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TMI Blog2015 (12) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... 1885 and the Indian Wireless Act, 1933 on the terms and conditions specified in the licenses issued to them. 2. In the broadcasting sector, the content of the broadcast reaches the ultimate subscriber through different distribution platforms. For the purposes of the instant cases, the examination is limited to only two of them viz. Cable TV network and DTH services. In the cable TV network, the services value chain comprises of four supply side entities namely (i) the broadcaster, (ii) the aggregator, (iii) The Multi-system operator (MSO) and (iv) The local cable operator (LCO). In the case of the DTH Service provider the services value chain comprises of only three supply side entities namely, (i) the broadcaster, (ii) the aggregator and (iii) the DTH Operator. At the end of the supply chain in both the above cases is the subscriber or end customer, who receives the content of the broadcast on his receiving device such as a Television set or Monitor. The Broadcaster owns the content to be televised and received by the viewer. His role is to transmit or uplink the content signals to the satellite from where they are downlinked by the distributor. An aggregator is a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilms or moving pictures or series of pictures which are viewed and heard on Television receiving set at a residential or a nonresidential place of a connection holder." Charging Section: "S.4. Levy and collection of luxury tax:- (1) Subject to the provisions of this Act, there shall be levied and collected a tax, hereinafter called the 'luxury tax', in respect of any luxury provided:- (i) ....... (ii) by cable operators: ............ (2) Luxury tax shall be levied and collected,- ........... (d) in respect of a cable TV operator at the rate of rupees five per connection per month, and shall be collectable from the person enjoying the luxury: Provided that no luxury tax shall be payable in respect of a connection provided by a cable operator engaged in the distribution of programmes of Doordharshan channels only: Provided further that luxury tax, if any, collected shall be paid over to the Government:" 4. The levy was challenged by various cable operators, inter alia on the ground of legislative incompetence of the State Legislature by contending that the cable TV connection enjoyed by a customer could not be termed as a luxury enjoyed by the Customer. The challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same service were not subjected to tax. Dealing with the said argument, this court found as follows: "7. Even though the petitioners have succeeded on the first additional ground raised and decided above, learned Senior counsel appearing for the petitioners wanted us to consider the next additional ground raised that is the allegation of discrimination and violation of Article 14 of the Constitution of India with reference to the Direct-to-Home operators, who are providing same service as cable TV operators to the subscribers. Learned Advocate General appearing for the respondents submitted that the argument is academic in nature because during 2006 when luxury tax was introduced on cable TV operators, Direct-to- Home connections were not in vogue. Further, the learned Advocate General brought to our notice the subsequent amendment, whereunder luxury tax is specifically introduced for Direct-to-Home operations. We find force in the contention of the learned Advocate General because Direct-to-Home connections were not popular or extensive in the State when luxury tax was introduced on cable TV operators in 2006, and as and when the Direct-to-Home operations became extensive and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential place of a subscriber, providing pleasure, comfort and entertainment to the subscribers and viewers. (l) "subscriber" means a person who enjoys the luxury by receiving the signal of cable television network or a direct-to-home service at a place indicated by him to the cable operator or the Direct- To-Home (DTH) Service Provider, without further transmitting it to any other person. 4. Levy and collection of luxury tax:- (1) Subject to the provisions of this Act, there shall be levied and collected a tax, hereinafter called the 'luxury tax', in respect of any luxury provided:- (i) ....... (ii) by Direct-To-Home (DTH) Service Providers; (5) Every Direct-To-Home (DTH) Broadcasting Service Provider in the State shall pay luxury tax at the rate of two per cent on the gross charges received or receivable by him every month in any manner including installation charges, subscription charges, recharges, or other charges by whatever name called from the subscribers in the State in respect of the luxury provided by him. [4D. Registration of Direct-To-Home (DTH) Broadcasting Service Provider].