TMI Blog2010 (8) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... hashank Verma, Abhijeet Shrivastava, S.S. Chauhan, Pankaj Bhagat and Rahul Diwakar For the Respondents : V.K. Thankha, Senior Counsel with P.K. Kaurav, Deputy Advocate-General and Rishabh Sancheti ORDER:- The order of the court was made by ARUN MISHRA J.- The petitioners have challenged the imposition of entertainment tax on direct to home (in short, DTH ) services under the provisions of the Madhya Pradesh Entertainments Duty and Advertisement Tax Act, 1936 (hereinafter referred to as M.P. Act of 1936 ). The petitioners have mainly assailed the imposition on the ground that the State of Madhya Pradesh does not have any authority of law to impose entertainment tax on DTH services in absence of any specific provision under the M.P. Act of 1936. Even otherwise the State of Madhya Pradesh does not have any authority to impose entertainment tax on DTH broadcasting services provided in entry 92C of List I of the Seventh Schedule to the Constitution of India. The facts are being referred to from Writ Petition No. 10148 of 2009 (Tata Sky Limited v. State of M.P.). The petitioner/Tata Sky Limited is a service provider and the services are being taxed by the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consumer. Similarly, the entertainment tax is also on consumer. Thus, the field is being occupied by the Union and the State by defining entertainment so as to include DTH cannot tax DTH broadcasting services. It is further submitted by the petitioner that the predominant element in the licence given to the petitioner under section 4 of the Indian Telegraph Act, 1885 is one of service and not of entertainment . The service and entertainment part are not discernible because it is the composite whole. The State would not have any power to separate agreement of entertainment from the agreement to render service and impose entertainment tax on it. There is no specific charges mentioned under the M.P. Act of 1936, hence, no tax can be imposed. Reliance has been placed by the petitioner on a decision of the High Court of Patna in Sky Vision TV through its proprietor, Sanjay Lodha v. State of Bihar [1995] 2 BJLR 845, which has been affirmed by the apex court in special leave petition by a reasoned order. The provisions of Bihar Act and the Madhya Pradesh Act of 1936 are pari materia. The High Court of Uttrakhand in Dish T.V. India Limited v. State of Uttarakhand [2009] 26 VST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh by M.P. Taxation Law Extension Act, 1937. Under entry 62 of List II of the Seventh Schedule to the Constitution of India, the State is fully empowered to levy tax on luxuries including tax on amusement, gambling, betting. The entry 31 of the List I of the Seventh Schedule to the Constitution covers the field of post and telegraph. There is no dispute to the constitutional provisions. Telegraph has been defined under section 3(1AA) of the Indian Telegraph Act, 1885. The term broadcasting has been defined in clause (c) of section 2 of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990. It is not disputed that the DTH services are within the control of the Central Government and the service tax is payable which is the subject-matter mentioned at entry 92C of List I of the Seventh Schedule to the Constitution. It is further submitted by the respondents that the DTH services are amenable to entertainment duty under the M.P. Act of 1936. Admission to entertainment as defined in section 2(a) of the M.P. Act of 1936 covers admission to any place in which entertainment is held. Section 2(b) defines the term entertainment . The DTH is clearly entertainment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bscription payment made by the subscriber is towards availment of broadcasting service and not for admission to entertainment . Service tax at the rate of 10.36 per cent is paid on the subscription amount received from the subscriber for availment of DTH services. Nothing is paid towards admission to entertainment . The service and entertainment part are indivisible. The State has no competence to levy entertainment tax when the Union has brought the same within the ambit of service tax. It was also submitted by counsel for the petitioners that the entertainment element in the said composite activity transaction to be taxed must be discernible by the authority of law. There is no mechanism provided under the M.P. Act of 1936 to discern the charges towards provision/delivery of service and the provision of entertainment. Service is composite and indivisible. If it is construed that subscribers are making payment towards admission to entertainment then entire payment so made by the subscribers has to be appropriated towards payment for admission to entertainment for the purpose of levy of entertainment tax and that when nothing would survive or remain of the said considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -sections of section 2 of the M.P. Act of 1936 defining cable television, VCR and VCP cannot be termed as constituting one category or class thereby restricting application of sections 2(c), 2(d)(iii) and (iv) of the M.P. Act of 1936 only to the cable television, VCR and VCP. In view of section 2(d) by Amending Act No. 6 of 1999 read with Explanations