TaxTMI 
TaxTMI 
2010 (7) TMI 946
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....providing "direct-to-home" (DTH) broadcasting service in India on March 15, 2001. In the aforesaid guidelines, the conditions of eligibility were also prescribed. 2. In so far as the procedural aspect of the matter is concerned, interested parties were to be required to submit an application to the Secretary, Ministry of Information and Broadcasting. If the applicant was found eligible (for setting up a "direct-to-home" (DTH) platform in India) on the basis of the information furnished, the applicant was to be subjected to security clearance (in consultation with the Ministry of Health Affairs), and to clearance for satellite use (in consultation with the Department of Space). If an applicant was successful in obtaining the aforesaid clearances, the applicant was to be required to pay an initial non-refundable entry fee of Rs. 10 crores to the Ministry of Information and Broadcasting. Only upon the payment of the aforesaid non-refundable entry fee, an applicant would become eligible for further consideration. Having followed the aforesaid procedure, an applicant would be informed of the intent of the Ministry of Information and Broadcasting to issue the licence sought by it. The....
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....titioner-company, it has been paying an annual fee equivalent to 10 per cent of its gross revenue (reflected in the audited accounts of the company for that particular financial year) within one month of the end of the year. The petitioner-company has also been paying additional licence fee and royalty for spectrum used as prescribed by the wireless planning and coordination authority under the Department of Telecommunications. 4. The "direct-to-home" (DTH) broadcasting licence granted to the petitioner, operationally extends to the entire country. It is the case of the petitioner, that the petitioner-company having complied with the formalities of procedure expressed above, is not required to obtain any other permission or to pay any further cess/duty at the hands of any other authority, for carrying out the "direct-to-home" (DTH) broadcasting service in India. 5. It would be pertinent to mention, that the "direct-to-home" (DTH) broadcasting service, is an important medium for information dissemination. The service facilitates dissemination of news, current affairs, sports events, educational programmes, programmes related to public health, employment opportunities, consumer....
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....to-home" (DTH) service under the Entertainments Act, 1979 was, not leviable. On the issue, it was sought to be pointed out, that the States of Karnataka and Maharashtra had carried out amendments in their respective enactments, so as to include the "direct-to-home" (DTH) service, within the meaning of the term "entertainment", and only thereafter, had commenced to charge entertainment tax on "direct-to-home" (DTH) service. It was pointed out, that the Uttarakhand Legislature had not carried out any such amendments in the Entertainments Act, 1979, so as to include "direct-to-home" (DTH) services, as amenable to entertainment tax under the provisions of the Entertainments Act, 1979. The claim of the petitioner-company therefore was, that entertainment tax could not be levied on it in terms of the existing provisions of the Entertainments Act, 1979. At the time when the aforesaid challenge was raised by the petitioner-company through Writ Petition (M/S) No. 2562 of 2007 Dish T.V. India Limited [2009] 26 VST 649 (Uttarakhand)) and Writ Petition (M/S) No. 353 of 2008 (Tata Sky [2009] 26 VST 649 (Uttarakhand)), the term "entertainment" was defined in section 2(g) of the Entertainments Ac....
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....the petitioner-company under the Entertainments Act, 1979, was impermissible in law. 10. This court, while disposing of Writ Petition (M/S) No. 353 of 2008 (Tata Sky Limited v. State of Uttarakhand [2009] 26 VST 649 (Uttarakhand)), distinguished "cable services" from "direct-to-home services" by holding, that the technology used in the latter envisaged transmission of electromagnetic waves through beams, whereas the technology used in the former involved transmission of electromagnetic waves through cables. On the basis of the aforesaid conclusion, this court held, that the action of the State of Uttarakhand in treating "direct-to-home" (DTH) service providers, at par with cable operators for levy of entertainment tax, was unjustified. 11. This court, despite having recorded the conclusion noticed in the foregoing paragraph, pointed out that it was open to the Uttarakhand Legislature to amend the existing provisions of the Entertainments Act, 1979, so as to include "direct-to-home" (DTH) services within the ambit of the provisions of the Entertainments Act so as to levy entertainment tax thereon; in the same manner as earlier amendments were introduced into the Entertainments....
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....VST 649 (Uttarakhand)), observed as under (pages 659-660 in 26 VST): ". . . However, this court is of the opinion that a harmonious construction needs to be adopted in interpreting the field of legislation mentioned in entry 62 of State List and entry 92C of the Union List. Merely for the reason that a service tax is payable by certain broadcasting service operators, it cannot be said that no entertainment tax can be levied by the State. . ." In its ultimate conclusion, while disposing of Writ Petition (M/S) No. 353 of 2008, on November 26, 2008 (Tata Sky Limited v. State of Uttarakhand [2009] 26 VST 649 (Uttarakhand)), this court recorded as under (page 660 in 26 VST): "For the reasons as discussed above, this court is of the view that though, there is legislative competence of the State to levy entertainment tax on the entertainment provided by the petitioners (broadcasting agencies) to its subscribers, but the same cannot be levied without there being specific provision in such local Act (U.P. Entertainments and Betting Tax Act, 1979). As such, the notices issued by the respondent-District Magistrate for recovery of ente....
