The State Of Kerala vs Asianet Satellite Communications Ltd

2025 INSC 757 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE/ORIGINAL JURISDICTION

CIVIL APPEAL NO.9301 OF 2013

STATE OF KERALA & ANOTHER APPELLANTS

VERSUS

ASIANET SATELLITE COMMUNICATIONS LTD. & OTHERS RESPONDENTS

WITH

CIVIL APPEAL NO.1629 OF 2020

CIVIL APPEAL NOS.1765-1766 OF 2020

CIVIL APPEAL NO.1531 OF 2020

CIVIL APPEAL NO.1533 OF 2020

CIVIL APPEAL NO.1534 OF 2020

CIVIL APPEAL NO.1752 OF 2020

CIVIL APPEAL NO.1753 OF 2020

CIVIL APPEAL NO.1755 OF 2020

WRIT PETITION (C) NO.699 OF 2014

CIVIL APPEAL NO.1532 OF 2020

CIVIL APPEAL NO.1687 OF 2020

CIVIL APPEAL NO.1688 OF 2020 Signature Not Verified

Digitally signed by NEETU SACHDEVA Date: 2025.05.22

CIVIL APPEAL NO.1689 OF 2020 15:46:37 IST Reason:

Page 1 of 321 CIVIL APPEAL NO.1690 OF 2020

CIVIL APPEAL NOS.1548-1549 OF 2020 CIVIL APPEAL NO. OF 2024 (Arising out of Special Leave Petition (Civil) No.9025 of 2023)

CIVIL APPEAL NO.1630 OF 2020

CIVIL APPEAL NO.1726 OF 2020

CIVIL APPEAL NO.1725 OF 2020

CIVIL APPEAL NO.10114 OF 2011

CIVIL APPEAL NO.2147 OF 2012

CIVIL APPEAL NO.1543 OF 2020

CIVIL APPEAL NO.1547 OF 2020

CIVIL APPEAL NO.1680 OF 2020

CIVIL APPEAL NO.1754 OF 2020

CIVIL APPEAL NO.1756 OF 2020

CIVIL APPEAL NO.1530 OF 2020

WRIT PETITION (C) NO.748 OF 2015

CIVIL APPEAL NO.1628 OF 2020

CIVIL APPEAL NO.5867 OF 2012

CIVIL APPEAL NO.5228 OF 2012

CIVIL APPEAL NO.1535 OF 2020

CIVIL APPEAL NO.1679 OF 2020

CIVIL APPEAL NOS.1681-1682 OF 2020

CIVIL APPEAL NO.1683 OF 2020

CIVIL APPEAL NO.1684 OF 2020

Page 2 of 321 CIVIL APPEAL NO.1685 OF 2020

CIVIL APPEAL NO.1686 OF 2020

CIVIL APPEAL NO.1580 OF 2020

CIVIL APPEAL NOS.1581-1583 OF 2020

CIVIL APPEAL NO.1536 OF 2020

JUDGMENT

NAGARATHNA, J.

INDEX

1. Bird’s Eye View of the Controversy: ................................................ 6

2. Facts in brief: ................................................................................. 8

3. Writ Petitions filed before this Court: ........................................... 24 a. W.P. (C) No. 699/2014:................................................................ 24 b. W.P. (C) No.748/2015: ................................................................. 26

4. Submissions: ................................................................................ 28 a. Submissions on behalf of Appellants: ........................................ 28 b. Submissions of Respondent-States: ............................................ 51 i. State of West Bengal: ............................................................... 51 ii. State of Uttar Pradesh: ........................................................... 53 iii. State of Odisha: ..................................................................... 54 iv. State of Tamil Nadu: .............................................................. 62 v. State of Rajasthan: ................................................................. 70 vi. State of Punjab: ...................................................................... 71 vii. State of Nagaland: ................................................................ 71 viii. State of Andhra Pradesh: ..................................................... 72

Page 3 of 321 ix. Union of India: ....................................................................... 72 c. Reply Arguments: ....................................................................... 73

5. Points for Consideration: .............................................................. 73

6. Legal Framework: ........................................................................ 75 a. Relevant Entries of the Seventh Schedule of the Constitution: .. 77 b. Finance Act, 1994 with Relevant Amendments: ......................... 78 c. Relevant Provisions of the State Enactments: ............................ 91 i. Assam Amusements and Betting Tax Act, 1939: ...................... 91 ii. Delhi Entertainments and Betting Tax Act, 1996: .................. 94 iii. Gujarat Entertainments Tax Act, 1977: ................................. 96 iv. Jharkhand Entertainment Tax Act, 2012: ........................... 104 v. Kerala Tax on Luxuries Act, 1976: ........................................ 108 vi. Orissa Entertainment Tax Act, 2006: ................................... 117 vii. Punjab Entertainment Duty Act, 1955: ................................ 120 viii. Rajasthan Entertainments and Advertisements Tax Act, 1957:

................................................................................................. 128 ix. Tamil Nadu Entertainments Tax Act, 1939: ......................... 130 x. Uttar Pradesh Entertainment and Betting Tax Act, 1979: ..... 133

7. Interpretation of Entries of the Lists of the Seventh Schedule of the Constitution: .................................................................................. 142

8. State of Karnataka vs. State of Meghalaya: ............................... 157

9. Meaning and Scope of the expression “Luxuries, Entertainments and Amusements” and Legislative Competence of State Legislatures to impose Entertainment Tax: ............................................................ 162 a. Luxuries: ................................................................................. 162 b. Entertainments and Amusements: ........................................... 168 c. Amusement: ............................................................................. 171

10. Parameters of Taxation: ........................................................... 180

11. Relevant case law: .................................................................... 184 a. Suresh: .................................................................................... 184 b. Vasant Madhav Patwardhan: ................................................... 194

12. Geeta Enterprises vs. Purvi Communication: ............................ 195

13. “Aspect Theory” or Aspect Doctrine: A Discussion .................... 217

Page 4 of 321

14. Criticism of its Use in Indian Context: ...................................... 219

15. Usage of Aspect Theory in the Indian Context: ......................... 222

16. Aspect Theory: Its Extent and Scope in India: .......................... 246

17. Application of Aspect Theory to the Case at hand: ................... 256

18. Modus Operandi of the Assessees and their aspects: ................ 260

19. Allahabad High Court’s Ruling on retrospective operation of the Amendment: ................................................................................... 265

20. State of Kerala vs. Asianet: ...................................................... 277 a. Submissions:............................................................................ 282 b. Judgments relied upon by State of Kerala: .............................. 283

21. Jharkhand High Court’s Ruling: .............................................. 293

22. Summary of Discussion and Conclusions: ................................ 296 a. Constitutional Scheme regarding distribution of Legislative Powers: ........................................................................................ 298 b. Service Tax: ............................................................................. 303 c. Tax on Luxuries: Entertainments & Amusements .................... 305 d. Parameters of Taxation under State Enactments: ................... 307 e. Geeta Enterprises and Purvi Communications:......................... 308 f. Aspect Theory: .......................................................................... 310

Leave granted in Special Leave Petition (Civil) No.9025 of

2023.

1.1 Since common questions of law and facts arise in these civil

appeals and writ petitions, they have been heard together and are

being disposed of by this common judgment.

1.2 The Civil Appeals arise from the judgments of the High

Courts of Allahabad, Delhi, Gauhati, Gujarat, Jharkhand, Kerala,

Page 5 of 321 Madras, Orissa, Punjab & Haryana, Rajasthan and Uttarakhand

while two writ petitions have been filed before this Court under

Article 32 of the Constitution by M/s Tata Play & Another and M/s

Tata Play Ltd.

Bird’s Eye View of the Controversy:

2. The assessees have filed these appeals assailing the

provisions of the respective State Acts under which tax on

entertainment has charged on them on the premise that their

activity is relatable to the field of entertainment as envisaged under

Entry 62 – List II of the Seventh Schedule to the Constitution. It is

their contention that they are not liable to pay entertainment tax

(or luxury tax) under the respective provisions of the State

enactments. It is further case of the assessee that they are engaged

in broadcasting of signals etc. through television channels to the

subscribers of those channels hence, possibly they are liable to pay

service tax to the Central Government under Entry 97 – List I of

the Seventh Schedule of the Constitution. There are however two

writ petitions filed by certain assessees who have also ventilated

their grievance that they are not liable to pay service tax as well.

The question whether the appellants-assessees are liable to pay

Page 6 of 321 entertainment tax under the provisions of the respective State

enactments which are relatable to Entry 62 – List II of the Seventh

Schedule of the Constitution and are also liable to pay service tax

under the provisions of the Finance Act, 1994 as amended from

time to time as a provider of a taxable service namely broadcasting

service within the scope and ambit of Entry 97 – List I which is a

residuary entry for the relevant purpose of assessment is the moot

question which arises in these appeals.

2.1 The State of Kerala being aggrieved by the striking down of

the sub-section (iv) of proviso to Section 4 under which the cable

operators who have less than 7,500 connections are being exempt

from payment of entertainment tax and whereas those who have

over and above 7,500 connections are liable to pay the same tax

being discriminatory in nature and being strike down by the Kerala

High Court is questioned by the State of Kerala in its appeal. While

considering the controversy between the parties, the doctrine of

pith and substance in interpreting the entries of the Seventh

Schedule of the Constitution as well as the aspect theory as

referred to by the learned senior counsel and learned counsel who

have appeared for the respective parties shall be dealt with.

Page 7 of 321 2.2 Since the fields of legislation are in the Seventh Schedule to

the Constitution of India and would be referred to during the

course of discussion primarily in List I and List II (Union List and

State List respectively) in these cases, it shall be understood that

any reference to these Lists is only with reference to the Seventh

Schedule to the Constitution of India.

Facts in brief:

3. For the sake of convenience, some of the relevant facts are

delineated in the form of a table which is as under:

Impugned Name of S.No. Case No. Cause Title order dated enactment 1. C.A. No. State of Kerala The Kerala Tax on 9301/2013 Versus Luxuries Act,1976

Arising out of Asianet Satellite 28.06.2012 SLP(C) No. Communications Ltd.

17573/2013

2. C.A. No. Tata Sky Limited Uttarakhand 1629/2020 Versus (Uttar Pradesh Arising out of State of Uttarakhand Entertainment and SLP(C) No. 26.07.2010 Betting Tax Act, 1173/2011 1979) (Amendment) Act, 2009

3. C.A. Nos. 1765- M/s. Tata Sky Ltd. Rajasthan 1766/2020 Versus Entertainments & Arising out of State of Rajasthan Advertisements SLP(C) Nos. Tax Act, 1957 and 19.08.2014 34237 - Rajasthan 34238/2014 Entertainments & Advertisements Tax Rules, 1957

Page 8 of 321 Impugned Name of S.No. Case No. Cause Title order dated enactment

4. C.A. No. Sun Direct TV Pvt. Gujarat 1531/2020 Ltd. Entertainment Tax Arising out of Versus (Amendment) Act, SLP(C) No. State of Gujarat 2009 and Gujarat 17300/2015 Entertainment Tax 12.03.2015 (Exhibition by means of Direct-to-

Home (DTH) Broadcasting Services) Rules, 2010 5. C.A. No. Dish TV India Ltd. Gujarat 1533/2020 Versus Entertainment Tax Arising out of State of Gujarat (Amendment) Act, SLP(C) No. 2009 and Gujarat 22171/2015 Entertainment Tax 12.03.2015 (Exhibition by means of Direct-to- Home (DTH) Broadcasting Services) Rules, 2010 6. C.A. No. Bharat Business Gujarat 1534/2020 Channel Ltd. Entertainment Tax Arising out of (Now Known as (Amendment) Act, SLP(C) No. Videocon D2H Ltd.) 2009 and Gujarat 20511/2015 Versus Entertainment Tax State of Gujarat (Exhibition by 12.03.2015 means of Direct-to- Home (DTH) Broadcasting Services) Rules, 2010

7. C.A. No. Bharti Telemedia Ltd. Jharkhand 1752/2020 Versus Entertainment Tax Arising out of State of Jharkhand Act, 2012 30.01.2014 SLP(C) No. 4855/2014

Page 9 of 321 Impugned Name of S.No. Case No. Cause Title order dated enactment 8. C.A. No. Tata Play Limited Jharkhand 1753/2020 Versus Entertainment Tax Arising out of State of Jharkhand 30.01.2014 Act, 2012 SLP(C) No. 6690/2014 9. C.A. No. Reliance Big TV Ltd. Jharkhand 1755/2020 Versus Entertainment Tax Arising out of State of Jharkhand 30.01.2014 Act, 2012 SLP(C) No. 8421/2014 10. W.P.(C) No. Tata Play Ltd. Section 65(105) 699/2014 Versus (zk) and Section Union of India 65(15) of Finance Act, 1994 11. C.A. No. Bharati Telemedia Ltd. Gujarat 1532/2020 Versus Entertainment Tax Arising out of State of Gujarat (Amendment) Act, SLP(C) No. 2009 and Gujarat 18164/2015 Entertainment Tax 12.03.2015 (Exhibition by means of Direct-to- Home (DTH) Broadcasting Services) Rules, 2010 12. C.A. No. IndusInd Media and Uttar Pradesh 1687/2020 Communications Ltd. Entertainments Arising out of Versus and Betting Tax SLP(C) No. State of Uttar Pradesh Act, 1979 and 11304/2018 19.04.2018 Uttar Pradesh Entertainments and Betting Tax (Amendment) Ordinance, 2009 13. C.A. No. MultiTech Digital Uttar Pradesh 1688/2020 Services Pvt. Ltd. Entertainments Arising out of Versus 09.04.2018 and Betting Tax SLP(C) No. State of Uttar Pradesh Act, 1979 and 13949/2018 Uttar Pradesh

Page 10 of 321 Impugned Name of S.No. Case No. Cause Title order dated enactment Entertainments and Betting Tax (Amendment) Ordinance, 2009 14. C.A. No. Siti Networks Limited Uttar Pradesh 1689/2020 Versus Entertainments Arising out of State of Uttar Pradesh and Betting Tax SLP(C) No. Act, 1979 and 14077/2018 09.04.2018 Uttar Pradesh Entertainments and Betting Tax (Amendment) Ordinance, 2009 15. C.A. No. Bling Ice Network Pvt. Uttar Pradesh 1690/2020 Ltd. Entertainments Arising out of Versus and Betting Tax SLP(C) No. State of Uttar Pradesh Act, 1979 and 22181/2018 09.04.2018 Uttar Pradesh Entertainments and Betting Tax (Amendment) Ordinance, 2009 16. C.A. Nos. 1548- Mansion Cable Uttar Pradesh 1549/2020 Networks Private Entertainments Arising out of Limited and Betting Tax SLP(C) No. 4233 - Versus Act, 1979 and 4234/2020 State of Uttar Pradesh 09.04.2018 Uttar Pradesh Entertainments and Betting Tax (Amendment) Ordinance, 2009 17. C.A. No. of Subhash Chand Uttar Pradesh 2025 Versus Entertainments Arising out of State of U.P. and Betting Tax SLP(C) No. Act, 1979 and 9025/2023 11.04.2018 Uttar Pradesh Entertainments and Betting Tax (Amendment) Ordinance, 2009

Page 11 of 321 Impugned Name of S.No. Case No. Cause Title order dated enactment 18. C.A. No. Dish TV India Ltd. Uttarakhand 1630/2020 Versus (Uttar Pradesh Arising out of State of Uttarakhand Entertainment and 26.07.2010 SLP(C) No. Betting Tax Act, 1185/2011 1979) (Amendment) Act, 2009 19. C.A. No. Bharti Telemedia Ltd. Punjab 1726/2020 Versus Entertainment Duty Arising out of State of Punjab 25.10.2010 Act 1955 (as SLP(C) No. amended in 2010) 4755/2011 20. C.A. No. M/s Tata Sky Ltd Punjab 1725/2020 Versus Entertainment Duty Arising out of State of Punjab 25.10.2010 Act 1955 (as SLP(C) No. amended in 2010) 13448/2011 21. C.A. No. Tata Play Ltd. The Delhi 10114/2011 Versus Entertainments and Arising out of Govt. of NCT of Delhi Betting Tax Act, SLP(C) No. 1996 and the Delhi 05.09.2011 28836/2011 Entertainments and Betting Tax (Amendment) Rules, 2010 22. C.A. No. Bharti Telemedia Ltd. The Delhi 2147/2012 Versus Entertainments Arising out of Government of NCT of and Betting Tax SLP(C) No. Delhi Act, 1996 and the 265/2012 05.09.2011 Delhi Entertainments and Betting Tax (Amendment) Rules, 2010 23. C.A. No. Tata Sky Ltd. The Assam 1543/2020 Versus Amusement and Arising out of State of Assam Betting Tax Act, 22.02.2012 SLP(C) No. 1939 and Rules 9 18256/2012 and 9A of the Rules framed thereunder

Page 12 of 321 Impugned Name of S.No. Case No. Cause Title order dated enactment 24. C.A. No. Bharati Telemedia Ltd. The Assam 1547/2020 Versus Amusement and Arising out of State of Assam Betting Tax Act, 22.02.2012 SLP(C) No. 1939 and Rules 9 18766/2012 and 9A of the Rules framed thereunder 25. C.A. No. Tata Sky Ltd. Uttar Pradesh 1680/2020 Versus Entertainments Arising out of State of Uttar Pradesh and Betting Tax SLP(C) No. Act, 1979 and 28058/2012 20.07.2012 Uttar Pradesh Entertainments and Betting Tax (Amendment) Ordinance, 2009 26. C.A. No. Dish T.V India Ltd. Jharkhand 1754/2020 Versus Entertainment Tax Arising out of State of Jharkhand Act, 2012 30.01.2014 SLP(C) No. 7100/2014

27. C.A. No. Dish TV India Ltd. Jharkhand 1756/2020 Versus Entertainment Tax Arising out of State of Jharkhand Act, 2012 30.01.2014 SLP(C) No. 10192/2014

28. C.A. No. Tata Play Limited Gujarat 1530/2020 Versus Entertainment Tax Arising out of State of Gujarat (Amendment) Act, SLP(C) No. 2009 and Gujarat 17005/2015 Entertainment Tax (Exhibition by 12.03.2015 means of Direct-to- Home (DTH) Broadcasting Services) Rules, 2010

Page 13 of 321 Impugned Name of S.No. Case No. Cause Title order dated enactment 29. W.P.(C) No. Tata Play Limited 748/2015 Versus Union of India

30. C.A. No. Bharati Telemedia Ltd. Uttarakhand 1628/2020 Versus (Uttar Pradesh Arising out of State of Uttarakhand Entertainment and SLP(C) No. 26.07.2010 Betting Tax Act, 1182/2011 1979) (Amendment) Act, 2009 31. C.A. No. Dish TV India Limited The Delhi 5867/2012 Versus Entertainments Arising out of Government of NCT and Betting Tax SLP(C) No. of Delhi Act, 1996 and the 16255/2012 05.09.2011 Delhi Entertainments and Betting Tax (Amendment) Rules, 2010 32. C.A. No. Dish TV India Ltd. The Delhi 5228/2012 Versus Entertainments Arising out of Government of NCT and Betting Tax SLP(C) No. of Delhi Act, 1996 and the 20902/2012 05.09.2011 Delhi Entertainments and Betting Tax (Amendment) Rules, 2010 33. C.A. No. Tata Play Ltd. The Orissa 1535/2020 Versus Entertainment Tax Arising out of State of Orissa Act, 2006 and SLP(C) No. Orissa 23533/2012 Entertainment Tax 24.04.2012 (Amendment) Act, 2010 along with the Orissa Entertainment Tax (Amendment) Rules, 2010

Page 14 of 321 Impugned Name of S.No. Case No. Cause Title order dated enactment 34. C.A. No. Tata Sky Limited. Uttar Pradesh 1679/2020 Versus Entertainments Arising out of State of Uttar Pradesh and Betting Tax SLP(C) No. Act, 1979 and 31532/2012 Uttar Pradesh 20.07.2012 Entertainments and Betting Tax (Amendment) Ordinance, 2009

35. C.A. Nos. 1681- New Era Uttar Pradesh 1682/2020 Entertainment Entertainments Arising out of Network Ltd. and Betting Tax SLP(C) Nos. Versus Act, 1979 and 29366 – 29367 State of Uttar Pradesh Uttar Pradesh 20.07.2012 /2012 Entertainments and Betting Tax (Amendment) Ordinance, 2009

36. C.A. No. Independent T.V. Uttar Pradesh 1683/2020 Ltd. Entertainments Arising out of Versus and Betting Tax SLP(C) No. State of Uttar Pradesh Act, 1979 and 31096/2012 Uttar Pradesh 20.07.2012 Entertainments and Betting Tax (Amendment) Ordinance, 2009

37. C.A. No. Bharti Telemedia Ltd. Uttar Pradesh 1684/2020 Versus Entertainments Arising out of State of Uttar Pradesh and Betting Tax SLP(C) No. Act, 1979 and 31416/2012 Uttar Pradesh 20.07.2012 Entertainments and Betting Tax (Amendment) Ordinance, 2009

Page 15 of 321 Impugned Name of S.No. Case No. Cause Title order dated enactment 38. C.A. No. Bharati Telemedia Ltd. Uttar Pradesh 1685/2020 Versus Entertainments Arising out of State of Uttar Pradesh and Betting Tax SLP(C) No. Act, 1979 and 31342/2012 20.07.2012 Uttar Pradesh Entertainments and Betting Tax (Amendment) Ordinance, 2009 39. C.A. No. Sun Direct TV Pvt. Uttar Pradesh 1686/2020 Ltd. Entertainments Arising out of Versus and Betting Tax SLP(C) No. State of Uttar Pradesh Act, 1979 and 32123/2012 20.07.2012 Uttar Pradesh Entertainments and Betting Tax (Amendment) Ordinance, 2009 40. C.A. No. Tata Sky Limited The Tamil Nadu 1580/2020 Versus Entertainments Arising out of The State of Tamil Tax Act, 1939 as SLP(C) No. Nadu amended by Tamil 10555/2013 19.10.2012 Nadu Entertainments Tax (Second Amendment) Act, 2011 41. C.A. Nos. 1581- Bharati Telemedia Ltd. The Tamil Nadu 1583/2020 Versus Entertainments Arising out of Union of India Tax Act, 1939 as SLP(C) Nos. amended by Tamil 10658 - 10660 19.10.2012 Nadu /2013 Entertainments Tax (Second Amendment) Act, 2011 42. C.A. No. Bharti Telemedia Ltd. The Orissa 1536/2020 Versus 14.11.2012 Entertainment Tax Arising out of State of Orissa Act, 2006 and SLP(C) No. Orissa

Page 16 of 321 Impugned Name of S.No. Case No. Cause Title order dated enactment 12692/2013 Entertainment Tax (Amendment) Act, 2010 along with the Orissa Entertainment Tax (Amendment) Rules, 2010

3.1 From the above table, it is evident that most of the Civil

Appeals have been filed by the assessees while Civil Appeal No.

9301 of 2013 has been filed by the State of Kerala assailing the

judgment of the said High Court dated 28.06.2012.

3.2 The Civil Appeals have been filed by the assessees assailing

the orders passed by the High Courts referred to above dismissing

the writ petitions while the State of Kerala has filed its appeal being

aggrieved by some of the findings arrived at by the Kerala High

Court in the context of Article 14 of the Constitution vis-à-vis the

plea regarding discrimination raised by the respondents in the said

Appeal.

3.3 The bird’s eye view of the orders and judgements passed by

the Eleven High Courts referred to above can be gleaned as under: Page 17 of 321

3.3.1 The High Court of Uttarakhand by way of impugned

judgment dated 26.07.2010 passed in Tata Sky Limited vs. State

of Uttarakhand, Writ Petition (M/B) No. 4 of 2010 held that

amendments to Uttar Pradesh Entertainment and Betting Tax,

1979 levying entertainment tax on DTH services was fully within

the legislative competence of the State and did not encroach upon

the field which the Parliament exclusively has authority to legislate.

Relying on the judgment of this Court in State of West Bengal vs.

Purvi Communication Pvt. Ltd., (2005) 3 SCC 711 (“Purvi

Communication”), it was observed that the activity carried on by

petitioners therein was not different from that carried out by cable

operators in Purvi Communication. To explain the distinctions

between the imposition of service tax and entertainments tax the

High Court noted that the ‘incidence’ of service tax is on the license

agreement obtained from the Ministry of Information and

Broadcasting whereas the ‘incidence’ for the levy of entertainment

tax is based on the individual contracts executed by the petitioner

with its customers.

3.3.2 Similarly, the High Court of Punjab and Haryana High

Court in the impugned judgment dated 25.10.2010 held that the

Page 18 of 321 levy of entertainment duty falls under Entry 62 - List II which

operates in a completely different field from Entry 92C - List I.

Affirming the application of aspect theory to the present facts, it

was observed that levies of service tax and entertainment tax can

co-exist and can be harmonized as they concern different aspects.

Therefore, the High Court upheld the vires of the Punjab

Entertainment Duty Act, 1955, as amended in 2010, which levied

entertainment duty on DTH services and dismissed the petition.

3.3.3 The impugned judgment dated 05.09.2011 of the Delhi

High Court passed in Bharti Telemedia Ltd. vs. Government of

NCT of Delhi, W.P.(C) No. 4935/2011 applied aspects theory to

the facts in hand and held that the State legislature is competent

to levy an entertainment tax on all payments for admission through

DTH. It was observed that the transaction in question has an

aspect of service which is amenable to service tax and an aspect of

entertainment which is amenable to entertainment tax. The writ

petitions were dismissed and challenge to Section 7 of the Delhi

Entertainments and Betting Tax Act, 1996 was rejected.

Page 19 of 321 3.3.4 Subsequently, Gauhati High Court at Guwahati vide

impugned judgment dated 22.02.2012 dismissed the petitions

challenging the relevant provisions of Assam Amusement and

Betting Tax Act, 1939 in terms of the judgments of the Uttarakhand

High Court dated 26.07.2010 and Punjab and Haryana High Court

dated 25.10.2010. The Gauhati High Court was of the view that the

issues raised were already covered by the aforesaid judgments.

3.3.5 By way of impugned order dated 24.04.2012, the High

Court of Orissa at Cuttack dismissed the writ petition being M/s.

Tata Sky Ltd. vs. State of Orissa, Writ Petition (C) No. 8966 of

2011, and held that the aforesaid decision of the Punjab and

Haryana High Court dated 25.10.2010 was squarely applicable to

the facts before it.

3.3.6 The High Court of Judicature at Allahabad also dismissed

the writ petition preferred before it vide impugned judgment dated

20.07.2012. The High Court thought it fit to respect the broad

latitude given to legislature in fiscal legislation and thereby rejected

the argument that the rate of entertainment was discriminatory in

comparison with cable operators. It also agreed with the findings

Page 20 of 321 of the Delhi High Court on the application of aspect theory. In the

present batch of petitions, subsequent orders of the Allahabad

High Court dated 09.04.2018, 11.04.2019 and 19.04.2018 are also

challenged. These orders which were passed in terms of the

impugned judgment dated 20.07.2012 are also challenged.

3.3.7 On 19.10.2012, the High Court of Judicature at Madras

vide its order and judgment impugned herein held, in principle,

that there could be a levy of entertainment tax on entertainment

received through DTH services and the pith and substance of the

levy contemplated under Entry 62 - List II is a levy on

‘entertainment’ in contradistinction to service tax levy on providing

of service. The High Court also rejected the argument that Entry

62 - List II only refers to public entertainment and not

entertainment through DTH vis-à-vis public entertainment.

However, in the specific facts and circumstances, the High Court

also held that the impugned charging provision i.e. Section 4-I of

the Tamil Nadu Entertainments Tax Act, 1939 is inadequate due

to no explicitly mention of the chargeable event and incidence of

tax. Therefore, the writ petitions challenging the levy of

entertainment tax were allowed. In so far as the matters arising

Page 21 of 321 from Madras High Court are concerned, the questions with regard

to legislative competence under Entry 62 – List I and whether DTH

services were exclusively within Entry 92C/97 – List I are

considered in these appeals. Further, the correctness of the

findings of the High Court with regard to the charging section being

defective is assailed by the State of Tamil Nadu in separate appeals

which are not part of this batch of appeals.

3.3.8 The High Court of Jharkhand at Ranchi vide impugned

judgment dated 30.01.2014 held that the Jharkhand

Entertainment Tax Act, 2012 levying tax on “entertainment”

through DTH, in pith and substance, is on entertainment which

falls under Entry 62 - List II. According to the High Court, the

aforesaid levy is distinguished from tax on “broadcasting service”

under Entry 62 - List II. Having found the State Legislature

competent to levy such “entertainment tax” the High Court

dismissed all the writ petitions.

3.3.9 Impugned order dated 19.08.2014 passed by Rajasthan

High Court conducted a survey of the extant judgments of different

High Courts on the issues raised and of Purvi Communication.

Page 22 of 321 Finally, the High Court dismissed all three writ petitions by way of

the impugned order.

3.3.10 Soon thereafter, the High Court of Gujarat at Ahmedabad

by way of impugned judgment dismissed the challenge to the

Gujarat Entertainment Tax (Exhibition by means of DTH

Broadcasting) Rules, 2010 for similar reasons as other High

Courts. The Gujarat High Court relied on Aspect Theory to dissect

the two taxable events herein, firstly, the service of enabling flow of

content and secondly, entertainment from content.

3.3.11 Finally, vide Impugned judgment dated 28.06.2012, the

Kerala High Court allowed WP(C) No.33966 of 2006 (R) on the

ground that the provisions of the impugned Act were

discriminatory inasmuch as they authorized levy and collection

of luxury tax on cable TV operators including petitioners only with

connections of 7500 or above as discriminatory. According to the

High Court, there could be no reasonable classification between

cable TV operators with connections below 7500 and cable TV

operators with connections above 7500 with reference to object of

legislation.

Page 23 of 321 Writ Petitions filed before this Court:

W.P. (C) No.699/2014:

3.4 W.P. (C) No.699/2014 has been preferred by the petitioner

Tata Sky Ltd. (now Tata Play Ltd.) challenging the constitutional

validity of Section 65 (105) (zk) read with Section 65(15) of the

Finance Act, 1994, which impose service tax on the provision of

“Direct to Home” (“DTH”) broadcast facility provided by

the petitioner to its subscribers. In short, the petitioner’s case is

that the entire operation carried on by the petitioner is one single

operation and since only service tax is being imposed on this

activity, the petitioner has been paying service tax on this activity

since the year 2006. However, later the Jharkhand Entertainment

Tax Act, 2012 (Act. No.13 of 2012) came into force taxing, inter alia,

the activity of the petitioners as an entertainment. As a challenge

to the legality of this imposition has been rejected by the High

Court of Jharkhand at Ranchi and several other High Courts,

which is now before this Court, this writ petition has been preferred

contending that once an activity is found to be subject of an

enactment under Entry 62 – List II, the same cannot also be subject

to service tax, which is imposed taking strength from Entry 97 –

Page 24 of 321 List I. Therefore, it is prayed that this Court may declare

unconstitutional the imposition of service tax on the petitioner’s

activity. In the alternative, it is prayed that this Court may declare

that the activity of broadcasting does not constitute providing

entertainment and is thereby amenable to service tax. The prayers

sought for in this writ petition read as under:

“a) Declare that Section 65 (105) (zk) and Section 65(15) of the Finance Act, 1994, insofar as they purport to impose a tax on the "Direct to Home" activity provided by the Petitioner, are lacking in legislative competence and are thereby unconstitutional;

b) Issue a writ of mandamus and/or such other appropriate writ, order or directing Respondent No.1, the Union of India, to pay to the various States, which seek to collect tax by way of entertainment tax, the amount collected by them towards service tax in discharge of the Petitioner's liability towards entertainment tax;

c) In the alternative, declare that the activity of broadcasting does not constitute providing entertainment and is thereby amenable to service tax, and a tax by the States on such activity under Entry 62, List II, Sch. 7 of the Constitution of India is lacking in legislative competence;

d) If prayer (c) above is allowed, then issue a writ of mandamus and/or such other appropriate writ, order or directing the Respondent States which collect tax by way of entertainment tax, to pay over the tax collected by them towards entertainment tax on the service provided by the Petitioner to the Union of India in discharge of the Petitioner's liability towards service tax.

Page 25 of 321

e) Pass such other orders as this Hon'ble Court may deem fit and proper in the interest of justice.”

W.P. (C) No.748/2015:

3.5 The issues raised in W.P.(C) No.748/2015 are similar to

W.P.(C) No.699/2014 inasmuch as the petitioner, M/s Tata Play

Ltd., challenges the constitutional validity of Section 65 (105) (zk)

read with Section 65(15) of the Finance Act, 1994, which imposes

service tax on the provision of DTH broadcast facility provided by

the petitioner to its subscribers. Petitioner also challenges the

constitutional validity of Sections 3(10), 3(11) and Section 15A of

the Andhra Pradesh Entertainment Tax Act, 1939, and the

Assessment Order RC No.A2/424/2014-15 (ET) dated 27.08.2015

issued by the Government of Telangana, Commercial Taxes

Department for FY 2011-22, 2012-13 and 2013-14. After re-

organization, the State of Telangana adopted the aforementioned

Act. The petitioner’s principal contention is that the petitioner

cannot be burdened with imposition of ‘service tax’ and

‘entertainment tax’ on the same taxable event i.e. ‘transmission of

signals’. It is also contended that the petitioner as a DTH operator

does not fall within the ambit of a ‘Master Cable Operator’ within

Page 26 of 321 the meaning of the state enactment and therefore no entertainment

tax can be levied on the petitioner’s activity. Furthermore, it is

argued that the State of Telangana cannot seek to levy

Entertainment Tax for the period prior to the existence of the State

of Telangana especially for the areas which now form part of the

Andhra Pradesh. The prayers sought for in this writ petition read

as under:

“(A) Issue an appropriate writ, order or direction declaring Section 65 (105) (zk) r/w Section 65(14) of the Finance Act, 1994 insofar as they purport to impose a tax on the "Direct to Home" activity provided by the Petitioner, as lacking legislative competence and thereby unconstitutional; (B) In the alternative, declare that the activity of broadcasting does not constitute providing entertainment and is thereby amenable to service tax and a tax by the States on such activity under Entry 62, List II, Schedule 7 of the Constitution of India is. lacking in legislative competence;

(C) Issue an appropriate Writ, Order or direction, declaring the Section 3(10), 3(11) and Section 15 A of the Andhra Pradesh Entertainment Tax Act as adopted by the State of Telangana, in so far as it purports to impose a tax on the activities carried on by the Petitioner as lacking legislative competence;

(D) Issue a Writ of certiorari or any other writ, order or direction setting aside the Assessment Order (Rc. No. A2/ 424/2014-2015 (ET) dated 27.08.2015 (received by the Petitioner on 07.09.2015) issued by Respondent No. 3 as illegal, and having been issued without the authority of law;

Page 27 of 321 (E) Pass such other orders as this Hon'ble Court may deem fit and proper in the interest of justice.”

