beyond the necessary requirements of an average member of society and not articles of luxury. Since the Act challenged before the Supreme Court sought to tax goods described as luxury goods and not any activity, the said Act must be....
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....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 treated. When differential treatment is not reasonably explained and justified the treatment is discriminatory. If different subjects are equally treated there must be some basis on which the differences have been equalised otherwise discrimination will be found. To be able to succeed in the charge of discrimination, a person must establish conclusively that persons equally circumstanced have been treated unequally and vice versa. However, in Khandige Sham Bhat v. Agricultural Income Tax Officer [1963] 3 SCR 809 at p. 817 it was observed: If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an adva....
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.... 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 High Court; so too before the Punjab and Haryana High Court. The questions raised before the Allahabad High Court and Uttaranchal High Court dated 26.7.2010 in the case of Tata Sky Ltd. (supra) related to the scope of Entry 62 List II and Entry 92C List I of VII Schedule to the Constitution of India and the validity of the charging provision. 224. As far as the decision of the Madhya Pradesh High Court vide Tata Sky Ltd. (supra) is concerned, the issue raised therein is also similar to what had been raised before the other High Courts and the upholding of the charging provision was based on the wordings of the Section of the State enactment. 225. We hold, in principle, that there could be a levy of entertainment tax on entertainment received through DTH services an....
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....erwise, 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 attention of the viewer agreeably, with common content of entertainment in cable TV and DTH service, we do not find any rationality in differentiating the self-same taxable event to a differential tax treatment; consequently, we uphold the contention of the petitioners that the classification and differential treatment in the tax structure is offensive of Article 14 of the Constitution. Hence, even though we have held that by reason of the imperfections pointed out as to the absence of chargeable event not being specified in explicit, unambiguous and clear terms in Section 4-I, the charge cannot be effectuated, yet, on the grounds of violation of Article 14 and the imperfection in the Section creating the impression as though the charge is in the nature of service tax and hen....
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.... 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 case of the above W.Ps. 233. This leaves us with yet another set of writ petitions. W.P.No.25928 of 2011 is filed by Bharati Telemedia Limited seeking to declare Section 65(105(zk) of the Finance Act, 1994 as ultra vires Entry 62 List II of Seventh Schedule to the Constitution of India and Articles 14, 19(1)(g) and 245 of the Constitution of India. 234. W.P.No.25929 of 2011 is also filed by M/s.Bharati Telemedia Limited seeking to declare Section 65(105)(zzzx) of the Finance Act, 1994 as ultra vires Entry 62 List II of Seventh Schedule to the Constitution of India and Articles 14, 19(1)(g) and 245 of the Constitution of India. 235. W.P.No.25872 of 2011 is filed by M/s.Bharat Business Channel seeking to declare Section 65 (105)(zk) read with Section 65(15) and Section 65(16) of the Fi....
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....ate, 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 imposed by the Finance Act, 1994 in exercise of Parliament's exclusive power to levy a tax on services under article 246(1) read with Entry 92C of List I of the VIIth Schedule to the Constitution of India. It was also contended on behalf of the petitioners that Parliament alone has the exclusive power to tax DTH services and that the States do not have any power to tax the said service by any name called. It is argued that the State legislature cannot, in the guise of imposing a tax on entertainments, in exercise of its powers under Entry 62 of List II of the VIIth Schedule to the Constitution, impose a tax on the DTH service. Consequently, it was submitted that the said Act, to the extent it attempts at encompassing DTH services within the ambit of entertainment tax, is unconstitutional. It is....
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....e 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 tax thus not valid, after obtaining advice from the senior counsels in Delhi, the petitioner has filed the Writ Petition in W.P.No.4302 of 2012 before the Delhi High Court also. Thus the petitioners made the plea that in the absence of Entry 92C List I of VII Schedule to the Constitution of India notified, the Union cannot impose service tax. Before this Court, the petitioner conceded that being a subject falling under Entry 62 List II of VII Schedule to the Constitution of India to tax entertainment, the exclusive power to tax entertainment rested with the State, and the Centre cannot levy service tax. As already seen from the extract from the judgment of the Delhi High Court, the petitioner conceded about its liability to service tax and all that it challenged was the levy of entertainment tax under the....
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....llenged 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 states that during the course of the arguments, earnest attempts were made by the petitioner to demonstrate the error in the judgments of the High Court and lapse was there in the affidavit in not specifically referring to the inconsistent stand and there was no intention to suppress the material. 245. It is a matter of record that the second Writ Petition in W.P.No.4302 of 2012 before the Delhi High Court, challenging the levy of service tax, was rejected by the Delhi High Court, by order dated 20th July, 2012, by referring to the earlier decision of the Delhi High Court as to the sustainability of service tax as well as entertainment tax and the decision of the Delhi High Court on the Delhi Entertainments and Betting Tax Act was challenged before the Supreme Court in Civil Appeal No.2147 of 2012 and the same i....
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....dcasting 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 the Delhi High Court on 18th July, 2012. Referring to the earlier decision of the Delhi High Court, the petitioner contended that once it is held that DTH service is taxable as entertainment, service tax cannot be levied and every aspect of the broadcasting was included under Entry 62 List II of VII Schedule to the Constitution of India. The affidavit contains the provisions of the Delhi Entertainments and Betting Tax Act. The petitioner states that even though the service tax levy was not the issue before the Delhi High Court and the petitioners were not heard on the issue whether service tax can be leviable when the entertainment tax is also levied, the Delhi High Court held that service tax is also leviable on the DTH. The petitioner takes the contention that service tax cannot be levied on DTH services, as the sa....
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....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 stand taken before the other High Court, conceding a particular position on its liability. When the petitioner had not disclosed the basis of the shift in the stand and the arguments were advanced without even making a reference about this, we can only record our displeasure at the attitude of the petitioner in going for forum shopping, taking different stands at different point of time before different Courts. Even though learned senior counsel appearing for the petitioners pointed out that the petitioners had, in fact, taken the question of levy of service in the first round of litigation itself, the observation of the Delhi High Court as to the admitted case of the petitioners that service tax is leviable, as recorded by the Delhi High Court may not be correct, we are not prepared to accept this plea when admittedly th....