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....ee with this view of the learned single judge because we ourselves are of the view, after going through all the provisions of the 1979 Act as it stood at the time the impugned judgment was delivered, that this Act did not contain any provision which authorized or permitted the imposition or levy of entertainment tax qua DTH service providers. . ." While dealing with the second issue adjudicated upon by the learned single judge, the Division Bench observed as under: "In so far as the second issue is concerned, we are firmly of the opinion that even though the Constitutional Scheme is clear that the levy and imposition of the entertainment tax as covered by entry 62 of the State List is clearly distinct than the levy and imposition of service tax as originating from entry 92C of the Union List, both the legislations operate in different, distinct and independent fields and therefore, both the Legislatures, the State Legislature as well as the Union Parliament were competent to legislate in their respective fields. In the present case, there was no occasion for the learned single judge to have gone into that aspect because of the fact that he had himself....
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.... and the judgment of the learned single judge impugned in these appeals as well as the judgment passed by us today shall not come in their way in doing so. However, we also do wish to observe that any challenge to the aforesaid Amendment Act shall be dealt with and decided on its own merits and in accordance with law." 15. Dissatisfied with the order dated March 23, 2009 passed by the Division Bench dismissing Special Appeal No. 21 of 2009 (State of Uttarakhand v. Tata Sky Limited-decided on March 23, 2009), the State of Uttarakhand preferred Petition for Special Leave to Appeal (Civil) No. 14605 of 2009 (State of Uttarakhand v. Tata Sky Limited) before the Supreme Court. The aforesaid petition for special leave to appeal was summarily dismissed by the apex court on July 16, 2009. 16. The first contention advanced by the learned counsel for the petitioners during the course of hearing of the instant writ petition was, that the Uttarakhand Legislature was incompetent to levy entertainment tax on "direct-to-home" (DTH) broadcasting service, inasmuch as, the authority to legislate on the aspect of "direct-to-home" (DTH) broadcasting service, as also, the authority to impose tax ....
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....owed the prescribed procedure, the petitioner-company was granted a statutory licence on March 24, 2006 under section 4 of the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 for operating "direct-to-home" (DTH) broadcasting services in India. During the process of being granted the aforesaid licence, the petitioner-company was required to deposit a sum of Rs. 10 crores to the Ministry of Information and Broadcasting as an initial non-refundable entry fee and to furnish a bank guarantee for an amount of Rs. 40 crores for the duration of the licence. Additionally, in terms of the licence the petitioner-company was required to pay an annual fee equivalent to 10 per cent of its gross revenue (reflected in the audited accounts of the company for the financial year) within one month of the end of the year. It is also submitted, that the petitioner-company was required to pay, in addition to the aforesaid licence fee, royalty for spectrum use at the rates prescribed by the wireless planning and coordination authority under the Department of Telecommunications. It is therefore contended, that the entire regulation of the "direct-to-home" (DTH) broadcasting service ....
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.... 'taxable service' means any service provided,- (zk) to a client, by a broadcasting agency or organization in relation to broadcasting, in any manner; ... And the term 'service provider' shall be construed accordingly;" Section 66(5) specifies the quantum of tax liability on a "service provider" providing broadcasting services. Section 66(5) is being reproduced hereunder: "66. Charge of service tax.-(5) With effect from the date notified under section 137 of the Finance Act, 2001, there shall be levied a service tax at the rate of five per cent of the value of the taxable services referred to in sub-clauses (za), (zb), (zc), (zd), (ze), (zf), (zg), (zh), (zi), (zj), (zk), (zl), (zm), (zn) and (zo) of clause (72) of section 65 and collected in such manner as may be prescribed." A perusal of the aforesaid provisions reveals, that for the first time under the Finance Act, 2001, tax at the rate of five per cent of the value of taxable services was levied on a broadcasting agency, (i.e., five per cent of the gross amount charged by the service provider). 19(ii). The term "broadcasting" was re-defined ....
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....ovider". Section 65(90)(zk) of the Finance Act, 2002 is reproduced hereunder: "65. Definitions.-In this Chapter, unless the context otherwise requires,- (90) 'taxable service' means any service provided,- (zk) to a client, by a broadcasting agency or organization in relation to broadcasting in any manner and, in the case of a broadcasting agency or organization, having its head office situated in any place outside India, includes service provided by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting broadcasting charges on behalf of the said agency or organization. Explanation.-For the removal of doubts, it is hereby declared that so long as the radio or television programme broadcast is received in India and intended for listening or viewing, as the case may be, by the public, such service shall be a taxable service in relation to broadcasting, even if the enc....
