Service Tax & Entertainment Tax both can be levied on DTH Services –SC

HIGH COURT OF MADRAS

Tata Sky Ltd.

Versus

State of Tamil Nadu

Mrs.CHITRA VENKATARAMAN AND K. RAVICHANDRABAABU, JJ.

W.P. Nos. 25721, 25872, 25873, 25927 to 25929, 25986, 25987, 27070 to 27072, 28978 & 28979 of 2011
M.P. Nos. 1,1,1,1,1,1,1,1,1,1,1, 283 of 2011

OCTOBER 19, 2012

ORDER

Mrs. Chitra Venkataraman, J. 

The batch of Writ Petitions filed before this Court challenge the provision contained under Section 4-I of the Tamil Nadu Entertainments Tax Act, 1939, (hereinafter referred to as ‘the Act’), as inserted under Amendment Act 25 of 2011, with effect from 27.09.2011, levying entertainment tax at 30% of the gross charges, excluding service tax on Direct to Home Services, popularly called as DTH, received by the provider of DTH. The contentions taken by the various petitioners in a nutshell are as follows:

2. Writ petitioners in W.P. Nos. 25721 of 2011 M/s. Tata Sky Limited, W.P. Nos. 27070 to 27072 of 2011 M/s. Dish TV India Limited and W.P. No 25873 of 2011 – M/s. Bharat Business Channel Limited, challenge the levy of entertainment tax under Section 4-I of the Tamil Nadu Entertainments Tax Act, 1939, on the ground that the service provided by the petitioners therein are in the nature of service only and hence, amenable to levy of service tax alone, as falling under Entry 92C List I of VII Schedule to the Constitution of India. Entry 62 List II of Seventh Schedule to the Constitution of India is confined to taxing public entertainment; hence, the said Entry cannot be artificially extended to include private entertainment provided through the DTH services.

3. Referring to the Constituent Assembly discussions, the petitioners in W.P. Nos. 25721 and 27070 to 27072 of 2011, contend that Entry 62 List II of VII Schedule to the Constitution of India covers taxing public entertainment only. Thus, even if the Entries in the Lists are to be given a liberal meaning, the tax to be levied under Entry 62 List II of VII Schedule to the Constitution of India on entertainment has its own limitations, as referable to entertainment offered on payment for admission in the public places. DTH, in pith and substance, is a type of activity, amenable to levy under the service tax provisions. In the case of private entertainment, levy of tax, at best, could come only under Entry 97 List I of VII Schedule to the Constitution of India, which fits in with the federal polity.

4. The petitioners contend that in the name of levying entertainment tax, Section 4-I of the Act seeks to levy tax on the service part of providing DTH service. In any event, even if it be construed that the services offered have an element of entertainment in it, as in the case of hotels and in the works contract, there being no specific rule on apportionment of the charges collected with reference to service and entertainment, the Section is unworkable. Referring to the decisions of the other High Courts dealing with similar provisions under the respective Entertainments Tax Acts, the petitioners contend that apart from the issues raised by the petitioners before those High Courts, which were considered and rejected by the other High Courts, the petitioners have also challenged the vires of Section 4-I of the Act as a colourable one, since Section 4-I of the Act, as it stands, seeks to tax the service aspect in DTH services. It is further contended that as a charging Section, Section 4-I of the Act fails to lay down in clear and explicit terms as what the taxable event is. Consequently, the charge under Section 4-I of the Act, fails.

5. The petitioners contend that the amendment brought under the Tamil Nadu Act 25 of 2011, by insertion of Section 4-I of the Act, is arbitrary, discriminatory and violative of Article 14 of the Constitution of India. There is no rational basis for treating DTH as a separate class for differential tax treatment from cable TV, taxed under Section 4-E of the Act.

6. Making particular reference to the decision reported in State of West Bengal v. Purvi Communication (P) Ltd. [2005] 140 STC 154 (SC), the petitioners further contend that the above decision by the Apex Court was prior to the service tax levy. Hence, the issue herein on the levy of entertainment tax on DTH requires fresh consideration in the light of the service tax levy available today. In short, the petitioners contend that DTH is an activity attracting service tax under Entry 92C List I of VII Schedule to the Constitution of India. In the guise of taxing the entertainment provided through DTH, all that the State has done is to levy tax on service. Hence, Section 4-I of the Act is a colourable legislation and the State has no legislative competence to enact a law under Entry 62 List II of VII Schedule to the Constitution of India, taxing a service.

