TaxTMI 
TaxTMI 
2010 (8) TMI 878
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....erwise the State of Madhya Pradesh does not have any authority to impose entertainment tax on DTH broadcasting services provided in entry 92C of List I of the Seventh Schedule to the Constitution of India. The facts are being referred to from Writ Petition No. 10148 of 2009 (Tata Sky Limited v. State of M.P.). The petitioner/Tata Sky Limited is a service provider and the services are being taxed by the Central Government under the provisions of the Finance Act, 1994 and 2001 as amended time to time. The guidelines for obtaining licence for providing DTH broadcasting services in India referred to DTH distribution of multichannel programme in Ku band by using a satellite system by providing television signals direct to the subscriber's premises without passing through an intermediary such as cable operator. The Government of India grants licence to provide DTH services under section 4 of the Indian Telegraph Act, 1885 and the Indian Wireless Act, 1933. The DTH service is an important medium for information dissemination. It facilitates dissemination of news, current affairs, sports events, educational programme and the programme relating to public health, employment opportunitie....
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....e petitioner on a decision of the High Court of Patna in Sky Vision TV through its proprietor, Sanjay Lodha v. State of Bihar [1995] 2 BJLR 845, which has been affirmed by the apex court in special leave petition by a reasoned order. The provisions of Bihar Act and the Madhya Pradesh Act of 1936 are pari materia. The High Court of Uttrakhand in Dish T.V. India Limited v. State of Uttarakhand [2009] 26 VST 649 (Uttara) (Writ Petition (M/S) No. 2562 of 2007) has also quashed the levy of entertainment duty on DTH services without there being specific provision in the U.P. Entertainment & Betting Duty Act, 1979. The said decision was affirmed by a Division Bench in letters patent appeal and by the apex court in special leave petition. In other States like Maharashtra, Karnataka, Uttrakhand and Delhi, specific amendments have been made by the State Legislature to cover the DTH services under the Entertainment Tax Act. There is no specific amendment made in the M.P. Act of 1936 to levy entertainment duty on DTH services and the action is ultra vires of the Act. It is also submitted that no tax can be imposed by inference or assumption in absence of express provision. There is no specifi....
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....f the Seventh Schedule to the Constitution. It is further submitted by the respondents that the DTH services are amenable to entertainment duty under the M.P. Act of 1936. "Admission to entertainment" as defined in section 2(a) of the M.P. Act of 1936 covers admission to any place in which entertainment is held. Section 2(b) defines the term "entertainment". The DTH is clearly entertainment within the purview of the A.P. Act of 1936 where various packages for the customers are provided by the DTH operators at different prices. The M.P. Act of 1936 was amended time to time. In exercise of the power under section 3(1) of the M.P. Act of 1936, the Government has issued a notification dated May 5, 2008. The provisions of the M.P. Act of 1936 are applicable to the DTH services. The DTH services providers are subjected to levy of entertainment duty irrespective of levy of service tax in all other States. Prayer has been made by the respondents to dismiss the writ petitions. Shri H.S. Shrivastava and Shri Kishore Shrivastava, senior counsel, Shri D.K. Singh, Shri R.K. Asati, Shashank Verma, Shri Abhijeet Shrivastava, Shri S.S. Chauhan, Shri Pankaj Bhagat, Shri Rahul Diwakar, learned cou....
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....vision of entertainment. Service is composite and indivisible. If it is construed that subscribers are making payment towards "admission to entertainment" then entire payment so made by the subscribers has to be appropriated towards payment for "admission to entertainment" for the purpose of levy of entertainment tax and that when nothing would survive or remain of the said consideration for levy of service tax, in such a situation, the Central Government would be deprived of obtaining any tax whatsoever under the Finance Act, 1994. The power of Union has to prevail by virtue of articles 246(1) and 246(3) of the Constitution of India. The "aspect theory" will not be applicable to the transaction enabling the State to levy sales tax on the same transaction in respect of which the Government of India levies service tax. Reliance has been placed by the counsel for the petitioners on the decisions of the Supreme Court in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1 and Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes [2008] 12 VST 371 (SC); [2008] 2 SCC 614 and the other decisions to be re....