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....on 65(16). Section 65(16) of the Finance Act, 2003, is also being reproduced hereunder: "65. Definitions.-In this Chapter, unless the context otherwise requires,- (16) 'broadcasting agency or organization' means any agency or organization engaged in providing service in relation to broadcasting in any manner and, in the case of a broadcasting agency or organization, having its head office situated in any place outside India, includes its branch office or subsidiary or representative in India or any agent appointed in India or any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting the broadcasting charges on behalf of the said agency or organization;" Section 65(95) of the Finance Act, 2003, defines the term "service tax". Section 65(95) aforesaid is being reproduced hereunder: "65. Definitions.-In this Chapter, unless the context otherwise requires,- (95) 'service tax' means tax leviable under the provisions of this Chapter;....
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....vied on service providers rendering broadcasting services were enhanced from five per cent to six per cent of the value of taxable service, (i.e., eight per cent of the gross amount charged by the service provider) under the Finance Act, 2003. 19(iv). The provisions of the Finance Act, 2004 on the subject-matter of the controversy in hand were identical to the ones incorporated under the Finance Act, 2002, and as such, the relevant provisions of the Finance Act, 2004 are not being reproduced here. 19(v). In so far as the Finance Act, 2005 is concerned, it re-defined the term "broadcasting" under section 65(16). Section 65(16) of the Finance Act, 2005 is being reproduced hereunder: "65. Definitions.-In this Chapter, unless the context otherwise requires,- (15) 'broadcasting' has the meaning assigned to it in clause (c) of section 2 of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990 (25 of 1990) and also includes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing, as the case may be; and in the....
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....bsp; "65. Definitions.-In this Chapter, unless the context otherwise requires,- (105) 'taxable service' means any service provided,- (zk) to a client, by a broadcasting agency or organization in relation to broadcasting, in any manner and, in the case of a broadcasting agency or organization, having its head office situated in any place outside India, includes service provided by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting the broadcasting charges or permitting the rights to receive any form of communication like sign, signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means to cable operator, including multisystem operator or any other person on behalf of the said agency or organization. Explanation.-For the removal of doubts, it is hereby....
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....ter of laws made by Parliament and by the Legislatures of States.-(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as 'the Union List'). (2) Notwithstanding anything in clause (3), Parliament and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as 'the Concurrent List'). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as 'the State List'). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List." Having relied on article 246 of....
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....h respect to a matter enumerated in List II must supersede pro tanto the exercise of power of the State Legislature. 3. Both Parliament and the State Legislature have concurrent powers of legislation with respect to any of the matters enumerated in List III. ... 41. The words 'notwithstanding anything contained in clauses (2) and (3)' in article 246(1) and the words 'subject to clauses (1) and (2)' in article 246(3) lay down the principle of federal supremacy, viz., that in case of inevitable conflict between Union and State powers, the Union power as enumerated in List I shall prevail over the State power as enumerated in Lists II and III, and in case of overlapping between Lists II and III, the former shall prevail. But the principle of federal supremacy laid down in article 246 of the Constitution cannot be resorted to unless there is an 'irreconcilable' conflict between the entries in the Union and State Lists. In the case of a seeming conflict between the entries in the two Lists, the entries should be read together without giving a narrow and restricted sense to either of them. Secondly, an att....
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....ountries with federal structures such as the United States, Canada and Australia, the learned author opined: "The Lists contained in the Schedule VII to the Government of India Act, 1935, provided for distinct and separate fields of taxation and it is not without significance that the concurrent legislative List contains no entry relating to taxation but provides only for "fees" in respect of matters contained in the List but not including fees taken in any court. List I and List II of Schedule VII thus avoid overlapping powers of taxation and proceed on the basis of allocating adequate sources of taxation for the federation and the provinces, with the result that few problems of conflicting or competing taxing powers have arisen under the Government of India Act, 1935. This scheme of the legislative Lists as regards taxation has been taken over by the Constitution of India with like beneficial results." Accordingly, it is the vehement contention of the learned counsel for the petitioners, that the field levying tax in respect of "direct-to-home" (DTH) broadcasting services, must be deemed to vest exclusively in the Parliament. In view of the enactmen....
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.... find out, by applying the rule of pith and substance, whether that legislation falls within any of the entries in List II. If it does, no further question arises; the attack upon the ground of legislative competence shall fail. It cannot be that even in such a case, article 246(3) can be employed to invalidate the legislation on the ground of legislative incompetence of State Legislature. If, on the other hand, the State legislation in question is relatable to an entry in List III applying the rule of pith and substance, then also the legislation would be valid, subject to a Parliamentary enactment inconsistent with it, a situation dealt with by article 254. Any incidental trenching, as already pointed out, does not amount to encroaching upon the field reserved for Parliament, though as pointed out by T.L. Venkatarama Iyer, J. in A.S. Krishna v. State of Madras [1957] SCR 399; AIR 1957 SC 297, the extent of trenching beyond the competence of the legislating body may be an element in determining whether the legislation is colourable. No such question arises here." In addition to the aforesaid, reference has also been made to the decision rendered by the Supreme Court in State of....
