In all the above three writ petitions, levy of entertainment tax under the U.P Entertainments and Betting Tax Act, 1979, on Direct to Home (for short DTH) service provided by the petitioners is challenged, and the question of law involved is the same, hence, the writ petitions are being disposed of by this common judgment.
2. Heard learned counsel for the parties and perused the affidavits, counter affidavits and rejoinder affidavits filed on behalf of the parties.
3. Factual matrix of these cases is that the petitioners are granted licenses under Section 4 of the Indian Telegraph Act, 1885 read with Section 5 of the Indian Wireless Telegraphy Act, 1933, on payment of license fee. Their case is that DTH service is different to that of one provided by the cable operators. It is pleaded by the petitioners that the DTH services are provided by them by using satellite system that transmits programmes and provides T.V signals directly to subscriber's premises. The sub-scriber in the case of DTH can have access to the multiple channel directly at home in KU band using a small antenna and a Set Top Box (STB) which decrypts/decodes the code. STB once purchased by the customer becomes his property and no monthly rent is payable on it. On the other hand, cable operations are done on C band through cables and it serves number of televisions. Each of the petitioners, namely M/s. Dish T.V India Limited and M/s. Tata Sky Limited have paid rupees ten crores as license fee and rupees forty crores for bank guarantee. The case of the petitioners is that DTH service is under the control and regulation of the Central Government and a service tax is payable on it which is the subject matter mentioned at Entry No. 92C in List I (Union list) as such the State Government has no power to levy the entertainment tax on it. It is further pleaded that DTH is a broadcasting service which is transmitted through electro magnetic waves and not through the cable, unlike the one provided by the cable operator. The entertainment tax is payable under Section 4C of the U.P Entertainments and Betting Tax Act, 1979, by the cable operators. The petitioners have raised a plea that demand of entertainment tax is being made from them by the District Magistrates of Districts Pithoragarh, Champawat, Udham Singh Nagar and Nainital, who have started issuing notices under the U.P Entertainments and Betting Tax Act, 1979, treating the petitioners (DTH service provides) at par with the cable operators. In Writ Petition No. 2562 (M/S) of 2007, the petitioner has further pointed out that in the State of Maharashtra and Karnataka amendments have been made by the State Legislatures to bring the DTH services under the net of entertainment tax. But, in the State of Uttarakhand without there being any amendment in the State Law, impugned notices are being issued to the petitioners seeking recovery of entertainment tax which according to the petitioners is illegal and without jurisdiction. It is further pleaded in aforesaid Writ Petition No. 2562 (M/S) of 2007 that when under Right to Information Act, an information was sought from the State Government vide letter dated 4th of October 2007. from the office of the Commissioner. Entertainment Tax, it is informed that the matter whether DTH service is to be brought under the net of entertainment tax, is under consideration of the State Government (a copy of which is Annexure-17 to the writ Petition). Challenging the notices issued by the respondent District Magistrates to recover the entertainment tax it is pleaded that said tax is not payable by the petitioners under any law.
4. On behalf of the respondents counter affidavit has been filed in W.P No. 2562 (M/S) of 2007. Relying on judgment dated 26-5-1995, passed by the Division Bench of Allahabad High Court in Writ Petition No. 1353 of 1993 (reported in 1995 AIHC 6398), it has been pleaded that no specific provision is required to be made in U.P Entertainments and Betting Tax Act, 1979, to bring the DTH service providers under the net of entertainment tax. It is further stated in the counter affidavit that State Legislature is fully competent to levy the entertainment tax on DTH service, under Entry 62 of the List II (State list) of Seventh Schedule of the Constitution of India. Referring to the case of State of West Bengal v. Purvi Communication; AIR 2005 Supreme Court 1849, it is further pleaded that the regulatory power and taxing powers cannot be mixed up. What is material is that the DTH service providers are also showing channels of entertainment, like the cable operators.
5. Before further discussion, it is pertinent to mention here that the U.P Entertainments and Betting Tax Act, 1979, was enacted by the Legislature of State of Uttar Pradesh (applicable to the State of Uttarakhand) as the subject matter relating to entertainment tax was covered under Entry 62 of list II (State list) of schedule VII of the Constitution of India. Initially, the said tax was payable on admissions to entertainments under Section 3 read with Section 4 of said Act by proprietors of an interior cinema who provided cinematograph exhibitions. When the proprietors of video cinema started exhibition of films, to bring them under the net of entertainment tax, Section 4-A was inserted in the Act vide U.P Act No. 12 of 1989 w.e.f 15-4-1989. Simultaneously, Section 4-B was also inserted to bring the video shows in public service vehicles and hotels under the net of entertainment tax. Thereafter, vide U.P Act No. 28 of 1995, Section 4-C was inserted to bring the proprietors of cable television network providing cable services under the net of the tax. The petitioners have challenged levy of entertainment tax from the DTH service providers mainly on two grounds (1) Direct to Home (DTH) are not the cable operators, and (2) since, DTH service is covered under service tax which is a subject matter of tax by the Central Government, under Entry 92C of Union list, the State authorities have no power to levy tax on the same subject matter.