7. The petitioners in W.P. Nos. 25872 and 25873 of 2011, viz., M/s. Bharat Business Channel Limited, contend that the services rendered by the petitioner therein cannot be subjected to entertainment tax. Contending that DTH service is essentially an activity and hence a service, the petitioner states that DTH is a form of telecommunication similar to mobile phone. Learned counsel appearing for the petitioners in these writ petitions adopted the submissions made in the other writ petitions.

8. The third set of writ petitions viz., W.P.Nos.27070 to 27072 of 2011 are filed by M/s. Dish TV India Limited; W.P.No.25987 of 2011 are filed by M/s. Sun Direct TV Private Limited and W.P.No.28978 of 2011 are filed by M/s. Reliance Big TV. The petitioners challenge the provisions under Section 4-I of the Tamil Nadu Entertainments Tax Act, introduced under the Tamil Nadu Act 25 of 2011, on the ground of discrimination. While conceding that the State has the jurisdiction to tax the entertainment content in DTH service, it is contended that the classification made, treating DTH as a distinct and separate class from cable TV, is violative of Article 14 of the Constitution of India. Comparing the entertainment content through cable TV and DTH and the treatment under the service tax provisions on cable TV operators and DTH providers, the petitioners contend that given the fact that the provisions of the Telecom Regulatory Authority of India Act, 1987, treat both the services alike in the matter of tariff fixation, taking note of the self-same entertainment content, there can be no such discriminatory/ arbitrary classification under Section 4-E and Section 4-I of the Act. Referring to Tariff Order No. 4 of 2008 dated 26.12.2008, Tariff Order No.5 of 2008 dated 26.12.2008 and the structure indicated in Tariff Order, 2010 and 2011, the petitioners pointed out to the detailed consultative process among the various stake-holders, that, ultimately, the Telecom Authority had fixed a uniform rate for DTH as well as for cable TV. It is stated that taking note of the viewing public interests and the content availability, the Central Government has fixed uniform rate, apart from the fact that the Telecom Authority have recommended digitalisation of cable TV with an addressable system, to bring about transparency in the conduct of business for the purposes of service tax levy as well as for better quality delivery to the subscribers. This indicates that there is no difference between DTH and Cable TV in the matter of providing entertainment. In other words, the content of entertainment under DTH is no different from those presented through cable TV services. Thus, in terms of content, rate and class of subscribers/viewers, DTH broadcasting services is similar to cable television services. Even though the mode of dissemination of information may be different between DTH broadcasting services and cable TV operators, both media are similarly placed in terms of content, information/ entertainment provided, rates charged and class of viewers. Referring to the Cable Television Network Regulation Amendment Ordinance, 2011, and presently the Act of 2012, issued by the Government of India, the petitioners pointed out that the drive in telecasting programmes today is through digitalisation. Cable TV analog services are stated to have given rise to many complaints, particularly as regards the escapement of the levy of service tax, by reason of there being no accounts maintained as to the number of subscribers catered to by the TV operators. Thus the Telecom Authority has issued directives to switch over to digital technology. In terms of the tariff treatment thus maintaining parity, the new Section 4-I, inserted by Act 25 of 2011, meeting out differential treatment, taxing DTH as distinct and separate class, is arbitrary, discriminatory and violative of Article 14 of the Constitution of India. The classification is not based on any intelligible differentia for adopting different rate of tax under Section 4-E and Section 4-I of the Act, thereby discriminating between the levy of tax on entertainment provided through Cable TV and the one through DTH. There is no rational nexus in classifying DTH as distinct and separate class from Cable TV with the object sought to be achieved by the law. Apart from that, the said levy is also violative of Article 19(1)(a) of the Constitution of India, since the tax imposed has a direct and immediate negative effect in restricting the use of DTH broadcasting services as a medium of dissemination and receipt of information, ideas and expression. The petitioners contend that if the incidence of levy under Section 4-I of the Act is passed on to the subscribers, that would decrease the subscriber base of the broadcaster; consequently, the imposition is a burdensome one. The petitioners have also challenged Section 4-I of the Act that insofar as the charging Section fails to specify the chargeable event, the Section is vague and fails to achieve the purpose of the enactment. Further, going by the language of Section 4-I of the Act, the levy is more in the nature of service tax.