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....ifferent taxable objects and taxable persons is not prohibited by the Constitution of India. The Bengal Amusements Tax Act, 1922 and the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 are two statutes which have been enacted under the same Legislature field, i.e., entry 62 of List II of the Seventh Schedule to the Constitution, and the two statutes apply admittedly to levy of tax on amusements, entertainments and luxuries in their respective area but the area of application of the said 1982 Act is different as would be evident from the provisions of the 1922 Act and the 1972 Act as aforesaid. The said 1982 Act was, for the first time, enacted by the State Legislature in 1982 and its area of application was initially confined to levy and collection of tax from the holders of television set or sets under section 4 of that Act. Thereafter, under section 4A of that Act, inserted by the West Bengal Taxation Laws (Second Amendment) Act, 1983, the area of its application was extended to levy and collection of tax from the holders of video cassette recorder. The purpose of sub-section (4a) of section 4A of the Act is to levy and collection of tax from any pe....
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....ce promised or paid in terms of agreements entered by and between them. This is clear from the below-set out terms of the franchise agreement: GRANT The NETWORK hereby grants to the FRANCHISEE and the FRANCHISEE accepts the right to receive signals through a feeder line for further instant transmission/communication in the TERRITORY on the terms and conditions set out in this agreement. PRICE The PRICE payable by the FRANCHISEE for access to the signals provided by the NETWORK shall be as follows: (a) Rs. 25 per subscriber per month to be paid before the 7th day of the month. (b) The FRANCHISEE will keep an interest-free deposit of Rs. 50 per subscriber with the network. (c) The price mentioned in (a) above is liable to change depending upon the market conditions and by mutual understanding between the parties of the area. TERMS AND CONDITIONS (a) The NETWORK shall not provide any connections direct-tohome in the territory where the FRANCHISEE is operating. (b) The FRANCHISEE would provide a list of subscribers within seven days of signing this agreement with full name, address and other information of relevance as required by the NETWORK. Subsequently....
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....see from the ultimate subscribers. Their franchisee, called as sub-cable operator under the said 1982 Act having no independent role to offer or provide entertainments to the subscribers inasmuch as franchisees 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. 39. In tax matters, the State Legislature is free to, if it has legislative competence, to choose the persons from whom the tax levied on entertainments is to be collected. In other words, what are taxed are the entertainments, which is very much within the ambit of entry 62 of List II of the Seventh Schedule. It is the respondents who as cable operator for the purpose of the said 1982 Act are engaged in the business of providing or offering entertainments which include showing of films, various serials, cricket matches and dramatic performances to the subscribers, a....
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....Thus, respondent 1 who is engaged in receiving and providing TV signals to individual cable operators is liable to pay tax under clause (ii) of sub-section (4a) of section 4A of the Act. From the definition of 'communication network' given in the agreement between the cable operator and sub-cable operator (termed as Franchisee in the agreement), it will be clear that the service rendered by respondent 1 is not restricted only to receiving signals but also extends to sending visual images and audio and other information by means of telecommunication network for presentation to members of the public. In the present case, respondent 1 sends visual images and audio signals for presentation to the individual subscribers at various homes through their feeder line, i.e., coaxial cable or any other device used for transmitting audio and visual signals in terms of clause 2 of the said agreement. The franchisee has access to the signals provided by respondent 1. Therefore, it cannot be disputed that the price or prices received or receivable by respondent 1 is the amount received or receivable by him for transmitting the signal for exhibition of any performance, film or any other pro....
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.... definition of the term "entertainment". As already noticed above, through the instant writ petition the petitioner-company has not assailed the amendment, whereby the definition of the term "entertainment" was widened so as to include "direct-to-home" (DTH) broadcasting services within its ambit. Thus viewed, the deficiencies in the Entertainments Act, 1979, to the effect, that there was no provision therein, whereby entertainment tax could be levied on "direct-to-home" (DTH) broadcasting service, stood remedied by an amendment made in the definition of the term "entertainment" under section 2(g) of the Entertainments Act, 1979 (which was notified on March 16, 2009). In carrying out the aforesaid exercise the Uttarakhand Legislature had abided by the advice and liberty tendered to it by this court. Thus, having made up the deficiency in the same manner as had been done by the States of Karnataka and Maharashtra by carrying out amendments in their respective enactments, it was, therefore, not open to the petitioner to re-agitate the matter, specially when, the petitioner's only objection stood dealt with and remedied by the amendment notified on March 16, 2009. But then, the pr....
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.... a State Legislature is on the "entertainment component" as the basis, as is the assertion of the learned counsel for the respondents, a different connotation to the issue would arise. In the aforesaid backdrop, levy of "entertainment" tax on "direct-to-home" (DTH) broadcasting services may well be legitimate and justified because entry 62 of the State List, contained in the Seventh Schedule to the Constitution of India, rests the jurisdiction and authority to levy tax on "entertainment" with the State Legislature. Entry 62 of the State List is being extracted hereunder: "62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling." During the course of hearing, we repeatedly asked the learned counsel for the petitioner-company, whether or not, the petitioner-company had assailed the validity of the inclusion of "direct-to-home" (DTH) broadcasting service, in the definition through the term "entertainment" under section 2(g) of the Entertainments Act, 1979 by an amendment carried out by the Uttarakhand Legislature and duly notified on March 16, 2009. In response, learned counsel acknowledged, that the definition of the t....