I and II and the amendment of section 3 by Act No. 9 of 2003, the word cinema has been substituted as entertainment . Every proprietor of entertainment has to make payment of entertainment duty. The State has legislative competence to enact the M.P. Act of 1936 under entry 62 of List II of the Seventh Schedule to the Constitution. There is no violation of any power of the Union of India. The Union is levying a service tax on broadcasting. Element of entertainment is different from broadcasting and hence, tax events are wholly different and distinctly identifiable. Reliance has also been placed by the counsel for the respondents on aspect theory on a decision of the Supreme Court in Federation of Hotel Restaurant Association of India v. Union of India [1989] 74 STC 102 (SC); [1989] 3 SCC 634. There is no overlapping in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the payment, if any, for admission to the entertainment or without any such payment for admission; (vi) any payment, made by a person, who having been admitted to one part of the place of entertainment is subsequently admitted to another part thereof, for admission to which a payment involving tax or more tax is required; Explanation I.-Any subscription raised or donation collected in connection with an entertainment in any form shall be deemed to be payment for admission. Explanation II.-Where entertainment is provided as part of any service by any person, whether forming an integral part of such service or otherwise the charges received by such person for providing the service shall be deemed to include charges for providing entertainment or access to entertainment also. Under section 2(d)(iii) of the M.P. Act of 1936, the payment for admission includes any payment made for the loan or use of any instrument or contrivance which enables a person to get a normal or better view or hearing or enjoyment of entertainment, which without the aid of such instrument or contrivance, such person would not get. Section 2(d)(iv) provides that any payment made by a person by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in respect of the amount allowed for facilities also from the proprietor of the cinema. Amended section 3(1) also provides that every proprietor of an entertainment other than proprietor of an entertainment by video cassette recorder or video cassette player or cable operator shall, in respect of entertainment, pay to the State Government a duty at the rate as prescribed by the State Government not exceeding seventy five percentum thereof. The substitution of word cinema by entertainment is of significance, impact of it cannot be ignored. In our opinion, a fair reading of the definition of entertainment and payment for admission read with section 3 makes it clear that the services provided by the DTH are liable for entertainment tax. It has been submitted that the DTH is a broadcasting service and its dominant purpose is broadcasting and not entertainment . In our opinion, entertainment has been used in wide sense under the M.P. Act of 1936 so as to include within its ambit entertainment of any kind. The broadcaster may also provide for entertainment. The apex court has considered the meaning of word entertainment in Geeta Enterprises v. State of U.P. [198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; is defined as a pleasurable occupation of the senses, or that which furnishes it, as dancing, sports, or music. Likewise, in Reader's Digest Family Word Finder at page 264, 'entertainment' has been defined thus: 'Entertainment-amusement, diversion, distraction, recreation, fun, play, good time, pastime, novelty, pleasure, enjoyment, satisfaction. In Webster's Third New International Dictionary the word 'entertainment' has been defined at page 757 thus: 'entertainment'-the act of diverting, amusing or causing someone's time to pass agreeably. Something that diverts, amuses, or occupies the attention agreeably. A public performance designed to divert or amuse. Similarly in the Concise English Dictionary by Hayward and Sparkes the word 'entertainment' has been defined thus: the art of entertaining, amusing or diverting, the pleasure afforded to the mind by anything interesting, amusement, other performance intended to amuse. The apex court in Geeta Enterprises v. State of U.P. [1983] 4 SCC 202 also considered the question that even if admission fee is not paid by the viewer seeing the video, the operator of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tertainments 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 possible for the individual subscribers to choose the desired channels on their individual T.V. sets because of cable televisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4a) of section 4A of the Act. From the definition of 'communication network' given in the agreement between the cable operator and sub-cable operator (termed as franchisee in the agreement), it will be clear that the service rendered by respondent No. 1 is not restricted only to receiving signals but also extends to sending visual images and audio and other information by means of telecommunication network for presentation to members of public. In the present case, respondent No. 1 sends visual images and audio signals for presentation to the individual subscribers at various homes through their feeder line, i.e., coaxial cable or any other device used for transmitting audio and visual signals in terms of clause 2 of the said agreement. The franchisee has access to the signals provided by respondent No. 1. Therefore, it cannot be disputed that the price or prices received or receivable by respondent No. 1 is the amount received or receivable by him for transmitting the signal for exhibition of any performance, film or any other programme telecast and the aggregate of such prices or amounts is the gross receipt of respondent No. 1 in relation to any month or part thereof. