TaxTMI 
TaxTMI 
2015 (2) TMI 1043
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....notices calling upon them to deposit entertainment tax and to show cause why action should not be taken against them. 2. This judgment shall dispose of all the writ petitions as all the petitions involve common question. We refer to the facts in W. P. (T) No. 909 of 2013 where the writ petitioner is Tata Sky Limited. 3. Averments in the writ petition:- The petitioner is a company registered under the Companies Act, 1956. It provides DTH broadcasting services to the subscribers across the country. The Government of India has granted licence to the petitioner under section 4 of the Indian Telegraph Act, 1885 and under section 5 of the Indian Wireless Telegraphy Act, 1933 on the terms and conditions contained in the licence agreement for a period of ten years. The petitioner has paid Rs. 10 crores as licence fee and has also furnished a bank guarantee of Rs. 40 crores (Rs. 40,00,00,000) to the Ministry of Information and Broadcasting as security which is valid for the entire period of the licence. The terms in the licence further provide for payment of annual fee equivalent to 10 per cent. of its gross revenue as reflected in the audited accounts of the company f....
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....purview of service tax with effect from June 16, 2005 by the Finance Act, 2005 under section 65(105)(zk), as amended by the Finance Act, 2001 and the "service tax" at the rate of 12.36 per cent. on the gross amount is paid. 6. The Jharkhand Entertainment Tax Act, 2012 (hereinafter referred as "the Act") was enacted by the State of Jharkhand in exercise of its power under entry 62 of the State List (Seventh Schedule) which provides "taxes on luxuries, including taxes on entertainments, amusements, betting and gambling". The Jharkhand Entertainment Tax Act, 2012 was notified in the Jharkhand Gazette on April 27, 2012. Section 1(3) of the Jharkhand Entertainment Tax Act, 2012 stipulates that it shall come into force on such date as the State Government may, by notification, direct. The Notification S. O. No. 3 dated May 14, 2012 has been issued by the Commercial Taxes Department, Government of Jharkhand, whereby the provisions of the Jharkhand Entertainment Tax Act, 2012 has been implemented with retrospective effect, i.e., from the date of publication of the Act in the Gazette (April 27, 2012). 7. According to the petitioners, such levy of entertainment tax was, in substance, levy ....
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....v. State of U. P. [2005] 139 STC 537 (SC); [2005] 4 RC 186 ; [2005] 2 SCC 515, it was submitted that the entries under the three Lists of the Seventh Schedule provide for distinct and separate power of taxation and avoid overlapping power of taxation between the Union and the States and the levy under the Jharkhand Entertainment Tax Act encroaches upon the power of Union of India to levy "service tax" on provision of DTH signals which is a broadcasting service. Drawing our attention to the Principles of Statutory Interpretation by Justice G. P. Singh which was quoted with approval in [1999] 237 ITR 24 (SC); [1999] 3 SCC 346 (Commissioner of Income-tax, Madras v. Kasturi and Sons Ltd.), the learned senior counsel submitted that in the taxing Act, one has to look merely at what is clearly said and there is no room for any intendment and nothing is to be read in and nothing is to be implied. 10. The learned senior counsel Sri Binod Poddar reiterated the submissions and contended that the Jharkhand Entertainment Tax Act, 2012 transgresses into the subject "service" exclusively earmarked for the Parliament under the Union List and therefore, the Jharkhand Entertainment Tax Act has to b....
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....roadcasting service' which falls under entry 92C of List I on which service tax is leviable? (ii) Whether levy of entertainment tax on 'direct-to-home' (DTH) service under Jharkhand Entertainment Tax Act 13 of 2012 transgresses into the Union List and whether the Jharkhand Entertainment Tax Act is ultra vires the powers of the State Legislature provided under entry 62 of List II?" 15. To deal with the above questions it is necessary to refer to some of the provisions of the Constitution of India, statutory provisions of the Finance Act, 2001, the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 and the (Jharkhand Act 13 of 2012), Jharkhand Entertainment Tax Act, 2012 which are relevant. The same are as under:- "Article 245. Extent of laws made by Parliament and by the Legislatures of States:- (1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State. (2) No law made by Parliamen....
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....e slots or obtaining sponsorships for broadcasting of any 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 electromagnetic 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, 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." 17. Section 65(105)(zk) of the Finance Act, as amended with effect from June 16, 2005, "the taxable service" in relation to "broadcasting agency" means as follows:- "Taxable service' means any service provided or to be provided 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 places outside India, includes service provided by its branch office or subsidiary or representative in India or any agent appointed....
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....har Entertainment Tax Act, 1948. The Jharkhand Entertainment Tax Act, 2012 (Jharkhand Act 13 of 2012) has been enacted by Gazette Notification No. 206 dated 27th April, 2012. By the Jharkhand Act 13 of 2012, the concepts of "direct-to-home (DTH) service", "direct-to-home (DTH) service provider" and "subscribers" have been introduced. In exercise of the powers conferred under section 27 of the Jharkhand Entertainment Tax Act, 2012, the Rules were framed and came into force as per Notification S. O. No. 14 dated July 13, 2013. 22. Principles of interpretation of taxing entries:- Before considering the contentions, we may refer to the settled position of interpretation of scope of taxing entries. The Constitution of India, in making the distribution of subject-matter of laws to be made by Parliament and by Legislatures of the States, follows the Government of India Act, 1935. It enumerates various items of legislation in three Lists of the Seventh Schedule to the Constitution of India:- List I--the Union List; List II--the State List ; List III--the Concurrent List. Parliament has exclusive powers of legislation with respect to 97 items in List I. The State Legisl....