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....e instant aspect of the matter is concerned, inasmuch as, in State of West Bengal v. Purvi Communication P. Ltd. [2005] 140 STC 154 (SC); [2005] 4 RC 543; [2005] 3 SCC 711, while examining the legislative competence of a State Legislature to levy "entertainment" tax, under entry 62 of the State List, contained in the Seventh Schedule to the Constitution of India, on cable television network operators, it was held as under (page 173 in 140 STC): "36. Therefore, the respondents as a cable operator have direct and proximate nexus with the entertainments provided by them through their cable television network and, as such, they are the taxable person in respect of their gross receipts in relation to any month for providing entertainments to the individual viewers. Therefore, the respondents have a direct and proximate nexus with the entertainments presented to the viewers inasmuch as in terms of the respondent's agreement vide clause 4(d) 'Recording and then retransmission of the signals by the franchisee is not allowed'. That apart, the name of every subscriber having connection with the respondent's network must be on their records and the ....
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.... tax on "entertainment" (vide entry 62 of the State List, contained in the Seventh Schedule to the Constitution of India) rests with the State Legislatures. The regulation of "direct-to-home" (DTH) broadcasting as a "service" under the provisions of the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933, as also, the levy of tax on "direct-to-home" (DTH) broadcasting as a "service" under the provisions of the different Finance Acts relied upon by the petitioner-company, to our mind, will not have any effect on the legislative competence of State Legislature either to regulate or to levy tax on "direct-to-home" (DTH) broadcasting services as an "entertainment", under entries 33 and 62 of the State List, contained in the Seventh Schedule to the Constitution of India, respectively. To our mind, even the judgments relied upon by the learned counsel for the rival parties, lead to the same conclusion. In State of A.P. v. Mcdowell & Co. [1996] 3 SCC 709, it was held, that the sole exercise that needed to be carried out was to determine, whether the legislation under reference was within the scope of legislative competence of a State Legislature? According to the concl....
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....ercompany on Hoechst Pharmaceuticals Ltd.'s case [1984] 55 STC 1 (SC); [1985] 154 ITR 64 (SC); [1983] 4 SCC 45, is clearly misconceived, because the controversy in the instant case does not relate to an issue, the subjectmatter whereof needs to be reconciled on the basis of some seeming conflict between two overlapping entries-one in the Union List, and the other in the State List. The subject of "service" in entry 92C of the Union List, and the subject of "entertainment", contained in entry 62 of the State List, are separate and distinct subjects, with no overlapping or grey areas. For exactly the same reasons, the judgment in Godfrey Phillips India Ltd.'s case [2005] 139 STC 537 (SC); [2005] 4 RC 186; [2005] 2 SCC 515 relied upon by the learned counsel for the petitioner, has no relevance to controversy being adjudicated upon by us. We are satisfied, that the conclusion drawn by us hereinabove is also in consonance with the principles laid down in State of West Bengal's case [2005] 140 STC 154 (SC); [2005] 4 RC 543; [2005] 3 SCC 711. The petitioner-company having not contested the inclusion of "direct-to-home" (DTH) broadcasting service within the definition of the te....
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....ves to be made to entries 1, 2, 12, 13, 17, 22, 23, 24, 32, 33, 37 and 54 of the State List, contained in the Seventh Schedule to the Constitution of India. The aforesaid entries are being extracted hereunder for facility of reference: "1. Public order (but not including the use of any naval, military or Air force or any other armed force of the Union or of any other force subject to the control of the Union or of any contingent or unit thereof in aid of the civil power). 2. Police (including railway and village police) subject to the provisions of entry 2A of List I 12. Libraries, museums and other similar institutions controlled or financed by the State; ancient and historical monuments and records other than those declared by or under law made by Parliament to be of national importance. 13. Communications, that is to say, roads, bridges, ferries, and other means of communication not specified in List I; municipal tramways; ropeways; inland waterways and traffic thereon subject to the provisions of Lists I and III with regard to such waterways; vehicles other than mecha....
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....leaving no room for any overlapping or gray areas. In the third set, reference deserves to be made to entry 84 of the Union List, contained in the Seventh Schedule to the Constitution of India. Entry 84 of the Union List is being extracted hereunder: "84. Duties of excise on tobacco and other goods manufactured or produced in India except- (a) alcoholic liquors for human consumption; (b) Opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry." The aforesaid entry deserves to be compared with entry 51 of the State List, contained in the Seventh Schedule to the Constitution of India. Entry 51 of the State List is also being reproduced hereunder: "51. Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India:- (a) alcoholic liquors for human consumption; &n....