Submissions:

4. We have heard learned senior counsel and learned counsel

appearing for the respective assessees/appellants herein and

learned senior counsel and learned counsel for the respective State

as well as learned senior counsel appearing for the Union of India

at length and on several dates.

Submissions on behalf of Appellants:

4.1 Learned senior advocate, Sri Datar, appearing on behalf of

the appellant in C.A. No. 2147/2012, drew our attention to the

conscious use of the word ‘entertainments’ in Entry 62 - List II. It

was contended that the word ‘entertainments’ is not the plural of

‘entertainment’ but is nomen juris. This line of argument was

advanced to contend that the State cannot expand its taxing power

by including DTH services within the meaning of the word

“entertainments”. To buttress his submission, he took us through

the consistent use of the word ‘entertainments’ from the year 1622

onwards in British legislation. It was his argument that this

consistent usage reflects the continuing and underlying intention

Page 28 of 321 of constitutional makers for ‘entertainments’ to mean only public

entertainment to the exclusion of private entertainment. Reliance

in this regard was also placed on Cantonment Board Poona vs.

Western India Theatres Ltd., AIR 1954 BOM 261, wherein the

Bombay High Court held that ‘entertainments’ is used as a

common noun and is to mean ‘entertainments in public’.

4.2 Sri Datar also argued that Entry 31 – List I refers to

‘communication’ and ‘broadcasting’. Therefore, even in the absence

of an express entry taxing telecommunication or broadcasting, it

was contended that these are “services” and can be taxed only by

the Union, even if used for television channels. As “broadcasting

service” includes DTH service, the States do not have the

competence to tax the same service. He also drew our attention to

the omission of Section 129 of the Government of India Act, 1935

that permitted imposing of fees on construction, use of

transmitters, and use of receiving apparatus. This was contended

in light of the fact that DTH operators use an apparatus to receive

signals and further decode them.

Page 29 of 321 4.3 It was further contended that vide Circular No.

61/10/2003-ST dated 14.07.2003, the Ministry of Finance

directed Doordarshan and All India Radio to pay service tax as a

provider of broadcasting services. It was therefore contended that,

even if there is any entertainment through Doordarshan and All

India Radio, it has always been treated as part of broadcasting

service. By way of analogy, it was argued that Radio Tax was also

levied by the Post and Telegraph Department even though radio

provided entertainment. It was put forth that while Entry 31 - List

I covers broadcasting and “other like forms of communication”,

Entry 13 - List II applies to communications not specified in List I

(which actually concerns surface transport).

4.4 Our attention was also drawn to Entry 92C – List I of the

Constitution, which was inserted but not notified. Relying on a

judgment of the Constitution Bench of this Court in State of

Kerala vs. Mar Appraem Kuri Company Ltd., (2012) 7 SCC 106,

Sri Datar argued that the subject service tax is within the exclusive

domain of Parliament even though Entry 92C was not notified.

Therefore, it was contended that under Article 246(1) read with

Page 30 of 321 Article 248, only Parliament can levy tax on any kind of services

after the insertion of Entry 92C.

4.5 Furthermore, Sri Datar highlighted that, even the Negative

List under Section 66D of the Finance Act, 1994 in the service tax

regime also specifically excludes tax on entertainments, which,

according to him, means only public entertainments. Therefore, it

was contended that entertainments in public places, theatres, etc.

will be subject to State taxes; whereas the same cinema shown on

a personal device or on DTH/Cable TV can be taxed only by the

Centre as being part of broadcasting service.

4.6 It was also contended by Sri Datar that all the impugned

enactments passed by States have merely included “DTH Services”

or broadcasting service as part of the definition of entertainment

and therefore the tax is levied on the service itself and not on the

entertainment, particularly because the entire value is taxed.

4.7 On the application of aspect theory, learned senior counsel

Sri Datar’s categorical argument was that “Double Aspect” theory

only comes into play when both the Union and States have

legislative competence. However, as Parliament in 2001 declared

Page 31 of 321 its intent to tax DTH services, the aspect theory will have no

application here.

4.8 Furthermore, on the relevancy of Purvi Communication to

the matter at hand, it was pointed out by Sri Datar that while

Parliament levied a tax in the year 2001, the judgment in Purvi

Communication was pronounced in 2005 and has not noted the

legislative history of entertainments and also did not refer to any

entries pertaining to broadcasting or communications.

4.9 As an argument in the alternative, it was contended that

even if the aspect theory was to apply, the impugned enactments

are liable to be struck down as they ignore that in all composite

transaction with different aspects, the legislature provides for

bifurcation; however, herein the State legislatures have not

provided for computation of the value attributable to

entertainment. Only the States of Delhi and Assam have not levied

entertainment tax on the gross consideration. It was contended

that taxation on gross value is prohibited in law and the value of

entertainment cannot be included in the value of service and vice-

a-versa, vide Bharat Sanchar Nigam Limited vs. Union of

Page 32 of 321 India, (2006) 3 SCC 1 (“Bharat Sanchar Nigam Limited”); K.

Damodarasamy Naidu & Bros. vs. State of Tamil Nadu, (2000)

1 SCC 521.

4.10 In that context, it was also argued that where the services

are availed by the weaker section of the society as well, an

interpretation that avoids double taxation should be preferred.

4.11 Sri S.K. Bagaria, learned senior counsel appearing on behalf

of the appellant in Civil Appeal No.1680 of 2020 and Writ Petition

(Civil) No.699 of 2014, contended that the activity of the appellants

herein is primarily broadcasting and has been treated and taxed as

such under the statutes enacted by the Parliament. To show that

the entire field of DTH services is occupied by the Central

Government, Sri Bagaria drew our attention to the order dated

15.03.2001 of the Ministry of Information and Broadcasting,

Government of India, by which DTH broadcasting was permitted in

India.

4.12 According to Sri Bagaria, the fact that neither Entry 62 -

List II nor any other entry in the State List explicitly mentions taxes

on broadcasting shows that any and all taxes on broadcasting can

Page 33 of 321 be imposed exclusively by the Parliament. Reliance in that regard

was placed on Article 248(2) of the Constitution which provides for

the Parliament to make any law imposing a tax not mentioned

either in the Concurrent list or in the State list. Reliance was placed

on the dictum of this Court in Association of Leasing &

Financial Service Companies vs. Union of India, (2011) 2 SCC

352.

4.13 It was sought to be advanced that the question before this

Court was not merely regarding the scope of taxes on

entertainments but also about the conspicuous absence of taxes

on broadcasting in Entry 62 - List II. In other words, the question

is whether the expression ‘taxes on entertainments’ can be

construed so broadly as to include taxes on broadcasting within it.

The argument advanced was that even a reading of the entries in

their widest amplitude would not enable the respondents to read

into the entry a subject not covered by it. Succinctly stated, the

argument of Sri Bagaria is that giving such a wide interpretation to

Entry 62 - List II will nullify Parliament's power and legislative

competence to levy taxes on broadcasting service as there can be

no overlapping in the field of taxation.

Page 34 of 321 4.14 While Entry 31 - List I is undisputedly acknowledged as a

regulatory entry, it was also argued that a construction as argued

by the appellants will also be fully in line with the structure of the

constitutional scheme, especially that of the Seventh Schedule. As

broadcasting and other like forms of communication are covered

by Entry 31 - List I and service tax on broadcasting is imposed

under Entry 97 - List I, it was argued that there is a discernible

constitutional scheme which necessitates the widest possible

construction of Entry 31- List I. Additionally, it was advanced that

the State List has no mention of broadcasting and other like forms

of communication or taxes on broadcasting whereas State List does

have regulatory entries in the form of Entry 33 – List II concerning

sports, entertainments and amusements, and in the form of Entry

34 – List II for betting and gambling. Thus, Entry 62 – List II relates

to taxes on luxuries, including taxes on entertainments,

amusements, betting and gambling.

4.15 Sri Bagaria, learned senior counsel, placed significant

reliance on the scheme of regulation and definition of broadcasting

by Parliamentary statutes and orders. It was argued that the entire

contour of broadcasting is a subject matter of parliamentary

Page 35 of 321 enactments and, therefore, as all forms, types and varieties of

broadcasting are covered by Parliamentary Law, it is evident that

every facet of regulation of broadcasting is subsumed under Entry

31 – List I and the taxing power for broadcasting is under Entry 97

– List I. Highlighting the importance of broadcasting, it was also

argued that broadcasting and other forms of communication are

subjects of national importance which were intended by the

constitutional framers to be regulated and taxed by the Central

Government only. It is the case of the appellants that upholding

such an interpretation of Entry 62 – List II would be to truly and

correctly reconcile the same with other entries in List I. According

to the appellants, the constitutional scheme is with respect to all

forms, types and contents of broadcasting. The consequences and

effects of broadcasting are not the same thing as legislative subject

matter and, consequently, all forms and attributes of broadcasting

also fall within List I. It is Sri Bagaria’s argument that tax is sought

to be levied merely with reference to the entertainment - causing

attribute of broadcasting and is, therefore, impermissible in law.

4.16 Reliance was placed on the judgment of this Court in

Special Reference No.1 of 2001, In Re: Association of Natural

Page 36 of 321 Gas vs. Union of India, (2004) 4 SCC 489, wherein the validity

of Gujarat Gas (Regulation of Transmission, Supply and

Distribution) Act, 2001 was challenged before the Constitution

Bench. The issue before the Court was whether the State had

legislative competence to make laws on natural gas and liquefied

natural gas under Entry 25 – List II, “Gas and Gasworks” or

whether the Parliament was competent to make laws under Entry

53 – List I, “Regulation and development of oilfields and mineral oil

resources; petroleum and petroleum products; other liquids and

substances declared by Parliament by law to be dangerously

inflammable”. While the State of Gujarat argued that Entry 25 –

List II must be given the widest possible interpretation and that it

includes all types of gases especially when there are no words of

limitation in the entry itself, this Court considered the consistent

legislative practice in various legislations to hold that the term

“petroleum” or “petroleum products” has been given a wide

meaning to include within itself natural gas and other similar

products. Sri Bagaria, learned senior counsel, contended that

similarly, central legislations passed by Parliament over several

decades included within “broadcasting” any form of

Page 37 of 321 communication like signals, images, sounds of all kinds by

transmission of electromagnetic waves irrespective of the contents

and their natures or types. It was further contended that this

reading will not make Entry 62 – List II a “useless lumber” because

any or all forms of broadcasting was never intended to be covered

by the expression “entertainments”.

4.17 It was categorically argued that the aspect theory has no

application to the activity at hand as the activity of broadcasting is

taxed by the Parliament and the state legislatures have no

legislative competence to tax the same under Entry 62 - List II as

tax on ‘entertainments’. Sri Bagaria would argue that even in

Federation of Hotel & Restaurant Association of India vs.

Union of India, (1989) 3 SCC 634 (“Federation of Hotel &

Restaurant Association of India”) this Court rejected the

challenge to the central statute impugned therein as it found that

the subject matter of the impugned statute was in pith and

substance a tax on expenditure and not on luxuries or sale of

goods.

Page 38 of 321 4.18 Sri Gulati, learned senior advocate, argued that at a

foundational level, far from carrying out any activity of

entertainment, the appellant only acts as a conduit in the entire

process of transmission of signals to the subscriber of television

channels. In this context, he outlined that appellants perceive the

nature of their activity as follows:

(i) entire activity of appellants is in relation to transmission of

DTH signals; and

(ii) neither do appellants exercise any control over the content

received from the broadcaster nor do they control exhibition of

the content.

4.19 It was contended that the said activity is aptly described as

only rendering broadcasting service which was earlier amenable to

service tax under Section 65(105)(zk) of the Finance Act, 1994 and

was specifically expanded in 2005 to include DTH signals. That

from the year 2007 onwards, the appellant was discharging service

tax on the entire monthly subscription charges under

‘broadcasting services’ without charging any additional

consideration for set-top boxes and dish antenna. It was argued

Page 39 of 321 that, in substance, this position continued even after the Negative

List regime was brought about in 2012.

4.20 Sri Gulati highlighted that States have enacted statutes

under Entry 62 – List II intending to tax the very same activity as

that of providing “broadcasting service”, which is already amenable

to service tax imposed by the Parliament. According to Sri Gulati,

the provisions of various State enactments levying Entertainment

tax can be categorized as follows:

i. Levy of tax is on admission to entertainment by way of a DTH

connection;

ii. Levy is on entertainment through DTH service, and

iii. No taxable event is specified in the charging provision.

4.21 It was contented that herein there is only one activity of

providing DTH signal and that itself is a service. Reliance was

placed on All India Federation of Tax Practitioners vs. Union

of India, (2007) 9 SCR 527 (“All India Federation of Tax

Practitioners”) to submit that a service is also an activity. Thus,

it was contended that the only taxable event here being providing

the service of broadcasting, there are no two aspects to the service

Page 40 of 321 provided by the Appellants and only one taxable event i.e. provision

of DTH service does not enable the States under the guise of Entry

62 - List II to levy entertainment tax on the same aspect. 4.22 It was stressed on behalf of the appellants that though

entertainment may, inter alia, be a consequence of DTH service,

but entertainment tax cannot be levied on the activity of provision

of DTH service, vide Godfrey Phillips Ltd. vs. State of U.P.,

(2005) 2 SCC 515 (“Godfrey Phillips”). It was contended that

there being only one taxable event, there can be no confounding of

the service provided herein as both: a service and an

entertainment.

4.23 In the same vein, reliance was placed on Godfrey Phillips

to contend that the word ‘entertainments’ contemplates a tax on

‘activities’ of entertainments and not on any person being

entertained or receiving entertainment per se. As no entertainment

is inherently embedded in the activity conducted by appellants,

namely, broadcasting service, there can be no levy of entertainment

tax on them.

Page 41 of 321 4.24 It was also pressed that the position of law permits tax

under Entry 62 - List II only on the act of entertaining and not on

the consequence of an activity being entertainment vide Western

India Theatres vs. Cantonment Board, Poona, 1959 Supp (2)

SCR 63 (“Western India Theatres”). Highlighting the multitude

of content transmitted by appellants, it was advanced that the

activity of appellants cannot be seen as providing entertainment

insofar as informational and educational shows, news, etc. as these

may not have any element of entertainment at all.

4.25 Another line of argument of appellants advanced before us

relates to a distinction between public entertainment and private

entertainment. By way of analogy to cinema theaters, it was

contended that mere provision of DTH services does not constitute

a ticket “for admission to an entertainment”/or provision of

“entertainment”. It was also contended that for an entertainment

to be taxed as such, it should be open to public where members

are invited. That is to say, Entry 62 – List II is restricted to

entertainments of a public color. – vide Geeta Enterprises vs.

State of Uttar Pradesh, (1983) 4 SCC 202 (“Geeta

Enterprises”). However, as DTH service is provided to a subscriber

Page 42 of 321 in a private place, the appellants contended that the aspect of

providing DTH service levy of entertainment tax is constitutionally

impermissible. According to Sri Gulati, learned senior counsel, the

words appearing alongside ‘entertainments’ in Entry 62 – List II

must also be taken aid of to interpret the entry as having a public

colour. It was argued that the juxtaposition of amusements, betting

and gambling within one entry indicates that the tax contemplated

is on establishments providing entertainment activities. Similarly,

it was highlighted that the taxable event in various state

legislations is the “admission for an entertainment” and not the

consequence of entertainment.

4.26 The next line of contention taken by the appellants is that

there is no overlap in taxing entries and that it is settled law that

taxing entries must be construed with clarity and precision as to

maintain exclusivity. - Commissioner of Central Excise and

Customs, Kerala vs. Larsen and Toubro Ltd., (2016) 1 SCC 170

and Hoechst Pharmaceuticals Ltd. vs. State of Bihar, (1983) 4

SCC 45 (“Hoechst Pharmaceuticals”).

Page 43 of 321 4.27 On the question of applicability of aspect theory, which has

been relied on by various High Courts, the appellants contend that

the activity of broadcasting is only one indivisible transaction

which cannot be artificially split into two taxable events and,

therefore, the aspect theory would have no applicability here as

splitting is permitted only when the activity represents two distinct

and separate contracts which are discernible as such. - Bharat

Sanchar Nigam Limited.

4.28 In substance, the contention of the appellants was that the

provision of providing DTH service is only one taxable event which

cannot be split into various aspects to become amenable to

taxation as both a broadcasting service and as entertainments.

Reliance was also placed on the fact that the appellants are

mandated to avail license granted under Section 4 of the Indian

Telegraph Act, 1885 for providing telecommunication services. It

was also highlighted that this Court in Bharat Sanchar Nigam

Limited observed that the license under Section 4 of the Indian

Telegraph Act is for providing telecommunication service and not

for supply of any goods or transfer of right to use any goods. In

furtherance of the same, it was noted by this Court that the

Page 44 of 321 integrity of the telecommunication service or license would

therefore be mutilated if it were to be broken down into pieces to

be taxed as supply of goods or transfer of right to use goods.

4.29 Sri Gulati, learned senior counsel, furthermore argued that

there being no divisible event, the correct test to ascertain the true

nature of the activity herein is the dominant nature test. Having

argued vehemently that the dominant intention of the appellant is

to act only as a conduit for receipt and transmission of

broadcasting signals, he highlighted that the aspect theory will be

of no avail to the States to entrench upon the Union List and tax

services by including the cost of such service in the value of the

goods, vide Bharat Sanchar Nigam Limited; Imagic Creative (P)

Ltd. vs. CCT, (2008) 2 SCC 614 (“Imagic Creative”); Larsen and

Toubro Limited vs. State of Karnataka, (2014) 1 SCC 708.

4.30 Sri Gulati took us through the origin of the aspect theory in

the Canadian jurisprudence whilst highlighting at the outset a

significant distinction between the Canadian and Indian

jurisprudence that must be borne in mind. In Lyle Francis Smith

vs. Her Majesty the Queen, (1960) SCR 776, and in several

Page 45 of 321 decisions since then, it has been observed by the Supreme Court

of Canada that within the Canadian constitutional scheme, an

overlap is inevitable between the subjects outlining the areas of

legislations to be legislated on by the Parliament of Canada and

provincial legislatures due to the general wording of the subjects

under Sections 91 and 92 of the British North America Act, 1867

respectively. However, it is settled law that in India, there is no

overlap between the taxation entries in List I and List II. It was

highlighted that the double aspect doctrine has been developed to

resolve these situations of inevitable overlap and has been applied

to allow both federal and provincial regulation where powers

overlap. It was contended that the doctrine has, however, never

been allowed to enable the dominion and provincial legislatures to

separately tax two aspects of the same transaction. It was therefore

contented that any transplantation of the doctrine to the Indian

Constitution must be tempered and exercised with caution given

that in the Indian constitutional scheme, there cannot be any

overlap in respect to the entries pertaining to taxation.

4.31 Furthermore, it was contended that the true nature of the

activity of DTH services must be ascertained while keeping in mind

Page 46 of 321 that the DTH operator has no control over the content that is

broadcast or received. It was contended that as the activity would

continue to be a service even if no entertainment value is

transmitted, it must be held that the true nature of the activity is

predominantly that of a broadcasting service. It was repeatedly and

vehemently argued on behalf of appellants that any element of

entertainment is purely incidental to the provision of service.

4.32 Sri Gulati further argued that the pith and substance of the

state legislations, impugned herein, is in the nature of a

broadcasting service. This argument links to the foundational

argument that the activity of providing broadcasting services is not

in the nature of entertainment, and therefore, the levy imposed on

purported entertainment isn't different from service on which

service tax is levied by the central government. It was contended

that states cannot simply deem the whole activity undertaken by

appellant as ‘entertainment’ which in fact is, fundamentally, a

broadcasting service.

4.33 The argument further advanced on behalf of the appellants

was that there is no machinery to exclude the value of service from

Page 47 of 321 the value of entertainment. This was argued as the impugned

legislations, except those of the States of Delhi, Gujarat, and

Assam, do not exclude the value of service from the value of

entertainment before levying entertainment tax. According to the

appellants, it is impermissible to levy entertainment tax on the

value of the gross amount received by the appellants from its

subscribers without segregating the value of service from the value

of entertainment. In substance, the contention of the appellant was

that in the absence of any machinery to compute the measure of

tax for the purpose of levy of entertainment tax, the charge of

entertainment tax itself would fall, vide Commissioner of Income

Tax, Bangalore vs. B.C. Srinivasa Setty, (1981) 2 SCC 460.

4.34 Notably, a three-judge bench of this Court in Purvi

Communication has already found that entertainment tax was

leviable against cable operators. However, learned senior counsel

Sri K.K. Venugopal argued that the decision of this Court in Purvi

Communication failed to consider the tests laid down in Geeta

Enterprises and to that extent is per incuriam and sub silentio.

Appellants also contended that the decision in Purvi

Communication is distinguishable as that case was not concerned

Page 48 of 321 with attempts of both Central Government and State Governments

to levy a tax on the same activity but instead dealt with the conflict

between Entry 62 – List II and Entry 31 – List I i.e. between a taxing

entry and a regulatory entry, whereas the conflict herein is between

two taxing entries being Entry 97 – List I and Entry 62 – List II.

4.35 The appellants also contended that if the State legislatures

are held competent to levy entertainment tax under Entry 62 – List

II, then the taxable event would fall within the exclusive

jurisdiction of the State legislature and consequently the Central

Government would lose competence to levy service tax under Entry

97 – List I.

4.36 Without prejudice to the foregoing arguments, learned

senior counsel appearing for the appellants argued that the

impugned legislations promulgated by the states of Tamil Nadu,

Odisha, Assam and Gujarat fail to provide for a clear and

unambiguous taxable event as they only deem the operations of

DTH operators as entertainment. Therefore, it was contended that

these legislations do not satisfy the test laid down by this Court in

Govind Saran Ganga Saran vs. CST, 1985 Supp SCC 205

Page 49 of 321 (“Govind Saran Ganga Saran”) and must be held to be

unconstitutional. As only the Madras High Court accepted this

argument, learned counsel for the appellants contended that the

impugned judgments arising out of the High Courts including

Orissa, Gauhati and Gujarat are bad in law.

4.37 It was further contended that Section 3 of the Jharkhand

Entertainment Tax Act, 2012, which is the charging section, merely

provides a tax on entertainment and lacks any clear and

unambiguous stipulation to tax entertainment through DTH.

Therefore, in the absence of such express words in the charging

section, there cannot be any levy of entertainment tax. It was also

contended that the Notification dated 14.05.2012 issued by the

State Government under Section 1(3) of the Jharkhand

Entertainment Tax Act, 2012 appointing 27.04.2012 as the date of

implementation of the Act suffers from the vice of imposing

retrospective taxation in the absence of any express legislative

provision providing for it.

4.38 Ms. Shirin Khajuria, learned senior counsel appearing on

behalf of the subscribers, took us through the scheme of the

Page 50 of 321 impugned Act promulgated by the State of Kerala and brought to

our attention that there was a stay on the levy of luxury tax for the

period 2006 to 2010 and therefore the tax has to be collected only

if leviable and not otherwise.

Submissions of Respondent-States:

State of West Bengal:

5. Sri Jaideep Gupta, learned senior counsel appearing for the

State of West Bengal in W.P.(C) 699/2014, commenced his

arguments by noting that the writ petitioners have not pressed the

prayers challenging the constitutional validity of Section 65

(105)(zk) and Section 65(15) of the Finance Act, 1994. Further,

arguing in support the constitutional validity of the entertainment

tax imposed under the State enactment, he contended that there

is no conflict between Entry 62 – List II and Entry 97 – List I.

5.1 According to learned senior counsel, this Court’s approach

must be to first interpret Entry 62 – List I, followed by an

examination of the scope of Entry 33 – List I. It was argued that

the scope of Entry 62 – List II can be informed by the judgment of

this Court in Western India Theatres wherein it was held that a

Page 51 of 321 State imposition is on the activity of entertainment. In that case, it

was on the happening of a show in a theater. Reliance was placed

on the following paragraph from Western India Theatres:

“As pointed out by this Court in Navinchandra Mafatlal v. The Commissioner of Income Tax, Bombay City (1), following certain earlier decisions referred to therein, the entries in the legislative list should not be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. It has been accepted as well settled that in construing such an entry conferring legislative powers the widest possible construction according to their ordinary meaning must be put upon the words used therein. In view of this well established rule of interpretation, there can be no reason to construe the words " taxes on luxuries or entertainments or amusements " in entry 50 as having a restricted meaning so -as to confine the operation of the law to be made thereunder only to taxes on persons receiving the luxuries, entertainments, or amusements. The entry contemplates luxuries, entertainments, and amusements as objects on which the tax is to be imposed. If the words are to be so regard- ed, as we think they must, there can be no reason to differentiate between the giver and the receiver of the luxuries, entertainments, or amusements and both may, with equal propriety, be made amenable to the tax. It is true that economists regard an entertainment tax as a tax on expenditure and, indeed, when the tax is imposed on the receiver of the entertainment, it does become a tax on expenditure, but there is no warrant for holding that entry 50 contemplates only a tax on moneys spent on luxuries, entertainments or amusements. The entry, as we have said, contemplates a law with respect to these matters regarded as objects and a law which imposes tax on the act of entertaining

Page 52 of 321 is within the entry whether it falls on the giver or the receiver of that entertainment. ...” (emphasis supplied)

Applying the aforesaid to the facts of the instant cases, it was

argued that irrespective of the nomenclature of broadcasting or

entertainment, the activity of the petitioner ends with the TV set

and is therefore carried out for the purpose of entertainment.

5.2 Sri Gupta further argued that where taxing entries are not in

conflict, then there is no need to go the doctrine of pith and

substance. Furthermore, examining the application of aspect

theory in Federation of Hotel & Restaurant Association of

India, he argued that the same has been followed in All India

Federation of Tax Practitioners. It was also argued that Purvi

Communication is not per incuriam and was rightly decided it

being distinguished from Geeta Enterprises for multiple reasons.

State of Uttar Pradesh:

5.3 Learned senior counsel Sri Raizada appearing for the State

of Uttar Pradesh, contended that the judgment in Geeta

Enterprises was adjudicated on the anvil of interpretation of

‘places of entertainment’ as it appeared in the 1937 Act whereas the

Page 53 of 321 present impugned levy is imposed under the revised 1979 Act. It

was highlighted that the period of the controversy herein is from

2005–2009 and any dictum under the 1937 Act would have no

bearing on the present case. Furthermore, it was argued that if for

a single transaction two levies are made out or use a measure of

another tax then such an imposition would not be ultra vires the

Constitution. Therefore, it was contended that ‘entertainments’ as

it appears in Entry 62 – List II must be given a widest possible

interpretation and it would be erroneous to define entertainment

in a myopic, rigid or straightjacket formula.

State of Odisha:

5.4 Sri Preetesh Kapur, learned senior advocate, appearing for

the State of Odisha in C.A. No.1536/2020 contended that Entry 62

– List II must be read in the widest amplitude possible and a correct

reading of the same allows imposition of tax on the act of

entertaining whether it falls on the provider or receiver of

entertainment, vide Western India Theatres. Furthermore, in

Express Hotels (P) Ltd. vs. The State of Gujarat, 1989 3 SCC

677 (“Express Hotels”), this Court, while interpreting Entry 62 –

List II on the context of luxuries, observed that a legislative entry

Page 54 of 321 takes within it everything that can fairly and reasonably be said to

be comprehended in it while the actual measure of the levy is a

matter of legislative policy and will be held to be good in law as long

as it has a reasonable nexus with the concept of luxuries. It was

also canvassed that the actual utilization or derivation of

entertainment was irrelevant for the imposition of tax and could be

of any kind including one which may be purely educative vide

Express Hotels or Geeta Enterprises.

5.5 It was further argued that the Orissa Entertainment Tax Act,

2005 as well as the Amendment Act of 2010 are, in pith and

substance, relatable to Entry 62 - List II. Applying the test

expounded by a three-Judge Bench of this Court in Purvi

Communication to ascertain whether a tax falls within the ambit

of Entry 62 - List II, learned senior counsel contended that the

amendment in question, whereby entertainment tax was imposed

on DTH operators, is a tax on entertainment.

5.6 Sri Kapur argued that this Court in para 46 of Purvi

Communication has held that the appropriate test is whether the

activity being taxed has a direct and proximate nexus with the

Page 55 of 321 provision (or enjoyment) of entertainment. It was also argued that

once the law is found to be in pith and substance relatable to Entry

62 - List II, the mere imposition of service tax cannot by itself

denude the State legislatures of their legislative competence.

5.7 Sri Kapur sought to contend that when neither entry is

subject to the other, then both entries are required to be

constructed so harmoniously that they are given full effect in their

respective fields. Therefore, both entries herein, though they may

seem overlapping, can indeed be given full effect as they deal with

distinct aspects. States have also placed significant reliance on

‘aspect theory’ or the ‘double aspect doctrine’ to establish that both

Central and State Acts are valid as they seek to levy tax on entirely

different aspects even though they may form part of the same

activity.

5.8 According to Sri Kapur, had the liability been imposed

directly upon the subscriber, the distinction between service tax on

the services rendered by the DTH operator and entertainment tax

upon the subscribers would have been self-evident. It is settled law

that entertainment tax, for administrative convenience, can either

Page 56 of 321 be on the receiver or equally be upon the provider of the content

without causing any alteration to its nature. – Federation of Hotel

& Restaurant Association of India. The same case was also

relied upon to contend that a measure of tax is not determinative

of the nature of the levy.

5.9 Furthermore, it was contended that the argument advanced

by the appellants herein would render Entry 62 – List II redundant

as almost every provision of entertainment would necessarily be

borne out of rendition of some service. According to Sri Kapur, this

is precisely why the distinction between the two aspects must

always be kept in mind.

5.10 On the application of aspects theory, it was contented that

the same is neither contrary to the pith and substance doctrine nor

is it an exception, but only compliments the latter. The

operationalization of aspect theory is explained by suggesting that

two competing enactments, if they deal with distinct aspects of a

transaction, will not restrict each other and will continue to apply

in their respective fields without inviting any question of overlap or

repugnancy. It was submitted that the aspect theory is helpful at

Page 57 of 321 the stage of a “seeming” conflict to determine whether the aspects

legislated upon are distinct and whether there is an overlap or not

at all.

5.11 In response to the arguments of the appellants that Entry

31 read with Entry 97 – List I must be seen as taking out from

Entry 62 – List II a tax on entertainment provided by means of

broadcasting, the State of Orissa contended that such an argument

overlooks the distinct aspects involved in rendition of services and

entertainment. Neither could Entry 31 – List I being a regulatory

entry whittle down the scope of Entry 62 – List II nor could Entry

97 – List I being a residuary entry cull out any aspect from a

specific taxing entry in the State List.

5.12 Pertinently it was also highlighted that this Court in State

of Karnataka vs. State of Meghalaya, (2023) 4 SCC 416

(“State of Karnataka”), specifically rejected the contention that a

regulatory entry in the Union List must be construed as also

covering all facets of taxation along with and through the residuary

entry, even if that tax may squarely fall within the State List.

Page 58 of 321 5.13 Furthermore, in response to the contentions on Geeta

Enterprises and Purvi Communication, it was contended that

the judgment in Geeta Enterprises categorically notes that this

Court was concerned with the definition of entertainment under a

particular statute and not under Entry 62 – List II. That it would

be wholly erroneous to transplant the limitations and

interpretations made in the context of a statute to be taken to

govern the interpretation of an entry in the Seventh Schedule of

the Constitution, which must be given an interpretation of the

widest possible amplitude.

5.14 It was also highlighted that this Court in Suresh vs. State

of T.N., (1997) 1 SCC 319 (“Suresh”) had already considered the

argument and expressed agreement with the view of the States

herein.

5.15 Summarily, it was also argued that the imposition of tax on

goods or an activity that a person may ultimately enjoy or consume

at home cannot be construed as an invasion of the right to privacy.

5.16 To the argument of the appellants that they are merely

conduits in the chain between broadcasters and subscribers, it was

Page 59 of 321 responded that it is settled law that a tax under Entry 62 – List II

can be on the provider of entertainment as well as or on the

receiver. It was also contended that the DTH operator evidently has

a direct and proximate nexus with the subscriber inasmuch as it

is the DTH operator who enrolls and provides the setup box along

with dish antenna to the subscriber. Finally, it was contended that

the argument of merely being a conduit overlooks the well settled

position that tax can be collected at any convenient stage as long

as a rational connection is maintained. – vide CCE vs. Grasim

Industries Ltd., (2018) 7 SCC 233.

5.17 It was also argued that the appellants have erred in relying

on Bharat Sanchar Nigam Limited to contend that the dominant

intention of the activity must be seen and that there must be

splitting of charges between services and entertainment. Learned

senior counsel submitted that this argument ought to be rejected

as it would be totally erroneous to draw an analogy between

entertainment tax on the one hand and tax on sale of goods on the

other, as in the case of entertainment the entire service rendered

by the provider is for the purpose of entertainment. Even though it

might be one activity, it is on one aspect, the price for services

Page 60 of 321 rendered and, from the point of view of the subscribers, the price

for entertainment. – Federation of Hotel & Restaurant

Association of India.

5.18 According to learned senior counsel, the Court in Bharat

Sanchar Nigam Limited held that tax on sale of goods cannot be

levied on a separate and severable component i.e. services as goods

are only a component of the deemed severable transaction by way

of a fiction. In other words, in Bharat Sanchar Nigam Limited,

it was held that the States lacked jurisdiction to tax the services

component and consequently, lacked the competency to include

the price of services as a measure of tax for sale of goods and vice-

versa. It was for this reason that the judgment in Bharat Sanchar

Nigam Limited held that value of services cannot be included in

the value of goods. By way of analogy, it was contended that had it

been the case that electromagnetic waves had also been deemed to

be goods and there was an overlap of the entire consideration, only

then would the judgment in Bharat Sanchar Nigam Limited be

similar to the facts herein.