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for admission to include any payment made for the loan or use of any instrument or contrivance which enables a person to get a normal or better view or hearing or enjoyment of entertainment, which without the aid of such instrument or contrivance, such person would not get. The payment made for DTH services and for set top box enables a person to get a normal or better view or hearing or enjoyment of entertainment, which without the aid of such instrument of contrivance, such person would not get. Thus, DTH services are covered under the M.P. Act of 1936 and there was absence of such a provision in the Bihar Act. Section 2(d)(iv) of the M.P. Act, 1936, which has been inserted by way of Amending Act No. 6 of 1999 provides that any payment made by a person by way of contribution or subscription or installation and connection charges or any other charges, by whatever name called for providing access to and entertainment, whether for a specific period or on a continuous basis is payment for admission . Thus, the payment made by way of contribution or subscription or installation and connection charges or any other charges for providing access to any entertainment is also covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h provision as of section 2(d)(iv) in the U.P. Act. In view of the aforesaid and otherwise also we are not able to persuade ourselves to follow the aforesaid decision in Dish T.V. India Limited v. State of Uttarakhand [2009] 26 VST 649 (Uttara) besides the same is distinguishable also. It was then submitted by the counsel for petitioners that several other States have mended the State Acts time to time like Maharashtra, Karnataka, Uttarakhand and Delhi so as to specifically cover the DTH services but in the Madhya Pradesh, no such specific amendment has been made. In our opinion, the submission made by counsel for the petitioners cannot be accepted and entertainment tax can be imposed under sections 2(b), 2(d) read with section 3 of the M.P. Act of 1936 on DTH services. Thus, as the amendment made under the M.P. Act of 1936 covers entertainment provided by DTH services, the intendment of M.P. Act of 1936 is clear that it intends to levy tax on entertainment . Thus, it is not necessary to insert specifically every time when entertainment is provided by some new device. The amendments effected in 1999 and 2003 are enough to cover entertainment provided by the DTH servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho is liable to pay tax and it also provides the rate at which such tax is to be paid as apparent from a conjoint reading of sections 2(b), 2(d) and amended section 3 of the M.P. Act of 1936. Merely by the fact that the entertainment duty payable by a proprietor is separately provided in section 3A of the Act and an entertainment duty payable by the cable operator is defined in section 3B, it cannot be said that entertainment services provided by the DTH are not covered within the ambit of section 3 of the M.P. Act of 1936. Method of levy provided under section 4(1) of the M.P. Act of 1936. However, sub-section (2) of section 4 provides other modes also to be adopted for payment as provided in clauses (a) to (f) of sub-section (2) of section 4 of the M.P. Act of 1936. The apex court in Commissioner of Central Excise, Lucknow, U.P. v. Chhata Sugar Co. Ltd. [2004] 2 RC 614; [2004] 3 SCC 466, has laid down that section 3(1) of the Central Excise Act, 1944 is a charging section which creates liability to pay excise duty on the goods produced or manufactured in India and the said sub-section clearly indicates the nature and character of the duty, namely, that it is a tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or not. Therefore, sugar on which no sales tax is leviable because additional excise duty is payable would not be beyond the taxing net. In State of West Bengal v. Road Transport Association, Siliguri [2003] 131 STC 1 (SC); [2003] 3 SCC 593, the apex court has laid down that not providing any pro forma for declaring particular under the Explanation would neither make it vague not unworkable for want of any machinery provision. The apex court has held thus (pages 3 and 5 in 131 STC): 3. The Tribunal took the view that Explanation 1 to section 2(1a1) of the Act is valid but vague and that there is no machinery provision specifying the manner of disclosure and, therefore, suspended the operation of the said Explanation till a machinery for that purpose is provided; it was held that sub-sections (6) and (7) of section 4C of the Act were invalid and unconstitutional and consequently, sub-rule (4) of rule 48L was also invalid. The application of the respondents was thus allowed by the Tribunal by the order under challenge. 