9. Apart from the DTH provider in W.P. No. 25986 of 2011, there is yet another petitioner in the said writ petition, who is a subscriber to the services of the first petitioner company. Complaining about the dramatic increase in cost by reason of the heavy dose of taxation, the petitioner contends that he would have no other choice but to discontinue the DTH broadcasting services and opt for those provided by the cable TV operator. Referring to the rates fixed by the Arasu Cable TV Corporation Limited, which has started cable TV operation as a multi-system operator in Chennai Metropolitan area and cable operators in other areas in the State, the petitioner contends that the subsidized rate fixed by the said Corporation had already created a disparity, carving for itself, a monopoly in television exhibition. The rate fixed by the Corporation is wholly unrealistic and grossly subsidized. Thus the classification made between cable TV exhibition, which enjoys exemption under the notification issued by the State and DTH broadcasting exhibition attracting 30% levy, is irrational and unreasonable and does not have any nexus to the object sought to be achieved by the amendment made inserting Section 4-I of the Act. The petitioners also challenge the levy under Articles 301 and 304B of the Constitution of India.

10. Apart from the challenge to Section 4-I of the Act on the ground of arbitrariness and hence, violative of Article 14 of the Constitution of India, the petitioner also challenges the levy of service tax as an alternative prayer that in the event of this Court upholding the levy under the Tamil Nadu Entertainments Tax Act, the levy of service tax on DTH services has to be held as bad and beyond the competence of the Parliament to levy tax on entertainment. Thus the imposition of service tax on DTH broadcasting exhibition would be unconstitutional and violative of Articles 245 and 246 of the Constitution of India, read with Entry 62 List II of VII Schedule to the Constitution of India. Entertainment tax being a State subject and DTH broadcasting being an entertainment, falling for tax treatment under Entry 62 List II of VII Schedule to the Constitution of India, the levy of service tax lacks legislative sanction. The petitioner further states that given the constitutional position, imposition of service tax as well as entertainment tax on the same subject, namely, DTH broadcasting services, is unconstitutional; hence, there cannot be two taxes levied on DTH broadcasting services and one will have to give way to the other. Thus, as far as this batch of writ petitions is concerned, we have an alternate prayer that in the event of this Court upholding the constitutionality of Section 4-I of the Act, there could be no levy under the Service Tax Act under Section 66 or Section 65(1)(105)(zk) of Chapter V of the Finance Act of 1994. We must herein point out that except for making a faint plea, no serious arguments are placed in support of this contention.

11. In the course of hearing, the petitioners in W.P. Nos. 25986 and 25987 of 2011 and W.P. Nos. 28978 and 28979 of 2011, filed a petition seeking permission to raise additional grounds, contending that as Section 4-I of the Act fails to specify the chargeable event, the Section fails. These writ petitions and W.P. Nos. 25721 and 27070 to 27072 of 2011, attack Section 4-I of the Act as an imperfect charging provision in not providing the chargeable event and hence, the Section fails to achieve the object.

12. The writ petitioner in W.P.Nos.25928 and 25929 of 2011 – M/s. Bharati Tele Media Limited, challenges the levy of service tax on the service provided through DTH. The contention before this Court is diametrically opposite to what was raised before the other High Courts, wherein, conceding the levy of service tax on DTH service, it contended that DTH could not be assessed under the Tamil Nadu Entertainments Tax Act made under Entry 62 List II of VII Schedule to the Constitution of India. Before this Court, the petitioner contends that the essence of providing DTH service is nothing but providing entertainment; hence, the activity of the petitioner would not attract service tax. The petitioner contends that the transaction does not contain any characteristics of a service, which make the activities of the petitioner amenable to service tax. The petitioner points out that DTH is the provider of entertainment; under the DTH, service itself being an entertainment, there could be no levy of service tax; hence, providing DTH connection cannot be brought under the service tax provisions.