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....lourable legislation, the aspect theory, etc. 25. Where the legislative competence of the Legislature of any State is questioned on the ground that it encroaches upon the legislative competence of Parliament to enact a law, the question one has to ask is whether the legislation relates to any of the entries in List I or List III. If the State law relates to any of the entries in List I or List III, then the Parliament's legislative competence must be upheld. As held by the honourable Supreme Court that where there are three Lists containing a large number of entries, there is bound to be some overlapping among them. In such a situation, the doctrine of pith and substance has to be applied to determine as to which entry does a given piece of legislation relate. Once it is so determined, any incidental trenching on the field reserved to the other Legislature is of no consequence. 26. On the scheme of distribution of powers, we may refer to some of the leading judgments on the subject. The principles of interpretation have been succinctly summarized and enunciated by the honourable Supreme Court in Hoechst Pharmaceuticals Ltd. v. State of Bihar [1984] 55 STC 1(SC); [1984] 154 IT....
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....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 attempt should be made to see whether the two entries cannot be reconciled so as to avoid a conflict of jurisdiction. It should be considered whether a fair reconciliation can be achieved by giving to the language of the Union Legislative List a meaning which, if less wide than it might in another context bear, is yet one that can properly be given to it and equally giving to the language of the State Legislative List a meaning which it can properly bear. The non obstante clause in arti....
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....;fields' of legislation. The Constitution effects a complete separation of the taxing power of the Union and of the States under article 246. There is no overlapping anywhere in the taxing power and the Constitution gives independent sources of taxation to the Union and the States. (2) In spite of the fields of legislation having been demarcated, the question of repugnancy between law made by Parliament and a law made by the State Legislature may arise only in cases when both the legislations occupy the same field with respect to one of the matters enumerated in the Concurrent List and a direct conflict is seen. If there is a repugnancy due to overlapping found between List II on the one hand and List I and List III on the other, the State law will be ultra vires and shall have to give way to the Union law. (3) Taxation is considered 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....
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....on the Legislature which enacted it, an incidental encroaching in the field assigned to another Legislature is to be ignored. While reading the three Lists, List I has priority over Lists III and II, and List III has priority over List II. However, still, the predominance of the Union List would not prevent the State Legislature from dealing with any matter within List II though it may incidentally affect any item in List I." 28. In Godfrey Phillips India Ltd. v. State of U. P. [2005] 139 STC 537 (SC); [2005] 4 RC 186 ; [2005] 2 SCC 515, the assessees, who were either manufacturers, dealers or sellers of tobacco and tobacco products, have challenged the imposition and levy of a luxury tax on tobacco and tobacco products by treating them as "luxuries" within the meaning of the word in entry 62 of List II. Examining the constitutional validity of various enact-merits imposing levy of "luxury tax" on tobacco and tobacco products, the honourable Supreme Court considered the question as to whether tobacco can be considered to be an article of luxury. The argument of the assessees was that the tax leviable under entry 62 of List II cannot be a tax on goods as that would not only allow t....
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....slatively incompetent. . ." 29. The aforesaid principle laid down in Hoechst Pharmaceuticals Ltd.'s case [1984] 55 STC 1 (SC) ; [1984] 154 ITR 64 (SC) ; [1983] 4 SCC 45 the by honourable Supreme Court have been noted with approval by the honourable Supreme Court of India in several judgments including that of Girnar Traders (3) v. State of Maharashtra reported in [2011] 3 SCC 1 by a Constitution Bench (paras 173 to 176):- "Application of doctrine of pith and substance and incidental encroachment to the issue raised in the present case:- 173. The doctrine of pith and substance can be applied to examine the validity or otherwise of a legislation for want of legislative competence as well as where two legislations are embodied together for achieving the purpose of the principal Act. Keeping in view that we are construing a Federal Constitution, distribution of legislative powers between the Centre and the State is of great significance. Serious attempt was made to convince the court that the doctrine of pith and substance has a very restricted application and it applies only to the cases where the court is called upo....
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.... [1983] 4 SCC 45)." (underline supplied to add emphasis). 30. It would be appropriate by way of passing reference to indicate herein that article 254 provides the method of resolving conflict between law made by the Parliament and law made by the Legislature of the State with respect to the matter falling under the Concurrent List. The doctrine of repugnancy is, therefore, available to only such laws, which are made by the Parliament and the State Legislature in respect of matters falling within the Concurrent List of the Seventh Schedule. This shall not detain us any further, as admittedly the legislations in question do not fall within the entries of the Concurrent List so as to invite any attention of the principle enumerated in article 254 concerning doctrine of repugnancy. The extent and control in exercise of legislative powers in respective fields of legislation under List II of the Seventh Schedule are exclusively controlled by the provisions of article 246 of the Constitution of India. It is important to mention here that the scheme of distribution in the three Lists of Seventh Schedule is carefully crafted and the taxing fields are separately provided for. 31. On the qu....