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....nment" is different from "broadcasting" and hence, tax events are wholly different and distinctly identifiable. Reliance has also been placed by the counsel for the respondents on "aspect theory" on a decision of the Supreme Court in Federation of Hotel & Restaurant Association of India v. Union of India [1989] 74 STC 102 (SC); [1989] 3 SCC 634. There is no overlapping in law; pith and substance of both cannot be considered to be the same. It was further contended by the counsel for respondents that "entertainment" and "service" are not mutually exclusive as "goods" and "service". The submission that tax is being levied twice on the same amount is wholly bereft of legal force. There is no bar to double taxation. The essential ingredients are available for imposition of tax under the M.P. Act of 1936 hence, levy of entertainment tax cannot be said to be ultra vires or entrenching upon the power of the Union. First we consider the submission whether there is no specific charge in M.P. Act of 1936 hence, the State Government has no power to levy entertainment tax. Section 2(b) of the M.P. Act of 1936 defines "entertainment" thus: "'Entertainment' includes any exhibition, ....
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.... "payment for admission" includes any payment made for the loan or use of any instrument or contrivance which enables a person to get a normal or better view or hearing or enjoyment of entertainment, which without the aid of such instrument or contrivance, such person would not get. Section 2(d)(iv) provides that any payment made by a person by way of contribution or subscription or installation and connection charges or any other charges, by whatever name called, for providing access to any entertainment whether for a specific period or on a continuous basis, is "payment for admission". Explanation I to section 2(d) also makes it clear that any subscription raised or donation collected in connection with an entertainment in any form shall be deemed to be "payment for admission". Explanation II to section 2(d) provides that where entertainment is provided as part of any service by any person, whether forming an integral part of such service or otherwise the charges received by such person for providing the service shall be deemed to include charges for providing entertainment or access to entertainment also. Section 3(1)(a) was substituted by M.P. Act No. 34 of 1983. The Act has b....
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....not "entertainment". In our opinion, "entertainment" has been used in wide sense under the M.P. Act of 1936 so as to include within its ambit entertainment of any kind. The broadcaster may also provide for entertainment. The apex court has considered the meaning of word "entertainment" in Geeta Enterprises v. State of U.P. [1983] 4 SCC 202. The concept of "entertainment" which their Lordships considered has been discussed thus: "4. The crux of the matter is as to whether or not the show, the details of which have been described above falls within the four corners of the expression 'entertainment'. Sub-section (3) of section 2 of the Act may be extracted thus: 'Entertainment' includes any exhibitional, performance, amusement, game or sport to which persons are admitted for payment." The correct meaning and import of the word "entertainment" has been considered by their Lordships thus: "6. Before explaining the section we would like to ascertain the correct meaning and import of the word 'entertainment' (which is neither a scientific nor a technical term) as used in the popular sense or as understood in common parlance. This was held by this court in the ....
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....asure afforded to the mind by anything interesting, amusement, other performance intended to amuse." The apex court in Geeta Enterprises v. State of U.P. [1983] 4 SCC 202 also considered the question that even if admission fee is not paid by the viewer seeing the video, the operator of the video has to pay 50 paisa per 30 second for playing game, etc., and it can be paid by interested spectator. In State of West Bengal v. Purvi Communication P. Ltd. [2005] 140 STC 154 (SC); [2005] 4 RC 543; [2005] 3 SCC 711, the question came up for consideration before their Lordships whether the respondents, as a cable operator, for the purpose of levy and collection of tax under sub-section (4a) of section 4A of the West Bengal Entertainment-cum-Amusement Tax Act, 1982 (6 of 1982) have direct and close nexus with the entertainments made available to the viewer through their cable television network. Their Lordships held that the performance, film or programmes shown to the viewers through the cable television network come within the meaning of entertainment and, therefore, within the legislative competence of the State Legislature under entry 62 of List II of the Seventh Schedule to the Consti....
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....y sending or transmitting such visual or audio visual signals by coaxial cable, to subscribers' homes through their various franchise. It has been made possible for the individual subscribers to choose the desired channels on their individual T.V. sets because of cable television technology of the respondents and of sending the visual or audio visual signals to sub-cable operators, and instantly re-transmitting such signals to individual subscribers for entertaining them through their franchise. The respondents' act is, no doubt, an act of offering entertainment to the subscribers and/or viewers. The respondent is very much directly and closely involved in the act of offering or providing entertainment to subscribers who are on his record. For the fact of offering or providing entertainment to the subscribers and/or viewers, the respondents receive charges, which are realised or collected by their franchisee 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 netwo....