13. Thus, we have before us one set of writ petitions in W.P.Nos.25721 and 27070 to 27072 of 2011, primarily contending that DTH services is not entertainment; hence, being service, there could only be a levy under the Service Tax provisions of the Finance Act and to that extent, the provisions of Section 4-I of the Act are unconstitutional. The second set of writ petitions – Bharati Telemedia W.P. Nos. 25928 and 25929 of 2011 and Bharath Business Channel Limited W.P. No. 25872 of 2011 challenge the levy of service tax on DTH by contending that the substance of providing of DTH service is essentially one of entertainment in character; therefore, there can be no demand for payment of service tax. The third set of writ petitions in W.P.No. 25987 of 2011 and W.P. Nos. 28978 and 28979 of 2011 take a middle course, in the sense that given the legislative competence, Section 4-I of the Act, levying tax on entertainment in DTH, is a discriminatory legislation, apart from the rate as an arbitrary one and hence violative of Articles 14 and 19(1)(a) of the Constitution of India and in the event of this Court upholding the provision, the same would not attract service tax.

14. The State has filed its counter affidavit in each one of these writ petitions.

15. It is contended that entertainment tax, levied under Section 4-I of the Act, is on the aspect of entertainment content in DTH service. Referring to the provisions of Articles 245 and 246, it is contended that irrespective of the service tax levy under the Central Law, what is taxed under Tamil Nadu Entertainments Tax Act is the entertainment provided therein through DTH. Entry 62 List II of VII Schedule to the Constitution of India is not obliterated by the introduction of service tax levy under Entry 92 C List I of VII Schedule to the Constitution of India. Defending the provision introduced under Section 4-I of the Act under Act 25 of 2011 with effect from 27.09.2011 that the State has the legislative competence to levy entertainment tax by virtue of Entry 62 List II of VII Schedule to the Constitution of India, the State contends that in charging the entertainment content in the DTH service, there is no colourable legislation.

16. Referring the decisions reported in All India Federation of Tax Practitioners v. Union of India [2007] 10 STT 166 (SC). Purvi Communication (P.) Ltd. (supra), it is contended that when in pith and substance, the tax is on entertainment and when the charge is on the entertainment offered through the medium of DTH, the question of applying the aspect theory or for applying the apportionment of the charges collected towards the levy of service tax and entertainment tax does not arise.

17. Countering the submissions made by the writ petitioner in W.P. Nos. 25721 and 27070 to 27072 of 2011 that DTH service being already a subject matter of taxation under Entry 92C List I of VII Schedule to the Constitution of India, the same could not be subjected to levy under the Tamil Nadu Entertainments Tax Act, it is stated that the levy of service tax is essentially a subject matter falling under Entry 92C List I of the VII Schedule to the Constitution of India, but the mere availability of Entry 92C List I of the VII Schedule to the Constitution of India to tax the service provided through DTH, however, cannot obliterate or wipe out the levy of tax on the entertainment provided. Being two different fields, there could be no overlapping of this levy. Hence, a harmonious construction consistent with the aspect theory must be adopted. The pith and substance of the levy, which is to be the focal point of consideration, that is, Entry 62 List II of the VII Schedule to the Constitution of India, fails.

18. Pointing out to the various Entries in the Lists dealing with the general topics and on the field of taxation, the State pointed out to Entries 33 and 62 of List II of VII Schedule to the Constitution of India and contended that while Entry 33 is a legislation dealing with theaters and dramatic performances, cinemas subject to the provisions of Entry 60 of List I; sports, entertainments, and amusements, Entry 62 List II of VII Schedule to the Constitution of India is a legislation on tax on luxury, including tax on entertainment. Thus Entry 62 List II of VII Schedule to the Constitution of India is a specific entry for tax on luxury including entertainment.