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....en voyage in this direction in view of the availability of a Constitution Bench decision in M. P. V. Sundararamier and Co. v. State of Andhra Pradesh [1958] 9 STC 298 (SC) AIR 1958 SC 468 Venkatarama Aiyar, J., speaking for the Constitution Bench, traced the history of legislations preceding the Constitution, analysed the scheme underlying the division of legislative powers between the Centre and the States and then succinctly summed up the quintessence of the analysis. It was held, inter alia:- 1. In List I, entries 1 to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament. An examination of these two groups of entries shows that while the main subject of legislation figures in the first group, a tax in relation thereto is separately mentioned in the second. 2. In List II, entries 1 to 44 form one group mentioning the subjects on which the States could legislate. Entries 45 to 63 in that List form another group, and they deal with taxes. (AIR page 493, para 51)  ....
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.... narrow or restricted sense and that each general word should be held to extend to ancillary or subsidiary matters. Whenever an apparent overlap has occurred, the legislative entries should be liberally interpreted and it is the duty of the court to reconcile the entries and the competing entries must be read harmoniously. The proper way to avoid a conflict would be to read the entries together and to interpret the language of one by that of the other. There is bound to be overlapping and in all such cases, for deciding the true character and nature of a particular levy, with reference to the legislative competence, the court has to look into the pith and substance of the legislation. Legislations in the field of taxation and economic activities need special consideration and are to be viewed with larger flexibility in approach. 33. Whether DTH service provided by the petitioners is only broadcasting services falling under entry 92C of List I and State Legislature has no legislative competence to levy entertainment tax under entry 62 of List II:- "Service tax" can be imposed by the Parliament under entry 92C of the Union List of the Seventh Schedule to the C....
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....s on entertainment applicable to the State Legislature. The judgment rendered in the case of Hoechst Pharmaceuticals Ltd. v. State of Bihar [1984] 55 STC 1 (SC); [1984] 154 ITR 64 (SC); [1983] 4 SCC 45 and the Constitution Bench judgment in the case of State of West Bengal v. Kesoram Industries Ltd. reported in [2004] 266 ITR 721 (SC) ; [2004] 2 RC 298 ; [2004] 10 SCC 201 make it clear that there is no overlapping in fields of taxation available under Lists I and II to the Union and State Legislature. Therefore, it is apparent that while the Union Legislature has the power under article 246(1) to make laws in respect of the subject of taxes on service, at the same time the State Legislature also has power under entry 62 of List II to impose tax on entertainment. 36. The contention of the petitioners that by enacting the Prasar Bharti Act and amending the Finance Act, 1994, imposing tax on service, the Union Legislature has occupied the said field, denuding the State Legislature the power to levy tax on the activity of entertainment is without any substance. However, though there could not be overlapping in law in respect of respective legislative fields available to both the Legis....
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....stallation or rent or security and connection charges or by any other charges collected in any manner whatsoever ; but does not include magic show and temporary amusement including games and rides ; For the purposes of this clause:- The expression 'exhibition' includes any exhibition by cinematograph including video exhibition or television exhibition with the aid of any type of antenna with a cable network attached to it, or cable television network as provided by the cable operator incidental to cable service(s) ; Explanation:- For the purpose of this provision, exhibition shall include exhibitions in multiplex cinema complex(s). The expression 'game' includes video games which are played with the aid of machine which is operated electronically or mechanically or electro-mechanically for the purposes of entrainment or otherwise, and The expression 'temporary amusement' means the amusement rides and games which are not provided on fairly permanent basis like in: amusement park or meals or fair. (n) 'Entertainment tax' means a t....
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.... from persons admitted to the entertainment(s), an amount equal to the entertainment tax payable in respect to the valuable consideration of tickets or complimentary tickets or the sponsorship amount. 5. Payment of tax.-Subject to the provisions of this Act and such rules as may be prescribed, entertainments tax shall be payable by every assessee for the following class of entertainments- (i) for the cinematograph exhibition falling under sub-section (2) of section 3, before commencing of the week ; (ii) for the video exhibition falling under sub-section (2) of section 3 read with serial number 2 of the Schedule, before commencing of the month ; (iii) for the multiplex cinema complex exhibition falling under sub-section (2) of section 3 read with serial number 3 of the Schedule, before commencing of the week ; (iv) for the sponsored programmes falling under clause (x) and (ad) of section 2, before commencement of such sponsored programmes ; (v) f....
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.... the meaning of "entertainment" and comes within the legislative competence of the State Legislature under entry 62 of List II of the Seventh Schedule to the Constitution to make a law for the levy and collection of tax on such entertainment. It was held that the cable operator has a direct and proximate nexus with the entertainment and amusement provided to the viewers for the purpose of levy and collection for entertainment tax. The cable operator is a source of entertainment to the individual subscriber. Therefore, cable operators were held to be taxable persons in respect to their gross receipts under section 4(a) of the impugned Act. It was further held that tax under entry 62, List II can be imposed not only on the person spending on entertainment but also on the act of the person entertaining or subject of entertainment. The levy may be imposed on person offering or providing entertainment or even on the persons enjoying it. The State Legislature is free to choose the person from whom the tax levied is to be collected. It was held that under the impugned act there was clear indication of the character of tax from incidence of such tax or taxable events which takes place on t....
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....ly 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 person who provide cable service directly to consumers or transmits to a sub-cable operator through a cable television network and otherwise controls or is responsible for the management and operation of a cable television network and such person has been defined as 'cable operator' being a taxable person exclusively for the purpose of levy and collection of entertainment tax only when a ....