- Every Direct-To- Home (DTH) Broadcasting Service Provider shall get himself reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r v. State of UP - [(2005) 2 SCC 515] is authority for the proposition that Entry 62 of List II of the VIIth Schedule to the Constitution permits only a levy of tax on activities of indulgence, enjoyment or pleasure and does not permit the levy of tax on goods or articles. A subsequent decision of the Supreme Court in State of West Bengal and Others v. Purvi Communication P. Ltd. and Others - [2005 (140) STC 154] found, while upholding a levy of Entertainment Tax on cable operators through a legislation traceable to Entry 61 of List II of the VIIth Schedule to the Constitution, that a tax under Entry 62 of List II may be imposed not only on the person spending on entertainment but also on the act of entertaining, or the subject matter of entertainment. The levy of tax could be either on the person offering or providing the entertainment or on the person enjoying it. In arriving at the said finding, the court followed an earlier constitution bench decision of the Supreme Court in Express Hotels Private Limited v. State of Gujarat - [1989 (74) STC 157 (SC)]. The levy of luxury tax under the same enactment - The Kerala Tax on Luxuries Act, 1976 - on broadcasting services provided by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative competence to legislate on the aspect of "service" rendered to the customers. 9. As regards the further contention on behalf of the petitioners namely, that the legislation does not permit the petitioners to pass on the tax to the customers, I am of the view that such a contention cannot be of any assistance in a challenge to the legislative competence of the State Legislature to impose the levy. Merely because the legislature, in its wisdom, has chosen not to permit the service provider in question to pass on the tax to his customer, the tax does not cease to be a tax on luxury. This Court is not to concern itself with the reasons that weighed with the legislature in choosing to insist on the service provider bearing the tax burden. It is also relevant to note that many Constitution Bench decisions of the Supreme Court [ S ee: Tata Iron & Steel Company v. Bihar State - [AIR 1958 SC 452]; Konduri Buchirajalingam v. State of Hyderabad & Ors - [AIR 1958 SC 756]; George Oakes Pvt. Ltd. v. State of Madras - [ 1 9 61 (12) STC 476 (SC)] have held that it is not a necessary concomitant of an indirect tax (in those cases, sales tax) that it should necessarily be passed on to the buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory and violative of Article 14 of the Constitution of India. The thrust of the arguments of counsel for the petitioners is that the service provided by the DTH operators is substantially the same as that provided by cable operators and, when the State legislature had considered it fit to do away with the levy in respect of cable operators, it was not open to continue the levy only in respect of DTH operators. Reference is made to the fact that the Regulatory controls imposed on cable operators and DTH operators, by the regulatory authority (TRAI), are the same and this would suggest that the nature of the services provided by both category of operators is the same. It is pointed out that what does not qualify as luxury in relation to cable operators, cannot qualify as luxury when it comes to DTH operators. Reliance is placed on a decision of the Madras High Court in the case of Tata Sky Limited & Ors. v. State of Tamil Nadu & Ors - [W.P.(C).No. 25721 of 2011 - Judgment dated 19.10.2012] - where the said court considered a similar argument regarding irrational classification and found that there was no difference in the content of entertainment offered in DTH from the one offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices. While it is trite that the legislature is given greater latitude in tax matters and can even pick and choose the subject matter of a tax, any classification that is effected by the legislature must conform to the mandate of Article 14 of the Constitution. A sub-classification effected between persons who would ordinarily come within the ambit of tax, must be based on an intelligible differentia that bears a rational nexus with the object sought to be achieved by the legislature. It has to be shown that the difference between the two categories of service providers is real and substantial and there must be some just and reasonable relation to the object of the legislation. A classification based on microscopic and insignificant differences is not good, and overdoing classification would tantamount to undoing equality [See: State of U.P. v. Deepak Fertilizers and Petrochemical Corporation Ltd. - [(2007) 10 SCC 342; Roopchand Adlakha and others v. Delhi Development Authority and Others - [(1989) 1 Supp. SCC 116]; Union of India and Others v. N.S.Rathnam & Sons - [2015 (322) ELT 353 (SC)]. In the instant case, the sub-classification based on technological differences that do n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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