TaxTMI 
TaxTMI 
2015 (2) TMI 1043
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..... The petitioners have also impugned the 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 ref....
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....nd "broadcasting services" were brought within the 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, ....
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....service. Placing reliance upon Godfrey Phillips India Ltd. 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 Lis....
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....tertainment tax on 'direct-to-home' (DTH) is the levy on 'broadcasting 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 ....
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...., having its head office situated in any place outside India, includes the activity of selling of time 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, inclu....
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....ent for entertainment". 21. The State of Jharkhand was formed on November 15, 2000 and State of Jharkhand adopted Bihar 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 II....
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....out the conflict if any between the law making bodies like doctrine of harmonious construction, pith and substance, ancillary legislation, colourable 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 succinct....
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.... 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 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....
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....[1983] 4 SCC 45. They are:- (1) The various entries in the three Lists are not 'powers' of legislation but '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 b....
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....n an area common to both. There the doctrine of pith and substance is to be applied and if the impugned legislation substantially falls within the power expressly conferred upon 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....
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....ment or pleasure. Inasmuch as none of the impugned statutes seek to tax any activity and admittedly seek to tax goods described as luxury goods, they must be and are declared to be legislatively 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 signif....
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....late in the same field, i.e., when both, the Union and the State laws, relate to a subject in List III (Hoechst Pharmaceuticals Ltd. v. State of Bihar [1984] 55 STC 1 (SC) ; [1984] 154 UK 64 (SC) ; [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 ....
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....re of a tax. (emphasis in original) 74. It is necessary to examine the scheme underlying the Seventh Schedule of the Constitution. We are relieved of the need of embarking upon any maiden 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, entri....
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....nion List and the State List, the following principles emerge:- The legislative entries should be broadly construed and that items in the three Lists of the Seventh Schedule to the Constitution of India are not to be read in a 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 an....
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....List I and II do not appear to be overlapping upon each other. Similarly the legislative field available to the Union Legislature under entry 92C, i.e., taxes on service do not overlap with the legislative field under entry 62 relating to taxes 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....
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....ase of television exhibition with the aid of any type of antenna with a cable network attached to it or cable television network or direct-to-home (DTH) service, for which persons are required to make payment by way of contribution or subscription or installation 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 en....
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....as specified in the notification issued under this Act. . . . 4. Assessees to collect entertainment tax from persons admitted to entertainment.-Save as provided under sub-section (2) of section 3 of this Act, every assessee shall be entitled to collect, 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 n....
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....y of entertainment tax under the West Bengal Entertainment-cum-Amusement Tax Act, 1982 on television exhibition through cable T. V. network was under challenge. The honourable Supreme Court held that performance, film or programme shown to the viewer through cable T. V. network comes within 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....
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....nt Tax Act, 1922 and the West Bengal Entertainment and Luxuries (Hotels and Restaurants) Tax Act, 1972 are two statutes which have been enacted under the same legislative field, i.e., entry 62 of List II of the Seventh Schedule to the Constitution of India, 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 person who provide cable service directly to consumers or transmits to a sub-cable operator through a cabl....
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....collection of tax under sub-section (4a) of section 4A of the Act have direct and close nexus with the entertainments made available to the viewer through their cable television network. The performance, film or programmes shown to the viewers through the cable television network come 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 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 po....
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.... 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. v. Cantonment Board, Poona Cantonment 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 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 entert....
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....provider does not create original programming itself, it pays other companies for the right to broadcast their content via satellite. DTH providers get programming from two major sources: International turnaround channels (such as HBO, CNN, STAR TV, etc.) and various local channels (Sahara TV, Doordarshan, etc.). Turnaround 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,....
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.... tax" on the petitioner is the incidence of operating broadcasting center and uplinking signals to the designated transponders for transmission of signals in Ku-band. 45. In case of direct-to-home (DTH) broadcasting, service is on account of activity of transmission of signals which is received by the dish antenna for which "service tax" 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 ....
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....hand, by defining the same service as entertainment, cannot impose entertainment tax thereon. It was further submitted that predominant element in the licence granted to the petitioners under section 4 of the Indian Telegraph Act, 1885 is one of service and not entertainment and taxing "direct-to-home" (DTH) broadcasting services as entertainment 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 in....
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....ly because they overlap, the same does not detract from the distinctiveness of the aspects. Thus, there could be no question of a conflict solely on account of two aspects of the same transaction being made a subject-matter of legislation by two Legislatures falling within two fields of legislation respectively available to them. So long as the essential 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 c....
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....t there will be some overlapping then or that here there is a good deal of such overlapping, because the States have chosen to tax only some types of luxuries and the Centre to tax, at least for the time being, only expenditure which results in such luxuries, should not be allowed to draw a curtain over the basic difference between the two categories of imposts. 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 entertainmen....