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....meaning of entertainments and therefore within the legislative competence of the State Legislature under entry 62 of List II of the Seventh Schedule to the Constitution of India to make law for the levy and collection of tax on such entertainments. 38. A tax under entry 62 of List II of the Seventh Schedule to the Constitution of India may be imposed not only on the person spending on entertainment but also on the act of a person entertaining, or the subject of entertainment. It is well-settled by this court that such tax may be levied on the person offering or providing entertainment or the person enjoying it. The respondents admittedly engaged in the business of receiving broadcast signals and the instantaneously 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 TV sets because of cable television technology of the respondents and of sending the visual or audio-visual signals to sub-cable operators, and instantly retransmitting such signals to individual subscribers fo....
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....ith 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 judges observed (SCR page 69) that there can be no reason to 'differentiate between the giver and the receiver of entertainments and amusements and both may with equal propriety be made amenable to the tax'. ... 50. Therefore, there is no substance in the contention that taxable event is entertainment and there can be no tax if there is no entertainment. As held by the Constitution Bench, existence of means of providing entertainment would be sufficient to support a law imposing tax thereon and that means of providing entertainment provides the nexus between the taxing power and the subject of tax. ... 52. The a....
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.... channels usually have a distribution center that beams their programming to a geostationary satellite. The broadcast center uses large satellite dishes to pick up these. The broadcast center is the Central hub of the system. At the broadcast center, the TV provider receives signals from various programming sources and beams a broadcast signal to the satellites in geosynchronous orbit. The broadcast center downlinks the signals from the satellite and converts all of this programming into a high quality uncompressed digital stream and then uplinks to the designated transponders for transmission of signals in Ku-band. The satellites receive the signals from the broadcast station and rebroadcast them to earth. That is once the signal is compressed and encrypted, the broadcast center beams it directly to one of its satellite. The satellite picks up that signal, amplifies it and beams it back to earth where viewers can pick it up. Dish picks up the signal from the satellite and passes it on to the receiver in the viewer's house. A satellite dish is just a special type of antenna which consists of a parabolic (bowl-shaped) surface and a central feed horn. The dish on the receiving....
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....ax" is levied. As per the terms and conditions of the licence agreement to establish, maintain and operate direct-to-home platform, that it involves host of services which is a value addition to the actual entertainment for which the writ petitioners are paying the "service tax". The "service tax" paid under entry 92C of List I of the Seventh Schedule to the Constitution of India is only for those services involved in the DTH platform. In order to examine the true character of the enactment, the entire Act, its object, scope and effect is required to be gone into. If on such examination is found that the legislation is in substance on a matter assigned to the Legislature, then it must be held to be valid in its entirety, even though it might incidentally trench upon matters beyond its competence. 46. The activity of television exhibition through DTH service falls within the meaning of "entertainment" as defined in section 2(m) of the Act. The taxable event for levying "entertainment tax" is the actual entertainment provided to the viewers on the television set which is based on contracts executed by the petitioners with the customers to whom they provide entertainment by collectin....
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....t is ultra vires the competence of the State Legislature. It was also contended that the transaction of providing "direct-to-home" is one of the service and the other "entertainment" and since the service is a common component, it is not open to the State Legislature to separate a composite whole and segregate a part of it, describing that part to be entertainment, to levy tax thereon. 49. Mr. Poddar, learned senior counsel for the petitioners, placing reliance on the decision rendered in the case of Bharat Sanchar Nigam Ltd. v. Union of India reported in [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC) ; [2006] 6 RC 276 ; [2006] 3 SCC 1 and submitted that considering the aspect of the licence given to the DTH providers, it is clear that it is one for providing "broadcasting service" and not for "entertainment" and integrity of such licence cannot be broken into pieces so as to levy entertainment tax by the State Legislature. 50. Mrs. Anubha Rawat Choudhary, the learned counsel appearing for the respondents, submitted that for determining whether there is transgression, substance of the legislation is to be looked into and the substance of the Jharkhand Enter....
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....l character of the levy is not departed from within the four comers of the particular entry, the measure of tax or the manner of levying the tax would not have any vitiating effect. 53. In the case of Federation of Hotel and Restaurant Association of India v. Union of India reported in [1989] 74 STC 102 (SC); [1989] 178 ITR 97 (SC); [1989] 3 SCC 634, the stand of the Central Government that "expenditure aspect" was different from "luxury aspect" and that expenditure aspect could be held to be excluded from luxury aspect was upheld in the said case. The appellants were engaged in hotel industry and subjected to a tax at the rate of 10 per cent ad valorem on "chargeable expenditure" under the Expenditure Tax Act, 1987. The said tax was levied by the Parliament by treating this aspect from entry 97 of the Union List. The appellants challenged the levy of tax contending that the levy of expenditure tax was in the nature of a tax on "luxury'' contemplated under entry 62 of the State List and while so, the Parliament cannot levy tax invoking the residuary power under article 248 read with entry 97 of the Union List. In the case of Federation of Hotel and Restaurant Association o....
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....ts. For instance, if the conflict alleged had been between the present State Acts and an Act of Parliament taxing expenditure incurred in the construction of theatres or the maintenance of race horse establishments or the like, there would have been no overlapping at all and the pith and substance of the central tax could well be described as 'expenditure' and not 'luxuries'. This distinction is not obliterated merely because of the circumstance that both Legislatures have chosen to attack the same area of vulnerability, one with a view to keep a check on 'luxuries' and the other with a view to curb undesirable 'expenditure'." 54. In the present case the question which is required to be determined is whether the levy of tax by the State Legislature was on the service aspect or the entertainment aspect. As has been held in the case of Federation of Hotel [1989] 74 STC 102 (SC); [1989] 178 ITR 97 (SC) ; [1989] 3 SCC 634 by the honourable apex court, if the same transaction involved two or more taxable events in its different aspects, the fact that there is an overlapping does not detract from the distinctiveness of the aspect which can be subjected to....