19. In the decision reported in Purvi Communication (P) Ltd. (supra), the Apex Court had already confirmed similar contentions taken in the case of Tamil Nadu Cable TV Organizers v. Govt. of Tamil Nadu [W.Ps. Nos. 16237, 16517 and 16272 of 1994 etc. Batch-judgment dated 30.11.1994 and rejected the plea of the writ petitioners on the question of competency of the State to levy tax under Section 4-E of the Act relating to tax on cable television under Entry 62 List II of VII Schedule to the Constitution of India and the question regarding violation of Article 14 as to the arbitrary nature in the rate of tax and also violative of Article 19(1)(a) of the Constitution of India. Placing reliance on paragraphs 36 and 40 of the said judgment, it is submitted that it is not open to the petitioners to agitate the self-same issue once again merely because entertainment is offered through DTH.

20. Entry 62 List II of VII Schedule to the Constitution of India is concerned about levy of entertainment tax and Section 4-I of the Act is on the aspect of entertainment offered through the DTH service. Thus, it is contended that the amending provision, made in exercise of the legislative field under Entry 62 List II of VII Schedule to the Constitution of India, is a valid legislation.

21. As regards the contention that there is arbitrariness in treating entertainment through DTH as a separate class, it is contended that considering the difference in the nature and content of the entertainment between cable TV and DTH, the classification does not violate Article 14 of the Constitution of India and that the State has the wide choice to select and classify persons for differential tax treatment.

22. Countering the submission on the absence of the charging provision in not specifying the charge, the State submitted that the entertainment provided, being the subject matter of charge which is evident from the heading to the Section, it is incorrect to contend that the amended provision has failed to specify the charge and hence, it fails in its intent. It is further stated that the taxable event could be gathered from the wording of the Section namely “gross charges received by the provider of DTH”. Going through the statement of objects and reasons, the definition on “entertainment” under Section 3(4) and “direct to home service” under Section 3(3B), the marginal head note to the provision under Section 4-I and reading the Act as a whole, it is clear that the intention of the legislature is to tax on the entertainment provided through DTH service. Thus Sections 4, 4-D, 4-F, 4-G, 4-H and 4-J of the Act only provide for different modes of entertainment and each one is dealt with under separate charging Section. Referring to the challenge based on Article 14 of the Constitution of India, it is stated that the difference between cable TV and DTH are more than mere mode of delivery of signal and transmission. They have different characteristics and features. The system of transmission, the quality and the quantity of the content are different. The class of consumers is also different. The number of persons employed and the self-employment opportunities created are important social dimensions and that while DTH operators are few and are mainly large corporate entities on All-India basis, cable TV operators are either small firms or individuals operating in local level Expert bodies and the Competition Commission had considered the two services as having wide difference and hence, cannot be treated alike. Even assuming that the technological differences are now sought to be removed pursuant to the digitization, the petitioners cannot claim that there is no difference between the content through cable TV and DTH, as on the date when the provisions were introduced. Cable TV is mostly on analog system and they are different in several features when compared to DTH. The counter narrated the subtle differences as follows:

“DTH is defined as the reception of satellite programmers’ with a personal dish in an individual home. An an individual Set Top Box (STB) empowers to pick & choose bundles of choice and pay for what one watch.

DTH offer digital superior quality picture against cable TV of today which is mostly analog.

DTH also offers digital quality signals which do not degrade the picture or sound quality. It also offers interactive channels and program guides with customers having the choice to block out programming which they consider undesirable.

Programs offered by cable vary from area to area whereas satellite gives you programs that are same everywhere. There are a lot more programs that one can watch on DTH which can never be accessible through cable.

DTH enables one to watch one program and record another which may be on at the same time. Such interactive services are not generally available through cable. Under DTH, Direct Video Recording lets pause, rewind and record any program one likes giving immediate control over live TV. However, in Cable, Video on Demand limits one to what the cable company eventually puts in its VOD library.”

23. Pointing out to the availability of entertainment in several channels upto 150 under the DTH service, the State contends that cable TV offers 50 to 90 channels alone, but the DTH offers digital pictures which ensures clarity, which is not possible in analog system. The programmes are available on demand. Referring to the technological superiority to justify the classification of DTH as a class by itself, the State places reliance on the decisions reported in:

(i) Tube Investments of India Ltd. v. Asst. CIT [2010] 325 ITR 610;

(ii) Sony India Ltd. v. CTO [2008] 18 VST 49 (Mad.)