6. Now, some definitions are necessary to be looked into to examine the grounds raised in the writ petitions. Expression ‘cable service’ and ‘cable television network’ are defined in Section 2(ee) and Section 2(eee) of the U.P Entertainments and Betting Tax Act, 1979, which reads as under:
“2. ………………………………………
(ee) ‘cable service’ means the transmission by Cables or programmes including retransmission by cables of any broadcast television signals;
(eee) ‘cables television network’ means any system consisting of closed transmission paths and associated signal generation, control and distribution equipment, designed to provide cable service for reception by multiple subscribers”.
Section 2(c) of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 (Central Act No. 25 of 1990), defines word ‘broadcasting’, as under:
“2. …………………………………………
(c) ‘broadcasting’ means the dissemination of any form of communication like signs, signals, writing, pictures, images and sounds of all kinds by transmission of electromagnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the medium of relay stations and all its grammatical variation and cognate expressions shall be construed accordingly;”
The same definition of word ‘broadcasting’ has been adopted by the Finance Act, 2001 (with the following changes made vide Finance Act, 2003):
“broadcasting” has the meaning assigned to it in clause (c) of Section 2 of the Prasar Bharati (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 organisation, 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 organisation, 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 matter;
The Telecommunication (Broadcasting and Cable Services) Interconnection Regulations 2004, provides definition of expression ‘directed to home operator’ in Regulation 2(k), as under:
“direct to home operator” means an operator licensed by the central Government to distribute multi channel TV programmes in KU band by using a satellite system directly to subscriber's premises without passing through intermediary such as cable operator or any other distributor of TV channel;
7. After quoting the above definitions, now, I come to Section 4-C of the U.P Entertainments and Betting Tax Act, 1979, which empowers the State Government to levy tax on cable service:
“4-C. Tax on cable service—
(i) the proprietor of a cable television network providing cable service shall be liable to pay entertainment tax at such rate not exceeding two hundred rupees for every subscriber for every month, as the State Government may, from time to time, notify in this behalf;
Provided that the proprietor of a cable television network shall not be liable to pay entertainment tax in respect of a subscriber which is a hotel.
(2) the tax payable under this section shall be paid, collected, and realized in such manner as may be prescribed.”
From the above Section 4-C of the U.P Entertainments and Betting Tax Act, 1979 read with definition of ‘cable service’ quoted above, it is clear that direct to home service which uses the technology of transmission of electromagnetic waves through beams, and not through cables, is not covered.
8. Learned counsel for the petitioners drew attention of this Court to the amendments made in the State law relating to entertainment tax by the State of Maharashtra to bring the DTH service under the net of entertainment tax. The said amendment which is being quoted below was added in the Bombay Entertainments Duty Act, 1923, vide Maharashtra Act No. 20 of 2002:
“(b) ………………
(vii) any payment made by a person to the proprietor of a Direct-to-Home (DTH) Broadcasting service by way of contribution, subscription, installation or connection charges, or any other charges collected in any manner whatsoever from 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 place of connection-holder directly to the Satellite;
Explanation ………………………….
Provided ……………………………..
Provided ……………………………….
Provided ………………………………..
9. Having heard learned counsel for the parties and after going through the definition of expressions ‘admission to an entertainment’ given in Section 2(a) of the U.P Entertainments and Betting Tax Act, 1979 and that of ‘cable service’ and ‘cable television network’, quoted above, and the definitions of expressions ‘broadcasting’ and ‘broadcasting agency and organisation’ given in the Finance Act, 1994 (as amended), this Court is of the clear view that the broadcasting agency or organization which is providing entertainment without cables cannot be said to be covered by Section 4-B of the U.P Entertainments and Betting Tax Act, 1979 (applicable to the State of Uttarakhand). And, the State legislature, if so advised, may Come with the amendments like the one brought by State Legislature of Maharashtra in the Bombay Entertainments Duty Act. 1923. Unless such amendment is brought by the Legislature to bring the broadcasting agencies into the net of the entertainment tax, said tax cannot be levied on the broadcasting agencies for DTH service provided by them to its subscribers.