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....act, the chartered accountant/cost accountant renders profession based services. The activity undertaken by the chartered accountant or the cost accountant or an architect has two aspects. From the point of view of the chartered accountant/cost accountant it is an activity undertaken by him based on his performance and skill. But from the point of view of his client, the chartered accountant/cost 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. ." 56. The honourable Supreme Court drew distinction between the two aspects/spheres, i.e., profession on the one hand and service on the other hand and upheld the levy of service tax on chartered accountants or cost accountants. 57. The validity of the levy of entertainment tax on DTH providers by the State of Uttarakhand was challenged before the High Court of Uttarakhand. Referring to the distinction drawn by the apex court between the two aspects/spheres, i.e., profession on one hand and serv....
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....he Seventh Schedule to the Constitution of India can co-exist and can be harmonized on being different aspects. The transaction of providing broadcasting services and entertainment cannot be treated as an indivisible contract so as to include the aspect of entertainment by holding that the predominant transaction is broadcasting and not entertainment. It further observed that only when the transaction is treated as a composite one, the need for splitting up entertainment from broadcasting would arise. Referring to the aspect theory, the High Court held that tax is on entertainment aspect and the levy of service tax is on the providing of the service. 60. In Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC) ; [2006] 145 60 STC 91 (SC) ; [2006] 282 ITR 273 (SC) ; [2006] 6 RC 276 ; [2006] 3 SCC 1, the question involved was whether SIM card (subscribers' identity module) provided to customers by mobile cellular telephone companies was a "sale" or a "service" or "both". The honourable Supreme Court held that although tax could be levied as a "service" on mobile cellular telephone company for providing SIM card to customers, the question whether the sales tax also could be levied ....
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.... [2006] 282 ITR 273 (SC); [2006] 6 RC 276 ; [2006] 3 SCC 1 was concerned, as pointed out earlier, the question involved was whether sales tax could be levied on SIM card provided by the mobile cellular telephone companies. In Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC) ; [2006] 145 STC 91 (SC) ; [2006] 282 ITR 273 (SC) ; [2006] 6 RC 276 ; [2006] 3 SCC 1, the honourable Supreme Court held that the sale of SIM card is merely incidental to the service being provided for mobile connection and that SIM card facilitates the identification of the subscriber. The honourable Supreme Court found that sale of SIM card being incidental to providing mobile connection and the sale being integral part, the State cannot levy sales tax. 62. Levy of tax on the entertainment provided by the DTH providers:- The Jharkhand Entertainment Tax Act, 2012 has been enacted to levy tax on entertainment including entertainment through cable TV, DTH network, etc., in the State of Jharkhand. The levy of service tax on "broadcasting" is separate and distinct from the power of taxing by the State Legislature under entry 62 of the State List being specific power to levy the tax on entert....
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....entertainment. This fee being charged in a different manner at a different stage, is in any case for providing entertainment. 64. The payment of subscription by a subscriber for viewing television exhibition through DTH broadcasting service in the confines of the consumer's residence or place therefore, is, no different payment made by a person for admission to entertainment in a different place like theater and cinema hall. The fact that the subscriber is able to view the content provided by the DTH service provider upon payment of subscription, is enough to conclude that the activity provided by the DTH provider and enjoyed by the subscriber is an entertainment which is amenable to tax by the State Legislature. 65. As discussed above, in the case of Purvi Communication P. Ltd. [2005] 65 140 STC 154 (SC) ; [2005] 4 RC 543 ; [2005] 3 SCC 711, the honourable Supreme Court held that the performance, film or programmes shown to the viewers through cable television network (cable service) as falling within the meaning of "entertainments" and therefore, within the legislative competence of the State Legislature under entry 62 of List II of the Seventh Schedule to make law for the ....
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....ction 65(105)(zk) was incorporated with effect from June 16, 2005 and therefore, the decision in Purvi Communication P. Ltd. [2005] 140 STC 154 (SC) ; [2005] 4 RC 543 ; [2005] 3 SCC 711, is not applicable to the present case of DTH operators. Learned senior counsel further submitted that the moment the writ petitioners are registered under the service tax for the service being provided, for which service tax is levied under section 65(105)(zk) and the State of Jharkhand cannot segregate the entertainment part and levy the entertainment tax. 68. We find no merit in the above contention. We have already held that there is fine distinction between the service aspect and broadcasting service and actual entertainment and the tax is imposed on the act of providing entertainment. What is being taxed by the State Legislature is only entertainment. The writ petitioners being the source of entertainment to the viewers are providing entertainment. They are directly connected with the entertainment provided to the viewers. As such the petitioners are the taxable persons in relation to the entertainment provided by them in respect of the gross receipts. 69. Whether charging section and other ....