Page 61 of 321 5.19 It was also contended that the argument of splitting the

consideration between services and entertainment is an indirect

manner of contending that the entire subscription amount cannot

form the measure of tax. It was argued that in case of a composite

transaction including services and sale of goods, a measure for one

is distinct from the other by virtue of there being two deemed

separate transactions. However herein, as the employment of

aspect theory as laid down in the Federation is justified, the full

subscription amount can indeed constitute the measure for both

taxes as the rational nexus between the levy and the measure is

maintained. – vide Mineral Area Development Authority vs.

Steel Authority of India, 2024 SCC OnLine SC 1796.

State of Tamil Nadu:

5.20 Sri Radhakrishnan, learned senior counsel appearing on

behalf of Respondent-State of Tamil Nadu in C.A. No.1580/2020

and C.A. No.1581/2020, invited this Court’s attention to the

history of the legislation on the subject in the State of Tamil Nadu.

Promulgated in 1939, the preamble to the Tamil Nadu

Entertainments Tax Act, 1939 reflects that the Act was intended

“to impose a tax on amusement and other entertainments in the

Page 62 of 321 Province of Madras.” Vide Act No.XVII of 1949 w.e.f. 1st August

1949, the words “a tax” was substituted by “taxes” and by Madras

Act No.V of 1958, the words “amusements and other

entertainments” were substituted by the word “entertainments”.

5.21 Thus, as it stands today, the Tamil Nadu Entertainments

Tax Act, 1939 is “an Act to impose taxes on entertainments in the

State of Tamil Nadu”. It was shown that Section 3(4) of the Act,

which defines “entertainment” was amended to levy tax on gross

collection per show made by the theatres-touring, permanent and

semi-permanent.

5.22 Of note is the charging section of the Act i.e., Section 4

which sought to tax entertainment provided through

cinematograph exhibition in the theatres on payment for

admission. The system of levy gradually underwent changes to pay

a percentage on gross collection and based on theatre location.

Pertinently, it was submitted that in the wake of new age medium

of recreation on television screen through a VCR or cable television

network, the legislature in its wisdom inserted Section 4-D to the

Act w.e.f. 17.05.1984. The aforesaid Section was substituted by

Page 63 of 321 Amendment Act 37 of 1994 with effect from 01.09.1994, which

inserted a charging provision under Section 4-E to levy tax on

entertainment through cable television at 40% of contribution or

subscription or installation or connection charges or charges

collected in any manner for television exhibition. Similarly,

appropriate changes were made to the definition of “entertainment”

under Section 3(4) of the Act to include cable TV and another

source of entertainment. Thereafter, the State of Tamil Nadu,

having taken note of further technological advancement in offering

entertainment through DTH and through IPL matches, inserted

section 4-I in the said Act to levy tax. Therefore, DTH service and

cricket tournaments conducted by the IPL were brought within the

definition of the term ‘entertainment’.

5.23 Aggrieved, several DTH service providers preferred Writ

Petitions before Madras High Court challenging the levy of

entertainment tax. By judgment dated 19.10.2012, the High Court

accepted the contention of DTH service providers that the charging

section was defective and the levy of entertainment tax is contrary

to Article 14; however, the High Court held that the State

Page 64 of 321 Legislature was competent to levy tax on the entertainment aspect

of the DTH services.

5.24 Learned senior counsel submitted that while construing an

entry in a List conferring legislative power, the widest possible

construction according to their ordinary meaning must be given to

the words used therein. – vide Navinchandra Mafatlal vs.

Commissioner of Income-Tax, Bombay City, AIR 1955 SC 58.

It was submitted that the most liberal and widest construction

must be given to accommodate within an organic Constitution the

changing meaning of the text in tune with an evolving society. In

that context, it was submitted that in today’s society, it is pedantic

to contend that the term ‘entertainment’ does not cover within its

ambit DTH service providers. Furthermore, it was argued that

merely because individuals can derive entertainment in their

private space does not denude the public character of

entertainment through DTH services. The facility of choosing the

time, place, mode or content does not convert entertainment

through DTH into private entertainment and therefore, the subject

matter of tax is not a justifiable ground to read any limitation into

this expression.

Page 65 of 321 5.25 Learned senior counsel vehemently argued that the theory

of occupied field advanced by the appellants herein has already

been rejected by this Court. Our attention was drawn to the

judgment of Madras High Court dated 30.11.1994 in Tamil Nadu

Cable TV Organisers vs. Government of Tamil Nadu, W.P. No.

16237/1994. Therein, Section 4-E of the State legislation which

levied an entertainment tax on the entertainment aspect of service

provided by cable operators was challenged in the aforementioned

petition before the Madras High Court. Rejecting the challenge, it

was held that there being nothing in Entry 62 – List II to warrant a

restrictive meaning, the definition of entertainment would not be

restricted to cinematographic exhibitions alone and would include

other forms of entertainment as well. It was submitted that the

challenge made therein was most similar to the challenge made

here against Section 4-I of the same Act. As noted, the Madras High

Court rejected the restricted interpretation of entertainments and

rejected the contention based on the theory of occupied field as it

found that in pith and substance the impugned legislation fell

within Entry 62 - List II. Thereafter, an appeal was preferred before

this Court by cable TV operators which was rejected in Suresh,

Page 66 of 321 while observing that there was no reason as to why the

entertainment aspect of the transaction could not be taxed.

5.26 It was further argued that in India, the subject of tax can

be the person, thing or activity on which the tax is imposed and

herein the subject of tax is the receiver of entertainment by

subscription to DTH: Godfrey Phillips.

5.27 Sri Radhakrishnan referred to the distinct and different

senses in which the words ‘levied’, ‘paid’ and ‘recoverable’ are used

in Section 4-I of the Act. While the tax is ‘levied’ on entertainment,

it is ‘paid’ on all payments for admission to an entertainment and

it is ‘recovered’ by the proprietor and paid to the government. Sri

Radhakrishnan also agreed that even if the DTH service provider

only acts as a conduit between content providers and the

subscribers, since it is clarified that the subject matter of the tax

is the entertainment derived from the content, there is no scope for

confusing the entertainment with the service of enabling the flow

of content through the DTH system. It was also argued that there

are two aspects of the DTH service; i.e. the service aspect and the

entertainment aspect. The taxable event for the former being the

Page 67 of 321 flow of content through satellites and for the latter being the

entertainment derived from the subscription of the content.

5.28 It was also canvassed that the specific power of taxation

within the legislative competence of State of Tamil Nadu cannot be

fettered by the general power of regulation or the residuary power

of taxation available to the Union Government under Entry 31 or

even Entry 97 – List I. It was contended that this Court has already

observed that legislative competence of the State to levy

entertainment tax could not be fettered by the enactment of any

regulatory enactment law, vide Purvi Communication.

5.29 It was therefore contended that the state’s specific power of

taxation cannot be cut down by regulatory power of the Union. To

assail any question of overlapping in the present case, learned

senior counsel submitted that Entry 62 – List II operates in an

entirely different sphere to that of Entry 92C or Entry 97 – List I.

5.30 It was further contended that a reading of Entry 33 – List II

makes it evident that entertainment and amusement is a class by

itself not subject to Entry 60 – List I. Although cinemas mentioned

in Entry 33 – List II are made subject to Entry 60 – List I relating

Page 68 of 321 to sanctioning of cinematographic films for exhibition, but other

forms of entertainment qua which general power of regulation is

given to the state are not made subject to any entries in List I.

5.31 It was reiterated that this Court has held that under the

Indian Constitution, the scheme of division of taxing powers is not

based on any criterion depending on the incidence of the tax. –

Chhotabhai Jethabhai Patel and Co. vs. Union of India, AIR

1962 SC 1006. The importance of the doctrine of pith and

substance in deciding the scope of legislation qua the entries in the

three Lists was also emphasized. - MPV Sundararamier & Co. vs.

State of Andhra Pradesh, AIR 1958 SC 468 (“MPV

Sundararamier”). It was also contended that to decide the true

nature and character of a particular levy with reference to

legislative competence, the Court has to look into the pith and

substance of the legislation as a whole. - All India Federation of

Tax Practitioners. On an application of the aforesaid principles

to the facts of these cases, the learned senior counsel concluded

that taxes on DTH service is on a different subject when compared

to taxes on entertainment as the pith and substance of the relevant

state legislation is to tax the subject of entertainment.

Page 69 of 321 5.32 Sri Radhakrishnan submitted that the question in Geeta

Enterprises was limited to the interpretation of the word

‘entertainment’ as used in Section 2(3) of the United Provinces

Entertainment and Betting Tax Act, 1937 and therefore non-

consideration of the ratio of the said case does not make the

judgment in Purvi Communication bad in law.

5.33 Additionally, it was also argued that DTH operators are not

merely engaged as conduits in the service of broadcasting but also

create their exclusive content and channels available to their

subscribers.

State of Rajasthan:

5.34 Dr. Manish Singhvi, learned senior counsel appearing on

behalf of the State of Rajasthan, submitted that if the activity of

the petitioners is within Entry 62 – List II then nothing more is to

be seen and the imposition of service tax is wholly irrelevant. After

taking us through the provisions of the relevant Act promulgated

by the State of Rajasthan Act, it was argued that imposition of

service tax is not a tax on entertainment, validity of which needs to

Page 70 of 321 be determined only by testing if in pith and substance it is

traceable to Entry 62 – List II.

State of Punjab:

5.35 Learned senior counsel Sri Farasat appearing for the State

of Punjab, argued that broadcasting is merely a means to the

entertainment derived, by the content being delivered and that the

imposition of service tax would not detract from the competence of

the State Legislature to levy entertainment tax under Entry 62 –

List II. In the absence of any conclusive intent apparent from the

Constituent Assembly Debates, he argued against drawing any

myopic inference on the scope of Entry 62 – List II.

State of Nagaland:

5.36 Ms. K. Enatoli Sema, learned counsel appearing for the State

of Nagaland in W.P.(C) No.699/2014, brought to our attention that

the relevant state Act was amended in the year 2011 and that the

definition of entertainment includes DTH operators. That the

enactment promulgated by the State of Nagaland has not been

challenged and that in fact even after filing of the writ petition,

Page 71 of 321 entertainment tax has in fact been paid by the writ petitioner

without any protest.

State of Andhra Pradesh:

5.37 Sri Sahel, learned counsel appearing for the State of Andhra

Pradesh in W.P.(C) No.748/2015, similarly highlighted that there

is no challenge to the State Act in the writ petition.

Union of India:

5.38 Learned senior counsel Ms. Nisha Bagchi appearing for the

Union of India in W.P.(C) No.699/2014, submitted that the issue

of service tax has been conceded in almost all High Courts and has

not been disputed as such. She submitted that in view of the

dismissal of the C.A. No. 261/2013 and C.A. Nos. 1582-1583/2020

the prayers (a) and (b) in W.P. Nos. 699/2014 and 748/2015 do

not survive for consideration. She particularly highlighted that the

Delhi High Court dismissed the challenge to the constitutional

validity of service tax, as did Madras High Court, on the basis of

categorical concessions made by the assessees. Learned senior

counsel also submitted that no controversy with regard to payment

Page 72 of 321 of service tax arises in the Civil Appeal arising from the decision of

the Kerala High Court.

Reply Arguments:

5.39 We have heard the arguments made by way of reply by the

respective senior counsel and counsel appearing for the parties.

5.40 We have perused the voluminous material on record as well

as the judicial dicta cited before us.

Points for Consideration:

6. Whether the judgments of the High Courts (Eleven High

Courts) impugned in these cases would call for any interference

and if so, to what extent?

6.1 Whether Purvi Communications has been correctly decided

by this Court?

6.2 Whether the prayers sought for in the writ petitions are to be

granted and if so, to what extent?

6.3 What order?

6.4 On 11.09.2024, learned senior counsel Ms. Nisha Bagchi

submitted that in view of the dismissal of CA No.261/2013 and CA

Page 73 of 321 Nos.1582-1583/2020 by this Court, prayers (a) and (b) in WP

Nos.699/2014 and 748/2015 would not survive for consideration.

By way of response, learned senior counsel Sri Bagaria has also

conceded that the controversy in these writ petitions is essentially

on the imposition of entertainment tax and therefore, prayer (a) in

the writ petitions would not be pressed.

6.5 His submission is placed on record.

6.6 Learned senior counsel Ms. Bagchi also submitted that in the

Civil Appeal which arises from the decision of the Kerala High

Court dealing with luxury tax, there is no controversy with regard

to the payment of service tax by appellants therein.

6.7 The said position is not disputed at the Bar.

6.8 In view of the aforesaid submissions, the issue regarding the

payment of service tax on broadcasting service would be considered

only in light of the issue whether the activity of the appellants

herein is within the scope and ambit of Entry 62 – List II, namely,

providing entertainment to the subscribers or receivers of

entertainment by means of broadcasting through television

Page 74 of 321 channels and the relevant technology applicable for providing

entertainment through television to the subscribers.

6.9 In view of the fact that the correctness of the findings of the

High Court of Madras with regard to the charging section of the

State enactment being defective is assailed by the State of Tamil

Nadu in separate appeals which are not part of this batch of

appeals, the question of correctness or otherwise of the finding of

the High Court does not come up for our consideration here.

Legal Framework:

7. Before proceeding further, it is useful to refer to the relevant

provisions of the Constitution, relevant entries of the Seventh

Schedule of the Constitution and the relevant provisions of the

State Act under considerations. We also would advert to the

relevant provisions of the Finance Act, 1994 as amended from time

to time having a bearing on the controversy in question.

7.1 The following provisions of the Constitution of India are

adverted to as under:

“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

Page 75 of 321 a State may make laws for the whole or any part of the State.

(2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation.

246. Subject-matter of laws made by Parliament and by the Legislatures of States.- (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the “Union List”).

(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the “Concurrent List”). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the “State List”). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.

xxx

248. Residuary powers of legislation.- (1) Subject to Article 246A, Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List.

(2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists.

xxx

Page 76 of 321

265. Taxes not to be imposed save by authority of law.—No tax shall be levied or collected except by authority of law.”

Relevant Entries of the Seventh Schedule of the Constitution:

7.2 In order to understand the foundation of the controversy in

these cases, it is necessary to consider Article 246 of the

Constitution and the relevant entries of the two Lists which can be

usefully extracted as under:

“List I – Union List xxx

31. Posts and telegraphs; telephones, wireless, broadcasting and other like forms of communication.

xxx 92C. Taxes on Services.

[Omitted by the Constitution (One Hundred and First Amendment) Act, 2016, Section 17(a)(ii) (with effect from 16.09.2016). Prior to omission it read as aforementioned.] xxx

97. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists.

xxx List II – State List

33. Theatres and dramatic performances; cinemas subject to the provisions of entry 60 of List I; sports, entertainments and amusements.

xxx

Page 77 of 321

62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.”

Finance Act, 1994 with Relevant Amendments:

7.3 Chapter V of the Finance Act, 1994 (2001 amended) which

deals with various types of service tax, perhaps under the said Act

has defined “broadcasting” as under-

"65. Definitions.- In this Chapter unless the context otherwise requires,-

(13) "broadcasting" has the meaning assigned to it in clause (c) of Section 2 of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990 (25 of 1990);"

7.3.1 In view of the aforesaid definition reference has to be made

to Section 2 (c) of the Prasar Bharti (Broadcasting Corporation of

India) Act, 1990 (“Prasar Bharti Act, 1990”, for short), which define

“broadcasting” as under:-

“2. Definitions- In this Act, unless the context otherwise requires,-

(c) broadcasting' means the dissemination of any form of communication like signs, signals, writing, pictures, images and sounds of all kinds by transmission of electro-magnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the

Page 78 of 321 medium of relay stations and all its grammatical variations and cognate expressions shall be construed accordingly."

7.3.2 Section 65(63) of the Finance Act, 1994 (amended in 2001)

defines "service tax" as under:

"65. Definitions.- In this Chapter unless the context otherwise requires,-

(63) "service tax" means tax leviable under the provisions of this Chapter;"

7.3.3 Section 65 (72) (zk) defines “taxable service” with regard to

“broadcasting agency” as a “service provider” as under:

"65. Definitions.- In this Chapter unless the context otherwise requires,-

(72) "taxable service" means any service provided,-

xxx (zk) to a client, by a broadcasting agency or organization in relation to broadcasting, in any manner;

And the term "service provider" shall be construed accordingly;"

7.3.4 Section 66(5) specifics the quantum of tax liability on a

'service provider" providing broadcasting services which is

extracted as :

Page 79 of 321

"66. Charge of service tax.-(5) With effect from the date notified under Section 137 of the Finance Act, 2001, there shall be levied a service tax at the rate of five per Cent of the value of the taxable services referred to in sub-clauses (za), (zb), (zc), (zd), (ze), (zf), (zg), (zh), (zi), (zj), (zk), (zl), (zm), (zn) and (zo) of clause (72) of Section 65 and collected in such manner as may be prescribed."

Thus, tax at the rate of five per cent of the value of taxable

services was levied on a broadcasting agency (i.e. five per cent of

the gross amount charged by the service provider).

7.3.5 The term "broadcasting" was re-defined under Section

65(14) of the Finance Act, 1994 by way of 2002 Amendment which

reads as under:-

"65. Definitions.- In this Chapter, unless the context otherwise requires,-

(14). "broadcasting" has the meaning assigned to it in clause(c) of Section 2 of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990 (25 of 1990) and also includes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing, as the case may be;

and in the case of a broadcasting agency or organization, 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 on behalf of the said agency or

Page 80 of 321 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;"

7.3.6 The term "broadcasting agency or organization" was also re-

defined under Section 65(15) by way of an amendment in the year

2002 to the Finance Act, 1994, which is extracted as under:-

"65. Definitions.- In this Chapter, unless the context otherwise requires,-

(15) "broadcasting agency or organization" means any agency or organisation engaged in providing service in relation to broadcasting in any manner and, in the case of a broadcasting agency or organization, having its head office situated in any place outside India, includes its branch office or subsidiary or representative in India or any agent appointed in India or any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting broadcasting charges on behalf of the said agency or organization;"

7.3.7 Section 65 (80) defines the term “service tax” by way of an

amendment to the Finance Act, 1994 in the year 2002, which reads

as under:-

"65. Definitions.- In this Chapter, unless the context otherwise requires,-

(80) "service tax" means tax leviable under the provisions of this Chapter;"

Page 81 of 321

7.3.8 Section 65 (90) (zk) again while defining "taxable services",

it included therein a "broadcasting agency" as a "service provider".

Section 65 (90) (zk) of the Finance Act, 2002 is reproduced

hereunder:-

"65. Definitions.- In this Chapter, unless the context otherwise requires,-

xxx (90). ''taxable service" means any service provided,- (zk) 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 place outside India, includes service provided 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, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting broadcasting charges on behalf of the said agency or organization.

Explanation.- For the removal of doubts, it is hereby declared that so long as the radio or television programme broadcast is received in India and intended for listening or viewing, as the case may be, by the public, such service shall be a taxable service in relation to broadcasting, even if the encryption of the signals or beaming thereof through the satellite might have taken place outside India;

And the term "service provider" shall be construed accordingly;"

Page 82 of 321

7.3.9 Section 66 (5) of the Finance Act, 2002 specified the

quantum of tax liability on a service provider, providing

broadcasting service to the following effect. Section 66(5) aforesaid

is reproduced hereunder:-

"66. Charge of service tax.-(5) With effect from the date notified under Section 137 of the Finance Act, 2001 (14 of 2001), there shall be levied a service tax at the rate of five per cent of the value of the taxable services referred to in sub-clauses (za), (zb), (zc), (zd), (ze), (zf), (zg), (zh), (zi), (zj), (zk), (zl), (zm), (zn) and (zo) of clause (90) of Section 65 and collected in such manner as may be prescribed."

7.3.10 A perusal of the provisions of the Finance Act, 2002

reveals, that as hitherto before (under the Finance Act 2001)

service tax at the rate of five per cent of the value of taxable service

was leviable on a service provider rendering broadcasting services

(i.e. five per cent of the gross amount charged by the service

provider) even under the Finance Act, 2002.

7.3.11 Under the Finance Act, 2003, the term "broadcasting"

was re-defined through Section 65(15), which is being extracted

hereunder:-

Page 83 of 321

"65. Definitions.- In this Chapter, unless the context otherwise requires.-

xxx (15) '(broadcasting" has the meaning assigned to it in clause (c) of Section 2 of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990 ( 25 of 1990) and also includes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing, as the case may be;

and in the case of a broadcasting agency or organization, 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 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;"

7.3.12 The Finance Act, 2003 also defined the term

''broadcasting agency or organization" in Section 65(16). Section

65(16) of the Finance Act, 2003 is also being reproduced

hereunder:-

"65. Definitions.- In this Chapter, unless the context otherwise requires.-

(16) "broadcasting agency or organization" means any agency or organization engaged in providing service in relation to broadcasting in any manner and, in the case of a broadcasting agency or

Page 84 of 321 organization, having its head office situated in any place outside India, includes its branch office or subsidiary or representative in India or any agent appointed in India or any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting the broadcasting charges on behalf of the said agency or orgnisation;”

7.3.13 Section 65 (95) of the Finance Act, 2003, defines the

term "service tax".

Section 65 (95) aforesaid is being reproduced hereunder:-

"65. Definitions.- In this Chapter, unless the context otherwise requires.-

xxx (95) “service tax” mean tax leviable under the provisions of this chapter;"

7.3.14 Section 65 (105) (zk) of the Finance Act, 2003 again

while defining the term 'taxable service", it included therein a

"broadcasting agency" as a 'service provider". Section 65(105) (2k)

aforesaid is being extracted hereunder:

"65. Definitions.- In this Chapter, unless the context otherwise requires.-

xxx

Page 85 of 321 (105) “taxable service" means any service provided,-

(zk) 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 place outside India, includes service provided 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, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting the broadcasting charges on behalf of the said agency or organization.

Explanation.- For the removal of doubts, it is hereby declared that so long as the radio or television programme broadcast is received in India and intended for listening or viewing, as the case may be, by the public, such service shall be a taxable ser vice in relation to broadcasting, even if the encryption of signals or beaming thereof through the satellite might have taken place outside India;"

and the term "service provider" shall be construed accordingly;”

7.3.15 Section 66(1) of the Finance Act, 2003 specified, that

quantum of tax liability on a service provider providing

broadcasting services as under:-

"66. Charge of service tax.-(l) There shall be levied a tax (hereinafter referred to as the service tax) at the rate of eight per cent of the value of the taxable services referred to in sub-clauses (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k),

Page 86 of 321

(l), (m), (n), (o), (p), (q), (r), (s), (t) (u), (v), (w), (x), (y), (z), (za), (zb), (zc), (zd), (ze), (zf), (zg), (zh), (zi), (zj), (zk), (zl), (zm), (zn), (zo), (zp), (zq), (zr), (zs), (zt) (zu), (zv), (zw), (zx), (zy), (zz) and (zza) of clause (105) of Section 65 and collected in such manner as may be prescribed.”

7.3.16 A perusal of the aforesaid provisions reveals, that

under the Finance Act, 2001, service tax levied on service providers

rendering broadcasting services were enhanced from five per cent

to six per cent of the value of taxable service (i.e. eight per cent of

the gross amount charged by the service provider) under the

Finance Act, 2003.

7.3.17 The provisions of the Finance Act, 2004 on the subject

matter of the controversy in hand were identical to the ones

incorporated under the Finance Act, 2002, and as such, the

relevant provisions of the Finance Act, 2004 are not being

reproduced here.

7.3.18 Insofar as the Finance Act, 2005 is concerned, it re-

defined the term "broadcasting" under Section 65(16). Section

65(16) of the Finance Act, 2005 is being reproduced hereunder:-

Page 87 of 321

"65. Definitions.- In this Chapter, unless the context otherwise requires.-

xxx (15) “broadcasting” has the meaning assigned to it in clause (c) of Section 2 of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990 ( 25 of 1990) and also includes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing, as the case may be;

and in the case of a broadcasting agency or organization, 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 electro-magnetic 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;"

7.3.19 Likewise, the term "broadcasting agency or

organization" was again re-defined under Section 65(16) of the

Finance Act, 2005, which is being reproduced hereunder:-

Page 88 of 321

"65. Definitions.- In this Chapter, unless the context otherwise requires.-

xxx (16) "broadcasting agency or organization" means any agency or organization engaged in providing service in relation to broadcasting in any manner and, in the case of a broadcasting agency or organization, having its head office situated in any place outside India, includes its branch office or subsidiary or representative in India or any agent appointed in India or any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for 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 electro-magnetic waves through space or through cables, direct to home multisystem operator or any other person on behalf of the said agency or organization;"

7.3.20 The term "service tax" retained the same definition as

was assigned to it by the Finance Act, 2003 even for the Finance

Act, 2005. However, sub-clause (zk) as defined in the Finance Act,

2005 was given a different meaning and effect. In this behalf

Section 65(105)(zk) of the Finance Act, 2005 is being reproduced

hereunder:-

Page 89 of 321

"65. Definitions.- In this Chapter, unless the context otherwise requires,-

xxx (105) "taxable service" means any service provided,- (zk) 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 place outside India, includes service provided 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, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for 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 electro-magnetic 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.

Explanation.- For the removal of doubts, it is hereby declared that so long as the radio or television programme broadcast is received in India and intended for listening or viewing, as the case may be, by the public, such service shall be a taxable service in relation to broadcasting, even if the encryption of signals or beaming thereof through the satellite might have taken place outside India;

and the term "service provider" shall be construed accordingly;"

Page 90 of 321

7.3.21 The quantum of service tax under the Finance Act

2005, on service providers, rendering broadcasting services was

sustained at the same rate as in the preceding Finance Act, 2004.

7.3.22 A perusal of the provisions of the various Finance Acts

reproduced hereinabove, according to the learned counsel for the

petitioners, reveals, that "service tax" was levied on "Direct-to-

Home" (DTH) broadcasting services thereunder. The aforesaid

'legislation, according' to the learned counsel for the petitioners

had obviously been enacted by the Parliament under Entry 92C of

the Union List, contained in the Seventh Schedule of the

Constitution of India.

Relevant Provisions of the State Enactments:

Assam Amusements and Betting Tax Act, 1939:

7.4 The relevant State Acts can be adverted to as under:

(a) The relevant provisions of Assam Amusements and Betting

Tax Act, 1939 are as under:

“2. Definitions. – In this Chapter, unless there is anything repugnant in the subject or context – xxx

Page 91 of 321 (3B) "Cable service" means the transmission by cables of programme including transmission by cables of any broadcast television signal;

Explanation-- For the purpose of this clause--

(a) "cable operator" means any person who provides cable service directly to customer or transmits signal to a sub-

cable operator through a cable television network otherwise controls or is responsible for the management and operation of a cable television network;

(b) "sub-cable operator" means a person other than any owner or person who is a cable operator referred to in this Explanation who, on the basis of an agreement, contract or any other agreement made between him and such cable operator, receives signal from such cable operator and provides cable service for exhibition of performance, film or any programme to the customers".

(3C) "cable television network" means any system consisting of a set of closed transmission paths and associated signal generation, control and distribution equipment designed to provide cable service for reception by multiple subscribers".

(3CC) "direct to home service" means a service for multi channel distribution of programmes direct to subscribers' premises by up-linking to a satellite system"; (4) "Entertainment" includes any exhibition, performance, amusement, game, sport, music, cultural and dramatic performances, entertainment by electronic devices and entertainment by direct to home service and cable television network or a series of exhibitions, performances, amusements, games, sports, music, cultural and dramatic performances, entertainment by electronic devices and entertainment by direct to home service and cable television network, to which persons are admitted for payment, and the continuity of which is either broken or unbroken as the case may be, or is only broken by such

Page 92 of 321 intervals as are in the opinion of the State Government a normal or usual feature thereof.

xxx (8) 'Proprietor' in relation to any entertainment means the owner and shall also include manager, organiser and any person responsible for, or, for the time being, in charge of the management thereof;

xxx (10) "Subscriber" means a person who receives the signal of cable television network or of direct to home service at any place indicated by him without further transmitting to any other person;

Explanation- In case of hotels, each room or premise where signals of cable television network or of direct to home service are received shall be treated as a subscriber"

xxx Section 3C : Tax on cable service and direct to home service. - (1) The proprietor of a cable television network providing cable service [and the service provider of the direct to home service]1 shall be liable to pay entertainment tax at such rates not exceeding rupees one thousand and two hundred for every subscriber for every year, as the Government may from time to time, notify in this behalf.

(2) Nothing in sub-section (1) shall preclude the Government from notifying different rates of entertainment tax for household or for different categories of hotels. (3) Where the subscriber is a proprietor of a hotel, he shall pay the entertainment tax to the Government on such condition, and in such manner as may be prescribed and at such rate as the Government may from time to time notify and different rates of tax may be notified for different categories of such subscribers.

Page 93 of 321 (4) The tax payable under this section shall be paid, collected or realised in such manner as may be prescribed."

Delhi Entertainments and Betting Tax Act, 1996:

(b) The relevant provisions of Delhi Entertainments and

Betting Tax Act, 1996 are as under:

“2. Definitions In this Act, unless the context otherwise require,-

(a) "addressable system" means an electronic device or more than one electronic devices put in an integrated system through which television signals and value added services can be sent in encrypted or unencrypted form, which can be decoded by the device or devices at the premises of the subscriber within limits of the authorization made, on the choice and request of such subscriber, by the service provider to the subscriber;

(aa) "admission to an entertainment" includes admission to any place in which the entertainment is held and in case of entertainment through cable service and direct-to-home (DTH) service with or without cable connection, each connection to a subscriber shall be deemed to be an admission for entertainment’ xxx (ha) "direct-to-home (DTH) service" means distribution of multi-channel television and radio programmes and similar content by using a satellite system, by providing signals directly to subscriber's premises without passing through an intermediary or otherwise;

Page 94 of 321 (i) "entertainment" means any exhibition, performance, amusement, game, sport or race (including horse race) or in the case of cinematograph exhibitions, cover exhibition of news-reels, documentaries, cartoons, advertisement shorts or slides, whether before or during the exhibition of a feature film or separately, and also includes entertainment through cable service and direct-to-home (DTH) service;

xxx

(m) "payment for admission" includes— xxx

(vi) any payment made by a person by way of contribution, subscription, installation or connection charges or any other charges collected in any manner whatsoever for entertainment through direct-to-home (DTH) broadcasting service for distribution of television signals and value added services with the aid of any type of addressable system, which connects a television set, computer system at a residential or non-

residential place of subscriber's premises, directly to the satellite or otherwise.

xxx

(s) "subscriber" means a person who receives the signals of television network and value added services from multi-system operator or from cable operator or from direct-to-home (DTH) broadcasting service at a place indicated by him to the service provider, without further transmitting it to any other person;

Explanation I: In case of hotels, each room or premises where signals of cable television network are received shall be treated as a subscriber;

Explanation II : In case of direct-to-home (DTH), every television set or computer set receiving the signals shall be treated as a subscriber;

xxx

Page 95 of 321

7. Tax on cable, video service and direct-to-home (DTH) service.- (1) Subject to the provisions of this Act, there shall be levied and paid an entertainment tax on all payments for admission to an entertainment through a direct-to-home (DTH) or through a cable television network with addressable system or otherwise, other than entertainment to which section 6 applies, at such rates not exceeding rupees six hundred for every subscriber for every year as the Government may, from time to time, notified in this behalf, which shall be collected by the proprietor and paid to the Government in the manner prescribed.

xxx

8. Information before holding entertainment.-

xxx (2) No proprietor of a cable television network or video cinema or Direct-to-Home (DTH) shall provide entertainment unless he obtains permission from the Commissioner in the manner prescribed.”

Gujarat Entertainments Tax Act, 1977:

(c) The relevant provisions of Gujarat Entertainments Tax Act,

1977 are as under:

“2. Definitions. – In this Act, unless the context otherwise requires, xxx (dd) Direct-To-Home (DTH) Broadcasting Service means a system of distribution of multi-channel television programmes in Ku Band by using Satellite system, by providing television signals direct to the subscriber’s premises without passing through an intermediary such as cable operator.

Page 96 of 321 Explanation.- For the purpose of this clause and clause (g), “Ku Band” ordinarily means the 11.7 – 12.7 GHz (Giga Hertz) frequency band which splits into two segments, viz. the first having the frequency of 11.7 – 12.7 GHz, known as FSS (Fixed Satellite Service) and the other having the frequency of 12.2 – 12.7 GHz, known as BSS (Broadcasting Satellite Service), or it may have such other band width as may be approved by the Government of India from time to time;

2(e) ‘entertainment’ includes any exhibition, performance, amusement, game or sport to which persons are admitted for payment or in the case of television exhibition with the aid of any type of antenna with a cable network attached to it or cable television, for which persons are required to make payment by way of contribution or subscription or installation charges of connection charges or any other charges collected in any manner whatsoever. Explanation. - For the purpose 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; or Direct-To-- Home (DTH) Broadcasting System;

xxx 2(g) ‘Payment for admission’ includes –

(i) any payment made by a person who, having been admitted to one part of a place of entertainment, is subsequently admitted to another part thereof for admission to which a payment involving tax or more tax is required;

(ii) any payment for seats or other accommodation in a place of entertainment;

(iii) any payment for a programme or synopsis of an entertainment;

Page 97 of 321

(iv) 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 of the entertainment which, without the aid of such instrument or contrivance, such person would not get;

(v) any payment for any purpose whatsoever connected with an entertainment which a person is required to make a condition of attending or continuing to attend the entertainment in addition to the payment, if any, for admission to the entertainment;

(vi) any payment for admission of a motor vehicle into the auditorium of a cinema known as Drive-in-Cinema;

(vii) any payment made by a person by way of contribution or subscription or installation charges or connection charges or any other charges collected in any manner whatsoever for television exhibition with the aid of any type of antenna with a cable network attached to it or cable television;

(viii) any payment made by a person to the proprietor of a Direct-To-Home (DTH) Broadcasting Service by way of contribution, subscription, installation 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 which connects television set at a residential or non-residential or any other place of connection-holder directly to the Satellite;” 2(gg) ‘place of entertainment’ includes a house, building, tent or any other place where the books of account, ticket books and other relevant records pertaining to the entertainment or pertaining to the management of providing cable connections from any type of antenna or cable television or pertaining to the management of providing Direct-To-Home (DTH) Broadcasting Service are kept or are believed to have been kept;” xxx

Page 98 of 321 2(j) ‘proprietor’ in relation to any entertainment, includes the owner thereof, and any person –

(i) responsible for, or for the time being in charge of, the management thereof, or

(ii) connected in whatsoever manner with the organization of the entertainment for any duration, or

(iii) charged or entrusted or authorized with the work of admission to the entertainment, or (iii-a) a company registered under the Companies Act, 1956, having license to provide Direct-To-Home (DTH) Broadcasting Service by the Government of India under section 4 of the Telegraph Act, 1885 and the Wireless Telegraphy Act, 1933 or;

(iv) responsible for, or for the time being in charge of, management of providing of maintaining or operating cable connection from any type of antenna or cable television;

Whether or not he has obtained license or Certificate of Registration, if any, for such entertainment under any law for the time being in force;

2(jj) ‘set top box’ means an apparatus connected to a television set at a residential or non-residential or any other place which receives encrypted television signals through dish antenna from satellite directly and provides decrypted television signals to the television set, which enables the viewers to tune into multi-channel television programmes in Ku Band, on payment, by the connection- holder, of the charges collected in any manner whatsoever by the proprietor;

xxx 6C. Registration.- (1) No proprietor providing an entertainment with the aid of any type of antenna or cable television or Direct-To-Home (DTH) Broadcasting Service shall carry on television exhibition without obtaining a valid Certificate of Registration from the prescribed officer.