(iii) Twyford Tea Co. Ltd. v. State of Kerala AIR 1970 SC 1133

(iv) State of UP v. Kamla Palace [2000] 1 SCC 557

(v) Malwa Bus Service (P.) Ltd. v. State of Punjab [1983] 3 SCC 237

(vi) Kerala Hotel & Restaurant Association v. State of Kerala AIR 1990 SC 913

(vii) State of Madhya Pradesh v. Gwalior Sugar Co. Ltd. [1962] 2 SCR 619

(viii) Tamil Nadu Cable TV Organizers (supra) by this Court; and

(ix) East India Tobacco Co. v. State of Andhra Pradesh AIR 1962 SC 1733

Thus, the State justifies the classification and submits that in the light of the decisions of the Apex court, the challenge to the Amending Act has to fail.

24. Heard learned senior counsel appearing for the petitioners in the respective writ petitions, learned Advocate General appearing for the State, Mr. C.S. Vaidyanathan, learned senior counsel appearing for the State, Mr. N. Senthil Kumar, learned Senior Central Government Standing Counsel and perused the materials placed before this Court.

25. The Tamil Nadu Entertainments Tax Act, 1939, passed originally in the year 1939, was an Act “to impose a tax on amusement and other entertainments in the Province of Madras.” By Madras Act No. XVII of 1949 with effect from 1.8.1949, the word “taxes” was substituted for the word “a tax” as appearing in the preamble to the Act. Again, by Madras Act No. V of 1958, the word “entertainments” was substituted for “amusements and other entertainments”. Thus the Tamil Nadu Entertainments Tax Act, 1939 is “an Act to impose taxes on entertainments in the State of Tamil Nadu”. The simple enactment of taxing “entertainment”, defined, under Section 3(4) of the Act, as horse race or cinematograph, was amended to levy tax on gross collection per show made by the theaters- touring, permanent and semi-permanent. The rate of tax levied varied according to the geographical location of the theaters. Thus, to start with, there was one charging Section under Section 4 of the Act, to tax entertainment provided through cinematograph exhibition in the theaters on payment for admission. The system of levy gradually underwent changes to pay a percentage on gross collection and based on theater location.

26. Development of technology made its entry in the field of providing entertainment in the early 1990s, that apart from the traditional medium of getting entertainment through exhibition of films, entertainment through exhibition of films and other forms of information and recreation on the television screen through VCR or cable television network, started gaining momentum. This form of entertainment was sought to be taxed as a class by itself with effect from 17.5.1984, by insertion of Section 4-D under Tamil Nadu Act 25 of 1984. The Section was subsequently substituted under Amendment Act 37 of 1994 with effect from 01.09.1994. This was followed by insertion of yet another charging provision under Section 4-E of the Act from 01.09.1994 under Amendment Act 37 of 1994, to levy tax on entertainment through cable television, fixing the rate of tax at 40% of the amount collected by way of contribution or subscription or installation or connection charges or other charges collected in any manner whatsoever for television exhibition. Corresponding changes were made to the definition of “entertainment” under Section 3(4) of the Act, to include cable TV as another source of entertainment. Section 4-E of the Act was substituted by Section 2(1) of the Amendment Act 18 of 2000 with effect from 12.06.2000 and again under Amendment Act 23 of 2003, with effect from 01.06.2003. As in the nature of regulatory measures in the field of cable television network, the Parliament enacted the Cable TV Networks (Regulation) Act, 1995, introduced with effect from 29.09.1994. Entertainment through DTH services began from 2004 on wards.

27. Thus, taking note of the further technological advancement in the system offering entertainment through DTH and the entertainment provided through I.P.L. matches, the State of Tamil Nadu, by Amendment Act 25 of 2011 with effect from 27.09.2011, inserted Section 4-I in the Act to levy tax on Direct to Home Services and tax on cricket tournament conducted by I.P.L. The statement of objects and reasons for inserting the charging Section reads as under:

“The Tamil Nadu Entertainments Tax Act, 1939 (Tamil Nadu Act X of 1939) does not contain any provision to levy tax in respect of entertainment provided by DTH (Direct To Home service) and the cricket tournaments organized by the Indian Premier League (IPL). In certain States, entertainment tax has been levied on DTH service and on cricket tournaments conducted by the IPL. The Government have, therefore decided to include the DTH service and the cricket tournaments conducted by the IPL within the definition of the term “entertainment” and to levy entertainment tax under the said Act.