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....any theory of taxation'." 70. The above passage was also quoted by the honourable Supreme Court in the decision rendered in the case of Commissioner of Income-tax, Madras v. Kasturi and Sons Ltd. reported in [1999] 237 ITR 24 (SC) ; [1999] 3 SCC 346. 71. Drawing our attention to page 826 of the "Principles of Statutory Interpretation" by Justice G. P. Singh, 13th Edition, learned senior counsel submitted that there is no presumption as to tax and nothing is to be read in, nothing is to be implied and one can only look fairly at the language used. 72. Taking us through various provisions of the Act, learned counsel for the respondents contended that the definition "entertainment" in section 2(m) includes definition of "television exhibition through DTH service" and section 2(a) clearly defines the assessee, which means a person who receives payment for entertainment(s) from any person or subscribers. Sub-sections (a), (m), (s), (v) of section 2 are clear and unambiguous defining direct-to-home (DTH) within the meaning of entertainment. Learned counsel for the respondents places reliance, contending that the provisions of the Act to be liberally construed, upon the decision re....
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....ion 2(k), 2(1), 2(m) and 2(s)(v), we find that DTH service is the source of entertainment to the individual subscribers, who make payment. Dish antenna installed by DTH provider is the one who receives signals and the same is decrypted/decoded by the set top box to create visual image to entertain viewers. Viewers enjoy such performance, film or programmes offered by the DTH providers. Entertainment is not possible unless the encrypted format in the satellite is received by the dish antenna and decrypted by the set top box to create visual images and audio. Thus, DTH service providers have direct proximity and nexus with the entertainment provided by them and DTH operators are collecting subscription and other charges and thus fall within the meaning of "entertainment" within section 2(m). The entertainment made available to viewers through DTH falls within the meaning of section 2(m), "entertainment" and whatever amount is received or receivable by the writ petitioners in respect of providing such entertainment fall within the ambit of section 2(s)(v) and is taxable. The definitions of sections 2(k), 2(1) and 2(m) are clear and unambiguous that DTH service providers are the provid....
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....iscal legislation a transaction cannot be taxed on the doctrine of substance of the matter. 79. The learned counsel for the respondents submitted that all the requirements of a charging section, viz., (i) taxable event, (ii) person who is to pay the tax, and (iii) rate at which the tax shall be levied, are present in the charging section and it is not necessary that all the ingredients are to be found in the same section. Taking us through the various provisions of the Act, the learned counsel submitted that there is no ambiguity in section 3 of the Act. Referring to the components which enter into the concept of the tax, the learned counsel placed reliance upon the decision rendered in the case of Govind Saran Ganga Saran v. Commissioner of Sales Tax reported in [1985] 60 STC 1 (SC); [1985] 155 ITR 144 (SC) in which the honourable Supreme Court has held as under (page 4 in 60 STC):- "6. The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is ob....
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....Government may specify different rates in relation to the separate units of multiplex cinema complex, depending upon their respective sitting capacity." 82. By a careful reading of section 3, it is seen that the taxable event is the "entertainment" (section 2(m)). The person who is liable to pay the tax is the "assessee" within the meaning of section 2(d). DTH service providers, who provide entertainment through the transmission of signals received by dish antenna and set top box, are the taxable persons in respect of their gross receipts for providing entertainment(s). Rate of tax levied on the "entertainment" is specified in the Schedule of the Act. Section 3 contains the essential components which enter into the concept of tax. There is no force in the contention that the charging section (section 3) of the Jharkhand Entertainment Tax Act, 2012, is defective and ambiguous. 83. As discussed earlier, in the case of State of West Bengal v. Purvi Communication P. Ltd. [2005] 140 STC 154 (SC) ; [2005] 4 RC 543 ; [2005] 3 SCC 711, the honourable Supreme Court upheld the levy of "entertainment tax" on cable television by the State of West Bengal. Ratio of the decision in Purvi Commun....
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....d that the writ petitioners are conduits and bound to have a business office in the State of Jharkhand as per the provisions of the Act itself and the dish antenna and set top boxes are installed for the subscribers within the State of Jharkhand and when the writ petitioners are carrying on the business activities in the State of Jharkhand, they cannot contend that there is no territorial nexus. 87. As pointed out earlier, for the taxable service of "broadcasting service and cable operators", the petitioners have obtained certificate of registration under section 69 of the Finance Act (in form ST2). In the said certificate of registration (in W. P. (T) No. 408 of 2013, annexure 2), the address of business premises of the writ petitioner in W. P. (T) No. 408 of 2013 is stated as Floor No. 8, Tower-B, Unitech World Cyber Park, Sector-39, Gurgaon, Haryana. The other business premises are situated in various States including Jharkhand. In the State of Jharkhand, address of the business premises is stated as opposite to Income-tax Building, Peppey Compound Main Road, Ranchi, Jharkhand. Similar is the case in respect of the other writ petitioners. 88. As rightly pointed out by the lear....
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....outside the State of Bombay. The validity of the amended Act was challenged contending that the Legislature of State can only make a law for the State or any part thereof and the Bombay Legislature overstepped the limits of its legislative field by the impugned Act which purported to affect the men residing and carrying on business outside the State of Bombay. It was submitted that there was no territorial nexus between the State and the activities of the petitioners thereon are not within the State of Bombay. Observing that whether in a given case there is sufficient territorial nexus is essentially one of fact, the honourable Supreme Court held as under:- "(24) . . . The doctrine of territorial nexus is well established and there is no dispute as to the principles. As enunciated by learned counsel for the petitioners, if there is a territorial nexus between the person sought to be charged and the State seeking to tax him the taxing statute may be upheld. Sufficiency of the territorial connection involves a consideration of two elements, namely, (a) the connection must be real and not illusory, and (b) the liability sought to be imposed must be pertinent to tha....