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..... 1 is the amount received or receivable by him for transmitting the signal for exhibition of any performance, film or any other programme telecast and the aggregate of such prices or amounts is the gross receipt of respondent No. 1 in relation to any month or part thereof. 43. Who will be considered the giver of the entertainment-the cable operator or the sub-cable operator? . . . 46. In this context, it is important to refer to the case of Express Hotels Private Ltd. v. State of Gujarat reported in [1989] 74 STC 157 (SC); [1989] 178 ITR 151 (SC); [1989] 3 SCC 677 in which the Constitution Bench had dealt elaborately with Western India Theatres Ltd case [1959] Supp. 2 SCR 63. In the said case, with reference to entry 50 in Schedule VII of the Government of India Act, 1935, which is identical to entry 62, contention was raised that levy with respect to luxuries, entertainments or amusements can be made on person's receiving such luxuries or entertainment and that there can be no levy of tax on those who are givers or providers of such luxuries, entertainments, etc. While rejecting such a contention that it is only the receivers who can be taxed and not the giver, the learned....
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....whether for a specific period or on a continuous basis is "payment for admission". Thus, the payment made by way of contribution or subscription or installation and connection charges or any other charges for providing access to any entertainment is also covered under "payment for admission" and DTH services, in our opinion, clearly provide "entertainment" and comes within the definition of sections 2(b) and 2(d) and amended section 3 which provides every proprietor of an "entertainment" has to make the payment of "entertainment" duty. The word "cinema" which was used earlier has been substituted by the word "entertainment" by Amending Act No. 9 of 2003. The decision in the case of Sky Vision TV v. State of Bihar [1995] 2 BJLR 845, is distinguishable and in our opinion under the M.P. Act of 1936, the "entertainment" provided by the DTH service provider is clearly covered within the purview of its provisions. In Sky Vision TV v. State of Bihar [1995] 2 BJLR 845, interference was made mainly on the basis that the tax was sought to be imposed by executive action and it was not covered under the Act. A single Bench decision was affirmed by a Division Bench and by the apex court by di....
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....ds to levy tax on "entertainment". Thus, it is not necessary to insert specifically every time when "entertainment" is provided by some new device. The amendments effected in 1999 and 2003 are enough to cover "entertainment" provided by the DTH services. It was also contended by counsel for the petitioners that no tax can be imposed by inference or assumption in absence of express provision. It was also submitted by them that section 3 of the M.P. Act does not mention DTH services hence, in absence of specific charging section, no tax can be imposed by inference or assumption as laid down 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 in which the apex court has observed that taxing statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything, which is not expressed. Before taxing any person, it must be shown that he falls within the ambit of charging section by clear words used in the section and if the words are ambiguous and open to two interpretations, the benefit of interpretation is gi....
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.... Excise Act, 1944 is a charging section which creates liability to pay excise duty on the goods produced or manufactured in India and the said sub-section clearly indicates the nature and character of the duty, namely, that it is a tax on production and manufacture of goods, while section 4 is in the nature of machinery provision and, therefore, anything said therein must be read so as to carry out the basic concept of excise duty. In Bhagatram Rajeev Kumar v. Commissioner of Sales Tax, Madhya Pradesh [1995] 96 STC 654 (SC); [1995] 1 Supp SCC 673, the apex court has laid down that charge and incidence of tax is different from realisation of it. The apex court has held thus (pages 656 and 658 in 94 STC): "3. The levy was described in substance to be purchase tax leviable under the Sales Tax Act. But it appears to have been prompted by the latter part of the section which identifies the person who shall be responsible for paying the tax. The section is in two parts-one, levying the tax and other fixing the person from whom it shall be realised. The latter is more a part of machinery provision. It cannot control the main or the substantive part of the section. The taxable event is t....