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....ect for consideration. Service tax is a tax on each activity undertaken by a chartered accountant/cost accountant or an architect. The cost accountant/chartered accountant/architect charges his client for advice or for auditing of accounts. Similarly, a cost accountant charges his client for advice as well as doing the work of costing. For each transaction or contract, 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....
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....Jharkhand. 59. Applying the doctrine of "aspect theory" in a similar case reported as Tata Sky Limited v. State of Punjab [2011] 37 VST 1 (PandH); [2011] 38 PHT 160 (Pand H), the Punjab and Haryana High Court held that levy of service tax on the providing of service vide entry 97 read with entry 92C of List I and levy of entertainment tax covered by entry 62, List II of the 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....
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....thin another legislative power. There 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'." 61. In so far as 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 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:- &nbs....
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....ld come within the meaning of the expression "payment for admission" as with the advancement of civilization and scientific development, new forms of entertainment has come into existence. It was held that mere fact that the payment is not made at the time of entering the premises, is irrelevant. Payment made at a later stage by inserting coin is nonetheless for admission to a place of 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 1....
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....ursuant to entry 62 of the State List vis-a-vis entry 31 of the Union List and the honourable Supreme Court, while disposing of the same in March, 2005, held that entry 31 of the List I did not come in the way. Therefore, the submission of the petitioners is that entry 92C of the Union List gives exclusivity to the Parliament to levy service tax and exercise of powers under entry 92C and under section 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 ....
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....ressing the principle in the following words: 'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.' Relying upon this passage Lord Upjohn said: 'Fiscal measures are not built upon 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 secti....
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....tion 2(s)(v) cannot be read in isolation and has to be read along with section 2(m), which brings within the fold of entertainment through cable television network, direct-to-home (DTH) service for which persons are required to make payment by way of contribution or subscription or installation, rent, security and connection charges or other charges collected in any manner whatsoever. 76. A combined reading of section 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"....
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....e paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the Legislature to do the needful in the matter." 78. Placing reliance upon the passage in page 826 of the Principles of Statutory Interpretation by Justice G. P. Singh, it was submitted that when there is no intendment in the charging section, there can be no presumption as to tax and in fiscal 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 report....
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....hibition on the proprietor of an entertainment at compounded rate(s) as specified in the Schedule:- Provided that the State Government may specify different rate or rates of tax in respect to the different specified areas and for different specified periods:- Provided further the State 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....
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....the case of National Thermal Power Corporation Ltd. v. State of A. P. [1990] 78 STC 132 (AP). 86. Refuting the contentions, the learned counsel for the respondents submitted that as per the Regulation under the Act, the writ petitioners are supposed to undertake certain activities within the State of Jharkhand and the writ petitioners' contention that the entire activity is extra territorial, is factually incorrect. The learned counsel further submitted 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 wri....
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....marbaugwala reported in AIR 1957 SC 699. In the said case Bombay Lotteries and Prize Competitions Control and Tax Act, 1939 covered the betting and gambling prize competitions within the State of Bombay. The 1939 Act was replaced by the Bombay Lotteries and Prize Competitions Control and Tax Act (Bombay Act 54 of 1949) in and by which the applicability of the Act was enlarged and extended so as to cover prize competition contained in newspapers printed and published 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 n....
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....port of his contention, much reliance was placed upon the decision rendered in the case of State of A. P. v. National Thermal Power Corporation Ltd. [2002] 127 STC 280 (SC) ; [2002] 5 SCC 203.' In the said case, NTPC Ltd. generated electricity in one of its super thermal power station in the State of Andhra Pradesh and electricity was fed info the southern grid and was made available to Electricity Boards of Karnataka, Kerala, Tamil Nadu and the State of Goa. The State of 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 sa....
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.... event is not the transmission of the signals, but the entertainment through the direct-to-home (DTH). 96. Retrospective operation of Jharkhand Entertainment Tax Act, 2012 with effect from April 27, 2012 which was notified on May 14, 2012:- The learned counsel for the petitioner Mr. Indrajit Sinha submitted that the same was published in the Gazette of April 27, 2012 and the Act was notified on May 14, 2012 with retrospective effect from April 27, 2012 and the delegated 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 retros....
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....andates that an assessee must be registered in the prescribed manner. Section 20 of the Act provides that no assessee/proprietor, who does not hold certificate of registration granted under section 6(3), shall collect from any person any amount by whatever name or description it may be called towards purporting to be taxed on admission to an entertainment. Section 27(2) of the Act empowers the State Government to frame rules providing for fees payable in respect of any application to be made, 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 petit....