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....he subject of "entertainment" on "direct-to-home" (DTH) broadcasting service, independently of the tax levied by Parliament, is also in our considered view, legitimate and valid. 29. We have examined the first contention advanced by the learned counsel for the petitioner from a number of different angles and perspectives. As is apparent from the conclusions recorded hereinabove, we have not been able to accept the veracity of the first contention from any of the different view points. For the reasons recorded by us in the foregoing paragraphs, we find no merit in the first contention advanced by the learned counsel for the petitioner. 30. The second contention advanced by the learned counsel for the petitioners was, that legislative competence of a taxing statute has to be determined by keeping in mind the taxable event. If the taxable event falls within the legislative competence of the Legislature, which has enacted the same, it would be valid; otherwise not. In order to explain his point of view, it is submitted, that tax can be levied on a particular taxing event falling in particular taxing entry. The aforesaid submission, stated in other words would mean, that one taxin....
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....H) broadcasting services. 31. In order to repudiate the second contention advanced by the learned counsel for the petitioners, it is the submission of the learned counsel for the respondents, that the issue in hand has been incorrectly projected at the hands of the learned counsel for the petitioners. It is the assertion at the hands of the learned counsel for the respondents, that the amendments made in the Entertainments Act, 1979 do not, in any manner, transgress into the subject of "service", exclusively earmarked for the Parliament under the Union List, contained in the Seventh Schedule to the Constitution of India. In order to substantiate the instant contention, learned counsel for the respondents also placed reliance on another judgment rendered by the apex court in State of West Bengal v. Kesoram Industries Ltd. [2004] 266 ITR 721 (SC); [2004] 2 RC 298; [2004] 10 SCC 201, wherefrom our attention has been invited to the following observations (pages 751-754 in 266 ITR): "31. Article 245 of the Constitution is the fountain source of legislative power. It provides-subject to the provisions of this Constitution, Parliament may make laws for the w....
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....ered to be a distinct matter for purposes of legislative competence. There is a distinction made between general subjects of legislation and taxation. The general subjects of legislation are dealt with in one group of entries and power of taxation in a separate group. The power to tax cannot be deduced from a general legislative entry as an ancillary power. (4) The entries in the List being merely topics or fields of legislation, they must receive a liberal construction inspired by a broad and generous spirit and not in a narrow pedantic sense. The words and expressions employed in drafting the entries must be given the widest possible interpretation. This is because, to quote V. Ramaswami, J., the allocation of the subjects to the Lists is not by way of scientific or logical definition but by way of a mere simplex enumeratio of broad categories. A power to legislate as to the principal matter specifically mentioned in the entry shall also include within its expanse the legislations touching incidental and ancillary matters. (5) Where the legislative competence of the Legislature of any State is questioned on the ground that it encr....
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....or straitjacket formula. In this field the court should feel more inclined to give judicial deference to legislative judgment. Their Lordships quoted with approval the following statement of Frankfurter, J. in Morey v. Doud [1957] 354 US 457 (page 255 in 133 ITR): 'In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The Legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events, selflimitation can be seen to be the path to judicial wisdom and institutional prestige and stability.' Their Lordships further observed that the courts ought to adopt a pragmatic approach in solving problems rather than measuring the propositions by abstract symmetry. The exact wisdom and nice adaptations of remedies may not be possible. Even crudities and inequities have to be accommodated in compli....
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.... per T.V. set per month in the case of hotels and restaurants. The taxable event for levying "entertainment" tax, in our view, is based on the individual contracts executed by the petitioner-company with its customers, to whom it provides viewing channels through "direct-to-home" (DTH) broadcasting service. The instant aspect of the matter can be easily illustrated from the manner in which entertainment tax is imposed in cinema theatres. Each ticket which is sold, at the hands of a cinema theatre, has a component of entertainment tax. The same principle has obviously been followed for levying "entertainment" tax on "direct-tohome" (DTH) broadcasting service, under the impugned legislation. It, therefore, emerges that the taxing event for levying tax on "direct-tohome" (DTH) broadcasting services under the Entertainment Act is based on the contractual agreements executed with customers for transmitting TV channels to its customers. Providing T.V. channels to its customers, can certainly be described as a means of "entertainment", and as such, there can hardly be any cause to dispute the levy of "entertainment" tax on the same. It clearly emerges from the aforesaid analysis that the ....
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.... It, therefore, emerges that the taxing event for levying tax on "direct-tohome" (DTH) broadcasting services under the Entertainment Act is based on the contractual agreements executed with customers for transmitting TV channels to its customers. Providing T.V. channels to its customers, can certainly be described as a means of "entertainment", and as such, there can hardly be any cause to dispute the levy of "entertainment" tax on the same. It clearly emerges from the aforesaid analysis that the incidence of "service" tax and that of "entertainment" tax are separate and distinct. The contention advanced on behalf of the petitioner-company that the incidence of levy of the two taxes, i.e., "service tax" and "entertainment tax" as one, seems to have been wrongly drawn from the common terminology used in the provisions for levying both the said taxes. Thus viewed there is hardly any merit even in the second contention advanced by the learned counsel for the petitioner-company. The third contention advanced by the learned counsel for the petitioners was, that the substance of the contract in the present case, as is evident from the licence agreement dated March 24, 2006 entered into b....