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....nts was thus allowed by the Tribunal by the order under challenge. 8. A perusal of the definition clause and Explanation 1 shows that there is no ambiguity in them. The requirements of the Explanation are clear enough. Not providing any pro forma for declaring particulars under the Explanation would neither make it vague nor unworkable for want of any machinery provision. It cannot be disputed that a prescribed pro forma would have been appropriate but absence of a pro forma for making the required declaration would not warrant suspension of the said Explanation. We find no substance in the reasoning of the Tribunal and, therefore, set aside the finding of the Tribunal in regard to Explanation 1." In Mahim Patram Private Ltd. v. Union of India [2007] 6 VST 248 (SC); [2007] 3 SCC 668, the apex court has laid down that failure to make rules for valuation of a type of asset cannot therefore affect the vires of section 7. The apex court has held thus (pages 261 and 262 in 6 VST): "28. In Sudhir Chandra Nawn v. Wealth-tax Officer [1968] 69 ITR 897 (SC); [1969] 1 SCR 108, this court rejected the contention that section 7(1) of the Wealth-tax Act was unconstitutional as no rules had be....
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....vices whereas cable operator, cable services, cable television network and subscriber have been defined by inserting amending section 2(aaa). Similarly, section 3B was also inserted. In this regard, reliance has been placed by the counsel for the petitioners on the decisions of the apex court in Commissioner of Income-tax v. McDowell & Company Limited reported in [2009] 314 ITR 177 (SC); [2009] 10 SCC 755, Mathuram Agrawal v. State of Madhya Pradesh [1999] 8 SCC 667, Housing Board of Haryana v. Haryana Housing Board Employees' Union [1996] 1 SCC 95 and Amar Chandra Chakraborty v. Collector of Excise, Government of Tripura [1972] 2 SCC 442. In Commissioner of Income-tax v. McDowell & Company Limited [2009] 314 ITR 177 (SC); [2009] 10 SCC 755, the apex court has considered the rule of ejusdem generis and has held that it applies when statute contains an enumeration of specific word which constitutes a class or category which is not exhausted by enumeration, the general terms follow enumeration and there is no indication of a different legislative intent. The general words are construed as limited to things of the same kind as those specified. In Mathuram Agrawal v. State of Mad....
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....nd article 14 of the Constitution. It was contended by Shri Sen that the only way in which section 43 can be saved from the challenge of arbitrariness is to construe the expression 'any cause other than' in section 43(1) ejusdem generis with the causes specified in clauses (a) to (g) of section 42(1). We do not agree with this submission. The ejusdem generis rule strives to reconcile the incompatibility between specific and general words. This doctrine applies when (i) the statute contains an enumeration of specific words; (ii) the subjects of the enumeration constitute a class or category; (iii) that class or category is not exhausted by the enumeration; (iv) the general term follows the enumeration and (v) there is no indication of a different legislative intent. In the present case it is not easy to construe the various clauses of section 42 as constituting one category or class. But that apart, the very language of the two sections and the objects intended respectively to be achieved by them also negative any intention of the Legislature to attract the rule of ejusdem generis." In the instant case, it cannot be said that the definition contained in section 2(aaa) of....
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....uction of taxation entry which may lead to overlapping must be eschewed. The apex court has laid down thus (pages 559 and 560 in 139 STC): "44. The Indian Constitution is unique in that it contains an exhaustive enumeration and division of legislative powers of taxation between the Centre and the States. This mutual exclusivity is reflected in article 246(1) and has been noted in H.M. Seervai's Constitutional Law of India, Fourth Edition, Volume 1, at page 166, in paragraphs 1A, 25 where, after commenting on the problems created by the overlapping powers of taxation provided for in other countries with federal structures such as the United States, Canada and Australia, the learned author opined: 'The Lists contained in the Schedule VII to the G.I. Act, 35, 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 the Seventh Schedule thus avoid overlapping powers of taxation and proceed on the basis of allocating adequate sources o....