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....Andhra Pradesh levied duty under section 3 of A. P. Electricity Duty Act, treating such sale as intra-State or interstate sale. The A. P. High Court held that levy of duty on such sale of electricity effected in pursuance of contracts of sales occasioning in inter-State movement of electricity was incompetent and outside the power of the State Legislature. The judgment of A. P. High Court was challenged before the honourable Supreme Court. Upholding the judgment of A. P. High Court, the honourable Supreme Court held that no State legislation, nor any stipulation in any contract can fix the situs of sale within the State or artificially define the completion of sale in such a way as to convert an inter-State sale into an intra-State sale or create a territorial nexus to tax an inter-State sale, unless permitted by an appropriate Central legislation. 93. Much reliance was placed upon the above judgment to contend that the State of Jharkhand cannot levy "entertainment tax" on the transmission of signals originating from other States and downlinking of signals in broadcasting centres situated outside the State and also uplinking the signals to the designated transponders and while so,....
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....elegated legislation did not have the power to give retrospective effect unless specifically empowered to do so. The learned counsel further submitted that the provisions of the Act are vitiated on account of said retrospective effect given and the demand notice is liable to be quashed. 97. The Jharkhand Entertainment Tax Act, 2012 was enacted and published in the Gazette on April 27, 2012 and the same was notified on May 14, 2012. Section 1(3) of the Act stipulates that the Act shall come into force on such date as the State Government may, by notification, direct. The Act itself has not been made to commence from a date prior to the passing of the Act. On the other hand, the Act was given retrospective effect from the date of enactment, i.e., April 27, 2012. Such retrospectivity of the Act given is well within the competence of the Legislature. In the case of Thanwal Kunju Musaliar (A.) v. Venkatachalam Potti (M.), ITO [1956] 29 ITR 349 (SC); AIR 1956 SC 246, the Travancore Taxation on Income (Investigation Commission) Act came into force on July 22, 1949. The notification was issued on July 26, 1949. Section 1(3) of the said Act contained similar provision as that of Jharkhand ....
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.... forms to be supplied, etc. Section 28 of the Act expressly repeals the Bihar Entertainment Tax Act, 1948 and the Rules made thereunder. However, second proviso to section 28(1) is the saving clause. Section 28(2) seeks to save the rules made, notifications published, powers conferred or other things done under the repealed Act, in so far as it is not inconsistent with the impugned Act. 99. In exercise of the powers under section 27(2), the State of Jharkhand framed Rules, which were notified by S. 0.14 dated July 13, 2013. Learned counsel appearing in W. P. (T) No. 909 of 2013, Mr. Indrajit Sinha, submitted that since the Rules came into force only on July 13, 2013, the asses-see/writ petitioner was not in a position to get itself registered and collect tax and hence, cannot be made liable to pay tax. It was further submitted that the repealed Act did not cover or provide for DTH service providers and special provisions with respect to the DTH service providers have been made in the Jharkhand Entertainment Tax Rules, 2013 and since DTH service providers were not covered under the Act repealed, the Rules made thereunder would not cover the DTH service providers and in that view of....
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....ct to the provisions of the Act and such Rules as may be prescribed, DTH service providers have to pay the entertainment tax by the seventh of the month. Section 3 deals with incidence of entertainment tax. As per section 3(1), subject to sub-section (2), entertainment tax shall be levied and paid to the State Government by an assessee-a tax on entertainment at the rate(s) as specified in the notification issued under the Act. Schedule of the Act contains description of the entertainment and the rate of entertainment tax to be levied. For entertainment falling under direct-to-home (DTH) or any other similar service is 10 per cent. of the total gross collection. As per section 16, the provisions of the Jharkhand Value Added Tax Act, 2005 and the rules made thereunder are made applicable to collect and enforce the payment of tax, levy, interest and penalty under the Jharkhand Entertainment Tax Act. The authorities empowered under the Jharkhand Value Added Tax Act, 2005 and rules made thereunder are empowered to assess, reassess, collect and enforce payment of tax, interest, penalty payable by the assessee under the Jharkhand Entertainment Tax Act. For the purpose of assessment, reass....
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....t Tax Act also considers both equally as a source of entertainment and while so, to levy a higher rate of entertainment tax of 10 per cent. on DTH is discriminatory. All the writ petitioners heavily placed reliance on the decision rendered in the case of Tata Sky Limited v. State of Tamil Nadu [2013] 62 VST 69 (Mad) (W. P. Nos. 25721 of 2011 and connected cases) and in support of their contention, all the writ petitions in extenso referred/extracted the judgment of the Madras High Court. 106. In Tamil Nadu Entertainments Tax Act, 1939, section 41 is to tax direct-to-home (DTH) service. The Madras High Court found that section 41, charging section, is defective and that there was no tax levied on cable T. V network, whereas 40 per cent. tax was levied to direct-to-home (DTH) service. In that context, the Madras High Court held that classification made within the same classes is discriminatory. 107. In para (216) of the aforesaid judgment, the Madras High Court, observing that there is no qualitative difference between the cable T. V and DTH, held as under (para 220, page 172 in 62 VST):- "216. Thus on a reading of the provision relating to section 4E and sectio....