Page 99 of 321 (2) The provisions of sub-section (1) shall not be deemed to have been contravened if the proprietor having applied for such registration as provided in this section within three months from the date of the commencement of the Gujarat Entertainments Tax (Amendment) Act, 1993, carries on television exhibition with the aid of any type of antenna with a cable network attached to it or cable television. (2A) The provisions of sub-section (1) shall not be deemed to have been contravened if the proprietor having applied for such registration as provided in this section within three months from the date of the commencement of the Gujarat Entertainments Tax (Amendment) Act, 2009, carries on television exhibition with the aid of Direct-To-- Home (DTH) Broadcasting Service.

(3) Every proprietor providing an entertainment with the aid of any type of antenna or cable television or Direct-To- Home (DTH) Broadcasting Service shall apply in such form, in such manner and on payment of such fee as may be prescribed to the prescribed officer.

(4) If the prescribed officer is satisfied that the requirements of provisions of this Act and the rules made thereunder have been complied with, he shall issue a Certificate of Registration.

xxx 6E (1) Notwithstanding anything contained in section 3, 4, 6, 6A or 6B or any other provisions of this Act, there shall be levied and paid, by the proprietor of every Direct-To- Home (DTH) Broadcasting Service, to the State Government, the entertainments tax, per television set which receives radio frequency signals for exhibition of films or moving pictures or series of pictures with the aid of a set top box or any other apparatus attached to it for securing transmission through Direct-To-Home (DTH) Broadcasting Service, a tax at the annual rate of Rs.200 per television set for which such proprietor has provided Direct-To-Home (DTH) Broadcasting Service Connection.

Page 100 of 321 (2) Where the number of Direct-To-Home (DTH) connection holders increase in any month during the financial year, the proprietor shall be liable to pay the tax proportionately in the manner as may be prescribed.

(3) The tax leviable under this section shall be paid in advance in quarterly installment of one-fourth of the annual rate within such period and in such manner as may be prescribed.

Explanation. - For the purpose of this section, ‘quarter’ means a period of three months commencing on the 1st day of April, 1st day of July, 1st day of October or the 1st day of January of each year, and the term ‘quarterly’ shall be construed accordingly.”

The relevant provision of Gujarat Entertainments Tax

(Exhibitions by means of Direct-To-Home (DTH) Broadcasting

Service) Rules, 2010 are as under:

“3. Application for Certificate of Registration. - A proprietor providing an entertainment with the aid of Direct to Home (DTH) Broadcasting Service shall apply for the Certificate of Registration under Section 6C in Proforma-I in triplicate I and shall be renewable after every twelve months.

4. Granting of Certificate of Registration.- (1) The Commissioner may, on receipt of an application in Proforma-I under rule 3 and having satisfied that all the rules have been complied with, grant Certificate of Registration to the proprietor. The Commissioner shall, while deciding whether to grant or refuse such a certificate shall have regard to the following matters namely:

(i) the interest of the public generally;

(ii) status of antecedents and the previous experience, if any, of the proprietor;

Page 101 of 321 (iii) the adequate precaution made for safety, convenience and comfort of the persons covered under Direct-to-Home (DTH) Broadcasting Service as per the guidelines issued by the Government of India from time to time.

Explanation. For the purpose of sub-rule (1) the expression ‘antecedents’ means the conduct of the applicant in relation to the regular payment of any tax or other dues payable by him.

(2) The Certificate of Registration under section 6C shall be issued Proforma-2 and the Commissioner may prescribe special condition or conditions to be fulfilled, in the certificate.

5. Refusal to Grant Certificate.- The Commissioner shall have absolute discretion to refuse a Certificate of Registration for grounds to be recorded in writing for refusal of granting the Certificate of Registration. The Commissioner before refusing the Certificate shall afford to the proprietor an opportunity of being heard.

6. Fees.- The fees for a Certificate of Registration shall be rupees 10 lacs, the fees for renewal of Certificate of Registration shall be ten thousand and the fees for duplicate Certificate of Registration shall be rupees five thousand.

7. Security Deposits.- Every proprietor shall furnish as required under section 7, security amount of rupee ten lacs in form of Demand Draft to the Commissioner or shall deposit the National Savings Certificate or furnish Bank Guarantee of a Nationalized Bank in favour of Government of Gujarat, Information and Broadcasting Department on obtaining Certificate of Registration.

xxx

11. Applicability of other Acts.- The proprietor shall comply with such of the provisions of the Electricity Act, 2003 (36 of 2003), the Wireless Technology Act, 1933 (17 of 1933), the Telegraph Act, 1885 (13 of 1885), Guidelines, Policies and Notifications issued by Government of India

Page 102 of 321 from time to time and such other Acts and the rules made thereunder as are applicable to the Direct-to-Home (DTH) Broadcasting Services.

12. Free access or public servants on duty.- Free access to any place in respect of which a certificate is issued under these rules for Direct-to-Home (DTH) Broadcasting Service shall be given at all hours to the Commissioner or any officer authorized by the Commissioner, the Collector or any other officer as may be authorized by the State Government in the execution of their duties.

13. Receipt for payment.- The proprietor shall give a receipt to the connection holder for every payment and shall also furnish the connection number to such connection holder when he receives payment for installation charges or any other charges by whatsoever it may be called. A copy of the receipt shall be kept in the receipt book by the proprietor till the assessments is completed and thereafter for a period of one year.

14. Return.- (1) The returns under clause (b) of sub- section (1) of section 8 shall be furnished to the prescribed officer.

(2) The returns relating to the payment of tax under section 6E shall be furnished quarterly in every financial year by the proprietor to the prescribed officer in Proforma-3, Proforma-4 and Proforma-5 along with challan within fifteen days of the completion of the respective quarter:

Provided that the return relating to the second and third quarter of the financial year 2009-10 shall be furnished within fifteen days from the publication of these rules in the official Gazette.

(3) Every proprietor shall maintain a register in Proforma-6 for each financial year.

xxx

Page 103 of 321

16. Order of Assessment.- (1) The assessment of tax in the respect of an entertainment shall be made within thirty days after the return in respect of such entertainment is furnished.

(2) After the assessment is made, the prescribed officer shall serve a notice upon the proprietor for payment of tax, if any additional amount of tax is found to be due.”

Jharkhand Entertainment Tax Act, 2012:

(d) The relevant provisions of Jharkhand Entertainment Tax

Act, 2012 are as under:

“2. Definitions. - In this Act, unless there is anything repugnant in the subject or context,-

xxx

(k) "Direct to Home (DTH) Service" means a system of distribution of multi-channel television programmes by using a Satellite system by providing television signals through Antenna direct or any other similar devices to the subscriber's premises/hotels/clubs, without passing through an intermediary such as cable service;

(l)"Direct to Home (DTH) Service provider" means any person or proprietor or agency, who provide Direct to Home (DTH) Service, whether by means of "Set top boxes" or any such antenna or instruments or equipments or any other similar devices and includes the activation or renewal of such DTH service.

(m)"Entertainment" includes any exhibition, performance, amusement, game shows or sports to which persons are admitted for payment, or in the case of television exhibition with the aid and 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

Page 104 of 321 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 entertainment or otherwise and; The expression "temporary amusement" means the amusement rides and games which are not provided on fairly permanent basis like in amusement park or meals or fair.

(n)"Entertainment Tax" means a tax levied on "entertainment" under this Act.

xxx 2(s) "Payment for entertainment" includes – xxx

(iv) any payment made by a person by way of contribution or subscription or installation or connection charges or valuable consideration or any other charge collected in any manner whatsoever for 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; or

Page 105 of 321

(v) any payment made by a person to the proprietor of a Direct to Home (DTH) service by way of contribution, subscription, installation or rent or security or activation charges or connection charges, or valuable consideration or any other charges collected in any manner whatsoever for Direct to Home (DTH) service with the aid of any type of set-top box(s) or any other instrument/equipment of like nature, or any other similar devices, which connects television set at a residential/hotels/clubs or non- residential place or a connection holder directly to the Satellite.

Explanation. - For the purposes or this sub-clause any expenditure incurred by any co-operative housing society, residential complexes as valuable consideration or by the management of any factory, hotels, lodge, bar, permit room pub, or by a person or group of persons, for the purchase of any type of antenna or any other apparatus equipments for securing transmission through the cable network of cable television attached to it, for its members, or for workers or customers or for himself or themselves, as the case may be, shall be deemed to be the payment made under this sub-clause for the television exhibition with the aid of any type of antenna with cable network attached to it or cable television network no DTH service provider.

xxx

3. Incidence of entertainment tax. - (1) Save as provided in sub- section (2), there shall be levied and paid to the State Government by an assessee: a tax on the entertainment at the rate(s) as specified in the notification issued under this Act.

Provided that the State Government may specify different rate or rates of entertainment tax in respect to different categories of the entertainments for the different specified periods and for different specified areas.

Provided further that the rate of entertainment tax shall not exceed thirty percent of the value of gross collection / admission charge(s) / subscription(s) / contribution(s) /

Page 106 of 321 rent / security / sponsorship / activation charges or by any other valuable consideration(s) received or receivable for providing entertainment(s).

(2) Notwithstanding anything contained in sub-section (1), entertainment tax shall be levied in relation to cinematograph exhibition 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.

4. Assesses 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 week;

(iii) for the Multiplex Cinema Complex exhibition falling under sub-section (2) of Section 3 read with serial number 3 of the schedule, before commencing of the week;

Page 107 of 321

(iv) for the sponsored programmes falling under clause (x) and (ad) of Section 2, before commencement of such sponsored programmes

(v) for the cable operators, operating cable television network and Direct-to-Home Service Provider, and all other descriptions of entertainment falling under sub- section (2) of Section 3 read with serial number 4, 5 and 6 of the Schedule; by 7th day of the month after the expiry of the respective month.

Explanation. - If the specified date happens to be holiday, the next working day shall be treated to be the payment day.” Kerala Tax on Luxuries Act, 1976:

(e) The relevant provisions of Kerala Tax on Luxuries Act,

1976 are as under:

“2. Definitions. – In this Act, unless the context otherwise requires.-

xxx (ca) “cable operator”, means a person engaged in the business of receiving and distributing satellite television signals, communication network including production and transmission of programmes and packages for a monetary consideration.

xxx (ee) “luxury” means a commodity or service that ministers comfort or pleasure;

xxx (fa) “Luxury provided by a cable operator” means any service by means of transmission of television signals by wire, where subscriber’s television set is linked by metallic

Page 108 of 321 co-axial cable or optic fibre cable to a central system called the ‘headend’ and by using a video cassette or disc or both, recorder or player or similar such apparatus on which pre-

recorded video cassettes or disc or both are played or replayed and the films or moving pictures or series of pictures which are viewed and hear on Television receiving set at a residential or a non residential place of a connection holder.

xxx

(g) “prescribed” means prescribed by rules made under this Act;

(h) “Proprietor” in relation to a hotel, house boat, hall auditorium, home stay, hospital Kalyanamandapam or place of like nature includes the person who for the time being is in charge of the management of such hotel, house boat, hall, auditorium home stay, hospital or kalyanamandapam or place of like nature as the case may be.

xxx

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) in a hotel, house boat, hall, auditorium or kalyanamandapam or including those attached to hotels, clubs, Kalyanamandapam and places of the like nature which are rented for accommodation for residence or used for conducting functions, whether public or private, exhibition;

(ii) by cable operators;

(iii) in a hospital; and

(iv) in a home stay

Page 109 of 321 Provided that the sub-section shall not apply to halls and auditoriums located within the premises of ‘places of worship’ owned by such institutions;

Provided that the sub-section shall not apply to halls and auditoriums located within the premises of ‘places of worship’ owned by such institutions.

(2) Luxury tax shall be levied and collected, -

xxx

(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 Doordarshan channels only:

Provided further that luxury tax, if any, collected shall be paid over to the Government:

xxx Provided also that a proprietor of a hotel who had claimed exemption under sub-clause (1) of clause 4 of the Kerala Finance Bill, 2006 (Bill No. 355 of the XI Kerala Legislative Assembly) from the 1st day of April 2006 being the charges of accommodation below rupees two hundred per room per day, shall be permitted to avail such exemption till 30th June, 2006.

xxx (3) The luxury tax shall be collected by the proprietor and paid within such period and in such manner as may be prescribed, into a Government treasury" or a Nationalised Bank notified by Government in this behalf.

xxx

Page 110 of 321

5. Returns. – Every proprietor liable to pay luxury tax under this Act shall submit such return in such manner and within such period as may be prescribed.

xxx The Kerala Finance Act, 2006

3. Amendment of Act 32 of 1976.- In the Kerala Tax on Luxuries Act, 1976 (32 of 1976), -

(1) in Section 2, -

xxx

(c) after clause (f), the following clause shall be inserted, namely:-

"(fa) "Luxury provided by a cable operator" means any service by means of transmission of television signals by wire, where subscriber's television set is linked by metallic co-axial cable or optic fibre cable to a central system called the headend and by using a video cassette or disc or both, recorder or player or similar such apparatus on which pre-

recorded video cassettes or disc or both are played or replayed and the films or moving pictures or series of pictures which are viewed and heard on Television receiving set at a residential or a non-residential place of a connection holder;";

xxx The Kerala Tax on Luxuries Rules, 1976

3. Filing of return. – (1) The return referred to in section 5 shall be xxx

(b) in Form 1A in the case of cable TV Operator;

xxx

Page 111 of 321 The Kerala Tax on Luxuries Act, 1976 (Act 32 of 1976) (Incorporating Amendments up to the Finance Act, 2010)

2. Definitions: - In this Act, unless the context otherwise requires: -

xxx (ca) "cable operator" means a person engaged in the business of receiving and distributing satellite television signals, communication network including production and transmission of programmes and packages for a monetary consideration"

xxx "(da) "Direct-To-Home (DTH) Broadcasting Service" means a system of distribution of multi-channel television programmes in ku band using a satellite system of providing television signals direct to the subscriber's premises in an encrypted form which will be received by an antenna and decrypted by an electronic device, thus providing television signals to the television set or other viewing devices of the subscriber, without passing through an intermediary such as cable operator.

(db) "Direct-To-Home (DTH) Broadcasting Service Provider"

means, a company registered under the Companies Act, 1956 (Central Act 1 of 1956) having granted license to provide Direct-To-Home (DTH) Broadcasting Service by the Government of India under section 4 of the Telegraph Act, 1885(Central Act 13 of 1885) and Indian Wireless Telegraphy Act, 1933 (Central Act 17 of 1933) and providing such service within the State.

xxx

Page 112 of 321 (ee) "luxury" means a commodity or service that ministers comfort or Pleasure:

xxx (fa) "Luxury provided by a cable operator" means any service by means of transmission of television signals by wire, where subscriber's television set is linked by metallic co-axial cable or optic fibre cable to a central system called the 'headend' and by using a video cassette or disc or both, recorder or player or similar such apparatus on which pre-

recorded video cassettes or disc or both are played or replayed and the films or moving pictures or series of pictures which are viewed and heard on Television receiving set at a residential or a non-residential place of a connection holder;

xxx "(fd) "Luxury provided by Direct-To-Home (DTH) Broadcasting Service Provider" means any service by means of transmission of television signals and the films or moving pictures or series of pictures which are viewed and heard on television receiving set or other devices through a Direct-To-Home (DTH) service at a residential or a non-residential place of a subscriber, providing pleasure, comfort and entertainment to the subscribers and viewers.";

xxx "(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.";

xxx

Page 113 of 321

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,-

xxx

(ii) by cable operators; ("and by Direct-to-Home (DTH) Service Providers") xxx Provided that the sub-section shall not apply to,-

xxx

(iv) to cable operators whose total number of connections, including those given through franchisees, is seven thousand and five hundred or less:

Provided further that the cable operators with seven thousand and five hundred or less connections shall not be liable to tax from 1st July, 2006 (2) Luxury tax shall be levied and collected, -

xxx

(d) in respect of a cable TV operator("and Direct-to-

Home(DTH) Broadcasting Provider") at the rate of rupees five per connection per month, and shall be collectable from the person enjoying the luxury :

xxx 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 Doordarshan channels only:

Provided further that luxury tax, if any, collected shall be paid over to the Government:

Page 114 of 321 Provided also that a proprietor of a hotel who had claimed exemption under sub-clause (1) of clause 4 of the Kerala Finance Bill, 2006 (Bill No. 355 of the XI Kerala Legislative Assembly) from the 1st day of April 2006 being the charges of accommodation below rupees two hundred per room per day, shall be permitted to avail such exemption till 30th June, 2006.

(2A) Notwithstanding anything contained in sub-section (2), there shall be levied a luxury tax at the rate of rupees one hundred per year per member and the same shall be collected by the person responsible for the management of the club, by whatever name called.

Explanation: For the purpose of this section, 'club' means a club which provides more than two facilities like card room, bar, billiard rooms, snooker room, tennis court, swimming pool, Sauna Jacuzzi and the like, gymnasium, golf course, internet facility, video, video compact disk, digital video disk and computer games and having a membership strength of at least twenty five.

xxx (4) In computing the luxury tax, a fraction of a rupee, which is not a multiple of five paise, shall be rounded of to the next higher multiple of five paise.

“(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.";” xxx

Page 115 of 321 4D. Registration of cable operators and Direct-to- Home(DTH) Broadcasting Service Provider.- Every cable operator ("and Direct-to-Home(DTH) Broadcasting Service Provider") shall get himself registered with such authority and in such manner, as may be prescribed and the application for registration shall be accompanied by a registration fee of Rupees one thousand. The registration shall be for a period of one year and shall be renewed annually.

xxx

5. Returns: - Every proprietor liable to pay luxury tax under this Act shall submit such return in such manner and within such period as may be prescribed.

ACT 10 of 2010 THE KERALA FINANCE ACT, 2010

6. Amendment of Act 32 of 1976. In the Kerala Tax on Luxuries Act, 1976 (32 of 1976),-

(1) in section 2,-

(i) after clause (d), the following clauses shall be inserted, namely:-

"(da) "Direct-To-Home (DTH) Broadcasting Service" means a system of distribution of multi-

channel television programmes in ku band using a satellite system of providing television signals direct to the subscriber's premises in an encrypted form which will be received by an antenna and decrypted by an electronic device, thus providing television signals to the television set or other viewing devices of the subscriber, without passing through an intermediary such as cable operator.

xxx

Page 116 of 321 (2) in section 4,-

(i) (a) in sub-section (1), in item (ii), the words, symbols, brackets and letters "and by Direct-To-Home (DTH) Service Providers" shall be added at the end:

(b) for the existing proviso to sub-section (1), the following provisos shall be substituted, namely:-

"Provided that the sub-section shall not apply to.-

xxx

(iv) to cable operators whose total number of connections, including those given through franchisees, is seven thousand and five hundred or less:

Provided further that the cable operators with seven thousand and five hundred or less connections shall not be liable to tax from 1ª July, 2006;

ACT 16 OF 2011 THE KERALA FINANCE ACT, 2011

6. Amendment of Act 32 of 1976.-In the Kerala Tax on Luxuries Act, 1976 (32 of 1976),一 (1) in section 2,-

(i) clause (ca) shall be omitted;

(ii) clause (fa) shall be omitted;

Orissa Entertainment Tax Act, 2006:

(f) The relevant provisions of Orissa Entertainment Tax

Act, 2006 are as under:

“2. Definitions. - In this Act, unless there is anything repugnant in the subject or context,—

Page 117 of 321

(a) “admission to an entertainment” includes admission to any place in which the entertainment is held and in case of entertainment through cable service (or Direct-to-Home (DTH) Broadcasting Service) each connection to a subscriber shall be deemed to be an admission for entertainment;

xxx

(d) “cable television network” means any system consisting of a set of closed transmission paths and associated signal generation, control and distribution equipment, designed to provide cable service for reception by multiple subscribers;

xxx (e1): Direct-to-Home (DTH) Broadcasting Service” means system of distribution of multi-channel television programme in KU Band by using a satellite system, by providing television signals to a television set with the aid of set-top box direct to subscribers without passing through an intermediary such as Cable Operator. Explanation.- For the purpose of this clause and clause (k1) “KU Band” ordinarily means the 11.7-12.7 Ghz.

(Gigahertz) frequency band which splits into two segments viz. the first having the frequency of 11.7-12.2 Ghz. Known as FSS (Fixed Satellite Service) and the other having the frequency of 12.2-12.7 Ghz. Known as BSS (Broadcasting Satellite Service), or it may have such other brand width as may be approved by the Government of India from time to time.”

(f) “entertainment” means any cinematographic exhibition including exhibition of news reels, documentaries, cartoons, advertisement shots or slides, whether before or during exhibition of a feature film or separately, and includes any other exhibition, performance, amusement and entertainment through cable service (or Direct-to- Home (DTH) Broadcasting Service);

xxx

Page 118 of 321

7. Tax on cable and DTH service. - (1) The proprietor of a cable television network providing cable service (and of a Direct-to-Home (DTH) Broadcasting Service) shall be liable to pay entertainment tax at such rate as specified in Part II of the Schedule.

(2) The tax payable under this section shall be paid, collected or realised in such manner as may be prescribed.

xxx

9. Intimation before holding entertainment.- (1) No entertainment on which tax is leviable shall be held without prior information being given to the Commissioner in the manner prescribed.

(2) No proprietor of a cable television network (or Direct- to-Home (DTH) Broadcasting Service) shall provide entertainment, unless he obtains permission from the Commissioner in the manner prescribed.

xxx (3a) Notwithstanding anything contained in sub-sections (2) and (3) where any proprietor of a Direct-to-Home (DTH) Broadcasting Service is providing entertainment immediately before the commencement of the Orissa Entertainment Tax (Amendment) Act, 2010 he may continue to provide entertainment,—

(a) for a period of three months from the date of commencement of said amendment Act; or

(b) till the permission under sub-section (2) is granted by the Commissioner, if an application to that effect is made in the prescribed manner within the period specified in clause (a).”

Page 119 of 321 The relevant provisions of Orissa Entertainment Tax Rules,

2006 are as under:

“12. Permission to operate cable television network or connection for the Direct-to-Home (DTH) Broadcasting Service. – (1) The proprietor of a cable television network or a Direct-to-Home (DTH) Broadcasting Service shall submit to the Commissioner an application in Form XA within fifteen days from the date of commencement of these rules bringing the Direct-to-Home (DTH) Broadcasting Service under the purview of the Act or at least fifteen days before the date of such entertainment and shall furnish any other information which may be so required by the Commissioner for the purpose. (2) The Commissioner, after making such enquiry as he may deem proper and after being satisfied that the application is in order, shall issue certificate in form XIIIA permitting the proprietor of a cable television network or a Direct-to-Home (DTH) Broadcasting Service.”

Punjab Entertainment Duty Act, 1955:

(g) The relevant provisions of the Punjab Entertainment Duty

Act, 1955 are as under:

“2. Definitions. - In this Act unless the context otherwise requires -

(a) 'admission to an entertainment’ includes admission to any place in which the entertainment is being held or is to be held and where television exhibition is being provided with the aid of any type of antenna with a cable network attached to it or cable television or direct-to-home television in residential or non-residential areas of which persons are required to make payment by way of contribution or subscription or installation and connection

Page 120 of 321 charges or any other charges collected in any manner, whatsoever.

xxx (aa) 'antenna' means an apparatus which received television signals which enable viewers to tune into transmissions including national or international satellite transmissions and which is erected or installed for exhibition of films or moving pictures or series of pictures by means of transmission of television signals by wire where subscriber’s television sets at the residential or non-

residential place are linked by metallic coaxial cable or optio-fibre cable to a central system called the head-end, on payment by the connection holder of any contribution or subscription or installation and connection charges or any other charges collected in any manner whatsoever. (aaa) 'cable television’ means a system organised on payment by a connection holder of any contribution or subscription or installation and connection charges or any other charges collected in any manner whatsoever, for exhibition of films or moving pictures or series of pictures by means of transmission of television signals by wire where subscriber's television set is linked by metallic coaxial cable or optio-fibre cable to a central system called the head-end, by using a video cassette or disc or both, recorder or player or similar such apparatus on which prerecorded vide cassettes or discs or both are played or replayed and the films or moving pictures or series of pictures which are viewed and heard on the television receiving set at a residential or non-residential place of a connection holder.

(b) 'Commissioner' means the Excise and Taxation Commissioner, Punjab, for the time being;

(bb) “direct-to-home television” means the reception of satellite programmes with the aid of a dish by a subscriber in his home or any other place for exhibition of films or moving pictures or series of pictures on payment basis;

Page 121 of 321 (bbb) “dish” means a large circular antenna for receiving television signals from a satellite;”;

(c) 'Entertainment Tax Officer' means the officer appointed as such under this Act;

(d) 'entertainment' includes any exhibition, performance, amusement, game, sport or race to which persons are ordinarily admitted on payment for exhibition of films or moving pictures or series of pictures which are shown in a cinema house or on the television receiving set, with the aid of any type of antenna with a cable net work attached to it or cable television or dish relating to direct-to-home television network for which persons are required to make payment by way of contribution or subscription or installation and connection charges or any other charges collected in any manner whatsoever.

Explanation.- For the purpose of this clause, the expression “Cinema house” shall have the same meaning as has been assigned to it in the Punjab Entertainments Tax (Cinematograph Shows) Act, 1954 (Punjab Act 8 of 1954).

(e) 'payment for admission' includes –

(i) any payment made by a person admitted to any part of a place of entertainment and in a case where such person is subsequently admitted to another part thereof for admission to which an additional payment is required, such additional payment, whether actually made or not;

(ii) in cases of free, surreptitious, unauthorised or concessional entry, whether with or without the knowledge of the proprietor, the payment which would have been made if the person concerned had been admitted on payment of the full charges ordinarily chargeable for such admission;

(iii) any payment for any purpose whatsoever connected with an entertainment which a person is required to make as a condition of attending or continuing to attend the

Page 122 of 321 entertainment in addition to the payment, if any, for admission to the entertainment;

(iv) any payment made by a person by way of contribution or subscription of installation and connection charges or any other charges collected in any manner whatsoever for television exhibition with the aid of any type of antenna with a cable network attached to it or cable television or a dish relating to direct-to-home television network.

(f) 'prescribed' means prescribed by rules made under this Act;

(g) 'proprietor' in relation to any entertainment includes the owner, partner or a person responsible for the management thereof and any person responsible for or for the time being incharge of the management for providing cable connection from any type of antenna or cable television or for providing direct-to-home television service.

xxx

3. Duty on payments for admission to entertainments. (1) A person admitted to an entertainment shall be liable to pay an entertainment duty at a rate of twenty-five per centum, which shall be collected by the proprietor and rendered to the Government in the prescribed manner. (1-A) Notwithstanding anything contained in sub-section (1), the Government may, by notification, levy lumpsum entertainment duty at a rate not exceeding, -

(a) eight thousand rupees per annum in the local area of a City constituted as such under the Punjab Municipal Corporation Act, 1976, or of a Municipality declared as such under the Punjab Municipal Act, 1911; and

(b) Six thousand rupees per annum in areas other than the local areas specified in clause (a);

in respect of entertainments arranged by a proprietor by replay of video cassette player or video record player and the lumpsum duty so levied shall be recoverable from the proprietor, (1-B) Notwithstanding anything contained in sub-section (1), a proprietor may, at his option, pay in lump sum entertainment duty on an amusement park at the rates,

Page 123 of 321 specified in the Schedule appended to this Act, per annum per ride.

SCHEDULE (See Section 3 (1-B) Category Description of Rate of duty per of rides rides ride (in Rupees)

1 2 3 1. Dragon Roller Sixty thousand Coaster 2. Big Apple 3.Dragon Coaster 4. Roller Coaster 5. Bumper Car 6. Cyclone 7. Striking Cars A 8. Go karts 9. Water Chute 10. Octopus 11. Twister 12. Enterprise 13. Kamikaze 14. Rainbow 15. Power Tower 16. Family Swinger 1. Break Dance Forty thousand 2. Caterpillar B 3. Paratrooper 4. Round About

Page 124 of 321 5. Train 6. Dream Boat 7. Formula Cars 8. Family Slide 9. Love Boats 10. My Fair Lady 11. Tea Cup or Cup and Saucer 12. Gandola 13. Jumping Frogs 14. Parachute Towers 15. Ship or Pandulum 16. Harakiri 17. Slide 18. Razzle Dazzle 19. Ferris Wheel 20. Rock ‘N’ Roll 21. Telecombat 22. Bumper Boats 1. Baby Train Twenty thousand 2. Toto Train 3. Fun Spin 4. Fun Channel C 5. Vintage Cat 6. Jingle Ride 7. Scooters 8. Guided Cars

Page 125 of 321 9. Money Tree 10. Snail 11. Kiddie Boats 12. Coin Operated Rides 13. Children Slide 14. Any other un- specified Ride 15. Merry Go Round 16. Carousel 17. Water Merry 18. Go Round 19. Sun and Moon 20. Mini Coaster 21. Water Canal 22. Crazy Submarine 1. Boating 2. Play Pen 3. Little Kingdo D 4. Funny Boats 5. Kids Castle 6. Bike Mania 7. Water Slide

(1-B) (a) Notwithstanding anything contained in sub- section (1) Government may, by notification, levy lump- sum entertainment duty of amusement park at a rate not exceeding rupees sixty thousand per annum.

Page 126 of 321

(b) A proprietor may, however, opt to pay an entertainment duty either under sub-section (1) or he may pay lump-sum entertainment duty under the proceeding clause (a).

(2) A draft of the proposed order specifying the rate of entertainments duty referred to in sub-section (1) shall be notified for the information of all persons likely to be affected thereby and it shall take effect only after the Government has considered all objections received within a period of thirty days from the date of such publications, and has notified the same again, with or without modification:

Provided that if the Government consider that such an order should be brought into force at once, the final notification may issue without previous publication:

Provided further that Government may impose an entertainments duty on complimentary tickets at a different from that imposed on other kinds of payment for admission subject to the maximum specified in sub- section (1).

(3) Until such time as the duty referred to in sub-

sections (1) and (2) has been finally notified, the entertainments duty shall be levied at the rates in force in this behalf immediately before the commencement of this Act.

(3-A) Notwithstanding anything in this section, the amount of duty shall be calculated to the nearest multiple of 5 naye paise by ignoring 2 naye paise or less and counting more than 2 naye paise as 5 naye paise.

(4) The final notification specifying the rates of entertainment duty shall be laid before the Legislature at the session immediately following its publication.

3.A. Entertainment duty is not leviable in case tax is paid under Punjab Act 8 of 1954.- Notwithstanding anything contained in this Act, no entertainment duty shall be leviable on the proprietor who is able to pay entertainment tax under the Punjab Entertainment Tax (Cinematograph Shows) Act, 1954.

Page 127 of 321 (3B) Notwithstanding anything contained in sub-

sections (l), (1-A), (2) and (3), in the case of entertainment provided with the aid of antenna or cable television to a connection holder, the proprietor of such entertainment shall pay entertainment duty of fifteen thousand rupees per annum at a time.

(3C) Notwithstanding anything contained in this section, in the case of entertainment, provided with the aid of dish, relating to direct-to-home television, the proprietor of such entertainment shall pay entertainment duty at the rate of ten per cent of the charges, received by such proprietor from the subscriber. The entertainment duty shall be paid by the proprietor by the 10th day, commencing from the close of the concerned calendar month.”

Rajasthan Entertainments and Advertisements Tax Act, 1957:

(h) The relevant provisions of the Rajasthan Entertainments

and Advertisements Tax Act, 1957 are as under:

“3. Definitions. – In this Act, unless the subject or context otherwise requires,-

xxx (4A).- “direct to home broadcasting service” means distribution of multi channel television programmes by using satellite system by providing television signals direct to the premises of subscribers without passing through an intermediary such as cable services.

(4AAA.)- “levy of tax on direct to home broadcasting service”- The proprietor of a direct to home broadcasting service shall be liable to pay entertainment tax at such rates, not exceeding twenty percent of the monthly subscription charges per subscriber, as the State Government may from time to time, notify in the Official

Page 128 of 321 Gazette, in this behalf and different may be notified for different categories of subscribers (5) “entertainment” includes –

(i) any exhibition, (show), performance, amusement, game or sport to which persons are admitted for payment.

(ii) providing cable service to a subscriber.