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....es not ipso facto trench upon regulation, development or control of the subject the power of legislation in respect whereof has been conferred on Parliament. In our opinion, there is no entrenching upon the power of the Union by the M.P. Act of 1936 and by bringing the DTH services within the purview of section 65(105)(zk) of the Finance Act, 2001, what is taxed by the Union is "broadcasting service" and not "entertainment" and under entry 62 of List II of the Seventh Schedule to the Constitution, the M.P. Act of 1936 imposes a tax on "entertainment". Both the provisions have their independent existence. Thus, it cannot be said that the field of "entertainment" is occupied by the aforesaid provision of the Finance Act, 2001. It was also submitted by counsel appearing for the petitioners that the predominant element and intention in the licence granted to a DTH operator under section 4 of the Indian Telegraph Act, 1885 is one of "service" and not of "entertainment". Reliance has been placed by the counsel for petitioners on a decision of the apex court in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC....
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....thing is paid towards "admission to entertainment". The aforesaid submission has no legs to stand as 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 has laid down that merely because quantum of coal/mineral produced and dispatched from the land is a factor taken into consideration for determining the value of the land, it does not become a tax on coal or mineral. The quantification of levy by reference to quantity of brick earth dispatched is a methodology adopted for the purpose of finding the quantity of brick earth removed from the land. It has a definite and direct co-relation with the land and hence, the cesses are valid as tax on land under entry 49of List II of the Seventh Schedule to the Constitution. The apex court has held thus (pages 801 and 802 in 266 ITR): "As a tax the impugned levy of cess is clearly covered by entry 5 of List II (as the High Court has held, and we add) read with entries 49, 50 and 66 of List II. There is no challenge to the declaration of the area as a special development area and the constitution of Special Area Development Authority for the administration thereof. In o....
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....vy a duty or cess upon tea or tea leaves for the purpose of that Act, can in no manner deprive the State Legislature of its power to tax the land comprised in tea estate. The "aspect theory" came to be considered by the apex court 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, wherein the apex court has observed arguendo assuming that the tax events are treated as conjoint or same or even otherwise, the "aspect theory" establishes that tax can be levied. The apex court in the context of imposing tax on luxuries or on the price paid for goods has further laid down that there might be overlapping but overlapping must be in the law. The same transaction may; involve two or more taxable events in its different aspect. The apex court has held thus (pages 119, 120, 121, 123, 125, 135, 143 and 145 in 74 STC): "29. The position in the present case assumes a slightly different complexion. It is not any part of the petitioners' case that 'expenditure-tax' is one of the taxes within the States' power or that it is a forbidden field for the Union Parliament. On the contrary, it is no....
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....e "matter" is but with what it "comes within" . . .'(page 115) '. . . it applies where some of the constitutive elements about whose combination the statute is concerned (that is, they are its "matter"), are a kind most often met with in connection with one class of subjects and others are of a kind mostly dealt with in connection with another. As in the case of a pocket gadget compactly assembling knife blade, screwdriver, fish-scaler, nailfile, etc., a description of it must mention everything but in characterizing it the particular use proposed to be made of it determines what it is.' (page 116) '. . . I pause to comment on certain correlations of operative incompatibility and the "aspect" doctrine. Both grapple with the issues arising from the composite nature of a statute, one as regards the precursory impact of federal law on provincial measures bearing on constituents of federally regulated conduct, the other to identify what parts of the whole making up a "matter" bring it within a class of subjects . . .' (page 117) . . . 37. It is trite that the true nature and character of the legislation must be determined with reference to the question of the po....
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....ng high rents and providing various types of facilities, amenities and conveniences such as telephone, television, air-conditioner, etc. The decision of this Court in Abdul Kadir v. State of Kerala [1976] 2 SCR 690, and in particular, the discussion at pages 699 to 701 places this beyond all doubt. This aspect has also been discussed by Thakkar, J., of the Gujarat High Court (as his Lordship then was) in the judgment under appeal and I am in agreement with his reasonings and conclusion that the Gujarat statute has been validly enacted in exercise of the powers available to the State Legislatures under entry 62 of List II. This applies equally to the other impugned State enactments as well. . . . 84. . . . In other words, there could be two enactments 'each, in one aspect, conferring the power to impose a tax upon goods'. The legislation was held not to be vitiated merely because there was an element of overlapping in that both excise duty and sales tax became leviable on the same assessee in respect of the same goods and by reference to the same sale price when the first sale after manufacture occurs, one by reference to the 'manufacture' aspect and the other by r....