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....x thereon. 34. In order to buttress the third submission advanced on behalf of the learned counsel for the petitioner, reliance has been placed on the judgment rendered by the Supreme Court in Gujarat Ambuja Cements Ltd. v. Union of India [2005] 1 VST 1 (SC); [2005] 274 ITR 194 (SC); [2005] 4 SCC 214 , wherein in (para 23 in SCC para 24 in VST), it has been held that (page 16 in 1 VST):- ". . . This mutual exclusivity which has been reflected in article 246(1) means that taxing entries must be construed so as to maintain exclusivity. Although generally speaking, a liberal interpretation must be given to taxing entries, this would not bring within its purview a tax on subject-matter which a fair reading of the entry does not cover. If in substance, the statute is not referable to a field given to the State, the court will not by any principle of interpretation allow a statute not covered by it to intrude upon this field." The apex court, also in the matter of Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 6 RC 276; [2006] 3 SCC 1, in (para 88 in SCC; ....
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....to the appellants, if a State Legislature had enacted a similar law, it would have been held to be within its competence under entry 62 of the State List, contained in the Seventh Schedule to the Constitution of India. It was then submitted, that recourse to the residuary power under article 248 read with entry 97 of the Union List should be the very last refuge and would be available if, and only if, the other entries in the State List and the Concurrent List did not cover the subject. The aforesaid contention was sought to be repudiated by the respondents by asserting, that if a subject is not shown to fall within the fields of legislation in the State List or the Concurrent List, no further inquiry was necessary, to support the legislative competence of the Parliament to legislate on the subject. It was pointed out, that since "expenditure" as a subject was not provided for in either the State List or in the Concurrent List, as such, there could be no dispute, that the Parliament could legislate thereon. It was further contended, that the measures adopted for the levy of the tax would not necessarily determine its essential character, and that, the object on which the "expenditu....
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.... example, encourage construction of 'janata' hotels rather than five star hotels. Such a tax may be on the person offering the luxury or the person enjoying it. It may be levied on the basis of the amount received for providing, or the amount paid for or expended for enjoying, the luxury. Conceivably, it could be on different bases altogether. The object of an expenditure tax-and, that, conceptually, there can be an expenditure tax is borne out by H.H. Prince Azam Jah Bahadur (Dead) v. Expenditure Tax Officer case [1972] 83 ITR 92 (SC); [1971] 3 SCC 621-is to discourage expenditure which the Legislature considers lavish or ostentatious. The object of the first would be to discourage certain types of living or enjoyment while that of the second would be to discourage people from incurring expenditure in unproductive or undesirable channels. If a general Expenditure-tax Act, like that of 1957, had been enacted, no challenge to its validity could have been raised because it incidentally levied the tax on expenditure incurred on luxuries. The fact that there will be some overlapping then or that here there is a good deal of such overlapping, because the States have chosen to ta....
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....subscribers' identification module) provided to customers by mobile cellular telephone companies was a "sale" or a "service" or both. The issue had come up for consideration before the Supreme Court on the basis of three judgments, the first rendered by the Allahabad High Court in Union of India v. State of U.P. [1999] 114 STC 288 (All), the second rendered by the Andhra Pradesh High Court in Union of India v. Secretary, Revenue Department (CT II), Government of Andhra Pradesh [1999] 113 STC 203 (AP) and the third rendered by the Punjab and Haryana High Court in Union of India v. State of Haryana [2001] 123 STC 539 (P&H), wherein it was held, that no component of sale was involved in providing SIM cards to customers. All the aforesaid three judgments came to be assailed before the apex court. The judgment rendered by the Supreme Court in the matter stands reported as State of Uttar Pradesh v. Union of India [2003] 130 STC 1 (SC); [2003] 3 SCC 239. Suffice it to notice that the judgments rendered by the High Courts, were set aside. Despite the aforesaid determination, on a similar matter which came up for consideration before the Kerala High Court in Escotal Mobile Communication....
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....spects' doctrine. That doctrine merely deals with legislative competence. As has been succinctly stated in Federation of Hotel & Restaurant Association of India v. Union of India [1989] 74 STC 102 (SC); [1989] 178 ITR 97 (SC); [1989] 3 SCC 634 (SCC pages 652-53, paras 30-31): '. . . subjects which in one aspect and for one purpose fall within the power of a particular Legislature may in another aspect and for another purpose fall within another legislative power'. They might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not detract from the distinctiveness of the aspects." A perusal of the aforesaid conclusion leads to the inference, that although tax could be levied, as a "service" on a mobile cellular telephone company for providing SIM cards to a customer, the question, whether sales tax could also be levied by the State Government, was a question of fact depending on whether a SIM card was a separate object of "sale", and in case the answer to the aforesaid factual aspect of the matter was in the....
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....tute, they can nonetheless be regarded sale for the purpose of that statute. In other words, it is possible, an activity may be service for purposes of one Act and sale for purposes of another Act. It may also be that in a given case, on the facts of that case, a particular activity can be treated as 'service' but in a different factsituation the same could be sale under the same statute. In Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1980] 45 STC 212 (SC); [1980] 2 SCC 167, the question that fell for consideration of the Constitution Bench of this court was, whether the service of meals to casual visitors in the restaurant was taxable as a 'sale', (i) when the charges were lump sum per meal, or (ii) when they were calculated per dish? It was held that in both the above situations it would be 'service'. On an application filed to review the said judgment while dismissing the review petition it was observed that the judgment had rested on the factual foundation and must be understood in that light. Rejecting the contention that the respondent therein as well as the States were apprehensive that the judgment would be invoked by the restauran....