(iii) providing direct to home broadcasting service and, (6) “entertainment tax” means the tax levied and charged under section 4, 4AA and 4AAA and the expression 4AA shall be deemed to have been inserted with effect from 26.03.1999 and the expression 4AAA shall be deemed to have been inserted with effect from 25.02.2008 and includes the additional tax payable under section 6A, xxx (8) “proprietor” in relation to an entertainment includes any person responsible for, or for the time being in-charge of the management thereof;

xxx (11A) “subscriber” means a person who receives the signals of cable television network at a place indicated by him to the proprietor of the cable television network without further transmitting it to any other person; Explanation : In case of hotels each room or premises where facility for receiving signals of cable television network have been attached shall be treated as a subscriber.”

The relevant provisions of the Rajasthan Entertainments

and Advertisements Tax Rules, 1957 are as under

“Rules 18BBBB.- Permission to be obtained to operate direct to home broadcasting service.

Page 129 of 321

(1) the proprietor of a direct to home broadcasting service shall submit to the Commissioner an application within fifteen days from the date on which these rules come into force or at least within fifteen days of his commencing entertainment through direct to home broadcasting service, whichever is later. (2) the proprietor shall submit to the Commissioner a security of an amount fixed by the Commissioner along with any other information which may be so required by the Commissioner.

Rules 18BBBBB.- Payment of tax for direct to home broadcasting service.

(1) The proprietor of a direct to home broadcasting service liable to pay tax in accordance with section 4AAA of the Act, shall maintain a true and correct record of the number of subscribers, the amount received from each subscriber and the amount of tax.

(2) The proprietor of a Direct to Home broadcasting service shall be required to deposit tax payable within seven days of the close of each calendar month.

(3) The proprietor of a Direct to Home broadcasting service shall file quarterly return in Form S-7 in duplicate, within fifteen days of the end of each quarter along with proof of deposit of tax payable under the Act.”

Tamil Nadu Entertainments Tax Act, 1939:

(i) The relevant provisions of the Tamil Nadu Entertainments

Tax Act, 1939 are as under:

“3. Definitions: In this Act, unless there is anything repugnant in the subject or context :

xxx

Page 130 of 321 (3B) “direct to home service” means distribution of multi-

channel television programmes by using a satellite system by providing television signals direct to subscribers’ premises without passing through an intermediary such as cable operator;

xxx 3(4) “entertainment” means a horse race or cinematograph exhibition to which persons are admitted on payment; or television exhibition for which persons are required to make payment by way of contribution, or subscription, or installation or connection charges or any other charges collected in any manner whatsoever or an amusement or a recreation parlour where a game such as bowling, billiards, snooker or the like is provided or direct to home service or a cricket tournament conducted by the Indian Premier League.

xxx 3(9) “proprietor” in relation to any entertainment means a licensee of Cinematograph exhibition under the Tamil Nadu Cinemas (Regulation) Act, 1995 (Tamil Nadu Act No.IX of 1955) or the licensee of an Exhibition of Cinematograph film on Television Screen through Video Cassette Recorder or through Cable Television Network under the Tamil Nadu Exhibition of Films on Television Screen through Video Cassette Recorders and cable Television Network (Regulation) Act, 1984 (Tamil Nadu Act No. VII of 1984) or any person providing Television exhibition or any person providing amusement or any person providing recreation parlour or any person providing direct to home service or the Indian Premier League and includes the State Government, any local authority or any person responsible for the management thereof.

xxx 3(11) “Television exhibition” means an exhibition with the aid of any type of antenna with a cable network attached

Page 131 of 321 to it or a cable television, of a film or moving picture or series of moving pictures, by means of transmission of television signals by wire where subscribers’ television sets at residential or non-residential place are linked by metallic coaxial cable or optic fibre cable to a central system called the head-end.

xxx 4-I. Tax on direct to home service.—(1) Notwithstanding anything contained in Sections 4 and 7, there shall be levied and paid to the State Government a tax (hereinafter referred to as the “entertainment tax”) calculated at the rate of thirty per cent of the gross charges excluding the service tax, received by the provider of a direct to home service.

(2) The tax levied under sub-section (1) shall be recoverable from the proprietor.

(3) The provisions of this Act (other than Sections 4, 7 and

13) and the rules made thereunder shall, so far as may be, apply in relations to the tax payable under sub-section (1).

xxx 4-E. Tax on television exhibition.- (1) Notwithstanding anything contained in Sections 4 and 7, there shall be levied and paid to the State Government a tax (hereinafter referred to as the entertainment tax) on television exhibition at the following rates namely:-

Within the limits of the Six thousand Municipal Corporation of rupees per month. Chennai, Madurai, Coimbatore, (i) Tiruchirapalli, Tirunelveli, Salem or any other Corporation that may be constituted under any law for the time being in force;

Page 132 of 321 Within the limits of the Three thousand Municipalities constituted rupees per month under the Tamil Nadu (ii) District Municipalities Act, 1920 (Tamil Nadu Act No. V of 1920) Within the limits of Town One thousand Panchayats constituted and five hundred under the Tamil Nadu rupees per month District Municipalities Act, (iii) 1920 (Tamil Nadu Act No. V of 1920) or any other area not specified in items (i), (ii) , or (iv) Within the limits of Village One thousand Panchayats constituted rupees per month. under the Tamil Nadu (iv) Panchayats Act, 1994 (Tamil Nadu Act No. 21 of 1994).

(2) The tax levied under sub-section (1) shall be recoverable from the proprietor.

(3) The provisions of this Act other than Sections 4, 4-B, 4-D, 4-F, 4-G, 5-F, 5-G, 6(1), 7 and 13 and the rules made there under shall, so far as may be, apply in relation to the tax payable under sub- section (1).

Uttar Pradesh Entertainment and Betting Tax Act, 1979:

(j) The relevant provisions of Uttar Pradesh Entertainment

and Betting Tax Act, 1979 as amended by Uttar Pradesh

Entertainment and Betting Tax (Amendment) Ordinance,

2009 are as under:

Page 133 of 321

“2. Definitions.- In this Act-

(a) ‘admission to an entertainment’ includes admission to any place which the entertainment is held or any place wherefrom entertainment is provided by means of the cable television network of Direct to Home service or any other emerging transmission by whatever name called.” (a-1) ‘amusement park’ mean a place wherein various type of amusements, which includes games or rides or water sports, water park, splash pool etc. but does not include exhibition by means of cinematograph and video, are provided on payment of admission.” xxx (ee) ‘cable operator’ means any person who provides cable service through a cable television network or otherwise controls or is responsible for the management and operation of cable television network and includes the proprietor of a hotel who provides cable service in the hotel through his own cable television network”;

xxx (f-1) ‘Direct-to-Home service’ means a system of distribution of multi-channel television programmes in Ku band by using a satellite system, by providing television signals direct to the subscriber’s premises without passing through an intermediary such as cable operator.”

(g) ‘entertainment’ includes any exhibition, performance, amusement, game, sport or race (including horse rase) to which persons are admitted for payment and in the case of cinematograph exhibition, includes exhibition of news-real, documentaries, cartoons, advertisement shorts or slides, whether before or during the exhibition of a feature film or separately,; It also includes any activity notified as entertainment by the State Government from time to time.”

Page 134 of 321 xxx (i-1) ‘Ku Band’ ordinarily means the 11.7 to 12.7 Gigahertz frequency band which splits into two segments namely Fix Satellite Service having the frequency of the 11.7 to 12.2 Gigahertz and Broadcasting Satellite service having the frequency of 12.2 to 12.7 Gigahertz, or any other band of width as may be approved by the Government of India and from time to time.” xxx (k.1) “Multi System Operator” means a cable operator who receives a programming service from a broadcaster or his authorized agencies and retransmits the same or transmits his own programming service for simultaneous reception either by multiple subscribers directly or through one or more local cable operators, and includes his authorized distribution agencies by whatever name called.

(l) ‘payment for admission’ includes-

(i) any payment for seats or other accommodation in any form in a place of entertainment;

(ii) any payment for a programme or synopsis of an entertainment;

(iii) any payment made for the loan or use of any instrument or contrivance which enables a person to get a normal or better view of hearing or enjoyment of the entertainment, which without the aid of such instrument or contrivance such person would not get;

(iv) any payment, by whatever name called or any purposes whatsoever, connect with an entertainment, which a person is required to make in any form as a condition of attending or continuing to attend the entertainment, either in addition to payment, if any,

Page 135 of 321 entertainment or without any such payment for admission.

(v) any payment made by a person, who having been admitted to one part of a place of entertainment is subsequently admitted to another part thereof, for admission to which a payment involving tax or more tax is required.

Explanation.-Any subscription raise or donation collected in connection with an entertainment in any form shall be deemed to be payment for admission;

(vi) Any payment made by a person by way of contribution or subscription or installation and connection charges or any other charges collected in any manner whatsoever, by whatever name called, for television exhibition through cable television network or any other such network by whatever name called, attached to television set or any other device at a residential or non-residential place of a connection holder; or

(vii) Any payment made by person to the proprietor of a Direct-to-Home service or any other service by whatever name called, by way of contribution or subscription or installation and connection charges or any charges collected in any manner by whatever name called either directly or through any agency established for the purpose for Direct-to-Home service with the aid of set top box or any other device of like nature which connects television set or any other device at a residential or non-residential place of a connection holder directly to the satellite without passing through an intermediary such as cable operator;

Explanation-For the purposes of sub-clauses (vi) and (vii) any expenditure incurred by any co-operative society including a co-operative housing society or by the

Page 136 of 321 management of any factory, hotel, lodge, bar, permit room, pub or by a person or group of persons for the purchase of any type of antenna or any other apparatus for securing transmission through cable television network, Direct-to- Home service or any other service by whatever name called, for its member or for workers or customers or for himself or themselves, as the case may be shall be deemed to be payment made under the sub-clause;

(viii) Where in any entertainment admission has been allowed on a gross payment, such gross payment shall be deemed to be aggregate payment”.

(l-l) 'Place of entertainment includes-

(i) a house, building, tent, site to be used for purpose of cinema building or other structure and description of transport whatsoever;

(ii) any addition to the place of entertainment;

(iii) a house building, tent or any other place where the books of account, ticket books or any other relevant records pertaining to the entertainment or pertaining to the management of providing cable service or Direct-to-Home service or Broadband service or any emerging transmission services, by whatever name called, are kept or purported to have been kept;.

xxx

(m) 'proprietor' in relation to any entertainment includes any person-

(i) connected with the organisation of the entertainment, or

(ii) charged with the work of admission to the entertainment, or

(iii) responsible for, or for the time being in-charge of the management thereof, or

(iv) any cable operator registered under Section 4 of the Cable Television Network (Regulation) Act, 1995 (Act

Page 137 of 321 No. 7 of 1995) or any person responsible for or for time being in charge of management of providing cable connection through cable television network or any other emerging technology; or

(v) any company registered under the Company Act, 1956 having license to provide Direct-to-Home service or any other emerging transmission services by whatever name called by the Government of India under Section 4 of the Telegraph Act, 1985 and the Indian Wireless Telegraph Act, 1933 or any agent thereof appointed for the purpose of sale, letting on rent or distribution of equipment related thereto;".

xxx (p-1) television signal receiver' means any device, by whatever name called, used to receive and/or decode the transmission programme of particular channel and without which no person is able to see a particular channel programme."

(p-2) 'television signal receiver agency' means a place of entertainment by whatever name called, where business of selling or letting on hire or distribution or exchange or putting into circulation in any manner whatsoever of television signal receiver.".

xxx

(t) Words and expressions used in this Act but not defined, shall have the meaning respectively assigned to them in the Cable Television Networks (Regulation) Act, 1952. (u) Words and expression used in this Act not defined, shall have the same meaning as respectively assigned to them in the Uttar Pradesh Cinema (Regulation) Act, 1955 or the rules made thereunder and the Cable Television Network (Regulation) Act, 1995 and the rules made thereunder.

3. Tax on entertainment. - (1) Subject to the provisions of this Act, there shall be levied and paid on all Aggregate payments required for admission to any entertainment

Page 138 of 321 other than an entertainment to which Section 4 or Section 4-A or Section 4-B applies or a compounded payment is made under the proviso to this sub-section an entertainment tax at such rate not exceeding one hundred and fifty per cent of each such payments as the State Government may form time to time notify in this behalf, and the tax shall be collected by the proprietor from the person making the payment for admission and paid to the Government in the manner prescribed.

Provided that a proprietor of a cinema or cable operator in a local area having a population not exceeding one lac. may, in lieu of payment under this sub-section, pay a compounded payment to the State Government on such conditions and in such manner as may be prescribed and at such rate as the State Government may from time to time notify, and different rates of compounded payments may be notified for different categories of local areas. Provided further that in the case of cable service, the proprietor of the cable service control room/multi system operator shall be liable to pay the tax irrespective of the fact whether he collect it directly from the person making the payment for admission or indirectly through an associate or franchise cable operator or an agent, who in turn collects it from the person making the payment:

Provided also that a proprietor of a cinema, in lieu of payment under this sub-section, shall make a lump sum payment to the State Government on such conditions and restrictions and in such manner as may be prescribed and at such rate as the State Government may from time to time notify, and different rates of lump sum payments may be notified for different categories of local areas or cinemas or for different payment for admission.

(2) Nothing in sub-section (1) shall preclude the State Government form notifying different rate of entertainment tax for different areas or for different classes of entertainment or for different Aggregate payment required for admission to entertainment.

Page 139 of 321

(2-a) It shall be lawful for the State Government to notify lump sum rate of entertainment tax for any entertainment or class of entertainments or for different payment for admission to entertainment or for different area; (3) Where the aggregate payment required for admission to an entertainment together with any other charge leviable under this Act, is not a multiple of one rupee then notwithstanding anything to the contrary contained in sub-section (1) or sub-section (2) or any notification issued thereunder, the tax shall be increase to such extent and be so computed that the aggregate of such aggregate payment and other charges is rounded off to the next higher multiply of one rupee and such increased tax shall also be collected by the proprietor and paid to the State Government in such manner as may be prescribed, (4) If in any entertainment, referred to in sub-section (1), to which admission is generally on payment, any person is admitted free of charge or on a concessional rate, the same amount of tax shall be payable as would have been payable had such person been admitted on full payment. (5) Where the Aggregate payment required for admission to an entertainment, referred to in sub-section (1), is made wholly or partly, by means of a lump sum paid as subscription, contribution, donation or otherwise, the tax shall be paid on the amount of such lump sum and on the amount of Aggregate payment required for admission if any made otherwise.

(6) Where in hotel or a restaurant, entertainment by way of cabaret or floor show (by whatever name called, by excluding a mere band in attendance or recorded music) is provided alongwith any meal or refreshment with a view to attracting customers, whether or not Aggregate payment required for admission is charged distinctly for such entertainment, Thirty per cent of the amount payable by the customer such meal or refreshment or the amount charge distinctly for such entertainment, whichever is higher, shall be deemed to be the Aggregate payment

Page 140 of 321 required for admission to such entertainment and the tax shall be levied and pain accordingly.

(7) Where in a hotel, entertainment by way of cable service is provided in rooms or other places, the entertainment so provided in each room or other place shall be deemed to be a separate entertainment and the subscription for admission to each such entertainment shall be deemed to be equal to the amount of subscription charged from a subscriber in the vicinity of the hotel by the cable operator providing cable service in the hotel, and the tax shall be levied and paid on the basis of such subscription:

Provided that where the cable operator himself is the proprietor of the hotel, the subscription for admission to each such entertainment shall be deemed to be equal to the amount of subscription charged from a subscriber in the vicinity of the hotel by any other cable operator. Explanation.- (1) For the purposes of this sub-section and clause (ee) of Section 2, 'hotel' includes an accommodational unit wherein rooms are provided to the customers on rent, but does not include the units approved under the 'Paying Guest Scheme' of the Department of Tourism of the State Government. Explanation - (2) For the purposes of this Act, the expression aggregate payment shall mean a sum paid by a person for admission to the entertainment which shall include entertainment tax and other amount required to be paid under this Act but does not include any fee or other charges which is not a part of entertainment tax under this Act."

The State Legislature of Uttarakhand amended the Uttar

Pradesh Entertainment and Betting Tax Act, 1979 (as applicable to

the State of Uttarakhand) by Act No.4 of 2009 notified on

16.03.2009 which are as under:

Page 141 of 321

“Section 2 – Definitions.– xxx (ff) “Direct-to-Home (DTH) Broadcasting” a service for multi-channel distribution programmes direct to subscriber’s premises without passing through an intermediary such as cable operator by uplinking to a satellite system.

Section 2(g) has been amended as under –

(g) “Entertainment” includes Direct-to-Home Broadcasting service and any and any exhibition, performance, amusement, game, sport or race (including horse race) to which persons are admitted for payment and in the case of cinematograph exhibition, includes exhibition of news-

reel, documentaries, cartoons, advertisement shorts or slides, whether before or during the exhibition of a feature film or separately.”

Interpretation of Entries of the Lists of the Seventh Schedule of the Constitution:

8. With regard to the distribution of legislative subjects under

the three Lists of the Seventh Schedule of the Constitution, it is

necessary to state that the Devolution Rules drawn under the

Government of India Act, 1919 and thereafter the Government of

India Act, 1935 are the precursors to the distribution of legislative

powers between the Union and the States. Some of the salient

aspects concerning the distribution of legislative powers between

the Parliament and State Legislature as per the three Lists in the

backdrop of constitutional provisions could be alluded to. Article

Page 142 of 321 246 of the Constitution deals with the distribution of legislative

powers between the Union and the States. The said Article has to

be read along with the three Lists, namely, the Union List, the State

List and the Concurrent List. The taxing powers of the Union as

well as the States are also demarcated as separate entries in the

Union List as well as the State List i.e. List I and List II respectively.

The entries in the Lists are fields of legislative powers conferred

under Article 246 of the Constitution. In other words, the entries

define the areas of legislative competence of the Union and the

State Legislature. (vide: State of Karnataka).

8.1 The legislative power to impose a tax or impost can be

traced to either List I - Union List or List II - State List. List III -

Concurrent List which gives powers to both Union as well as the

States to legislate on a subject does not contain any taxation entry.

Entry 47 - List III states that fees in respect of any of the matters

in that List but not including fees taken in any Court could be

levied and collected by an authority of law either by the Union or

the State Legislature. Similarly, Entry 66 - List II states that fees

in respect of any of the matters in List II but not including fees

taken in any Court could be collected by the State Legislature. In

Page 143 of 321 a similar vein, Entry 96 - List I gives power to levy fee in respect of

subjects enumerated in List I but not including fees taken in any

Court.

8.2 On the aspect of interpretation of legislative entries in the

three Lists, the principles are apposite as discussed in State of

Karnataka:

8.2.1 The power to legislate which is dealt with under Article 246

has to be read in conjunction with the entries in the three Lists

discussed above which define the respective areas of legislative

competence of the Union and State Legislatures. While interpreting

these entries, they should not be viewed in a narrow or myopic

manner but by giving the widest scope to their meaning,

particularly, when the vires of a provision of a statue is assailed. In

such circumstances, a liberal construction must be given to the

entry by looking at the substance of the legislation and not its mere

form.

8.2.2 However, while interpreting the entries, in the case of an

apparent conflict between the entries in the Lists, every attempt

must be made by the Court to harmonise or reconcile them. Where

Page 144 of 321 there is an apparent overlapping between two entries, the doctrine

of pith and substance is applied to find out the true character of

the enactment and the entry within which it would fall. The

doctrine of pith and substance, in short, means, if an enactment

substantially falls within the powers expressly conferred by the

Constitution upon the legislature which enacted it, the same

cannot be held to be invalid merely because it incidentally

encroaches on matters assigned to another legislature. Also, in a

situation where there is overlapping, the said doctrine has to be

applied to determine to which entry, a piece of legislation could be

related to by examining the true character of the enactment or a

provision thereof. Due regard must be had to the enactment as a

whole and to its scope and objects. It is said that the question of

invasion into another legislative territory has to be determined by

substance and not by degree. According to the pith and substance

doctrine, if a law is in its pith and substance within the competence

of the Legislature which has made it, it will not be invalid because

it incidentally touches upon the subject lying within the

competence of another Legislature.

Page 145 of 321 8.2.3 In case of any conflict between entries in List I and List II,

the power of Parliament to legislate under List I will supersede

when, on an interpretation, the two powers cannot be reconciled.

But if a legislation in pith and substance falls within any of the

entries of List II, the State Legislature's competence cannot be

questioned on the ground that the field is covered by Union list or

the Concurrent list (vide Prafulla Kumar Mukherjee vs. Bank of

Commerce, Khulna, AIR 1947 P.C. 60). It was further observed

that in distinguishing between the powers of the divided

jurisdictions under Lists I, II and III of the Seventh Schedule to the

Government of India Act, 1935, it is not possible to make a clean

cut between the powers of the various legislatures. They are bound

to overlap from time to time, and the rule which has been evolved

by the Judicial Committee whereby an impugned statute is

examined to ascertain its pith and substance or its true character

for the purpose of determining in which particular list the

legislation falls, applies to Indian as well as to Dominion legislation.

8.2.4 The Privy Council quoted with approval, the observations of

Gwyer, CJ in A.L.S.P.P.L. Subrahmanyan Chettiar vs.

Muttuswami Goundan, AIR 1941 FC 47 wherein it was observed

Page 146 of 321 that overlapping of subject-matter is not avoided by substituting

three lists for two, or even by arranging for a hierarchy of

jurisdictions. It was observed that “Subjects must still overlap, and

where they do the question must be asked what in pith and

substance is the effect of the enactment of which complaint is

made, and in what list is its true nature and character to be found.

If these questions could not be asked, much beneficent legislation

would be stifled at birth, and many of the subjects entrusted to

provincial legislation could never effectively be dealt with”. In the

said case, it was further observed that the dominant position of the

Central Legislature (Parliament) with regard to matters in List I and

List III is established. But the rigour of the literal interpretation is

relaxed by the use of the words “with respect to” which signify “pith

and substance”, and do not forbid a mere incidental encroachment.

The learned Chief Justice Gwyer further added as under:

“It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind adherence to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the Legislature enacting them may appear to have legislated in a forbidden sphere. Hence the rule which has been evolved by the Judicial

Page 147 of 321 Committee whereby the impugned statute is examined to ascertain its “pith and substance”, or its “true nature and character,” for the purpose of determining whether it is legislation with respect to matters in this list or in that.”

8.2.5 Where one entry is made “subject to” another entry, all that

it means is that out of the scope of the former entry, a field of

legislation covered by the latter entry has been reserved to be

specially dealt with by the appropriate legislature. Also, when one

entry is general and another specific, the latter will exclude the

former on a subject of legislation. If, however, they cannot be fairly

reconciled, the power enumerated in List II must give way to List

I.

8.2.6 But once the legislation is found to be ‘with respect to’ the

legislative entry in question, unless there are other constitutional

prohibitions, the power would be unfettered. It would also extend

to all ancillary and subsidiary matters which can fairly and

reasonably be said to be comprehended in that topic or category of

legislation (vide United Provinces vs. Atiqa Begum, AIR 1941

FC 16).

Page 148 of 321 8.2.7 Another important aspect while construing the entries in

the respective Lists is that every attempt should be made by the

Court to harmonise the contents of the entries so that

interpretation of one entry should not render the entire content of

another entry nugatory (vide Calcutta Gas Company Ltd. vs.

State of West Bengal, AIR 1962 SC 1044). This is especially so

when some of the entries in a different List or in the same List may

overlap or may appear to be in direct conflict with each other. In

such a situation, a duty is cast on the Court to reconcile the entries

and bring about a harmonious construction. Thus, an effort must

be made to give effect to both entries and thereby arrive at a

reconciliation or harmonious construction of the same. It is only

when such attempt to reconcile fails that the non-obstante clause

in Article 246(1) should be applied as a matter of last resort as

observed in Re: The Central Provinces and Berar Sales of Motor

Spirit and Lubricants Taxation Act, 1938, AIR 1939 FC 1 by

Gwyer, C.J. in the following words:

“for the clause ought to be regarded as a last resource, a witness to the imperfections of human expression and the fallibility of legal draftsmanship”.

Page 149 of 321 8.2.8 The sequitur to the aforesaid discussion is that if the

Legislature passes a law which is beyond its legislative competence,

it is a nullity ab-initio. The legislation is rendered null and void for

want of jurisdiction or legislative competence vide RMD

Chamarbaugwalla vs. Union of India, AIR 1957 SC 628.

8.2.9 On a close perusal of the entries in the three Lists, it is

discerned that the Constitution has divided the topics of legislation

into the following three broad categories:

(i) Entries enabling laws to be made; (ii) Entries enabling taxes to be imposed; and

(iii) Entries enabling fees and stamp duties to be collected.

8.2.10 Lists I and II are divided essentially into two groups :

one, relating to the power to legislate on specified subjects and the

other, relating to the power to tax. Thus, the entries on levy of taxes

are specifically mentioned. Therefore, as such, there cannot be a

conflict of taxation power of the Union and the State. Thus, in

substance the taxing power can be derived only from a specific

taxing entry in an appropriate List. Such a power has to be

determined by the nature of the tax and not the measure or

machinery set up by the statute. In Hoechst Pharmaceuticals, it

Page 150 of 321 has been categorically held that taxation is considered as a distinct

matter for purposes of legislative competence.

8.2.11 It would be relevant to discuss the following two

judgments of this Court in detail in order to bring out the pertinent

principles of interpretation of taxation entries in List II even when

regulation of an activity is provided under an entry in List I. They

are: (i) MPV Sundararamier and Union of India vs. H.S.

Dhillon, (1971) 2 SCC 779 (“H.S. Dhillon”).

8.2.12 In paragraph 51 of MPV Sundararamier, it was

observed as under:

“51. 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. Thus, Entry 22 in List I is “Railways”, and Entry 89 is “Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights”. If Entry 22 is to be construed as involving taxes to be imposed, then Entry 89 would be superfluous. Entry 41 mentions “Trade and commerce with foreign countries; import and export across customs frontiers”. If these expressions are to be interpreted as including duties to be levied in respect of that trade and commerce, then Entry 83 which is “Duties of customs including export duties” would be wholly redundant.

Entries 43 and 44 relate to incorporation, regulation and

Page 151 of 321 winding up of corporations. Entry 85 provides separately for corporation tax. Turning to List II, Entries 1 to 44 form one group mentioning the subjects on which the States could legislate. Entries 45 to 63 in that List form another group, and they deal with taxes. Entry 18, for example, is “Land” and Entry 45 is “Land revenue”. Entry 23 is “Regulation of mines” and Entry 50 is “Taxes on mineral rights”. The above analysis—and it is not exhaustive of the entries in the Lists—leads to the inference that taxation is not intended to be comprised in the main subject in which it might on an extended construction be regarded as included, but is treated as a distinct matter for purposes of legislative competence. And this distinction is also manifest in the language of Article 248 clauses (1) and (2) and of Entry 97 in List I of the Constitution. Construing Entry 42 in the light of the above scheme, it is difficult to resist the conclusion that the power of Parliament to legislate on inter-State trade and commerce under Entry 42 does not include a power to impose a tax on sales in the course of such trade and commerce.”

On the above analysis, it was categorically inferred in MPV

Sundararamier that taxation was not intended to be comprised

in the main subject in which it might, on extended construction,

be regarded as included but is to be treated as a distinct matter for

the purpose of legislative competence. But while saying so, in the

said case, reliance was also placed on Article 286 of the

Constitution.

8.2.13 It was observed in H.S. Dhillon that Entry 97 - List I

conferred the residuary powers on Parliament. Article 248 of the

Page 152 of 321 Constitution which speaks of residuary powers of legislation

confers exclusive power on Parliament to make any law with

reference to any matter not enumerated in the Concurrent List

or the State List. But at the same time, it provides that such a

residuary power shall include a power of making any law imposing

a tax not mentioned in either of those Lists. It is thus clear that

if any power to tax is clearly mentioned in List II, the same would

not be available to be exercised by Parliament based on the

assumption of a residuary power.

8.2.14 In fact, the judgment in H.S. Dhillon was by a majority

of 4 : 3 to the effect that the power to legislate in respect of a matter

does not carry with it a power to impose a tax under our

constitutional scheme. Thus, there is nothing like an implied power

to tax. The source of power to legislate on a subject which does not

specifically speak of taxation cannot be so interpretated by

expanding its width as to include therein the power to tax, by

implication or by necessary inference. Reliance was also placed

on Cooley on Taxation to the following effect:

“There is no such thing as taxation by implication. The burden is always upon the taxing authority to point to the

Page 153 of 321 act of assembly which authorises the imposition of the tax claimed.”

8.2.15 Thus, the power to tax is not an incidental power.

Although legislative power includes incidental and subsidiary

power under a particular entry dealing with a particular subject,

the power to impose a tax is not such a power which could be

implied under our Constitution. Therefore, it was held that the

power to legislate in respect of inter-State trade and commerce

(Entry 42 -List I) did not carry with it the power to tax the sale of

goods which are subject of inter-State trade and commerce, before

the insertion of Entry 92-A - List I and such power belonged to the

States under Entry 54 - List II subject to Article 286 of the

Constitution. (See: Builders’ Association of India vs. Union of

India, (1989) 2 SCC 645)

8.2.16 Delving further on the distinction between the power to

regulate and control and the power to tax, it has been observed by

this Court that there is a significant distinction between the two

primary purposes of legislation. The primary purpose of taxation is

to collect revenue. Power to tax may be exercised for regulating an

industry, commerce or any other activity. The purpose of levying

Page 154 of 321 such tax is the exercise of sovereign power for effectuating

regulation although incidentally, the levy may contribute to the

revenue. Taking a leaf from Cooley on his work on taxation, it was

observed that the distinction between a demand of money under

the police power and one made under the power to tax, is not so

much one of form as of substance.

8.2.17 In view of the detailed discussion made above, we find

that the dictum of this Court in MPV Sundararamier analysing

the entries in Lists I and II dealing with various subjects of

legislation and entries concerning taxation being separate and

distinct must be borne in mind while interpreting the impugned

provisions of the State Acts. That is the constitutional scheme. In

this regard, we reiterate what has been observed in Hoechst

Pharmaceuticals, to the effect that taxation is considered to be a

distinct matter for purposes of legislative competence and the

power to tax cannot be deduced from the general legislative entry

as an ancillary power. Also, a power to legislate as to the principal

matter specifically mentioned in the entry shall also include within

its expanse legislation touching only upon incidental and ancillary

matters. But the power to levy tax cannot be considered to be an

Page 155 of 321 incidental and ancillary matter while interpreting an entry in the

Lists concerning legislative competence of Parliament or legislature

of any State to enact laws on the subjects mentioned in the entry.

8.2.18 As a sequitur, it is observed that Entry 97 - List I which

is the residuary entry relatable to Article 248 of the Constitution

cannot be invoked or pressed into service when a specific entry

empowering Parliament or the Legislature of a State to pass laws

regarding the taxation on any subject is specifically enumerated

either in List I or List II.

8.2.19 It would also be useful to mention that since the

legislative competence to pass a law relating to taxation being

specific and distinct in List I or List II, such an entry is not found

in List III. In other words, both Parliament as well as the Legislature

of a State cannot have the competence to levy tax on a particular

subject and hence, there is no specific entry regarding taxation in

List III or the Concurrent List. In fact, Entry 47 - List III refers only

to power to impose “fees in respect of any of the matters in the List

but not including fees taken in any court”. The distinction between

the power to levy fees and the power to levy a tax is well known and

Page 156 of 321 it would not be necessary to go into that aspect of the matter in the

present cases except to highlight that there is no entry for taxation

in the Concurrent List. Therefore, while interpreting a taxation

entry in List I or List II, all efforts must be made to interpret them

in such a way as to give content and meaning to the same having

regard to the constitutional scheme under which the distribution

of legislative powers have been envisaged in the Seventh Schedule

and bearing in mind and the object and intent behind them.

State of Karnataka vs. State of Meghalaya:

8.3 The controversy in the aforesaid case was regarding the

interpretation to be given to the expression ‘betting and gambling’

in Entries 34 and 62 - List II of the Seventh Schedule to the

Constitution of India. Further, whether “lotteries organised by the

Government of India or the Government of a State”, which is a

subject in Entry 40 - List I also encompasses the power to levy tax

on the said lotteries? Consequently, whether under Entry 62 - List

II the State Legislature is denuded of the power to levy tax on the

said subject? In other words, whether the subject covered in Entry

40 - List I restricts the scope and ambit of Entries 34 and 62 - List

II? If the answer is in the affirmative, whether the State Legislatures

Page 157 of 321 have no legislative competence to levy tax on lotteries organised by

the Government of India or the Government of a State.

Consequently, the question in these cases was, whether, the

Legislatures of the States of Karnataka and Kerala had the

legislative competence to enact the Karnataka Act, 2004 and the

Kerala Act, 2005 respectively.

8.3.1 After examining the entries in List I and List II, it was

observed that the expression “betting and gambling” finds a

mention in Entry 34 – List II and taxes on, inter alia, betting and

gambling are leviable having regard to Entry 62 – List II. Thus, the

activity of betting and gambling and taxes on betting and gambling

are subjects falling within List II i.e. they are State subjects. If

conduct of lotteries is held to come within the scope of the

expression ‘betting and gambling’ then the regulation and control

of the said activity as well as the taxation on lotteries are squarely

within the contours of the legislative powers of the State. However,

only lotteries organised by the Government of India or the

Government of a State, even though, they come within the scope of

the expression ‘betting and gambling’ have been carved out of

Entry 34 - List II dealing with betting and gambling inasmuch as

Page 158 of 321 Entry 40 - List I (Union List) deals with lotteries organised by the

Government of India or the Government of a State. This implies

that conduct of lotteries by the Government of India or the

Government of a State, even though, is betting and gambling within

the meaning of Entry 34 and Entry 62 - List II, nevertheless, those

entries are denuded inasmuch as the State Legislature has no

legislative powers to pass any law on the subject lotteries organised

by the Government of India or the Government of a State. If such

is the simplistic interpretation to be given, the matter would rest.

However, that is not so. This Court observed that:

“158.2 The expression “betting and gambling” is also found in Entry 34 of List II. We have discussed at length above the content of the said expression and as to what it encompasses. The activity of “betting and gambling” includes, inter alia, lotteries. Lotteries can be conducted by the Government of India or the Government of States or authorised by a State or be conducted by private entities in a State. Thus, a lottery conducted by any of the above entities, Government or private is an activity falling within the nomenclature of “betting and gambling” which is the subject in Entry 34 List II. But what has been carved out of Entry 34 of List II is only lotteries conducted by the Government of India or the Government of any State. Therefore, all other types of lotteries continue to remain within the scope and ambit of “betting and gambling” as an activity in Entry 34 of List II.”