10. On behalf of the respondents attention of this Court is drawn to the judgment and order dated 26th May 1995, passed by the Division Bench of Allahabad High Court in Writ Petition No. 1353 of 1993 (reported in 1995 AIHC 6398); Universal Communication System v. State of U.P, wherein the Allahabad High Court has taken the view that where on account of progress being made by the society and development in science and technology, the Courts are confronted with new problems which had not been visualised at the time when the laws were enacted by Legislature. In this connection, Allahabad High Court quoting the view from Senior Electric Inspector v. Laxmi Narain Chopra; AIR 1962 SC 159, has observed that in a modern progressive society it would be unreasonable to confine the intention of legislature to the meaning attributable to the word used at the time the law was made, for a modern Legislature making laws to govern the society which is fast moving must be presumed to be aware of an enlarged meaning. The issue involved before the Allahabad High Court was whether the cable operators are liable to pay the entertainment tax when actually they are only facilitating the signals received through Satellite of the programmes telecasted by BBC, Star TV, MTV etc, to the subscribers. The Allahabad High Court took the view that the cable television operators are fully covered under the Entertainments and Betting Tax Act, 1979, and the writ petitions of the petitioners were dismissed.
11. As against this on behalf of the petitioners reliance is placed in Sky Vision T.V v. State of Bihar (1995) 2 BLJR 845, wherein Division Bench of Patna High Court took the view that no entertainment tax can be levied on the cable operators unless the Bihar Entertainment Tax Act, 1948, is amended to include them who are not specifically covered under the Act, as the cable operators cannot be said to be admitting anyone to entertainment (unlike the proprietors of cinema halls). It appears that said judgment of Patna High Court was challenged through Special Leave to Appeal C.C No. 28596 of 1994 and vide order dated 5-1-1995, the apex Court dismissed the SLP with the following order:
“Delay condoned.
In view of the observations in the judgment under appeal that it is always open to the State to amend the law to impose the impugned levy, if they are so advised, we see no ground to interfere. The Special Leave Petition is dismissed.”
12. Learned Advocate General for the State argued that the summary dismissal of Special Leave Petition by the apex Court cannot be said to be a ratio given by the apex Court on the issue on which the High Court had delivered the judgment. On the other hand, on behalf of the petitioners it is submitted that since, the dismissal of the special leave petition is not simpliciter but howsoever brief, for the reasons mentioned in the order, as such the view taken by the Division Bench of Patna High Court on the point, cannot be said to have been accepted by the apex Court.
13. Having heard learned counsel for the parties and after going through both the judgments of Allahabad High Court and Patna High Court, referred above, and after perusing the order of dismissal of special leave petition by the apex Court on the brief reasons, this Court is of the opinion that the ratio which has been approved by the apex Court by dismissing the SLP is more binding in nature as to the one expressed by the Division Bench of the Allahabad High Court. On this point, (relating to binding nature of such orders) the cases of State Of Manipur v. Thingujam Brojen Meetei, (1996) 9 Supreme Court Cases 29 : AIR 1996 SC 2124); Union of India v. M.C Desai (1998) 11 Supreme Court Cases 399 (400), referred on behalf of the respondents get clarified by the view taken by the apex Court in a subsequent judgment of Kunhayammed v. State of Kerala; (2000) 6 Supreme Court Cases 359 : (AIR 2000 SC 2587).
14. Relying on the principle of law laid down by the apex Court in A.V Fernandez v. State of Kerala, AIR 1957 SC 657; The Central India Spinning and Weaving and Manufacturing Co. Ltd. v. The Municipal Committee, Wardha, AIR 1958 Supreme Court 341 and Mathuram Agrawal v. State Of Madhya Pradesh (1999) 8 Supreme Court Cases 667 : (AIR 2000 SC 109), it is argued on behalf of the petitioners that in the matter of interpretation of taxing statute, the liability to pay tax must be unambiguous and Legislature must have in clear words specifically expressed its intention. And, by inference no other person can be said to be liable to pay tax in respect of which there is no liability imposed by the statute. Considering the principle of law laid down in the matter by the apex Court, this Court has no hesitation in accepting the argument advanced on behalf of the petitioners that levy of entertainment tax on the DTH service for the entertainment provided by broadcasting agencies (without cable) to their subscribers, cannot be said to be leviable under Section 4-B of the U.P Entertainments and Betting Tax Act, 1979, in its present form.
15. On behalf of the petitioners it is also argued that State Legislature has no legislative competence to levy tax on the services provided by the petitioners in respect of which they are already liable to pay service tax. In this connection, attention of this Court is drawn to Article 265 and Article 268-A of the Constitution of India and reliance is placed on various case laws.
Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law.
Article 268-A of the Constitution of India, reads as under:
268-A. Service tax levied by Union and collected and appropriated by the Union and the States—
(1) Taxes on Services shall be levied by the Government of India and such tax shall be collected and appropriated by the Government of India and the States in the manner provided in clause (2).
(2) the proceeds in any financial year of any such tax levied in accordance with the provisions of clause (1) shall be —
(a) collected by Government of India and the States
(b) appropriated by Government of India and the States,
in accordance with such principles of collection and appropriations as may be formulated by Parliament by law.
