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2015 (12) TMI 1625 - HC - VAT and Sales TaxConstitutional validity of the Kerala Tax on Luxuries Act - levy of luxury tax on Direct to Home Services - legislative incompetence of the State Legislature - whether the cable TV connection enjoyed by a customer could be termed as a luxury enjoyed by the Customer? - Held that: - The levy of luxury tax under the same enactment– The Kerala Tax on Luxuries Act, 1976– on broadcasting services provided by cable operators, was also found to be within the legislative competence of the State legislature. Inasmuch as it is the case of the petitioners in these writ petitions that the services rendered by them are similar to the services provided by the cable operators, I do not see any reason to deviate from the views expressed by the division bench of this court on the legislative competence of the State legislature in introducing the levy of luxury tax on DTH services. The levy of service tax is traceable to Entry 97 of List I of the VIIth Schedule to the Constitution, which is a residual entry. The power, to legislate under a residual entry in List I, is available to the Parliament only in respect of matters that are not relatable to any specific entry in Lists II and III. Thus, once it is found that the legislation in question is relatable to Entry 61 of List II, then the Legislative competence of the State Legislature is absolute and it is the validity of the Central Legislation, in respect of the same field of legislation, that would come under a cloud. Even if the levy of service tax is traceable to Entry 92C of List I of the VII Schedule, an application of the doctrine of pith and substance would clearly indicate that the levy is essentially on the luxury provided through the provision of DTH services. The aspects theory of taxation that was recognised by the Supreme Court in Federation of Hotel & Restaurant Association of India v. Union of India – [1989 (5) TMI 50 - SUPREME Court] would operate against the petitioners to find that the State legislature had the competence to legislate on the aspect of “luxury” provided by the petitioners to their customers, notwithstanding that the Parliament may have the legislative competence to legislate on the aspect of “service” rendered to the customers. While the State Legislature has the legislative competence to levy a tax on the luxury provided by a Direct to Home [DTH] Broadcasting service provider, the levy of luxury tax on DTH service providers to the exclusion of a similar levy on cable operators with effect from 01.04.2011 is discriminatory and violative of Article 14 of the Constitution of India - Taxes, if any paid by the petitioners during the period from 01.04.2011, shall be refunded. The notice demanding tax for the period from 1.4.2010 to 31.3.2011 was stayed during the pendency of the writ petition, with liberty to the respondents to pass fresh orders after complying with the rules of natural justice, and in particular, after affording the petitioner an opportunity of being heard - appeal allowed by way of remand.
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