Page 159 of 321 8.3.2 In the above backdrop, Entry 40 – List I and Entries 34

and 62 - List II were considered to assess whether there is any

apparent conflict or overlapping between the same. It was observed

that with regard to lotteries organized by the Government of India

or Government of a State are concerned, they continue to remain

within the scope and ambit of Entry 62 - List II dealing with, inter

alia, betting and gambling in so far levy of tax is concerned. But in

order to have uniformity of laws throughout the country governing

such lotteries, the framers of the Constitution had intentionally

included the said activity referred to above in Entry 40 – List I.

Consequently, Parliament has legislative competence to pass laws

on lotteries organized by the Government of India or the

Government of any State, uniformly throughout the country, as the

conduct of such lotteries by the sovereign State is a source of

revenue. Therefore, in order to enhance the faith of the people in

the organization and conduct of such lotteries throughout the

territories of India by the Government of India or the Government

of any State, the said regulation by Parliament is enabled by

placing the subject in Entry 40 – List I. Consequently, the Lotteries

(Regulation) Act, 1998 had been passed by Parliament which is

Page 160 of 321 regulatory in nature. But the question, whether, while interpreting

Entry 40 - List I alongside Entries 34 and 62 - List II, the power to

tax lotteries organized by Government of India or the Government

of a State was also taken away from Entry 62 - List II and was to

be read within the ambit of Entry 40 - List I was considered. It was

held that the power to tax remains in Entry 62 – List II with the

State Legislature for which in paragraph 158 of the said judgment,

twelve reasons were assigned. It was ultimately held that Entry 62

- List II is a specific taxation entry on luxuries, including taxes on

entertainments, amusements, betting and gambling. Since

lotteries conducted by any entity or organization was nothing but

betting and gambling, the State Legislatures would have the power

to tax lotteries under Entry 62 - List II as lotteries would come

within the nomenclature of betting and gambling irrespective of

who conducts them.

8.4 Therefore, before approaching Entry 97 - List I which is a

residuary entry in the Union List (List I), it would be necessary to

first interpret the relevant taxation entry in the State List and it is

only in the absence of there being legislative competence in the

relevant taxation entry in the State List could such a power be

Page 161 of 321 traced to Entry 97 - List I in the residuary list provided such a

power is not also traceable to any entry in the Union List. This is

because in List I itself the entries concerning taxation are separate

and distinct. Such entries are from Entries 82 to 92-B and Entry

96 - List I deals with fees in respect of any of the matters in the List

but not including fees taken in any court. Therefore, the power to

tax can be read under Entry 97- List I which is only a residuary

entry, if the same is not enumerated separately in List I or in List

II in which latter case it would come within the legislative

competence of the State Legislature.

8.5 From the aforesaid discussion, we would have to deduce and

give a finding whether the activity conducted by the assessees

herein falls within the nomenclature of entertainments under

Entry 62 – List II thereby recognizing legislative competence with

the State legislature to impose a tax on the assessees herein.

Meaning and Scope of the expression “Luxuries, Entertainments and Amusements” and Legislative Competence of State Legislatures to impose Entertainment Tax:

Luxuries:

8.6 The expression “entertainments and amusements” finds a

place both in Entries 33 as well as 62 – List II. The former is a

Page 162 of 321 regulatory entry while the latter is a taxation entry. Entry 33 – List

II, on the one hand, speaks of theatres and dramatic performances,

while on the other hand, it deals with sports, entertainments and

amusements. Cinemas are also covered within Entry 33 – List II

subject to Entry 60 – List I which deals with sanctioning of

cinematograph films for exhibition. The taxation entry (Entry 62 –

List II) essentially grants or reserves legislative competence to the

State Legislature to impose taxes on “luxuries” which expression

includes entertainments, amusements, betting and gambling.

Thus, the aforesaid four expressions have been brought under the

umbrella of the word “luxuries” so as to enable a State Legislature

to tax these activities. Therefore, it is necessary to understand the

meaning and content of the expression “luxuries, entertainments

and amusements”.

8.7 In Express Hotels, this Court observed that luxury connotes

extravagance or indulgence as distinguished from the needs and

necessities of life. Taxes on luxuries is not limited to things tangible

and corporeal but the entry encompasses all the manifestations

and emanations which comprehend the elements of extravagance

and indulgence that differentiates luxury from necessity. There can

Page 163 of 321 be elements of extravagance or indulgence in the quality of service

as well as activities.

8.8 It was observed that luxuries covered both corporeal and

incorporeal services and thus refers to goods and services as noted

above. Further, there are two aspects of luxury, the first being

objects and services which are intrinsically capable of fostering a

sense of luxury and second, the recipient of such articles or

services who consumes them experiences such gratification. Since

“luxuries” can be both goods and services, what is relevant is the

common denominator of the luxury element/potential of goods and

services.

Reference could be made to Oxford English Dictionary,

(Second Edition, Volume IX), wherein it is stated that luxury could

among other things be defined as –

(i) abundance, sumptuous enjoyment;

(ii) the habitual use of, or indulgence in, what is choice or costly;

(iii) refined and intense enjoyment; means of luxurious

enjoyment;

Page 164 of 321

(iv) in a particularised sense: something which conduces to

enjoyment or comfort in addition to what are accounted as the

necessaries. Hence, in recent use, something which is desirable

but not indispensable; and

(v) as an attribute such as luxury coach, cruise duty, edition,

flat, liner, shop, tax, trade.

8.9 In short, the connotation of the word luxury is something

which conduces enjoyment over and above the necessities of life to

which one takes with a view to enjoy, amuse or entertain oneself.

8.10 In the same vein, in A.B. Abdul Kadir vs. State of Kerala,

(1976) 3 SCC 219 (“A.B. Abdul Kadir”), it was observed that the

connotation of the word “luxury” is something which conduces

enjoyment over and above the necessities of life. It denotes

something which is superfluous and not indispensable and to

which one takes with a view to enjoy, amuse or entertain oneself.

An expenditure on something which is in excess of what is required

for economic and personal well-being would be expenditure on

luxury although the expenditure is of a nature which is incurred

Page 165 of 321 by a large number of people, including those not economically well

off.

8.11 Further, in Godfrey Phillips, it was observed that the

expression “luxury” must be understood in a sense analogous to

that of the less general words such as entertainments,

amusements, gambling and betting which are clubbed with it. This

is by way of the application of the principle of interpretation known

as noscitur a sociis. Thus, luxuries is also capable of meaning an

activity and has primarily and traditionally been defined as such.

It is only derivatively and recently used to connote an article of

luxury. If luxuries is understood as meaning something which is

purely for enjoyment and beyond the necessities of life, then,

entertainments, amusements, betting and gambling would come

within its scope and ambit. Further, these are all activities.

8.12 In Western India Theatres, this Court observed that the

ordinary meaning has to be given to the word “luxury”. This means

that it would refer to goods and services which foster “luxury”, a

sense of abundance, enjoyment and gratification. Further taxes on

luxuries, entertainments or amusements cannot have a restricted

Page 166 of 321 meaning so as to confine the operation of the law only to taxes on

persons receiving the luxuries, entertainments or amusements.

The entry contemplates luxury, entertainments and amusements

as objects on which the tax is to be imposed, if so there can be no

reason to differentiate between the giver and the receiver of the

luxuries, entertainments and amusements and both may, with

equal propriety be made amenable to the tax. Thus luxury tax can

be imposed on those who provided it also. It was further observed

that the concept of luxuries in the legislative entry takes within it

everything that can fairly and reasonably be said to comprehended

in it. The actual measure of the levy is a matter of legislative policy

and convenience so long as the legislation has a reasonable nexus

with the concept of luxuries in the broad and general sense in

which the expressions in legislative list are comprehended, the

legislative competent extends to all matters “with respect to” that

field of topic of legislation.

It was further observed that the taxable event need not

necessarily be the actual utilization or the actual consumption, as

the case may be, of the luxury. Once the legislative competence and

the nexus between the taxing power and the subject of taxation is

Page 167 of 321 established, the other incidence are matter of fiscal policy behind

the taxing law. The measure of the tax is not the same thing as and

must be kept distinguished from the subject of the tax.

8.13 In Federation of Hotel & Restaurant Association of

India, the concept of luxuries in Entry 62 – List II was also

considered and in the said case, the aspect theory was also applied.

Entertainments and Amusements:

8.14 According to P. Ramanatha Aiyar’s Advanced Law Lexicon,

6th Edition, Volume II, the word ‘entertainment’ includes any

exhibition, performance, game, sport and any other form of

amusement to which persons are ordinarily admitted on payment.

It also means “work in connection with, or for the purposes of, any

cinema, exhibition or entertainment”. The expression

‘entertainment’ includes hospitality of any kind and also

expenditure on business gift with the aim of advertising to the

general public. It is an activity that provides amusement and would

include public performances including games and sports,

exhibition, amusement to which persons are admitted for

payments.

Page 168 of 321 8.15 Readers Digest’s Family Word Finder defines the word

“entertainment” to mean amusement, diversion, distraction,

recreation, fun, play, good time, pass time, novelty, pleasure,

enjoyment and satisfaction. Entertainment denotes that which

serves for amusement and ‘amusement’ is defined as a pleasurable

occupation of the sense or that which furnishes it as sports or

music.

8.16 Webster’s Third New International Dictionary has defined

‘entertainment’ as an act of diverting, amusing or causing

someone’s time to pass agreeably.

8.17 According to Concise Oxford English Dictionary, 11th Edition

(Revised) as cited in Bangalore Turf Club Ltd. vs. Regional

Director, ESI Corporation, (2014) 9 SCC 657 (paragraph 43.1),

“entertainment” means ‘the action of providing or being provided

with amusement or enjoyment. An event or performance designed

to entertain’.

8.18 In State of Karnataka vs. Drive-in Enterprises, (2001) 4

SCC 60, it was observed that the word “entertainment” is wide

enough to comprehend in it, the luxury or comfort with which a

Page 169 of 321 person entertains himself. It includes viewing a cinema film inside

a driving theatre along with a car/motor vehicle.

8.19 In Purvi Communication, the expression “entertainments”

under Entry 62 – List II was held to include performance, film or

programmes shown to the viewers through the cable television

network.

8.20 Thus, the expression “entertainments” is a word of general

import and in common parlance, it includes cinema shows,

dramatic performances, etc. The expression ‘entertainments’ used

in Entry 62 - List II does not draw a distinction between one who

derives amusement and one who caters to it. It covers both

categories.

8.21 This Court has interpreted the expression “entertainments”

in a broad and wide manner and not restricted to entertainment in

a public place. With the advancement of technology, there can be

entertainment provided within the private space or the household

also by means of television or other electronic gadgets as well as in

a motor vehicle. The growth of technology is such that there is now

entertainment available even on a mobile phone (cell phone or even

Page 170 of 321 on a smart watch). Thus, the expression “entertainments” cannot

be interpreted in a narrow, pedantic or in a myopic way. With the

advancement in technology, there can be several modes in which

the activity of entertainment can be provided or received. However,

what is essential is the object of providing or receiving signals etc.

which must be for the purpose of entertainment.

Amusement:

8.22 The expression “amusement” in Entry 62 – List II would

mean diversion, pass time or enjoyment or a pleasurable

occupation of the senses or that which furnished it vide M.J.

Sivani vs. State of Karnataka, AIR 1995 SC 1770.

8.23 Entry 62 - List II is a specific taxation entry on luxuries,

including taxes on entertainments, amusements, betting and

gambling. The expression “entertainments and amusements”

would have to be read ejusdem generis. The tax is thus on the

activity of “entertainments and amusements” as it is on the activity

of betting and gambling. Hence under Entry 62 - List II, the specific

power to tax an activity which is “entertainments and

amusements” is reserved with the State Legislature and cannot be

Page 171 of 321 read within the scope and ambit of Entry 31 - List I which is

inherently restricted in its scope to include “broadcasting and other

like forms of communication” (Entry 31 – List I). We say so for the

following reasons:

8.23.1 First, when a specific entry regarding taxation is

provided in List II empowering the State Legislature to levy tax on

a subject, namely, “entertainments and amusements” amongst

other similar activities, the same cannot be read by implication in

an entry of List I, namely, Entry 31 - List I which is a regulatory

entry. This is because a taxation entry is separate and distinct from

an entry dealing on a particular subject. This principle has been

adequately explained by this Court in several judgments such

as MPV Sundararamier and was followed in Hoechst

Pharmaceuticals as discussed above.

8.23.2 Second, a taxation entry or legislative power to levy a tax

on “entertainments and amusements” in the instant case, cannot

be split between Parliament and the State Legislature when the

said power is expressly enumerated in Entry 62 - List II. This is the

constitutional scheme under the three Lists. This is also evident on

Page 172 of 321 a perusal of the entries of List III (Concurrent List) which empowers

both the Union as well as State Legislature to enact laws on

subjects mentioned therein and the power to levy a tax is

conspicuous by its absence.

8.23.3 Third, the object and purpose of Entry 62 - List II is to

tax the activity of “entertainments and amusements”.

8.23.4 Fourth, theatres and dramatic performances, cinemas,

sports, entertainments and amusements are subjects enumerated

in Entry 33 - List II and are State subjects, therefore, regulation of

such activities within a State is complemented by the power of the

State legislature to also tax the said activity under Entry 62 – List

II. This is because what is being taxed is an entertainment and

amusement activity which is squarely covered under Entry 62 -

List II. Therefore, the State legislature has the competence to tax

the activities enumerated in Entry 33 - List II.

8.23.5 Fifth, the contention of the assessees that the subject

being placed in Entry 31 - List I would also empower only

Parliament to impose a tax on the same by way of implication under

Page 173 of 321 the said entry itself is not a correct interpretation of the entries in

the Lists.

8.23.6 Sixth, Entry 97 - List I can be invoked only when any

matter is not enumerated in List II or List III including any tax not

mentioned in the said Lists. There is no specific entry for levy of

tax on entertainments and amusements in List I. It is only in Entry

62 - List II. Thus, Entry 62 - List II gives legislative competence to

a State Legislature to levy a tax on, inter alia, “entertainments and

amusements”. This would also include a tax on organisation and

conduct of entertainments and amusements within the State when

permission has been given by a State Government to conduct such

an activity of entertainments and amusements in whatever form it

may be. Thus, Entries 33 and 62 of List – II which, inter alia, deal

with “entertainments and amusements” have to be interpreted

identically and the expressions given an identical meaning.

8.23.7 Seventh, when the State Government has the legislative

competence to levy a tax on, inter alia, entertainments and

amusements (as a specific taxation entry is provided to levy tax on

the said activity under Entry 62 - List II), the said entry must be

Page 174 of 321 interpreted comprehensively and not in a restricted or narrow

manner by excluding from the purview of the said entry, taxation

on entertainments and amusements conducted through television

by the medium of broadcasting.

8.23.8 Eighth, such a power to levy taxes on entertainments

and amusements cannot be read into Entry 31 - List I by

implication or into Entry 97 - List I as a residuary power. Such

interpretation, if endorsed, would do violence to the manner of

interpretation of entries in the Lists and prove to be contrary to the

Articles of the Constitution and judgments of this Court cited

above.

8.23.9 Ninth, if the State Government permits any species of

entertainments or amusements activity within the State in terms

of Entry 33 - List II, then the State also has legislative competence

to tax such an activity as per Entry 62 - List II.

8.23.10 Tenth, Entry 31 - List I is meant only for the purpose of

regulation. The said entry cannot be expanded to cover the power

to levy taxes on entertainments and amusements by Parliament

when such a power is envisaged in Entry 62 - List II. Parliament,

Page 175 of 321 therefore, cannot tax an entertainment or amusement activity, on

the strength of Entry 31 - List I. It may however regulate the said

activity to the extent permissible under Entry 31 – List I. Any

impost strictly for the purpose of regulation of broadcasting is

permissible so long as it is not a tax on entertainment or

amusement which is only within the ambit of only Entry 62 - List

II.

8.23.11 Eleventh, any entertainment or amusement activity

conducted by a private entity in a State or authorised by a State

Government can be regulated only by the State Legislature. This is

because Entry 33 - List II which deals with, inter alia,

entertainments and amusements, also includes television

entertainment. The regulation could be of Cable Television

operators in the State.

8.24 The definition of broadcasting in Section 65(13) of the

Finance Act, 1994 as amended in 2001 is as per the meaning

assigned to it in clause (c) of Section 2 of the Prasar Bharti Act,

1990. The said Act is made pursuant to Entry 31 – List I which

deals with posts and telegraphs; telephones, wireless, broadcasting

Page 176 of 321 and other like forms of communications. The quintessence of Entry

31 – List I is communication which could be through various modes

as referred to above. However, Entry 62 – List II deals with taxes

on luxuries which is a totally distinct entry as opposed to

communication which is the subject-matter of Entry 31 – List I and

within the nomenclature of the expression “luxury”, is included

inter alia entertainments and amusements.

8.24.1 Therefore, on a plain reading of the said entries, it is very

apparent that broadcasting is a form of communication and

entertainment is a species of luxuries under Entry 62 – List II.

There is no doubt that there are various modes of entertainments.

Geeta Enterprises is a case which is restricted to certain modes

of entertainments but with the advancement of technology, we have

noted that entertainment could be through television and other

digital devices including cell phone or smart phone. The expression

“entertainments” in whatever mode it may be, come within the

nomenclature or genre of luxuries which totally distinct from the

expression “communication”. It may be that the activity of

entertainment is achieved through communication and in that

sense could be through the mode of broadcasting and in that

Page 177 of 321 sense, broadcasting and communication is for the purpose of the

entertainment. Hence, in our view, the State Legislature were fully

justified in imposing entertainment tax under Entry 62 – List II.

That broad casting through T.V. cable network and cable operators

is for carrying out the activity of entertainment and in pith and

substance falls within the scope and ambit of Entry 62 – List II.

However, the means adopted is through broadcasting which is a

means of communication under Entry 31 – List I and therefore

incidentally touches upon the subject under Entry 31 – List I.

8.24.2 Insofar as the argument that broadcasting falls only

within the scope and ambit of Entry 31 – List I is concerned, it has

to be viewed only as a form of communication and for the purpose

of imposition of service tax, broadcasting is given meaning which

is attributed to clause (c) of Section 2 of the Prasar Bharti Act, 1990

which as already noted as a regulatory entry. A regulatory entry

cannot be a basis for imposition of a tax as this Court way back in

MPV Sundararamier expressed. That a taxation entry is exclusive

and de hors a regulatory entry and cannot be read by way of an

implication into a regulatory entry. That apart, in H.S. Dhillon,

this Court has specifically stated that if a tax falls within the scope

Page 178 of 321 and ambit of an entry in a particular list then the same cannot be

read into the residuary list, namely, Entry 97 – List I. In the

circumstances, we find that the borrowing of the definition

“broadcasting” from the Prasar Bharti Act, 1990 for the purpose of

imposition of service tax on a broadcaster and thereby including a

person who is in the entertainment industry to also liable to pay

service tax, is not a levy in the nature of entertainment tax. Thus,

a levy of service tax on a broadcaster is not a levy on an activity

which is in the realm of entertainment. Conversely, a levy of

entertainment tax by a State under Enter 62 – List II is not a levy

on the activity/service of broadcasting but on the activity of

providing and receiving entertainment.

8.25 In conclusion we hold that the tax sought to be imposed by

the State Legislatures by way of the impugned Acts, is traceable to

the power conferred on the State Legislatures under Entry 62 - List

II. The said entry contemplates imposition of taxes, inter alia, on

the entire genus of “entertainments and amusements”. The pith

and substance of the provisions of the State Act referred to above

are in the realm of taxation of providers/receivers of

entertainment/amusement as luxuries within the said Entry

Page 179 of 321 through the medium of television which involves broadcasting

service which is regulated under Entry 31 – List I as a form of

communication in accordance with Prasar Bharti Act, 1990.

Parameters of Taxation:

8.26 A legislative enactment which provides for the imposition of

a tax must specify the following parameters of taxation:

(i) The taxable event which forms the basis of levy, also referred to as “subject” of a tax;

(ii) The measure of the tax;

(iii) The rate(s) of taxation; and

(iv) The incidence of the tax.

8.27 The said parameters are each distinct and must not be

conflated with the others. The components of tax, as stated above

have been characterised in Govind Saran Ganga Saran. In the

said case, it was also laid down that a legislative scheme which

seeks to impose a tax, ought to define each of the aforestated

components with certainty and precision. The observations of

Pathak, C.J. in the aforesaid case can be extracted as under : (SCC

pp. 209-10, para 6)

Page 180 of 321 “6. The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity.”

8.28 This Court, in State of Karnataka, applied the aforesaid

parameters of taxation in the context of the State enactments for

collection of tax on conduct of lotteries that is encompassing the

activity of betting and gambling. Paragraphs 111.1 – 111.4 are

apposite to the present case and they read as under:

“111.1. In the context of the tax sought to be imposed by the impugned Acts, the basis of levy is the conduct of lotteries within the State of Karnataka or Kerala. In other words, the subject of taxation is the conduct of lottery schemes, by the Government of India or the Government of other States, within the State of Kerala or Karnataka. While it has rightly been stated by the learned counsel appearing on behalf of the respondents that the conduct of lotteries involves a host of events such as formulation and notification of scheme of lotteries, printing, transportation and sale of lottery tickets, etc. all these events constituting the conduct of the lotteries are ultimately for the participation of persons, within the State of Karnataka or Kerala. Therefore, the subject of tax is the conduct of lottery schemes, within the State of Karnataka

Page 181 of 321 or Kerala, which is enabled by the propensity of persons to participate in the lottery schemes.

111.2. The measure of taxation in the instant case is the “draw”. The impugned legislations contemplate two kinds of draws, namely, bumper draw and draw other than a bumper draw.

111.3. The rate of tax, is a dependent variable and is to be determined based on the measure. In the instant case, the rate of tax under the Karnataka Act, 2005 is Rupees one lakh and fifty thousand in respect of a bumper draw and Rupees one lakh in respect of any other draw.

Similarly, in the Kerala Act, 2005, the rate of tax is Rupees ten lakhs in respect of a bumper draw and Rupees two lakhs and fifty thousand in respect of any other draw. 111.4. The incidence of the tax is on the promoters of the lotteries i.e. on the Government of India or a the Government of a State or a Union Territory or any country organising, conducting or promoting a lottery, within the State of Karnataka or Kerala, or any person or entity appointed by the said Government or country in this behalf. The impugned Acts require registration of promoters and all provisions requiring filing of the returns of draws and payment of tax, are to operate in relation to promoters. Therefore, the incidence of the tax, falls on the promoters of the lotteries.”

8.29 The above analogy be applied in the context of the legislative

enactments of the States under consideration and the following

table would bring out the aforesaid parameters of taxation in the

context of the activity of providing and receiving entertainment:

Page 182 of 321

Taxable S. Event or Measure Incidence States Rate of Tax No. subject of of Tax of Tax taxation

Section Assam Amusements Section 3C 3C read Section 1 and Betting Tax Act, Section 3C read with with 3C 1939 S.3C(4) S.2(4)

Delhi Entertainments 2 and Betting Tax Act, Section 7 Section 7 Section 7 Section 7 1996

Gujarat Section Section Section Section 3 Entertainments Tax 6E(1) 6E(1) 6E(1) 6E(1) Act, 1977

Jharkhand Section 3 Proviso to 4 Entertainment Tax Section 3 Section 3 & Section Section 3 Act, 2012 4

Orissa Entertainment 5 Section 7 Section 7 Section 7 Section 7 Tax Act, 2006

Punjab Section Section 6 Entertainment Duty Section 3C Section 3C 3C 3C Act, 1955

Section Rajasthan 4AAA read Notification Entertainments and Section Section 7 with S.O.443 dt.

Advertisements Tax 4AAA 4AAA Section 5 25.02.2008 Act, 1957 and 6

Uttar Pradesh Entertainment and Betting Tax Act, 1979 Section 3 Section 3 Section 3 8 as amended by U.P. read with read with Section 3 read with Ordinance No. 4 of S.2(a) S.2(l)(vii) S. 2(v) 2009 w.e.f. 16.06.2009

Page 183 of 321 Taxable S. Event or Measure Incidence States Rate of Tax No. subject of of Tax of Tax taxation

Uttar Pradesh Entertainment and Betting Tax Act, Section 3 Section 3 Section 3 Section 9 1979, as amended by read with read with read with S. read with Uttarakhand S. 2(g) S. 2(g) 2(g) S. 2(g) (Amendment) Act, 2009 dt. 16.03.2009

8.30 The parameters of taxation when juxtaposed with the

relevant provisions of the State Acts under consideration, it is

evident that the parameters of taxation can be clearly discerned

from the aforesaid provision of the State Acts all relatable to the

subject “entertainment” on which the tax is levied coming within

scope and ambit of Entry 62 – List II.

Relevant case law:

Suresh:

9. The judgment of this Court in Suresh is relevant to the issues

herein and deserves deliberation. Suresh arose from an appeal

against the judgment of the High Court of Judicature at Madras in

Tamil Nadu Cable TV Organisers Association vs. Government

of Tamil Nadu, W.P. No.10013/1994 dt. 30.11.1994 (“Tamil

Page 184 of 321 Nadu Cable TV Organisers Association”). In the aforesaid case,

the constitutional validity of sub-sections (2A), (2-B), (11) of section

3 and section 4-E of the Tamil Nadu Entertainments Tax Act, 1939

as amended by Act 37 of 1994 (“1994 Act”) with the relevant Rules

in G.O.P. No.265 dt. 18.08.1994 was under challenge. The purpose

of the 1994 Act was to levy entertainment tax on exhibition of films

or moving pictures or series of pictures through cable television.

“Cable television” was defined in clause (2-B) of section 3 as

follows:

““cable television” means a system organised for television exhibition by using a video cassette or disc or both, recorder or player of similar such apparatus on which pre- recorded video cassettes or discs or both are played or replayed and the films or moving pictures or series of pictures which are viewed and heard on the television receiving set at a residential or non-residential place of a connection holder.”

“Television exhibition” was defined in clause (11) of section 3

as follows:

““television exhibition” means an exhibition with the aid of any type of antenna with a cable network attached to it or cable television, of a film, or moving picture or series of moving pictures, by means of transmission of television signals by wire where subscribers’ television sets at residential or non-residential place are linked by metallic

Page 185 of 321 coaxial cable or optic fibre cable to a central system called the head-end.”

Section 4E is the charging section which was introduced for

the first time as follows:

“(1) Notwithstanding anything contained in sections 4 and 7, there shall be levied and paid to the State Government a tax (hereinafter referred to as the entertainments tax) calculated at forty per cent of the amount collected by way of contribution or subscription or installation or connection charges or any other charges collected in any manner whatsoever for television exhibition.

(2) The tax levied under sub-section (1) shall be recoverable from the proprietor.

(3) The provisions of this Act (other than Sections 4, 4B, 4D, 5, 5A, 5B, 5C, 5D, 5E, 5F, 5G, 6(1), 7 and 13) and the rules made thereunder shall, so far as may be, apply in relation to the tax payable under sub-section (1).”

9.1 It is relevant here to list the major issues of the writ

petitioners therein. They are as follows:

I. The State Legislature has no competence to pass the impugned

Act inasmuch as the subject falls entirely within List I of

Schedule VII to the Constitution.

II. The Union of India has passed a legislation viz., Cable

Television Network (Regulation) Ordinance 9 of 1994 and also

Page 186 of 321 framed the Cable Television Rules of 1994. Thus, by the

doctrine of “occupied field”, the State Legislature has no power

to pass the impugned Act.

III. The impugned Act violates the provisions of Article 19(1)(a) of

the Constitution of India, as it operates as an unreasonable

restriction on the freedom of speech and expression of the

citizens of this country.

IV. The tax levied by the Amendment Act is not a ‘tax on

entertainment’ even as defined by the Act. It is a colourable

legislation and is a fraud on the legislative powers for the

following reasons:

a. Installation Charges and connection charges paid by the

viewer cannot form part of the charges for entertainment.

b. In effect, it is a tax on trade, profession or calling, falling

within the scope of Entry 60 - List II read with Article 276

of the Constitution of India.

c. The transmission through the Cable Television Network is

not only of films or moving pictures but also of several

educative programmes. In effect, it is partly a tax on

Page 187 of 321 education. The entertainment part of the transmission will

be less than 10% of the total transmission. As there is no

provision for apportionment of the tax on entertainment

and on other non-entertainment programmes, the entire

levy is illegal and invalid.

d. There is no nexus between the object of the legislation and

the provision contained in the Act, and therefore, it is

unconstitutional.

V. The provisions of the Act violates Article 14 of the Constitution

of India for the following reasons:

a. It does not impose a tax on Door darshan and those who

own a disc antenna including posh hotels and other

organisations.

b. The Act treats unequals as equals inasmuch as the levy is

the same with reference to rural operators as well as urban

operators.

VI. Essentially, the tax levied by the impugned Act is one on

private enjoyment by the people in their respective houses and

not on public entertainment.

Page 188 of 321 VII. The provisions of the Act are unreasonable due to the following

reasons.

a. The rate of tax is unduly exorbitant and wholly

unreasonable so as to practically annihilate the business

of the Cable TV Operators.

b. The provision for security deposit of Rs. 10,000 under Rule

21C is an unreasonable restriction on the business.

c. The provision for inspection of the place from where such

television exhibition is provided, under Section 11 of the

Act is unwarranted and an unreasonable restriction on the

business.

9.2 As regards Issue I questioning the legislative competence,

petitioners therein argued that the subject matter was governed by

Entry 31 and Entry 60 - List I or alternatively, it would fall under

the residuary Entry 97 - List I as it was a matter not enumerated

in List II or List III of the Seventh Schedule. It was also argued that

the Act defined “entertainment” to mean “a horse-race or

cinematograph exhibition to which persons are admitted on

payment” and this definition had been holding the field since 1939

Page 189 of 321 and therefore the expression ‘entertainment’ was a nomen juris for

“a horse-race or cinematograph exhibition”.

9.3 However, the High Court opined that modern statutes have to

be interpreted under new facts and situations and that old

meaning cannot be given to the expression used therein by relying

on the maxim contemporanea expositio est optima et fortissima in

lege (contemporaneous exposition is the best and strongest in law).

It then opined that the Indian Constitution has always been held

to be an organic instrument and the expressions used in the

Constitution cannot be restricted to the facts and circumstances

which prevailed at the time of the passing of the Constitution. By

relying on cases such as Geeta Enterprises and Express Hotels,

the High Court held that the meaning of the word ‘entertainments’

used in Entry 62 - List II is not confined to the definition of the said

word as found in the Madras Entertainments Tax Act, 1939 and

that the impugned Act falls within Entry 62 - List II.

9.4 With regard to Issue II dealing with repugnancy and

occupied field, the Court rejected the argument of petitioners that

the impugned Act is repugnant to the provisions of the Central

Page 190 of 321 Ordinance 9 of 1994 since it had found that the subject-matter fell

within Entry 62 - List II.

9.5 On the contention regarding violation of Article 19(1)(a) of

the Constitution, the Court also rejected the argument that the

taxation curtails the freedom of expression of the various national

and international television operators by holding that the Cable TV

Operators are not prevented from expressing their views on any

particular matter.

9.6 As regards Issue IV(a), petitioners contended that the charges

for installation or connection are only for the purpose of laying own

connecting wires and cables which will not be a recurring

expenditure and they cannot be termed as charges paid for the

enjoyment of entertainment. The High Court rejected this

contention, noting that whatever amount was paid by the viewer to

the Cable TV Operator for installation or connection or for

transmission of different programmes, all that was intended as

payment for enjoying the entertainment. It also decided Issue IV(b)

in favour of the State noting that the incidence of tax was on

entertainment as such and not on any individual. As regards Issue

IV(c), the Court rejected the contention of the petitioners that the

Page 191 of 321 tax was mostly on non-entertainment programmes which were of

high educational value, and since it was not possible to apportion

the tax between entertainment programmes and non-

entertainment programmes, the entire levy had to be struck down

as unconstitutional. It held that if the pith and substance of the

Act brought an enactment within the scope of a particular

legislative entry, it could neither be dissected into different parts

nor could it be held that the major part of it fell outside the scope

of the entry. It rejected the contention of the petitioner as regards

Issue IV(d) at the very outset.

9.7 Issue V dealt with Article 14 and the Court reiterated the

principles of law relating to classification in a fiscal enactment that

the legislature has wide latitude in such matters. It noted that the

classification was based on intelligible differentia having nexus

with the object of the enactment and that there was no hostile

discrimination whatsoever against Cable TV operators. As regards

the urban/rural classification, the Court noted that merely

because the operators in rural areas may not get as many

customers as the operators get in urban areas, it cannot be a

ground to provide differential rates, as the incidence of tax was on

Page 192 of 321 entertainment and it was the same whether the viewer was in a

village or a town or a city.

9.8 Issue VI invoked a right to privacy argument. According to

the petitioners, due to the imposition of tax, the charges for getting

such connections became out of reach for ordinary people and

hence were deprived of watching programmes on the television in

the privacy of their respective abodes. The Court dismissed this

contention as far-fetched. It also noted that the tax was imposed

only on the proprietor, and the law does not mandate that the same

be passed on to consumers.

9.9 With regard to Issue VII, the Court reiterated the well-

settled principle that it has no concern with the wisdom of the

legislature in prescribing the rate of tax. It opined that when there

was no prohibition in the Act against the proprietor passing on the

tax liability to the customers, there was nothing wrong in the taxing

enactment to prescribe the furnishing of security for the proper

payment of tax. It also held as regards provisions for inspection

that the Legislature was always entitled to make provisions to

enable the proper enforcement of the levy. Holding so, it dismissed

all the petitions.

Page 193 of 321 9.10 The Supreme Court in Suresh upheld this decision of the

Madras High Court. It felt unnecessary to deal with all its

conclusions except the submissions relating to i) freedom of speech

and expression; ii) colourable legislation; and iii) the rate of tax. It

noted that the activity of the appellants therein was a combination

of two rights i.e. business and speech – sub-clause (g) and (a) of

clause (1) of Article 19 and that there was no reason why the

business part of it could not be taxed. It also noted that the State

had duly explained its reasons for imposing tax at the rate of 40%

and that since the appellants also carried on business, it was their

duty to share the burden of the State by paying taxes like any other

business.