16. It is pertinent to mention here that Entry 62 of List II (State list) clarifies the field of legislation of State legislature on ‘luxuries, including taxes on entertainments, amusements, betting and gambling’ and. Entry 92C of List I (Union list) clarifies the field of legislation of Parliament on ‘taxes on services’.
17. Article 246 read with Article 245 of the Constitution of India empowers the Parliament and the State Legislatures to make the laws on the subjects mentioned in List I and List II, respectively, while List III consists of the topics on which Parliament as well as the State Legislatures have power to make law. Learned counsel for the parties read out various paragraphs of State of West Bengal v. Kesoram Industries Ltd., (2004) 10 Supreme Court Cases 201 : (AIR 2005 SC 1646) in support of their contentions relating to competence of Legislature on entertainment tax (for brevity this Court does not think it necessary to quote the paragraphs, of the judgment). In Para 31 of said judgment referring to Hoechst Pharmaceuticals v. State of Bihar (1983) 4 Supreme Court Cases 45 : (AIR 1983 SC 1019), it is observed that there is no overlapping in the taxing power and Constitution provides independent sources of taxation to the Union and the States. It is further observed in said case that taxation is considered to be distinct matter for the purposes of legislative competence. It is further held that the power of tax cannot be deducted from a general legislative entry as an ancillary power. In State of West Bengal v. Kesoram Industries Ltd. (supra) referring to the Hoechst Pharmaceuticals (supra) it is further mentioned that doctrine of occupied field only applies when there is a clash between the Union and State List within an area common to both. In such case doctrine of pith and substance is to be applied and if the impugned legislation substantially falls within the power expressly conferred upon the legislature which enacted it, an incidental encroaching in the field assigned to another legislature is to be ignored. In para 33 of aforesaid case it is held that measure employed for assessing a tax must not be confused with the nature of the tax. In Para 104 of said judgment, the apex Court has held that power to tax must be express and there is nothing like an implied power to tax.
18. Learned counsel for the petitioners argued that since w.e.f 15-1-2004, Entry 92C relating to ‘taxes of services’ inserted in List I (Union list), as such, the power of State Legislature to make law on entertainment tax gets abridged to the extent of service providers by whom service tax is payable. However, this Court is of the opinion that a harmonious construction needs to be adopted in interpreting the field of legislation mentioned in Entry 62 of State List and Entry 92C of the Union List. Merely for the reason that a service tax is payable by certain broadcasting service operators, it cannot be said that no entertainment tax can be levied by the State. In State of West Bengal v. Purvi Communication (P) Ltd.; (2005) 3 Supreme Court Cases 711 : (AIR 2005 SC 1849), the apex Court has held that legislative competence of State to levy tax on luxuries, including taxes of entertainments, amusements etc., falling under Entry 62 of List II of Schedule VII, is not fettered by the enactment of Cable Television Networks (Regulation) Act, 1995, by the Parliament. In the opinion of this Court had the intention of Parliarheht been in inserting Entry 92C in List I to abridge the power of the State under Entry 62 in List II, the Parliament could have easily added words ‘excluding on the services on which service tax is payable’ (or the like words) in Entry 62 after the expression ‘tax on luxuries, including taxes on entertainments, amusements betting and gambling’.
19. For the reasons as discussed above, this Court is of the view that though, there is legislative competence of the State to levy entertainment tax on the entertainment provided by the petitioners (broadcasting agencies) to its subscribers but same cannot be levied without there being specific provision in such local Act (U.P Entertainments and Betting Tax Act. 1979). As such, the notices issued by the respondent District Magistrates for recovery of entertainment tax from the petitioners, being without authority of law, are liable to be quashed.
20. Accordingly, the impugned notices dated 24-8-2006, 20-11-2006, 12-2-2007, 9-8-2007 and recovery certificate/citation issued by the District Magistrate, Pithoragarh, and notice dated 27-8-2007 issued by the District Magistrate, Champawat; notices dated 2-8-2007 and 10-9-2007 issued by the District Magistrate, Udham Singh Nagar; and notice dated 12-9-2007 issued by the District Magistrate, Nainital, against petitioners M/s. Dish. T.V India Limited, and notices dated 2-8-2007, 10-9-2007, 9-8-2007, 27-8-2007 issued by the District Magistrate, Pithorgarh; District Magistrate, Champawat; District Magistrate, Udham Singh Nagar; and Commissioner, Entertainment Tax, Dehradun against petitioner M/s. Tata Sky Limited and the demand notice dated 12-2-2008 issued by District Magistrate, Nainital against petitioner M/s. Tata Sky Limited, are hereby quashed. The writ petitions, accordingly, stand allowed to that extent with the observations and reasons, mentioned above.
Petitions allowed.