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....overnment may, by notification, specify in this behalf. Thus, as per section 29(2)(c), all the prescribed forms under the repealed Act and the Rules made thereunder shall continue to be in force until discontinuance is made by notification. In the absence of the Rules framed under 2012 Act, the Bihar Entertainment Tax Rules, 1948 shall continue to be in force so far as it is not inconsistent with 2012 Act. 102. As per section 5 of the Act, entertainment tax shall be payable by every assessee subject 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 pr....
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....ioners is that different rates of taxation between the cable television network and direct-to-home (DTH) is artificial, arbitrary, without any reasonable basis and violates article 14 of the Constitution of India, as it is giving undue advantage to the cable television network against the direct-to-home (DTH) service. According to the petitioners, the service provided under the cable television network and direct-to-home (DTH) service is the same, i.e., transmission of channels and the Jharkhand Entertainment 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 ....
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.... Entertainment through direct-to-home services 1. Through cable network the viewers can view films which as exhibited by the cable operator through VCR. 1. In entertainment through the direct-to-home services the viewers are entitled to view film of their own choice. 2. The timing of the exhibition of the film is also fixed by the cable operator. 2. The viewers can view the films as per their own convenience regarding timings. 3. The viewers neither have any say on the film being exhibited nor the viewers have any 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 ki....
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....is confiscatory?:- Section 3 of the Jharkhand Entertainment Tax Act, 2012 deals with the incidence of "entertainment tax". As per the second proviso to section 3, the rate of "entertainment tax" shall not exceed thirty per cent. of the value of gross collection/admission charge(s)/subscription(s)/contribution(s) rent/ security/sponsorship/activation charges or by any other valuable consideration (s) received for providing entertainment(s). 112. Yet another contention was advanced that as per second proviso to section 3, levy of 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 rig....
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....o subscribers and connection charges collected in any manner." 116. The contention of the petitioners is that the value of set top box or other equipments cannot be included in valuable consideration and gross collection. The learned senior counsel for the petitioner urged to segregate the cost of set top box or other equipments and other instruments of like nature from valuable consideration received by the assessee and from gross collection. By reading of section 2(aj), we do not think that the value of set top box is included as valuable consideration. What is stated 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 considerat....
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....ax under entry 62 under the impugned legislation. The State Legislature by making such provision in the Explanation to section 2(s)(v) as also section 3 which relates to incidence of entertainment tax, has chosen to levy entertainment tax on the component for payment of set top box made by the subscriber which is beyond the scheme and object of the Act and admissible under the relevant legislative field of tax on entertainment available to the State Legislature under entry 62 of List II of the Seventh Schedule. Provisions of section 3, second proviso would also indicate that 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 autho....
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....king on behalf of the court summarized the positions which are as follows: (pages 950-951 of the Report):- "1. In determining whether the valid parts of a statute are separable from the invalid parts thereof, it is the intention of the Legislature that is the determining factor. The test to be applied is whether the Legislature would have enacted the valid part if it had known that the rest of the statute was invalid. Vide Corpus Juris Secundum, Volume 82, page 156 ; Sutherland on Statutory Construction, Volume 2, pages 176-177. 2. If 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 provisi....
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....hall not apply to such schools. 120. The doctrine of reading down is now a well-settled tool to uphold the vires of statute or a subordinate legislation by reading down the provisions which are either ultra vires the legislative competence of the Legislature in question or are ultra vires the Parent Act under which the rules have been framed or do offend the other provisions of the Constitution and the fundamental right guaranteed under the Constitution of India. 121. This court therefore by relying upon the principle of severability, declares that the provisions of the impugned Act shall 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 ....
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.... 124. We summarize our conclusion as under:- Jharkhand Entertainment Tax Act, 2012 levying tax on "entertainment" through direct-to-home (DTH) in pith and substance, is on entertainment which falls under entry 62 of List II of the Seventh Schedule. The levy of "entertainment tax" is different from the levy of tax on "broadcasting service" which falls under entry 92C of List I of the Seventh Schedule to the Constitution of India. Entry 62 of State List and entry 92C of the Union List operate in two different spheres. There is no transgression or encroachment upon the field of Union legislation and the levy of tax on "entertainment" through direct-to-home (DTH) by the State Legislature is not ultra vires the power of the State Legislature provided under entry 62 of List II of the Seventh Schedule to the Constitution of India. "Entertainment" as defined in section 2(m) of the Jharkhand Entertainment Tax Act, 2012 read with section 2(k) "direct-to-home (DTH) service" and 2(1) "direct-to-home (DTH) service provider", is not broadcasting service but only entertainment and State Legislature is competent to levy tax on the entertainment. In the charging section-section3-of t....