8. A perusal of the definition clause and Explanation 1 shows that there is no ambiguity in them. The requirements of the Explanation are clear enough. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment under the 1956 Act, as if it is an assessment under the State Act. The expression 'as if' is of some significance. The powers conferred and the procedures laid down under the State sales tax laws would, therefore, be applicable also for the purpose of carrying out assessment under the Central Act. Sub-section (2) of section 9 provides that the authorities under the State Act for the purpose of making assessment and reassessment under the 1956 Act shall have all the powers which they have under the general sales tax law of the State. Assessment would mean the entire process of computation and levy of tax. (See Additional Income-tax Officer v. E. Alfred [1962] 44 ITR 442 (SC) at page 446; [1962] Supp. 1 SCR 143 at 149 and S. Sankappa v. Income-tax Officer [1968] 68 ITR 760 (SC) at pages 761-762; [1968] 2 SCR 674 at 678. It is also submitted by counsel for the petitioners that no specific amendment has been made in the M.P. Act of 1936 with respect to DTH services whereas cable operator, cable services, cable television network and subscriber have been defined by inserting amending section 2(aaa). Similarly, section 3B was also inserted. In this regard, reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontains an enumeration of specific words; (2) the subjects of enumeration constitute a class or category; (3) that class or category is not exhausted by the enumeration; (4) the general terms follow the enumeration; and (5) there is no indication of a different legislative intent'. 53. Thus, it is essential for application of the ejusdem generis rule that enumerated things before the general words must constitute a category or a genus. It was, therefore, pointed out Lord Simonds in Russel (Inspector of Taxes) v. Scott [1948] 2 All ER 1; [1948] AC 422 (HL) that 'indeed if a collection of items is heterogeneous, it almost seems a conflict in words to say that they belong to the same genus'. The apex court in Amar Chandra Chakraborty v. Collector of Excise, Government of Tripura [1972] 2 SCC 442; AIR 1972 SC 1863, has held thus: 9. Before dealing with the contention relating to article 19 we consider it proper to dispose of the argument founded on the ejusdem generis rule and article 14 of the Constitution. It was contended by Shri Sen that the only way in which section 43 can be saved from the challenge of arbitrariness is to construe the expression 'any ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the consumer. The taxing event in the service tax is a provision/consumption of service and in case of entertainment tax, it is the provision of entertainment . Currently, various State Governments have defined the DTH broadcasting services as entertainment and are levying tax on the same. Thus, in pith and substance, the State Governments are taxing DTH broadcasting service while taxing the entertainment . The action is violative of article 246 of the Constitution of India and it amounts to entrenchment upon the field reserved to the Union of India under entry 92C of List I of the Seventh Schedule to the Constitution. Thus, the field being occupied by the Union, the States by deeming and inclusive definition of entertainment cannot tax DTH broadcasting service. Reliance has been placed by the counsel for the petitioners on a decision of the apex court in Godfrey Phillips India Ltd. v. State of U.P. [2005] 139 STC 537 (SC); [2005] 4 RC 186; [2005] 2 SCC 515 wherein the apex court has laid down that construction of taxation entry which may lead to overlapping must be eschewed. The apex court has laid down thus (pages 559 and 560 in 139 STC): 44. The Indian Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning or the subject of entertainment. We find that there is no overlapping or entrenching upon the field. The apex court in State of West Bengal v. Kesoram Industries Ltd. [2004] 266 ITR 721 (SC); [2004] 2 RC 298; [2004] 10 SCC 201, has laid down that List I has the priority over Lists II and List III has priority over List II. However, still the redominance 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. The court has to determine the field of legislation wherein, the impugned legislation falls by applying the doctrine of pith and substance. When once it is found that the impugned legislation fails within the power expressly conferred upon the Legislature which enacted it, an incidental encroaching in/trenching on the field assigned to another Legislature is to be ignored. The apex court has further laid down that if a tax or fee levied by the State with the object of augmenting its finances and in reasonable limits does not ipso facto trench upon regulation, development or control of the subject the power of legislation in respect whereof has been conferred on Parliament ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has no authority to impose tax on indivisible service under the garb of entertainment tax when the Government of India has already brought the same within the ambit of service tax. The entertainment element in the said activity must be discernible by