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....ny say in connection with the timing of the film nor the viewer have any say on the quality of CD being used by the cable operators and most the time the entire film is not recorded in the CD. 3. Viewers also have an option to pause the film at a particular point and continue to view it at a subsequent point of time at their own convenience. There is no doubt about the picture quality and complete film being exhibited. Viewers have no choice regarding the language used for kids channels like cartoon network, etc., and channels like discovery, national geographic and other relating to knowledge. Viewers have choice regarding the language used for kids channels like cartoon network, etc., and channels like discovery, national geographic and other relating to knowledge. One of the greatest disadvantage is that in case of electricity load shedding of either the owner of cable network or the viewer the event of entertainment cannot take place and it can be disrupted at any point of time on account of aforesaid leading to incomplete viewing of the programme which leads to a lot of mental discomfort and the whole idea of the entertainment is frustrated. Load shedding is a regular feat....
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....entertainment tax shall not exceed 30 per cent. of the value of gross collection, admission charges. It was submitted that ceiling limit fixed at the rate of 30 per cent. is confiscatory in nature. 113. The above contention does not merit acceptance. The maximum ceiling of 30 per cent. on gross amount is neither confiscatory, nor violative of article 19 of the Constitution of India. As per the adopted Bihar Entertainment Tax Act, 1948, which was applicable to the State of Jharkhand till 2012, the maximum ceiling of entertainment tax was 110 per cent., which was subsequently reduced to 60 per cent. by the State of Jharkhand. As rightly contended by the respondents, the Jharkhand Entertainment Tax Act is more beneficial to the public at large as the ceiling has been reduced to 30 per cent. 114. Whether set top box or any other similar instrument/device can be included in the gross collection to levy entertainment tax on it?:- As per section 3, tax on entertainment and rate(s) as specified in the notification-tax is payable at the rate specified in the notification issued under the Act. As per the Schedule for entertainment, for entertainment falling under "direc....
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....ed as valuable consideration in section 2(aj)(ii) in respect to direct-to-home (DTH) broadcasting service means any cash, deferred payment by way of contribution, subscription, installation or rent or security or activation charges or connection charges or any other charges collected in any manner whatsoever for direct-to-home (DTH) broadcasting service with the aid of any type of set top box or any other instrument of like nature at a residential or non-residential place. We are of the view that the connection charges are integral part of "entertainment" and have to be taken into account for the valuable consideration received by the assessee for calculating the gross collection. 117. However, while considering the relevant aspect of the impugned Act, it is also evident that the expression "entertainment" as contained in section 2(m) includes within its compass in the case of television exhibition through DTH service, payments made by way of contribution or subscription or installation or rent or security or connection charges or any other charges collected in any manner whatsoever. However, the payment made for the set top box by the subscriber is evidently not conceived in the ....
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....at the rates of entertainment tax should not exceed 30 per cent. of the value of the gross collection/admission charge/subscription/contribution/rent/security/sponsorship/acti-vation charges or any other valuable consideration receivable or received for providing entertainment. The subscriber obviously pays for content of the entertainment by making subscription and by paying any subscription and other allied charges for the activation of the equipment, etc., but payment for the set top box which may be by way of sale or hire purchase or even on rent, as per the regulation laid down by the telecom regulatory authority of India on the aforesaid subject, cannot be brought within the meaning of entertainment or payment for it. The aforesaid provisions under section 2(s), clause (v), Explanation which seeks to include payment for the equipment/charges such as set top box as payment for entertainment is beyond the purview of the State Legislature to be charged under the entertainment tax under the impugned legislation. 118. However, by relying upon the doctrines of severability for upholding the validity of the impugned legislation, the relevant provisions under Explanation to section ....
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....the valid and invalid provisions are so inextricably mixed up that they cannot be separated from one another, then the invalidity of a portion must result in the invalidity of the Act in its entirety. On the other hand, if they are so distinct and separate that after striking out what is invalid, what remains is in itself a complete code independent of the rest, then it will be upheld notwithstanding that the rest has become unenforceable. Vide Cooley's Constitutional Limitations, Volume 1 at pages 360-361 ; Crawford on Statutory Construction, pages 217-218. 3. Even when the provisions which are valid are distinct and separate from those which are invalid, if they all form part of a single scheme which is intended to be operative as a whole, then also the invalidity of a part will result in the failure of the whole. Vide Crawford on Statutory Construction, pages 218-219. 4. Likewise, when the valid and invalid parts of a statute are independent and do not form part of a scheme but what is left after omitting the invalid portion is so thin and truncated as to be in substance different from what it was when it emerged out of the Legislature....
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.... not apply so far as the subject of levy relates to payment for set top box or any other instrument/device of like nature or any other similar device under section 2(s)(v) while upholding the vires of the impugned Act of 2012 on other grounds of challenge. 122. The writ petitioners have also challenged the demand notices issued under section 5 of the Act. As pointed out earlier, as per section 5 of the Act, the DTH service providers to pay entertainment tax on the total gross collection for valuable consideration by seventh of the month after expiry of the respective month. Since the writ petitioners have not paid the tax within the stipulated time, because of non-payment of tax, notices were issued to the petitioners calling upon them to pay the tax also interest and penalty. The impugned notices issued are in consonance with the provisions of the Act and the prayer sought for by the petitioner challenging the impugned notices are liable to be rejected. 123. The levy of entertainment tax has been the subject-matter of legislation of different state and the State Legislature such as State of Uttarakhand, State of Punjab, State of Delhi, State of Orissa and also the State of Uttar....