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....f right to use the goods for the purpose of taxation under the relevant Sales Tax Act. Where, however, the supply of service as well as supply of goods are prominent objectives and they have been clubbed together under a composite contract, it would be possible to treat them separately; for example, where in a holiday package, transportation, boarding and lodging are separately treated, it would be possible to assess them separately, though covered under the same contract. ... 38. Having given our anxious consideration to the submissions made in regard to the composite contract of service of goods and the classification, above referred, we are of the view that they will not apply to the present case. Here the service of telephone connection cannot be artificially split into various categories-supply of instruments and accompaniment on the one hand and supply of telegraphic line/connection on the other, to name the former as 'sale' and the latter as 'service'. The analogy of composite contract will apply where 'sale' and 'service' are two different independent objects. 39. Inasmuch as we have ....
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....usive domain of State legislatures under entry 60 of the State List, contained in the Seventh Schedule of the Constitution of India. Entry 60 of the State List is being extracted hereunder:- "60. Taxes on professions, trades, callings and employments." It was submitted on behalf of the appellants before the Supreme Court, that there was no difference between tax on "profession" and tax on "service". It was asserted, that the term "profession" was synonymous with the term "service", and therefore, tax on "profession" would include tax on "service". It was cont ended that a "profession" cannot exist without "service", as "service" was the core of every profession. In fact, it was suggested, as noticed above, that the two words were interchangeable. Since tax on "profession" could only be levied by the State legislature, according to the appellants, there was no question of levying "service" tax on any "profession" through the Finance Act, 1998. The case sought to be set up by the appellants before the Supreme Court was, that there could not be a "profession" without "service", and therefore, "service" rendered by a professional to his client was nothing but "service" rendered a....
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....o words were interchangeable. Since tax on "profession" could only be levied by the State Legislature, according to the appellants, there was no question of levying "service" tax on any "profession" through the Finance Act, 1998. The case sought to be set up by the appellants before the Supreme Court was, that there could not be a "profession" without "service", and therefore, "service" rendered by a professional to his client was nothing but "service" rendered as a "professional". The argument thus sought to be advanced was, that since tax in the instant case was being levied on a "profession", it could only be levied by a State Legislature under entry 60 of the State List, contained in the Seventh Schedule to the Constitution of India. On the aforesaid analogy, it was asserted on behalf of the appellants, that the source of power could not be traced to entry 97 of the Union List, contained in the Seventh Schedule to the Constitution of India, so as to enable the Parliament to levy tax on a "profession" by treating it as "service". In other words, it was contended, that tax on "profession" under entry 60 of the State List, contained in the Seventh Schedule to the Constitution of I....
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....bove analysis shows that taxation is not intended to be compromised in the main subject in which an extended construction can be given as that test cannot be applied to taxation. Taxing entries are distinct entries. This distinction between the abovementioned two groups of entries is also manifest in the language of article 248 clauses (1) and (2) as also in the language of entry 97 in List I of the Seventh Schedule to the Constitution. (See M.P.V. Sundararamier & Co. v. State of A.P. [1958] 9 STC 298 (SC); AIR 1958 SC 468) (para 51 in AIR; page 340 in STC)." Having made the aforesaid distinction, the apex court, relying on a number of judgments, then recorded the following conclusion (pages 165 and 166 in 9 VST): "33. . . . we find that entry 60 of List II, mentions 'Taxes on professions, trades, callings and employments'. Entry 60 is a taxing entry. It is not a general entry. Therefore, we hold that tax on professions, etc., has to be read as a levy on professions, trades, callings, etc., as such. Therefore, entry 60 which refers to professions cannot be extended to include services. This is what is called as an aspect theory. If the argumen....
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....t accountant is his service provider. It is a tax on 'services'. The activity undertaken by the chartered accountant or cost accountant is similar to a saleable or marketable commodities produced by the assessee and cleared by the assessee for home consumption under the Central Excise Act. . ." While drawing the aforesaid conclusion, a clear distinction was drawn between two different aspects, i.e., 'professions' and 'services', whereupon in its ultimate analysis, it was held (page 174 in 9 VST): "52. For the above reasons, we find no merit in Civil Appeal No. 7128 of 2001 filed by All India Federation of Tax Practitioners. We hold that Parliament has legislative competence to levy service tax by way of the impugned Finance Act, 1994 and Finance (No. 2) Act, 1998 under entry 97 of List I on chartered accountants, cost accountants and architects. We further hold that the above position now stands fortified by the Constitution (Eighty-eighth Amendment) Act, 2003 which has inserted article 268A and entry 92C which clearly indicates that entry 60 of List II and entry 92C of List I operate in different spheres. However, we make it c....