Vasant Madhav Patwardhan:

9.11 A similar matter had come up before the Bombay High

Court in Vasant Madhav Patwardhan vs. State of

Maharashtra, 2000 SCC OnLine Bom 244 wherein operators of

Cable Television filed a writ under Article 226 of the Constitution

challenging the constitutional validity of an amendment to the

Bombay Entertainments Duty Act, 1923. The said Act imposed a

tax on the entertainment provided by the Cable TV network.

Page 194 of 321 9.12 The Bombay HC discussed Tamil Nadu Cable TV

Organisers Association and Suresh in detail. It noted that the

judgments above substantially covered the scope and controversy

raised before it and that the substance of the legislations both in

Maharashtra and Tamil Nadu were markedly similar. It noted that

the Constitution is an organic document and that the vision of the

founding fathers cannot, by a process of artificial construction, be

frozen at the scientific knowledge and technology which was

available at the point of time when the Constitution was drafted.

Consequently, it upheld the competence of the State to levy the tax.

An appeal against this judgment before the Supreme Court in Civil

Appeal No. 7167 of 2000 was dismissed on the ground that the

“point involved in this appeal is squarely covered by the judgment

of this Court in Suresh”.

Geeta Enterprises vs. Purvi Communication:

10. During the course of the arguments, learned senior counsel

Sri KK Venugopal submitted that the three Judge Bench judgment

of this Court in Purvi Communication is per incuriam as it did not

follow the reasoning of the coordinate Bench judgment in Geeta

Enterprises and therefore, the correctness of Purvi

Page 195 of 321 Communication must be examined by a larger Bench of five

judges.

10.1 While the three judge bench in Geeta Enterprises held that

the levy of entertainment tax necessitates that the entertainment

in question have a public colour, the coordinate bench deciding

Purvi Communication did not take note of the same and erred in

holding that state legislatures are competent to impose

entertainment tax under Entry 62 – List II on the services rendered

by Cable TV Operators. In that regard, Sri Venugopal placed

reliance on the judgment of the Constitution Bench of this Court

in State of M.P. vs. Abha Sethi, (1999) 4 SCC 32 wherein Geeta

Enterprises was cited with approval and its correctness affirmed.

10.2 Learned senior counsel further argued that the 1979 Act was

amended in 2009 to introduce entertainment tax on DTH services.

Our attention was drawn to the charging section of the 1979 Act

i.e. Section 3, which, according to Sri Venugopal, predicates the

levy of entertainment tax upon “admission to an entertainment”. It

was argued that watching television within the boundaries of one’s

home cannot be considered “admission to an entertainment”.

Page 196 of 321 Therefore, it was contended that the charging section does not

apply to the activity of the assessees herein. Placing reliance on

Bharat Sanchar Nigam Limited, it was further argued that the

dominant nature of the activity of the assessees is that of

broadcasting and this Court must be circumspect in holding

otherwise.

10.3 The crux of the submission was that in Geeta

Enterprises, the word ‘entertainment’, as used in section 2(3) of

the Uttar Pradesh Entertainment and Betting Tax Act, 1937

impugned therein, was interpreted to require a ‘public colour’. He

submitted that such an interpretation was in line with the meaning

of the word ‘entertainments’ in Entry 62 - List II, which has

historically required a ‘public colour’. The relevant paragraphs in

Geeta Enterprises are as follows (p.818):

“Thus, on a consideration of the legal connotation of the word entertainment as defined in various books, and other circumstances of the case as also on a true interpretation of the word as defined in s. 2 (3) of the Act, it follows that the show must pass the following tests to fall within the ambit of the aforesaid section :

1. that the show, performance, game or sport, etc. must contain a public colour in that the show should be open to public in a hall, theatre or any

Page 197 of 321 other place where members of the public are invited or attend the show.

2. …” (emphasis supplied)

10.4 Sri Venugopal, learned senior counsel submitted that Purvi

Communication ignored this requirement of ‘public colour’ and

proceeded to hold that the performance, film or programme shown

to the viewers through the cable television network came within the

meaning of ‘entertainments’ under Entry 62 - List II to make law

for the levy and collection of tax on such entertainments.

10.5 Sri Shisodia, learned senior counsel, on the other hand

submitted that, as regards the question of whether cable TV

operators may be taxed under the impugned Act when it is the

subscribers who spend on entertainment, the judgment of this

Court in Purvi Communication squarely covers it. Therein, this

Court held that,

“37. In our view, the respondents as a cable operator, for the purpose of levy and 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

Page 198 of 321 II of 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 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.

xxx

39. In the tax matters, the State Legislature is free to, if it has legislative competence, to choose the persons from whom the tax levied on entertainments is to be collected. In other words, what are taxed are the entertainments, which is very much within the ambit of Entry 62 of List II of Seventy Schedule.” (emphasis supplied)

10.6 We are of the view that Purvi Communication is not per

incuriam and need not be referred to a larger Bench. To

substantiate our reasons, let us revisit Geeta Enterprises and

Purvi Communication in light of Entry 62 - List II.

10.7 In Geeta Enterprises, the petitioner therein permitted

persons to enter the premises without any charge to view a show

on the video which consisted mainly of sports, games etc. played

on the screen of the video. Electronic machines were imported from

Japan and the mechanism for playing the machine was so designed

Page 199 of 321 that a coin of fifty paise was to be inserted into a strong box built

within the machine, the keys of which was with the manufacturer.

After the show was over, a representative of the manufacturing

company would come, open the box collect the money and pay the

share of the hire-petitioner therein out of the collected sale

proceeds. The charge of inserting the coin was released only from

those who wanted to operate the video machine at the rate of fifty

paise for a show lasting up to thirty seconds.

10.8 In Geeta Enterprises, the applicability of entertainment tax

on the video game installed by the petitioner therein was under

question. The modus operandi was that a machine with a video

screen was installed in the parlour of the petitioner. There was no

admission fee for people to enter the parlour, but a coin of 50 naya

paise was to be inserted into a strong box built within the machine

to play the video game. The question was, whether this modus

operandi would fall within the interpretation of the word

"Entertainment" as used in section 2(3) of the Uttar Pradesh

Entertainment and Betting Tax Act, 1937 (hereinafter referred to

as ‘the 1937 Act). Section 2(3) of the 1937 Act provided that:

Page 200 of 321

"entertainment" includes any exhibitional, performance, amusement, game or short to which persons are admitted for payment."

10.8.1 This Court went into the different meanings of

‘entertainment’ to arrive at a conclusion that it has been used in a

very wide sense to include within its ambit, entertainment of any

kind including one which may be purely educative. It rejected the

contention of the petitioner therein that video games do not fall into

the definition as no admission fee was charged from the viewers. It

held that (at p.817),

“…when a number of people without any admission fee enter a hall for entertainment and enjoy the games it becomes a public show and the hall where the video is played becomes a public hall and· amounts therefore to a public exhibition which is squarely covered by the first limb (exhibitional) of the definition of entertainment in Sub-section 3 extracted above.” (emphasis supplied)

10.8.2 Finally, the Court affirmed the views of the Allahabad

High Court in Gopal Krishna Agarwal vs. State of Uttar

Pradesh, (1982) All. L.J. 607 which held that entertainment tax

was leviable on video games. It approved the High Court’s

reasoning that,

Page 201 of 321 “With the advance of civilization ·and scientific developments new forms of entertainment have come into existence. Video Games are probably the latest additions to the means of entertainment. These games require skill and precision as so many other games do. They are a source of amusement and enjoyment to those who participate in the games. Others who stand by and watch also derive some pleasure and amusement though not to the same degree. Admission to the premises where the Video Machines are installed may be free but payment is admittedly made if one wants to play the game. The money charged for use of the Video Machine is an admission to entertainment and the payment made by the person who uses the Machine is the payment for admission. In any case it is a payment for admission.”

Section 3 of the 1937 Act, i.e. the charging section imposed

tax on all payment for admission to any entertainment

(entertainment tax). The question was, whether or not the aforesaid

show would fall within the four corners of the expression

“entertainment” which was defined to include any exhibitional,

performance, amusement, game or sport to which persons are

admitted for payment under the said statute. Having regard to the

aforesaid definition and bearing in mind the varying definitions of

the expression entertainment, it was observed that Section 2(3) of

the said Act required certain tests to be applied in order to

ascertain whether the activity fell within the aforesaid section. It

Page 202 of 321 was in the context of the definition of the expression entertainment

in the Act under consideration therein that this Court laid down

the test. Ultimately, this Court observed that the video show in the

instant case was exigible to tax under Section 3 of the Act

considered therein and the Writ Petitions filed were dismissed. This

decision pertains to the period prior to the ushering of television in

the country.

10.8.3 On a reading of this judgment, it becomes clear that the

interpretation of the word ‘entertainments’ includes newer forms of

entertainment such as video games, while at the same time it

viewed entertainment to have a public character.

10.9 Let us now consider Purvi Communication. In this case,

the respondent therein was carrying on business as a multi-system

operator (MSO) and engaged in receiving and providing TV signals

to individual cable operators of various localities. Communication

signals known as TV signals broadcasted by various satellite

channels were received and distributed to sub-cable operators. The

process involved in the business consisted of establishment of the

state-of-the-art control rooms and spreading the cable networks.

The said network signals were being given to various sub-cable

Page 203 of 321 operators with whom the respondents had franchise agreement.

According to the respondents therein, the object of the MSOs was

to capture signals from various satellites and to put all of them in

proper format/frequencies so that all those signals can travel

together in cables without encroaching upon and interfering with

other signals for the reception and distribution by the so-called

cable operators. The signals are transmitted through the satellites

by the various broadcasters from their earth up-linking stations in

various parts of the world.

Respondent No.1 therein entered into franchise agreement

with the individual cable operator of various localities and on the

basis of the said agreement, it transmitted the said signals to the

said individual sub-cable operators against a price. The individual

sub-cable operators on the basis of the monthly subscription

provided the said TV signals to the individual subscribers of the

locality.

10.9.1 The State of West Bengal sought to impose a tax on

MSOs engaged in receiving and providing television signals to

individual cable operators of various localities by amending the

Page 204 of 321 West Bengal Entertainment-cum-Amusement Tax Act, 1982 (“the

1982 Act”). Some of the relevant definitions under the Act were

with regard to the expressions “cable operators”, “sub-cable

operators”, “cable service”, “cable television network”, “subscriber”

and “gross receipt”. The said Act was amended in 1998 by omitting

sub-section (4) of Section 4A and inserting a new sub-section (4a)

which provided that,

“(4a) Where any owner, or any person for the time being in possession, of any electrical, electronic or mechanical device, is a cable operator and receives through such device the signal of any performance, film or any other programme telecast, and thereafter such owner or person, against payment received or receivable,-

i. exhibits such performance, film or programme through cable television network directly to customers, or ii. transmits such signal to a sub-cable operator, who in turn provides cable service for exhibition of such performance, film or programme to the customers, such owner or person shall be liable to pay tax from the month in which he exhibits such performance, film or programme or transmits such signal to a sub-cable operator on the basis of his monthly gross receipt at such rate, not exceeding twenty five per centum of the monthly gross receipt, as may be specified by the State Government by notification published in the Official Gazette.”

10.9.2 Aggrieved by the imposition of entertainment tax and the

demand notices issued, the respondents therein challenged the

Page 205 of 321 vires of the 1998 Amendment made to the 1982 Act as well as the

demand notices before the Taxation Tribunal and being aggrieved

by its decision approached the High Court under Article 226 of the

Constitution.

10.9.3 It was contended on behalf of the sub-cable operators

that they were not providing any entertainment within the meaning

of Entry 62 – List II as providing the cable link up to the viewers

was the only role. That the sub-cable operator was merely

transmitting the signals received by the cable operator which were

in the form of audio-video signal. Per contra, the State of West

Bengal in the said case submitted that the cable operators were

engaged in receiving and providing TV signals to individual sub-

cable operators of various localities and such cable operators on

their part transmit the signals to their respective subscribers, who

are the actual consumers who get the benefit of the entertainment

from the signals. That the signals received by the sub-cable

operators are utilized for providing information and entertainment

to their customers. That respondent No.1 before this Court was a

cable operator and the MSOs like the respondent company were

not only providing the input to the localized cable operators in their

Page 206 of 321 business of providing cable TV connections and transmission or

programme through cables but the MSOs were also concerned with

value added services like internet, telephone and transmission of

data. It was argued that the respondent therein did not carry on

any activity which constituted entertainment or amusement. That

the MSOs were different from sub-cable operators. It was

contended that a cable operator in a locality who is actually

providing the entertainment to his subscribers may be liable to pay

tax but those who function at an intermediary stage cannot be held

liable to pay the said tax.

10.9.4 It was further submitted that the taxable event, namely,

the act or activity of entertainment must have a direct and

proximate connection with the assessee on which it falls and must

itself constitute entertainment. That unless an activity in question

qualifies as entertainment itself, the taxable event of entertainment

cannot arise. If the activity in question is not the taxable event

(entertainment), the levy cannot be sustained.

10.9.5 The High Court of Calcutta allowed the writ petition filed

by the MSO and declared section 4A(4a) of the 1982 Act as ultra

vires the Constitution.

Page 207 of 321 10.9.6 On appeal by the State, the MSO submitted that they

merely capture signals from various satellites and put all of them

in proper format/frequencies for the reception and distribution by

the sub-cable operators. However, the Court allowed the appeal by

the State. While considering Section 4-A (4-a) of the State Act, it

was observed that the purpose of the said provision was to levy and

collection of the tax from any person who provides cable service

directly to consumers or transmits to a sub-cable operators

through a cable television network and otherwise controls or is

responsible for the management and operation of a cable television

network and such person has been defined as cable operator being

a taxable person exclusively for the purpose of levy and collection

of entertainment tax. Only when a cable operator so defined

receives through any electrical, electronic and mechanical device,

the signal of any performance, film or any other programme

telecast and provides cable service directly to consumers or

transmits signals to a sub-cable operator through a cable television

network and otherwise controls or is responsible for the

management and operation of cable television network, he would

be liable. Therefore, a cable operator is the source of entertainment

Page 208 of 321 to the individual subscribers because, it is he who receives the

signal of performance, film, and any programme which is

transmitted or given to a large number of sub-cable operators

(although they call them as cable operator). The viewers enjoy, or

are entertained by such performance, film, or programme because

of receiving and transmitting video or audio-visual signals through

coaxial cable or any other device by the respondents. No

entertainment can be presented to the viewers unless a cable

operator transmits the video and audio signals to a sub-cable

operator for instantaneous presentation of any performance, film

or any programme on their TV screen. The sub-cable operators are

mere franchisees who receive signals for transmission to the

viewers only on payment of a price promised or paid in terms of

agreements entered by and between them. Therefore, the

respondents as a cable operator have direct and proximate nexus

with the entertainment provided by them through their cable

television network and as such, they are the taxable person in

respect of their gross receipts in relation to any month for providing

entertainments to the individual viewers. This Court observed that

the respondents therein as cable operators for the purpose of levy

Page 209 of 321 and collection of tax had 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 - List II to make

law for the levy and collection of tax on such entertainments. This

Court further observed in paragraphs 38 and 39 is as under:

“38. A tax under Entry 62 of List II of the Seventh Schedule to the Constitution 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 are admittedly engaged in the business of receiving broadcast signals and then instantaneously sending or transmitting such visual or audio-visual signals by coaxial cable, to subscribers' homes through their various franchisees. It has been made possible for the individual subscribers to choose the desired channels on their individual TV sets because of cable television technology of the respondents and of sending the visual or audio-visual signals to sub-cable operators, and instantly retransmitting such signals to individual subscribers for entertaining them through their franchisees. The respondents' act is, no doubt, an act of offering entertainment to the subscribers and/or viewers. The respondent is very much directly and closely involved in the act of offering or providing entertainment to subscribers who are on his record. For the fact of offering

Page 210 of 321 or providing entertainment to the subscribers and/or viewers, the respondents receive charges, which are realised or collected by their franchisee from the ultimate subscribers. Their franchisee, called as sub-cable operator under the said 1982 Act having no independent role to offer or provide entertainments to the subscribers inasmuch as franchisees have to depend entirely on the respondents' communication network and this communication network of the respondents consists of receiving and sending visual images and audio and other information for preparation of the subscribers and/or viewers; without the communication network service of the respondents, no entertainments can be offered or provided to the subscribers and/or viewers.

39. In the tax matters, the State Legislature is free, if it has legislative competence, to choose the persons from whom the tax levied on entertainments is to be collected. In other words, what are taxed are the entertainments, which is very much within the ambit of Entry 62 of List II of the Seventh Schedule. It is the respondents who as cable operator for the purpose of the said 1982 Act are engaged in the business of providing or offering entertainments which include showing of films, various serials, cricket matches and dramatic performances to the subscribers, and the tax is imposed on the act of offering such entertainments in this way to such subscribers and/or viewers. The entire communication network service is built up and controlled by the respondents. Whatever amount is received or receivable by the respondent in respect of providing such entertainments is taxable under sub-

section (4-a) of Section 4-A of the said 1982 Act which has a direct and sufficient nexus with the entertainments.”

Page 211 of 321 10.9.7 It is thus clear that the cable operator, respondent No.

1 is the exhibitor in this case and also the provider of the

entertainment to the customer. Hence, he alone can be asked to

pay the tax on the entertainment that has resulted from this

exhibition. This provision, therefore, does not cross the bounds of

Entry 62 - List II and is intra vires. Providing a cable link up to the

viewers' end is the only role of sub-cable operator. It is, therefore,

inconceivable that despite putting forth the ready entertainment in

the form of signal on the cable line, the cable operator cannot be

said to be providing the entertainment within the meaning of Entry

62 - List II. So long as the State Act remains within the ambit of

Entry 62 - List II and is not offending the provisions of Article 286

of the Constitution or the laws made thereunder, the State Act's

validity is beyond question.

10.9.8 This Court further observed that in the said case,

respondent No.1 therein sends visual images and audio signals for

presentation to the individual subscribers in their 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

Page 212 of 321 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.

10.9.9 It was observed with reference to Western India

Theatres that existence of means or providing entertainment

would be sufficient to support a law imposing tax thereon and that

the means of providing entertainment provides the nexus between

the taxing power and the subject of tax. It was further observed

that if one is looking at the means of providing entertainment, both

the cable operator and the sub-cable operator play equally

significant role in providing such means of entertainment, namely,

transmission of signals received from the satellites. In one sense

the cable operator plays a more pivotal role than the sub-cable

operator since the signals are received by him through his devices

and transmitted while a sub-cable operator makes provision for

continued instantaneous transmission of the signals.

Page 213 of 321 10.9.10 It was further observed that the impugned legislation

was in pith and substance not relating to broadcasting but one

relating to entertainment within the scope and ambit of Entry 62 –

List II. Accordingly, the appeals filed by the State of West Bengal

were allowed by setting aside the judgment of the Calcutta High

Court.

10.9.11 On a perusal of the judgment in Purvi Communication,

it can be observed that there was no specific question raised as to,

whether, the act of transmission by MSO has a ‘public colour’ to it.

In fact, the Court was never required to go into such a question,

for the impugned provision, i.e. section 4A(4a) of the 1982 Act, did

not require such a ‘public colour’ to the activities of MSO.

10.10 There are other substantial differences between Geeta

Enterprises and Purvi Communication as the table below

enumerates due to which Geeta Enterprises and Purvi

Communication cannot be compared.

Geeta Enterprises Purvi Communication Impugned Provision

Definition of ‘entertainment’ Amended section 4A(4a) of the under section 2(3) of the 1937 1982 Act (West Bengal Act) Act (UP Act)

Page 214 of 321 Activity subject to taxation Video game operated on Transmission of signals by payment, in a parlour whose MSOs of any performance, film admission is free to public or any other programme telecast.

Date of Enactment of the provision impugned therein 1937 1998 Discussion on Entry 62 - List II No Yes

10.11 It was submitted by Sri Venugopal, learned Senior

Counsel that the interpretation of the word ‘entertainments’ in

Entry 62 - List II is restricted to ‘public entertainments’ and this

Court was not right in Purvi Communication to hold that the

impugned provision therein was constitutionally valid without

determining whether that provision fell within the restricted

interpretation of ‘entertainments’.

10.12 We do not agree with this limited interpretation of the

word ‘entertainments’. We hold in line with the principle that words

in entries must be given a broad, liberal and expansive

interpretation. As discussed above, the impugned activity of

transmission in Purvi Communication would still fall under its

ambit.

Page 215 of 321 10.13 It is true that in the earlier times, many people did not

have access to personal devices through which they could be

entertained. The entertainments, therefore, were mostly restricted

to those performed or displayed in public. With developments in

technology, it has become possible for such entertainments to be

experienced / enjoyed directly at home. In other words, what has

changed is the manner in which entertainments are accessed or

consumed. Nowadays, entertainment is available on a cell/mobile

phone in our hands. The forum or platform for entertainment as

well as the manner of perception has changed, namely, from

direct/live viewing to digital viewing but the content is essentially

the same, of course, with varieties of programmes, having regard

to the target viewers/audience of such entertainment, etc. That,

however, does not change the fact that such entertainment is

curated and transmitted for the benefit of the public at large.

Therefore, interpreting the activity taxed in Purvi Communication

in this manner, we hold that television viewing via DTH would still

fall within the ambit of “public entertainments”.

10.14 We also take note that the question of interpretation of

‘entertainments’ in Geeta Enterprises pertained to the

Page 216 of 321 interpretation of the 1937 Act and not Entry 62 – List II as it

appears in the Constitution. The judgment in Geeta Enterprises

can never be a binding precedent for the question raised before this

Court in Purvi Communication. Therefore, whereas the scope of

interpretation for Geeta Enterprises was limited to interpretation

of a provision in a statute we would be remiss to hold Purvi

Communication as per incuriam for its failure to take note of

Geeta Enterprises. Therefore, we find no reason to doubt the

correctness of Purvi Communication.

“Aspect Theory” or Aspect Doctrine: A Discussion

11. In Canada, the distribution of legislative powers is provided

in Sections 91 and 92 of its Constitution Act, 1867, dividing entries

between the Federal Government (under section 91) and the

Provincial Government (under section 92). The ‘Aspect’ theory, also

known as the ‘double aspect doctrine’, is a tool of constitutional

interpretation used in Canada to resolve issues which arise when

both the Federal and the Provincial Governments have the right to

legislate on a subject matter.

Page 217 of 321 11.1 Lord Haldane, in Union Colliery Co. of British Columbia

vs. Bryden, 1899 AC 580 at 587, commented on the ‘aspect

theory’ as follows:

“It is remarkable the way this Board has reconciled the provisions of section 91 and section 92, by recognizing that the subjects which fall within section 91 in one aspect, may, under another aspect, fall under section

92."

11.2 The Constitution Bench of this Court, in Federation of

Hotel & Restaurant Association of India, explained this theory

by quoting from the book ‘Canada’s Federal System’ by AHF Lefroy.

The Bench noted as under:

“14. In Lefroy's 'Canada's Federal System' the learned author referring to the "aspects of legislation" under Sections 91 and 92 of the Canadian Constitution i.e., British North America Act 1867 observed that "one of the most interesting and important principles which have been evolved by judicial decisions in connection with the distribution of Legislative Power is that subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. Learned author says: " ..... that by 'aspect' must be understood the aspect or point of view of the legislator in legislating the object, purpose, and scope of the legislation that the word is used subjectively of the legislator, rather than objectively of the matter legislated upon."

(emphasis supplied)

Page 218 of 321 Criticism of its Use in Indian Context:

11.3 Some scholars have criticised the transposition of the

Canadian ‘aspect theory’ to Indian jurisprudence on the ground

that the framework of distribution of legislative competence in

Canada is different from that in India and hence, that theory which

is used in Canada cannot be transposed to Indian contexts.

11.4 To substantiate this proposition, it is relevant to note that,

firstly, the aspect theory in Canada is used to resolve conflicts in

legitimacy to legislate on all subject matters, rather than

restricting its use only to entries concerning taxation. In India, the

doctrine of pith and substance is predominantly used to resolve

conflicts when two entries in different Lists of the Seventh Schedule

to the Constitution conflict with each other. As already noted, the

doctrine of pith and substance means that “if an enactment

substantially falls within the powers expressly conferred by the

Constitution upon the legislature which enacted it, it cannot be

held to be invalid merely because it incidentally encroaches upon

matters assigned to another legislature” [Goodyear India Ltd. vs.

State of Haryana, (1990) 2 SCC 71, para 71].

Page 219 of 321 11.5 Secondly, as regards taxation in Canada, it appears that

Section 91(3) of the Constitution Act, 1867 therein empowers their

Parliament to legislate on “the raising of Money by any Mode or

System of Taxation” whereas, under section 92(2), the Provinces

therein are empowered to legislate only on “Direct Taxation within

the Province in order to the raising of a Revenue for Provincial

Purposes”. This means that the Parliament therein has greater

legislative competence to impose a wide range of taxes, but the

Provinces therein are restricted to impose only direct taxes.

Therefore, the scope for the use of ‘Aspect theory’ in taxation

matters is limited in Canada. This distribution of taxation powers

in Canada is markedly different from that in India. Under our

Constitution, the subject matters of taxation available to

Parliament are enumerated in Entries 82 to 97 - List I and those

available to the State legislatures are in Entries 45 to 63 - List II.

There is no taxation entry in List III or the Concurrent List.

11.6 There are also alternate propositions as regards this theory.

For e.g., Sri Karthik Sundaram, in the book ‘Tax, Constitution and

the Supreme Court’ (OakBridge Publishing Pvt. Ltd. 2024, p.112),

argues that “the ‘aspect theory’ can, in some cases, be viewed as

Page 220 of 321 an exception to the doctrine of ‘pith and substance’”. Contrarily,

Sri V Niranjan, K.C. in Chapter 26 titled ‘Legislative Competence’

in the Oxford Handbook of the Indian Constitution, argues that

there is no distinction between the doctrine of pith and substance

and the aspect theory in the Indian context.

11.7 Despite the above observations, on a perusal of the cases in

India which have referred to this theory, it would be evident that

the use of ‘aspect theory’ in the Indian jurisprudence differs from

its usage in Canada and that it is home-grown and innovated to

suit the Indian context particularly in matters relating to taxation.

In other words, while we may have borrowed the theory from

Canada, its application in the Indian context has been within the

context of the framework of the Indian Constitution. The theory is

applied so as to save a provision of taxation rather than to a

situation where a legislature’s competence to tax is determined. In

other words, the aspect doctrine is applied to ascertain whether a

legislature can tax on a particular aspect of a transaction/activity

rather than on competence of a legislature vis-à-vis the scope of

entries in List I or List II.

Page 221 of 321 11.8 To elaborate, it is necessary to revisit some significant

judgments which have dealt with the concept of ‘Aspect theory’ and

some judgments that have laid down principles for interpretation

of entries governing taxation in the Seventh Schedule to the

Constitution.

Usage of Aspect Theory in the Indian Context:

11.9 In International Tourist Corporation vs. State of

Haryana, (1981) 2 SCR 364, the vires of Section 3(3) of the

Haryana Passengers and Goods Taxation Act, 1952 insofar as it

permitted the levy of tax on passengers and goods carried by their

carriages plying entirely along the National Highways was

questioned. The appellants therein argued that the Parliament had

the exclusive jurisdiction under Entry 23 read with Entry 97 - List

I to legislate in respect of National Highways, including levy of taxes

on goods and passengers carried on National Highways. This

Court, however, noted that Entry 97-List I itself is specific in that,

in case of a tax, a matter can be brought under that entry only if it

is not mentioned in either of List I or List II. This Court further

opined that a regulatory and compensatory tax should be upheld

if there exists a “specific, identifiable object behind the levy and a

Page 222 of 321 nexus between the subject and the object of levy”. Having found

this nexus, it upheld the imposition of tax under the impugned

section.

11.10 Thereafter, in Federation of Hotel & Restaurant

Association of India, the Constitution Bench of this Court had to

decide the constitutional validity of the Expenditure Tax Act, 1987

(Central Act 35 of 1987) which envisaged a tax at 10 per cent ad

valorem on “chargeable expenditure” incurred in the class of hotels

wherein “room charges” for any unit of residential accommodation

were Rs. 400 per day or more per individual. The Union sought to

sustain the legislative competence to enact the impugned law

under Article 248 read with Entry 97 - List I.

11.10.1 One argument of the appellants therein relevant to this

case was that the law was, in pith and substance, really one

imposing a tax on luxuries or on the price paid for the sale of goods.

It is relevant to note here that a tax on luxuries is an exclusive

subject matter of States under Entry 62 - List II. The other

contention was that the particular impost under the impugned law,

having regards to its nature and incidence, is really not an

“expenditure tax” at all as it does not accord with the economists’

Page 223 of 321 notion of such a tax. The question therefore was whether the

economists’ concept of such a tax qualifies and conditions the

legislative power and whether “expenditure” laid out on what may

be assumed to be “luxuries” or on the purchase of goods admits of

being isolated and identified as a distinct aspect susceptible of

recognition as being distinct field of tax legislation.

11.10.2 This Court referred to the ‘Aspect theory’ used in Canada

by quoting Lefroy’s ‘Canada’s Federal System’ who opined that “one

of the most interesting and important principles which have been

evolved by judicial decisions in connection with the distribution of

legislative power is that subjects which in one aspect and for one

purpose fall within the power of a particular legislature may in

another aspect and for another purpose fall within another

legislative power.

“… that by ‘aspect’ must be understood the aspect or point of view of the legislator in legislating the object, purpose and scope of the legislation that the word is used subjectively of the legislator, rather than objectively of the matter legislated upon.”

This Court further opined that,

“Indeed, the law 'with respect to' a subject might incidentally 'affect' another subject in some way; but that is not the same thing as the law being on the latter

Page 224 of 321 subject. 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 an overlapping does not detract from the distinctiveness of the aspects.” (emphasis supplied)

11.10.3 Reference was made to Lord Simonds in Governor

General in Council vs. Province of Madras, (1945) FCR 179:

AIR 1945 PC 98 in the context of concepts of Duties of Excise and

Tax on Sale of Goods in the following words:

“… The two taxes, the one levied on manufacturer in respect of his goods, the other on 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 of workshop for the first time on the occasion of its sale. …”

11.10.4 Referring to the “aspect” doctrine stated in Laskin’s

“Canadian Constitutional Law”, the Constitution Bench further

noted that the “aspect” doctrine bears some resemblances to those

noted above but, unlike them, deals not with what the “matter” is

but with what it “comes within” … In this regard it was observed

as under:

“It is trite that the true nature and character of the legislation must be determined with reference to a

Page 225 of 321 question of the power of the legislature. The consequences and effect of the legislation are not the same thing as the legislative subject matter. It is the true nature and character of the legislation and not its ultimate economic results that matters.” (emphasis supplied)

11.10.5 In other words, this Court held that the subject matter

of a tax is different from the measure of its levy and that the

measure of a tax does not determine its essential character or of

the competence of the legislature. The Court therefore accepted the

submission of the learned Attorney General and held that the

distinct ‘aspect’, namely, the ‘expenditure’ aspect of the transaction

fell within the subject-matter of the Union and that it had the

legislative competence to impose a tax.

11.11 The Constitution Bench of this Court had to again

decide on similar facts in Elel Hotels & Investments Ltd. vs.

Union of India, (1989) 3 SCC 698 (“Elel Hotels & Investments”).

In this case, the Hotel Receipts Tax Act, 1980 imposed a special

tax of 15% on the gross receipts of certain hotels, where the room

charges for residential accommodation provided to any person

during the previous year was Rs.75 or more per day per individual.

The petitioners therein argued that the reliance on Entry 82 – List

Page 226 of 321 I in support of the tax was wholly misconceived and the tax in pith

and substance was an impost under Entry 62 – List II reserved to

the States. The respondents however submitted that the word

‘income’ in Entry 82 – List I should not be read in a narrow and

pedantic sense, but must be given its widest amplitude. The Court

agreed with the respondents therein and opined that,

“The cardinal rule of interpretation is that the entries in the legislative lists are not to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it…In construing the words in a constitutional document conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude.” (emphasis supplied)

11.11.1 While this Court herein did not explicitly use the ‘aspect

doctrine’, it is implied from its reasoning that by interpreting the

word ‘income’ liberally, the impugned legislation had an aspect of

‘income’ and hence the Union had the legislative competence to

impose tax on the subject-matter.

11.12 In State of West Bengal vs. Kesoram Industries Ltd.,

(2004) 10 SCC 201, the Constitution Bench of this Court

summarised the principles as regards interpretation of taxation

Page 227 of 321 entries in List I and List II. While it did not explicitly refer to the

‘aspect theory’, it opined on different aspects of a transaction as

follows:

“141. As held in Goodricke Group Ltd. [1995 Supp (1) SCC 707] which we have held as correctly decided, this Court has noted the principle of law well established by several decisions that the measure of tax is not determinative of its essential character. The same transaction may involve two or more taxable events in its different aspects. Merely because the aspects overlap, such overlapping does not detract from the distinctiveness of the aspects. In our opinion, there is no question of conflict solely on account of two aspects of the same transaction being utilised by two legislatures for two levies both of which may be taxes or fees or one of which may be a tax and the other a fee falling within two fields of legislation respectively available to the two.” (emphasis supplied)

11.13 In All India Federation of Tax Practitioners, the

Court was concerned with the constitutional validity of the levy of

service tax on Chartered Accountants, Cost Accountant and

Architects by Finance Act, 1994 and Finance (No. 2) Act, 1998, and

the legislative competence of Parliament to impose service tax

under Entry 97 - List I, in view of Entry 60 - List II which is also a

taxation entry and mentions, “Taxes on professions, trades,

callings and employments” and Article 276 of the Constitution.

Page 228 of 321

This Court held that Entry 60 – List II which refers to ‘professions’

cannot be extended to include services and opined, “this is what is

called as an Aspect Theory”. But it said no more on the theory.