the authority of law by way of specific enabling provision in the Constitution and in absence of such provision, it does not come within the competence of the State to levy tax on entire consideration so received on a telecommunication service when sale is already available to service tax under entry 92C of List I of the Seventh Schedule to the Constitution. It was further submitted by counsel for the petitioner that payment for subscription is liable for service tax under entry 92C of List I of the Seventh Schedule to the Constitution and service tax at the rate of 10.36 per cent is paid on the said subscription amount received from subscriber for availing of DTH services and as such there is no question of levy of entertainment tax by the State on the said subscription amount when nothing is paid towards admission to entertainment . The aforesaid submission has no legs to stand as the apex court in State of West Bengal v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the land quantified by reference to the quantity of its produce was held to be a levy on the land and hence constitutional in Ralla Ram AIR 1949 FC 81; Kunnathat Thathunni Moopil Nair AIR 1961 SC 552 and Ajoy Kumar Mukherjee AIR 1965 SC 1561. It does not become excise duty on manufacture and production of goods merely on account of having relation with the quantity of product yielded by the land. Rather it is a safe, sound and scientific method of determining the value of the land to which the product relates. The levy of cess considered as a tax is constitutionally valid. The apex court in State of West Bengal v. Kesoram Industries Ltd. [2004] 266 ITR 721 (SC); [2004] 2 RC 298; [2004] 10 SCC 201, has also laid down that declaration under section 2 of the Tea Act, 1953 in terms of entry 52 of List I of the Seventh Schedule to the Constitution does not amount to vesting the power to tax or levy fee in the Central Government by reference to tea or on tea estates. The fact that section 25 of the Tea Act empowers the Central Government to levy a duty or cess upon tea or tea leaves for the purpose of that Act, can in no manner deprive the State Legislature of its power to tax the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. But the fact that there is an overlapping does not detract from the distinctiveness of the aspects. Lord Simonds in Governor-General in Council v. Province of Madras [1945] 1 STC 135 (PC) at page 141; [1945] FCR 179 (PC) at page 193, in the context of concepts of duties of excise and tax on sale of goods said: '. . . The two taxes, the one levied upon a manufacturer in respect of his goods, the other upon a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time upon the occasion of its sale. . .' 32. Referring to the 'aspect' doctrine, Laskin's 'Canadian Constitutional Law' states: 'The aspect doctrine bears some resemblance to those just noted but, unlike them, deals not with what the matter is but with what it comes within . . .'(page 115) '. . . it applies where some of the constitutive ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the measure of the tax is furnished by the amount of fare and freight charged, it does not cease to be a tax on passengers and goods . . . ' Indeed, reference may be made to the following statement in Encyclopaedia Britannica (Volume 14, page 459) on 'luxury tax': 'A different approach to luxury taxation, much less frequently found, seeks to single out the luxury component of spending on a given object rather than taxing specified goods and services as luxuries. One example of this is the Massachusetts five per cent tax on restaurant meal of $. 1 or more. . . . . . 72. The short question that one has to answer in these cases is whether the levies in question by the States and the Union can both stand or whether we have to treat the levies as either tax on 'luxuries' or as tax on 'income' or 'expenditure' and thus uphold one of them but not both. I do not think there can be any doubt at all that, in the context of the social and economic conditions that prevailed in India, it was a luxury for any person to stay in hotels charging high rents and providing various types of facilities, amenities and conveniences such as telephone, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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'. We find from what has been held in aforesaid decisions that there is no overlapping in law and the State is acting within its realm under entry 62 of List II of the Seventh Schedule to the Constitution and is not entrenching upon the right reserved with the Union of India under entry 92C of List I of the Seventh Schedule to the Constitution. We are unable to accept the submission of petitioners that aspect theory is not applicable. It was also submitted by counsel for the petitioners that there was no admission to entertainment which submission we have not accepted then alternatively it was submitted that even if it is admission to entertainment for the purpose of entertainment tax, nothing would survive of the said consideration for levy of service tax. We have already found that there is no overlapping in law and what is levied by the Central Government is the service tax at the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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