Service tax on admission to amusement facilities is constitutional

 Brief of the case:

• The Hon’ble Kerala High Court in the above cited case held that the levy of service tax on admission to amusement facilities do not result into any trenching of the Union Parliament on the power conferred on the State as the two aspects taxed by the respective legislatures are the ‘service’ and the ‘amusement’ and no law is invalid in taxing its respective aspect even when the same activity being getting taxed twice under two different laws.
• As such the High court upheld the constitutional validity of service tax on admission to amusement facilities and entertainment events.
  

Facts of the case:

• By way of amendment to Sec 66D containing negative list of services in Finance Act, 2015 w.e.f June 1, 2015 services provided by way of “admission and access to entertainment event and amusement facilities” were removed from negative list and consequently brought into service tax net.
• The petitioner company challenged the constitutional validity of service tax on amusement facilities and entertainment tax as these activities are already subject to entertainment tax levied and collected by the state government.
  

Question to be decided :

• Whether the removal of “admission and access to entertainment event and amusement facilities” [sub-clause (j) of Section 66D of the Finance Act, 1994] from the Negative List of service by an amendment and the consequent imposition of service tax on such activity would result in the Parliament overlapping exclusive power of state government to tax such activity?

Contention of the Petitioner:

• The petitioner made an argument that it what the petitioners offer is amusement and entertainment and what the entrant to such parks enjoys is also amusement or entertainment, which field is entirely covered by Entry 62 and nothing remains to be taxed by the Union and no service is offered.

Contention of the Department:

• The departmental counsel relied on the concept of “aspect theory” and submitted that there being two distinguishable aspects involved, one the services offered by the petitioners and the other the amusements and entertainments enjoyed by the entrants. The different aspects viz amusement and service are respectively liable to be taxed by State and Centre.
• There is no overlapping of the power and the trenching, if at all, is incidental, which does not take away the power of the Union Government, is the defence.
  

Held by Hon’ble Kerala High Court:

• High court observed that the activity of providing entry to amusement facilities are already subject to entertainment tax levied by state government under the power conferred upon to it under Entry 62 of List II of the Constitution of India. The levy of service tax on same activity by bringing amendment into law was thus disputed by the petitioner.
• The petitioner providing admission to amusement park facilities is a service offered by it for a fee which would result in the enjoyment of an activity by the entrant termed as an amusement or entertainment. It definitely partakes two distinct and different aspects; the power to tax, which; is respectively on the Union Parliament and the State Act where state to levy entertainment tax on enjoyment done by the entrant and union govt to levy service tax on the service aspect i.e. the admission to amusement facilities for a fee.
• The petitioners, maintaining an amusement park, are obliged to pay entertainment tax to the State, whether or not there are entrants to the park. The Union Parliament has provided for a tax on admission to the parks, making it clear that the levy is only when the service is availed of. The “service” provided is the object of taxation and it is imposed on the admission fee which is a permissible measure of tax and the incidence is at the time when a person pays the admission fee to enter the park.
• The Hon’ble Supreme Court of India upholding the constitutional validity of the multiple taxes on the same activity but on the respective different taxable events in the case of Federation of Hotel & Restaurant Association of India, Etc. v. Union of India [(1989) 3 SCC 634] beautifully explained that :

Even if there is an amount of overlapping when the power is exercised by two legislatures, if the overlapping is in law and is only an incidental trenching upon one, by the other, then it was held to be permissible. When the very same transaction involve two or more taxable events in its different aspects, then even if there was overlapping it would not “detract from the essential distinctiveness of these two aspects.

• Therefore, court upheld the constitutional validity of service tax on admission to amusement facilities by holding that there is no overlapping of the Union Parliament on the power conferred on the State, in fact or in law, since the respective legislatures tax two different aspects.
• In result the writ petition was dismissed.