However, from its reasoning that Entry 60 - List II concerns a tax

on the status and cannot be read to include every activity

undertaken or service rendered by a chartered accountant/cost

accountant/ architect, this Court suggested that the activity in

question i.e. service rendered by such professionals did not have

an aspect that can be covered by Entry 60 - List II which was only

regarding being a part of a particular profession. It was further

observed that a tax cannot be levied under the Finance Act, 1994

and its amendments without service being provided whereas a

professional tax under Entry 60 - List II is a tax on his status. It is

the tax on the status as a Cost Accountant or a Chartered

Accountant. As long as a person or a firm remains in the

profession, he/it has to pay professional tax. That tax has nothing

to do with the commercial activities which he undertakes for his

client. Even if the chartered accountant has no work throughout

the accounting year, still he has to pay professional tax. He has to

pay the tax till he remains in the profession. This is the ambit and

Page 229 of 321 scope of Entry 60 - List II which is a taxing entry. Therefore, Entry

60 contemplates tax on professions, as such.

11.13.1 Referring to Western India Theatres Ltd. it was

observed that Entry 50 of the Provincial List of the Government of

India Act, 1935 contemplated a tax on entertainment or

amusement as objects on which a tax was to be imposed and

therefore it was not possible to differentiate between the

entertainment provider and the entertainment receiver.

11.13.2 It was also highlighted that the importance of the

judgment in Western India Theatres Ltd. was in the fact that it

made a distinction between tax imposed for the privilege of carrying

on any trade or calling on one hand and a tax on every show, that

is to say on every incidence of the exercise of the particular trade

or calling. It was held that if there was no show, there was no tax.

It was held that the impugned tax on entertainment levied by the

Cantonment Board was a tax on the act of entertainment resulting

in a show and, therefore, the impugned law imposing tax on

entertainment fell under Entry 50 of the Provincial List in Schedule

VII to the Government of India Act, 1935 and not under Entry 46

of the Provincial List (similar to Entry 60 - List II). Therefore, it was

Page 230 of 321 held that Bombay legislature had power to enact the law imposing

tax on entertainment which had nothing to do with the law

imposing tax on the privilege of carrying on any profession, trade

or calling under Entry 46 (similar to Entry 60 - List II in the present

case). Therefore, this Court had clarified the dichotomy between

tax on privilege of carrying on any trade or calling on one hand and

the tax on the activity which an entertainer undertakes on each

occasion. The tax on privilege to practise the profession, therefore,

falls under Entry 60 - List II. It is quite different from tax on

services. Keeping in mind the aforestated dichotomy, it is clear that

tax on service does not fall under Entry 60 - List II. Therefore,

Parliament has absolute jurisdiction and legislative competence to

enact the law imposing tax on services under Entry 97 - List I.

11.14 In Union of India vs. Mohit Minerals Pvt. Ltd., (2018)

13 SCR 139 (“Mohit Minerals Pvt. Ltd.”), this Court explicitly

held that, “the principle is well settled that two taxes/imposts

which are separate and distinct imposts and on two different

aspects of a transaction are permissible as “in law there is no

overlapping”.” In this case the bone of contention between the

parties was whether an Indian importer can be subject to the levy

Page 231 of 321 of Integrated Goods and Service Tax (“IGST”) on the component of

ocean freight paid by the foreign seller to a foreign shipping line,

on a reverse charge basis. The notifications impugned in the said

case whether amounted to leading to double taxation was

considered.

11.14.1 The contention of the respondents therein was that the

transaction between the foreign exporter and the respondents was

already subject to IGST under Section 5 of the IGST Act read with

Section 3(7) and 3(8) of the Customs Tariffs Act as “supply of

goods”, and an additional levy of IGST on imported goods, that is

on the supply of transportation service, by designating the importer

as the recipient could amount to double taxation. The transaction

involved three parties, namely the foreign exporter, the Indian

importer and the shipping line. The first leg of the transaction

involved a CIF contract, wherein the foreign exporter sells the

goods to the Indian importer and the cost of insurance and freight

are the responsibility of the foreign exporter. In other words, the

foreign exporter is liable to ensure that the goods reach their place

of destination and the Indian importer pays the transaction value

to the exporter. The second leg of the transaction involved an

Page 232 of 321 agreement between the foreign exporter and the shipping line

(whether foreign or Indian) for providing services for transport of

goods to the destination i.e., in the territory of India. The appellant-

Union of India contended that the contract between the foreign

exporter and the foreign shipping line – of which the Indian

importer is not a party – cannot be deemed to be a part of

“composite supply” within the meaning of Section 2(30) of the

Central Goods and Service Tax Act (“CGST Act”). It was contended

that while the first leg of the transaction, between the foreign

exporter and Indian importer, is (according to the submission) a

composite supply, the second leg is an independent transaction. In

this regard, the Union of India relied on the decision of this Court

in State of Andhra Pradesh vs. Mc Dowell & Co, (1996) 3 SCR

721 (“Mc Dowell”) to contend that a single element can constitute

a levy and a part of the value for another transaction. Further the

Union Government urged that the levy is on different aspects of the

transaction.

11.14.2 This contention was not acceded to by this Court. It was

ultimately held that the impugned levy imposed on the “service”

aspect of the transaction is in violation of the principle of

Page 233 of 321 “composite supply” enshrined under Section 2(30) read with

Section 8 of the CGST Act. Since the Indian importer is liable to

pay IGST on the “composite supply”, comprising of supply of goods

and supply of services of transportation, insurance, etc. in a CIF

contract, a separate levy on the Indian importer for the “supply of

service” by the shipping line would be in violation of Section 8 of

the CGST Act. Hence the appeal filed by the Union of India was

dismissed.

11.15 The judgment of this Court in Bharat Sanchar Nigam

Limited appears to have approached the application of ‘aspect

theory’ differently. The principal issue which arose therein was,

whether, the nature of transaction by which mobile phone

connections (through SIM cards) are enjoyed is a sale or a service

or both. If it is a sale then the States are legislatively competent to

levy sales tax on the transaction under Entry 54 – List II but if it is

a service, then the Parliament alone can levy service tax under

Entry 97 – List I but if the nature of the transaction partakes of the

character of both sale and service, then the moot question would

be whether both legislative authorities could levy their separate

taxes together or only one of them. The contention of the appellants

Page 234 of 321 therein was that the transaction in question was merely a service

and therefore only the Union had the competence to levy tax

thereon. However, the respondents States argued that the

transaction was a deemed sale under Article 366(29A)(d) of the

Constitution read with the charging sections in their various sales

tax enactments and therefore they were competent to levy sales tax

on the transactions.

11.15.1 The impugned judgments therein had held that there

was a sale of SIM cards by the service providers to the subscribers

and that it is factually and legally distinct from the activity of giving

connection or activation of SIM cards. However, this Court held

that the expression ‘goods’ do not include electromagnetic waves

or radio frequencies for the purpose of Article 366(29A)(d) and that

the goods in telecommunication are limited to the handsets

supplied by the service provider.

11.15.2 This Court clarified that what a SIM card represents is

ultimately a question of fact. That in determining such an issue,

the Assessing Authorities had to keep in mind the principle that if

the SIM card was not sold by the assessee to the subscribers but

was merely part of the services rendered by the service providers,

Page 235 of 321 then a SIM card could not be charged separately to sales tax.

However, if the parties intended that the SIM card would be a

separate object of sale, only then it would be open to the Sales Tax

Authorities to levy sales tax thereon. Therefore, the Court held that,

as far as SIM cards were concerned, the issue was left for

determination by the Assessing Authorities.

11.15.3 Further, this Court noted that the State would have had

the power to separate the agreement to sell from the agreement to

render service and impose tax on the sale, only if the transaction

in truth represents two distinct and separate contracts and is

discernible as such. It held that the test for composite contracts,

other than those mentioned in Article 366(29A), would be the

intention of the parties and if there was no intention of sale of

goods, then the State cannot impose a sales tax even if the contract

could be disintegrated. Furthermore, the Court held that it would

be possible for the State to tax the sale element provided there is a

discernible sale and only to the extent relatable to such sale.

11.15.4 As regards the ‘aspect theory’, this Court noted that the

High Court in the impugned judgment therein could not have used

the theory to “enable the value of the services to be included in the

Page 236 of 321 sale of goods or the price of goods in the value of the service” and

that the ‘aspect theory’ merely deals with legislative competence. It

further noted, observing on the judgment of this Court in

Federation of Hotel & Restaurant Association of India that:

"subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. They 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".

11.15.5 It further held that no one denies the legislative

competence of States to levy sales tax on sales provided that the

necessary concomitants of a sale are present in the transaction and

the sale is distinctly discernible in the transaction. After narrating

the Constitutional history which led to the amendment of Article

366 by insertion of clause (29-A) by the Forty Sixth Amendment to

the Constitution, it was observed that of all the different kind of

composite transactions, the draftsman of the Forty Sixth

Amendment chose three specific situations namely, a works

contract, a hire-purchase contract and a catering contract to bring

them within the fiction of a deemed sale. Of these three, the first

Page 237 of 321 and third involve a kind of service and sale at the same time. Apart

from these two cases where splitting of the service and supply has

been constitutionally permitted in sub clause (b and f) of Clause

(29-A) of Article 366, there is no other service which has been

permitted to be so split. It was further observed that if there is an

instrument of contract which may be composite in form in any

case, other than the exceptions in Article 366 (29-A), unless the

transaction in truth represents two distinct and separate contracts

and is discernible as such, then the State would not have the power

to separate the agreement to sale from the agreement to render

service and impose tax on the sale. The test therefore for the

composite contract other than those mentioned in Article 366 (29-

A) continues to be: did the parties have in mind or intend separate

right arising out of the sale of goods? If there was no such intention

there is no sale even if the contract could be disintegrated. The test

for deciding whether a contract falls into one category or other is

to ask what is the substance of the contract. In other words, the

court termed it ‘the dominant nature test’.

11.15.6 It was further observed that what a SIM Card represents

is ultimately a question of fact. It was also observed that the States

Page 238 of 321 have the power to levy sales tax on sales provided the necessary

concomitants of a sale are present in the transaction and the sale

is distinctly discernible in the transaction. This does not however

allow the State to entrench upon the Union List and tax any service

by including the cost of such service in the value of the goods. Even

in those composite contracts which are by legal fiction deemed to

be divisible under Article 366 (29-A), the value of the goods involved

in the execution of the whole transaction cannot be assessed to

sales tax. For the same reason the Centre cannot include the value

of the SIM Card, if they are found ultimately to be goods, in the

cost of the service.

11.15.7 Therefore, this Court did not apply the aspect theory in

the aforesaid judgment because it did not find an aspect of sale in

the activity of mobile phone connections. It was observed that the

aspect theory would not apply to enable the value of the services to

be included in the sale of goods or the price of goods in the value

of the service.

11.15.8 In the aforesaid case, reference was made to Gujarat

Ambuja Cements Ltd. vs. Union of India, (2005) 4 SCC 214. In

this case, the writ petitions were filed challenging the

Page 239 of 321 constitutional validity of Sections 116 and 117 of the Finance Act,

2000 and Section 158 of the Finance Act, 2003 by which the

decision of this Court in Laghu Udhyog Bharti vs. Union of

India, (1999) 6 SCC 418 (“Laghu Udhyog Bharti”) striking down

Rules 2 (1)(d)(xii) and (xvii) of the Service Tax Rules, 1994 (as

amended in 1997) was sought to be overcome. The writ petitioners

were the customers or the clients of goods transport operator and

of forwarding and clearing agents. One of the contentions raised

was that the Parliament was not competent to levy the service tax

as it encroached upon the States Government power as defined in

Entry 56 – List II which pertains to “taxes on goods and passengers

carried by road or an inland waterways”. That Parliament could not

by resorting to the residuary Entry 97 – List I circumvent Entry 56

– List II and in the guise of levying service tax in fact, levy a tax on

transport of goods. The imposition of service tax on the customers

was challenged by many of the writ petitioners in Laghu Udhyog

Bharti but in the later case the legislative competency to levy

service tax on carriage of goods by transport operators was not

considered. It was contended that the subject fell under Entry 56

– List II and therefore could not come within Entry 23 read with

Page 240 of 321 Entry 97 – List I. This contention was not accepted. In paragraph

27 of this judgment, it was observed that there is a distinction

between the object of tax, the incidence of tax and the machinery

for the collection of the tax. The distinction is important but is apt

to be confused. Legislative competence is to be determined with

reference to the object of the levy and not with reference to its

incidence or machinery. There is a further distinction between the

objects of taxation in our constitutional scheme. The object of tax

may be an article or substance such as a tax on land and buildings

under Entry 49 - List II, or a tax on animals and boats under Entry

58 - List II or on a taxable event such as manufacture of goods

under Entry 84 - List I, import or export of goods under Entry 83 -

List I, entry of goods under Entry 52 - List II, or sale of goods under

Entry 54 - List II to name a few. Dealing with Entry 56 – List II it

was held that the subject matter of taxation under that entry are

goods and passengers. The phrase “carried by road or natural

waterways” carves out the kinds of goods or passenger which or

who can be subject to tax under the entry. After making an analysis

of the entry with reference to the dictum in Rai Ramakrishna vs.

State of Bihar, AIR 1963 SC 1667, it was observed that entry 66

Page 241 of 321 read with Section 65 (41)(j) and 67 (m-a) in Chapter V of the

Finance Act, 1994 did not seek to levy tax on goods or passengers

but the service of transportation itself which is a distinct levy from

what is envisaged under Entry 56 – List II. It may be that both the

levies are to be measured on the same basis but that does not make

the levy the same. Placing reference on Federation of Hotels and

Restaurant Association of India, it was observed that service tax

is not a levy on passengers and goods but on the event of service

in connection with the carriage of goods; it is not therefore, possible

to hold that the Act in pith and substance is within the States’

exclusive power under Entry 56 - List II. It was further observed

that the point at which the collection of the tax is to be made is a

question of legislative convenience and part of the machinery for

realisation and recovery of the tax. The manner of the collection

has been described as “an accident of administration; it is not of

the essence of the duty”. It will not change and does not affect the

essential nature of the tax. Subject to the legislative competence of

the taxing authority, a duty can be imposed at the stage which the

authority finds to be convenient and the most effective, whatever

stage it may be. The Central Government is therefore legally

Page 242 of 321 competent to evolve a suitable machinery for collection of the

service tax subject to the maintenance of a rational connection

between the tax and the person on whom it is imposed. By Sections

116 and 117 of the Finance Act, 2000, the tax is sought to be levied

on the recipients of the service. They cannot claim that they are

not connected with the service since the service is rendered to

them. It was observed that if in substance, the statute is not

referrable to a field given to the State, the Court will not by any

principle of interpretation allow a statute not covered by it to

intrude upon this field.

11.16 It is relevant at this juncture to discuss the judgment of

this Court in Imagic Creative. In that case, the appellant-

company was an advertising agency which used to create original

concept and design advertising material, brochures, annual

reports etc. for its clients. It used to file its returns for service tax

under Finance Act, 1994 and also for sales tax under Karnataka

Sales Tax Act, 1957. There was no express contract between the

appellant and their clients. But their purchase order and invoice

showed three categorical divisions; i) the amount of service tax on

the specific design and production; ii) the amount of sales tax on

Page 243 of 321 the specified item on the first sale; and iii) when certain items are

outsourced, the tax payable on resale of the said goods in terms of

section 6(4) of the Karnataka Sales Tax Act, 1957. The assessing

authority concerned, however, held that the entire activity

undertaken by the appellant therein was a comprehensive contract

and hence the entire sale value including the creation of concept

and design, formed part of the value of sale and was accordingly

liable to tax. The said order was confirmed by Tribunal as well as

High Court.

11.16.1 The question before this Court was, whether, the

charges collect towards the services for the evaluation of the proto-

type conceptual design (that is creation of concept), on which

service tax has been paid under the Finance Act, 1994 as amended

from time to time are liable to tax under Karnataka Value Added

Tax Act, 2003. This Court allowed the appeal filed by the appellant

therein. It held that payments of service tax as also Value Added

Tax are mutually exclusive and therefore, they should be held to

be applicable having regard to their respective parameters. It noted

that a distinction must be borne in mind between an indivisible

contract and a composite contract and that if in a contract, an

Page 244 of 321 element to provide service is contained, the purport and object for

which the Constitution was amended so as to insert Article

366(29A) must be kept in mind.

11.16.2 It was observed that the appellant in the said case

(Imagic Creative) admittedly was a service provider and therefore

was assessable to a service tax under the Finance Act, 1994 which

is a Parliamentary statute. That while interpreting a taxing statute

under Article 246 of the Constitution read with Seventh Schedule

thereof, the Court may have to take recourse to various theories

including “aspect theory”, as was noticed by this Court in

Federation of Hotels and Restaurant Association of India. It

was further observed that where a Parliamentary and State Act

come up for consideration, an endeavour has to be made to see

that provisions of both the Acts are made applicable. That payment

of service tax and also VAT are mutually exclusive, they should be

held to be applicable having regard to the respective parameters of

service tax and the sales tax as envisaged in a composite contract

as contradistinguished from an indivisible contract. It may consist

of different elements providing for attracting different nature of

levy. It is, therefore, difficult to hold that in a case of this nature,

Page 245 of 321 sales tax would be payable on the value of the entire contract,

irrespective of the element of service provided.

Aspect Theory: Its Extent and Scope in India:

11.17 On a perusal of the significant judgments of this Court

which have used or referred to ‘aspect theory’, two observations

can be made at the outset: first, it is discerned that Courts in India

have not used ‘aspect theory’ in the manner that is applicable in

Canada; and second, there appears to be a lack of clarity as to its

conceptual contours. For e.g., there is no clarity on i) the instances

when ‘aspect theory’ needs to be applied; or ii) whether ‘aspect

theory’ has any relevance in determining the legislative competence

of the Union or a State in enacting a tax legislation. The judgment

in Bharat Sanchar Nigam Limited opines that aspect theory is

‘merely concerned with legislative competence’, whereas the

judgment in Imagic Creative expressly suggested that in the

matter of interpretation of a taxing statute, in the context of the

Seventh Schedule of the Constitution, the Court may have to take

recourse to various theories including the “aspect theory” as was

noticed by this Court in Federation of Hotels and Restaurants

Association of India. Amidst this uncertain jurisprudence,

Page 246 of 321 several impugned judgments in the present cases have referred to

the ‘aspect theory’ to uphold the validity of several State

legislations imposing entertainment tax. It therefore becomes

necessary to examine the conceptual contours of this theory.

11.18 To appreciate the extent and the context of the use of

‘aspect theory’ in India, it would be instructive to reiterate some

well-established principles of interpretation of taxation entries.

Some of the relevant principles are reiterated as follows:

i. In interpreting expressions in the Legislative Lists of the

Seventh Schedule of the Constitution, a wide meaning should

be given to the entries.

ii. In the scheme of the Lists in the Seventh Schedule, there

exists a clear distinction between the general subjects of

legislation and heads of taxation. They are separately

enumerated.

iii. As the fields of taxation are to be found clearly enumerated in

Lists I and II, there can be no overlapping in law. There may

be overlapping in fact, but there can be no overlapping in law.

Page 247 of 321 iv. In the first instance, the pith and substance or true nature

and character of the legislation must be determined with

reference to the legislative subject matter and the charging

section;

v. The measure of tax is not a true test of the nature of tax;

vi. The same transaction may involve two or more taxable events

in its different aspects. Merely because the aspects overlap,

such overlapping does not detract from the distinctiveness of

the aspects.

11.19 Having noted few established principles of interpretation

of taxation entries, there are three specifics that must be kept in

mind while discussing this theory. The first is the taxation entries

provided for in List I and List II; the second is the legislation which

seeks to impose a tax on a subject-matter; and the third is the

activity on which tax is sought to be imposed by the legislative

enactment.

11.20 We observe that based on a reading of the cases

discussed earlier and the provisions of the Constitution, especially

Chapter I of Part XI of the Constitution which deals with legislative

Page 248 of 321 relations between the Union and the States and distribution of

legislative powers, that the legislative competence is determined by

applying the doctrine of pith and substance which governs the

relation between the entries provided in the three Lists of the

Seventh Schedule while considering the vires of a legislation

impugned on the basis of the principle of legislative competence.

The aspect theory has no relevance in determining the

constitutionality of any provision on the ground of legislative

competence. Rather, aspect theory concerns the relation between

the legislation which seeks to impose a tax on a subject-matter and

the activity sought to be taxed. In other words, the constitutional

validity of a taxing statute on the grounds of legislative competence

has to be examined in the context of the doctrine of pith and

substance as envisaged under Article 246 of the Constitution of

India to ascertain whether a particular legislature i.e., Parliament

or a State Legislature, as the case may be, has the competence to

legislate in relation to the particular field of legislation while

interpreting the field of legislation as epitomised in the respective

entries in the three Lists. A broad perspective of the entries must

be envisaged. Once the contours of the entry under which a

Page 249 of 321 legislation is made is ascertained, the next step is to study the

legislation in question in order to ascertain whether it is covered or

falls within the contours of an entry. If it does fall within the

contours of a particular entry in a particular List, then that

particular legislature which has enacted it would have the

legislative competence to enact such a legislation. If it incidentally

touches upon an entry in another List, it does not render it invalid.

That means that so long as a piece of legislation is in pith and

substance coming within an entry in a particular List, it would be

valid as the legislature which has enacted, has the legislative

competence to do so.

11.21 The aspect theory has really no role to play as regards

determining legislative competence of a particular legislation, since

the Constitution does not envisage such a test. However, in the

Indian context, the ‘aspect theory’ is relevant to determine the

applicability of a taxing statute on the activity sought to be taxed

i.e., whether the statute covers a transaction/activity which falls

within a specific taxation entry either in List I or in List II. An

activity may have multiple aspects on which different legislatures

can impose a tax falling within its legislative competence. In such

Page 250 of 321 a situation, the courts would save the tax from a challenge on the

basis of the aspect theory by discerning which aspect of the activity

falls within the subject matter of tax under a legislation relatable

to a particular entry of a List in the Seventh Schedule. Such a

determination of the aspects which are present in an activity is a

factual inquiry. Thus, an activity could be taxed by two different

legislatures on the basis of the entries in the respective Lists

without there being a clash and within their legislative competence.

However, the aspect of the activity which is being taxed must be

relatable to the legislation under a specific entry of a particular List

so as to be within legislative competence of a particular legislature.

11.22 This is in contrast to the applicability of this theory in

Canada, where this theory is used therein to determine legislative

competence of a federal or provincial legislature to enact a

particular law. The reason why we observe that the aspect theory

has no relevance in determining the constitutional validity of a

legislation is that such a ground is not prescribed anywhere in the

Constitution. This Court in Mc Dowell held that the power of the

Parliament or, for that matter, the State legislature, to legislate can

be struck down by Courts on two grounds and two grounds alone,

Page 251 of 321 viz., (i) lack of legislative competence; and (ii) violation of any of the

fundamental rights guaranteed in Part-III of the Constitution or

any other constitutional provision. This Court was categorical in

noting that there was no third ground. Similarly, in Anjum Kadari

vs. Union of India, 2024 INSC 831, this Court had to decide

whether a statute can be struck down for violation of basic

structure of the Constitution, and based on a survey of prior

judgments, held as follows:

“55. From the above discussion, it can be concluded that a statute can be struck down only for the violation of Part III or any other provision of the Constitution or for being without legislative competence. The constitutional validity of a statute cannot be challenged for the violation of the basic structure of the Constitution. The reason is that concepts such as democracy, federalism, and secularism are undefined concepts. Allowing courts to strike down legislation for violation of such concepts will introduce an element of uncertainty in our constitutional adjudication. Recently, this Court has accepted that a challenge to the constitutional validity of a statute for violation of the basic structure is a technical aspect because the infraction has to be traced to the express provisions of the Constitution. Hence, in a challenge to the validity of a statute for violation of the principle of secularism, it must be shown that the statute violates provisions of the Constitution pertaining to secularism.” (emphasis supplied)

Page 252 of 321 11.23 We have already discussed earlier in this judgment that

in case of an apparent overlapping between two entries, the

doctrine of pith and substance is applied to find out the true

character of the enactment and the entry within which it would

fall. This doctrine is not a judicial innovation, but is derived from

the phrase ‘subject to’ and ‘with respect to’ in Article 246 of the

Constitution of India. However, such a derivation cannot be made

vis-à-vis ‘aspect theory’ from any provision of the Constitution of

India. Therefore, as far as determining the constitutional validity of

a taxing statute is concerned, when it is challenged on the ground

of legislative competence, it is the doctrine of pith and substance

that would be applicable, rather than the aspect theory.

11.24 Thus, in our view, the aspect theory, in the Indian

context, comes into play at the level of determining the applicability

of a taxing statute on the activity sought to be taxed. Invariably, an

activity conducted by an assessee which is sought to be taxed by a

legislation, may have different aspects. The aspect theory is used

to determine if, in fact, there are different aspects within the

activity sought to be taxed and whether, the taxable event which

Page 253 of 321 forms the basis of the levy in a legislative enactment corresponds

to any aspect in the activity sought to be taxed.

11.25 It would be illustrative to consider the facts of the case

in Bharat Sanchar Nigam Limited to explain the application of

this theory. In that case, the principal question to be decided was

the nature of the transaction by which mobile phone connections

were enjoyed. On the one hand, the petitioners therein contented

that they were merely licensees under Section 4 of the Telegraph

Act, 1885 and that they provided ‘telecommunication services’ as

provided under section 2(k) of the Telecom Regulatory Authority of

India Act, 1997. That service tax was imposed on them under the

Finance Act, 1994 on the basis of the tariff realised from the

subscribers. They further contended that in providing such service

there were in fact no 'sales' effected by the service providers and

that the SIM card was merely an identification device for granting

access and was a means to access services. On the other hand, the

States contented that the transaction was a deemed sale under

Article 366 (29A)(d) of the Constitution read with the charging

sections in their various sales tax enactments and therefore they

were competent to levy sales tax on the transactions.

Page 254 of 321 11.26 This Court, inter alia, clarified that electromagnetic

waves or radio frequencies are not goods, and therefore, there

cannot be a ‘sale’ of such waves or frequencies. It held that a

telephone service is nothing but a service. That there was no sale

element apart from the obvious one relating to the handset, if any.

However, as regards SIM card, it observed that “what a SIM card

represents is ultimately a question of fact as has been correctly

submitted by the States”. It held that if the parties intended that

the SIM card would be a separate object of sale, only then it would

be open to the Sales Tax Authorities to levy sales tax thereon.

Therefore, as far as SIM cards were concerned, the Court left the

issue for determination by the Assessing Authorities.

11.27 If we proceed to understand the above facts from the

perspective of aspect theory enunciated above, it would be clear

that the question in essence in Bharat Sanchar Nigam Limited

was whether there was an aspect of sale in the activity of the

petitioners therein and consequently, whether the States could

validly impose sales tax thereon. This is nothing but a question of

the applicability of the various state enactments on the activity in

question, rather than a question of the validity of the enactment.

Page 255 of 321 The Court ultimately held that electromagnetic waves were not

‘goods’. However, it left the issue of SIM cards to the determination

of Assessing Authorities. This meant that, on a case-to-case basis,

the Assessing Authorities had to determine whether there was an

aspect of sale in the activity they sought to bring to tax, by

examining whether the parties intended that the SIM card was a

separate object of sale. In other words, the Assessing Authorities

had to make a factual enquiry as to whether there was an aspect

of sale in the activity they sought to tax under the relevant sales

tax legislation. If there was an aspect of sale, then sales tax was

leviable but if it was purely service then sales tax could not be

levied. But what would be the position if an activity has an aspect

of sale as well as service? Applying the said analogy to the instant

case, the question is, what is the consequence if an activity has an

entertainment aspect as well as a service aspect/element.

Application of Aspect Theory to the Case at hand:

11.28 To determine whether there are different aspects to the

activity conducted by the assessees herein which is sought to be

taxed by the Union under the Finance Act, 1994 (as amended in

different years) as a service tax and by the States under different

Page 256 of 321 State legislations as entertainment tax, it is first necessary to

examine the taxable events which form the basis of levy of the

legislative enactments impugned herein. Thereafter, the modus

operandi of the activity undertaken by the assessees herein needs

to be understood. Thereafter, a factual determination as to,

whether, the taxable event which forms the basis of the levy under

the Central and the State enactments corresponds to different

aspects of the activity under consideration must be undertaken.

12. Under the Finance Act, 1994 as amended from time to time,

the expression “broadcasting” is defined in Section 65(15) in terms

of clause (c) of Section 2 of the Prasar Bharti Act, 1990 which

defines it to mean the dissemination of any form of communication

through space or through cables intended to be received by the

general public either directly or indirectly through medium of relay

stations and all its grammatical expressions and cognate

expressions are to be construed accordingly. Under Section 65 (72)

(zk) “broadcasting agency” is a service provider and the service

rendered by a such an entity is a taxable service. The expression

‘taxable service’ is defined in Section 65(105)(zk) to mean any

Page 257 of 321 service provided to a client, by a broadcasting agency or an

organization in relation to broadcasting, in any manner.

12.1 Section 66 (5) of the Finance Act, 1994 as amended from time

to time is the charging section and service tax at the rate of 5% of

the value of the taxable service (broadcasting service in the instant

case) as defined above is chargeable to tax. Thus, the tax is 5% of

the value of taxable services levied on the service provider

rendering broadcasting services.

12.2 The expression “broadcasting” has been expanded from time

to time to include not only dissemination of any form of

communication but also programme selection, scheduling or

presentation of sound or visual matter on a radio or a television

channel that is intended for public listening or viewing, as the case

may be, irrespective of where the location of the broadcasting

agency is. In the year 2002, Section 65 (90) (zk) was amended

whereby the “broadcasting agency” could provide service by its

representative in India or any agent appointed in India or by any

person appointed to act on his behalf in any manner. This is

Page 258 of 321 irrespective of whether encryption of the signals of beaming thereof

through satellite might have taken place outside India or not.

12.3 The definition of “broadcasting” read with “broadcasting

agency or organization” was amended in the year 2003, wherein it

said that a “broadcasting agency” or organization means any

agency or organization engaged in providing service in relation to

broadcasting in any manner irrespective of its location and

includes inter alia a representative in India or any agent appointed

in India engaged in the activity of selling of time slots for

broadcasting of any programme or obtaining sponsorships for

programme or collecting the broadcasting charges on behalf of the

said agency or organisation.

12.4 In the year 2005, the Finance Act, 1994 was again amended

to define “broadcasting” to include a broadcasting agency or an

organization collecting the broadcasting charges for 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 an organization through any representative or agent

Page 259 of 321 appointed in India. Thus, service tax was levied on direct to home

(DTH) broadcasting services.

Modus Operandi of the Assessees and their aspects:

13. As regards the business of the assessees herein, they are

DTH broadcasting service providers licensed by the Central

Government in terms of the provisions of Section 4 of the Indian

Telegraph Act, 1885 and Section 5 of the Indian Wireless

Telegraphy Act, 1933. Their modus operandi is that they set up a

hub which enables them to downlink signals from the satellites of

various broadcasters of TV channels (Star, BBC, etc.), then they

uplink those signals to their own Ku Band (such as INSAT 4CR

satellite) designated transponders for transmission of the signals

in Ku band. These signals are received by the dish antennae which

are installed at the subscribers’ premises. Since these signals are

in encrypted form they are decrypted by the Set-Top Boxes and the

viewing cards inside these boxes enable subscribers to view the

various TV channels on their TV sets. Invariably, the set-top boxes

are installed without any consideration and remain the property of

the assessees.

Page 260 of 321 13.1 If we closely examine the modus operandi of the activity

undertaken by the assessees, it would be evident that their activity

involves at least two aspects: the first, is the act of relaying the

signals from the satellites of various broadcasters of TV channels,

and the second, is the object of such relaying of the signals, which

is the effect of the content delivered to the subscriber. This effect is

nothing but the entertainment of the subscribers. In other words,

the activity of the assessees involves at least two aspects which

correspond to the subject-matter of the levy under the Central

Finance Act, 1994, namely, broadcasting service and the respective

State enactments as providing entertainment to the subscribers.

13.2 It is the contention of the assessees that their activity merely

involves the relaying of the signals and they are in no way related

to the content that these signals carry and are not concerned with

providing entertainment. However, as held in Purvi

Communication, no entertainment can be presented to the

viewers unless the broadcaster transmits the signals for

instantaneous presentation of any performance, film or any

programme on their T.V. screen. The second aspect here concerns

not the kind of content of the signals, rather it is the effect of the

Page 261 of 321 decryption of the signals by the Set-Top Boxes and the viewing

cards inside these boxes provided by the assessees. Without the

apparatus provided for by the assessees to decrypt the signals, the

subscriber would not be able to watch the content that is

transmitted, the content being for the purpose of entertainment. In

other words, the State enactments are concerned about

broadcasting for the purpose of entertainment. It makes an

assumption that whatever be the content, the very act of

presentation of any performance, film or any programme on the

T.V. screen leads to entertainment which is reckoned to be a

luxury. Therefore, the assessees as DTH operators have direct and

proximate nexus with Entry 62 – List II. The entertainment

provided by them through their modus operandi is a luxury within

the meaning of that entry.

13.3 Although, the case at hand is different from Purvi

Communication in two respects; however, in our view, these

differences are immaterial and only support the view that the

observations in Purvi Communication are squarely applicable to

the modus operandi of the assessees and the second aspect herein.

Firstly, in the present case, the mode of transmission is through

Page 262 of 321 DTH broadcasting services and not transmission via cable.

Secondly, the present is a case of direct transmission by the

assessees to the customers and not through a hierarchical network

of cable operators. In our view, both these differences do not

detract from the view of this Court in Purvi Communication that

the activity of providing and receiving broadcast signals and then

relaying them ahead is ‘no doubt, an act of offering entertainment to

the subscribers and/or viewers’ and, consequently, the State

legislatures are competent to enact laws under Entry 62 – List II

imposing taxes on entertainment. The first difference noted above

merely speaks to the difference in medium of transmission and

does not deviate from the essential nature of the activity, as

discussed in Purvi Communication. The second differentiation,

again, only makes clearer the proximity of the assessees herein

with the act of entertainment. In some manner, it is fair to suggest

that the defence of lack of remoteness to the act of entertainment

taken by the cable-operators in Purvi Communication is, in fact,

not available to the assessees herein and therefore they are not on

a better footing, at least on this limited question.