2. In order to mobilize additional revenue resources, the Government have also decided to increase the rate of tax for admission to any cinematography exhibition in a theatre under the said Act. “

28. Thus, while providing for taxing DTH under Section 4-I of the Act, the definition of “Entertainment” under Section 3(4) of the Act to include DTH, was also amended. The definition of “Proprietor” under Section 3(9) was also amended to include any person providing DTH service.

Entry 62 List II of Seventh Schedule to the Constitution of India:

29. Before we consider the contentions raised in the respective writ petitions, the relevant provisions in Entry 92C List I and Entries 33 and 62 List II of the Seventh Schedule to the Constitution of India, the definition Section, inserting Section 3(3B) of the Act defining “direct to home service”, the amendment to “entertainment” under Section 3(4) of the Act to include DTH, and Section 3(9) of the Act defining “proprietor”, the insertion of the charging provision under Section 4-I of the Act to levy tax on direct to home service under Amendment Act No. 25 of 2011, with effect from 27.9.2011, which is under challenge now before this Court and Section 4-E of the Act “Tax on Cable Television” with the relevant amended definitions, need to be seen. The above provisions relevant for the consideration herein are as under:

“Entry 92 C List I of the VII Schedule to the Constitution of India Taxes on services.

Entry 33 of List II of Seventh Schedule to the Constitution of India –

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

Entry 62 of List II of Seventh Schedule to the Constitution of India –

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

The Tamil Nadu Entertainments Tax Act, 1939:

“3. Definitions:-

(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;

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; “

3(9) “proprietor” in relation to any entertainment means a licensee of cinematograph exhibition under the Tamil Nadu Cinemas (Regulation) Act, 1955 (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. “

“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 130 and the rules made there under shall, so far as may be, apply in relation to the tax payable under sub-section (1).”

30. “Television exhibition” is defined in Section 3(11) of the Tamil Nadu Entertainments Tax Act as follows:

“3(11) “television exhibition” means an exhibition with the aid of any type of antenna with a cable network attached 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 fiber cable to a central system called the head-end. “

31. Section 4-E of the Tamil Nadu Entertainments Tax Act reads as under:

“Section 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 entertainments tax) on television exhibition at the following rates, namely:–

(i)	Within the limits of the Municipal Corporations of Chennai, Madurai, Coimbatore, Tiruchirappalli, Tirunelveli, Salem or any other Corporation that may be constituted under any law for the time being in force;	Six thousand rupees per month
(ii)	Within the limits of the Municipalities constituted under the Tamil Nadu District Municipalities Act, 1920 (Tamil Nadu Act No.V of 1920).	Three thousand rupees per month
(iii)	Within the limits of Town Panchayats constituted under the Tamil Nadu District Municipalities Act, 1920 (Tamil Nadu Act No.V of 1920) or any other area not specified in items (i), (ii) or (iv).	One thousand and five hundred rupees per month
(iv)	Within the limits of Village Panchayats constituted under the Tamil Nadu Panchayats Act, 1994 (Tamil Nadu Act No.21 of 1994).	One thousand rupees per month

j(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).”

32. It may be noted herein that Section 4-D of the Act was a subject matter of challenge before this Court in a batch of Writ Petitions in W.Ps. Nos.16237, 16517 and 16272 of 1994 etc. (Tamil Nadu Cable T.V. Organizers Association (supra). Except for the grounds taken in the present Writ Petitions on service tax liability, and the challenge on the charging Section not providing the chargeable event, the challenge made therein on the vires of Section 4-E was almost on similar lines as are now taken in Section 4-I. Thus the contentions taken and considered by this Court in the batch of cases on Cable TV were, that the subject matter of levy fell entirely with List I of Schedule VII to the Constitution of India; Union of India has passed Cable Television Network Regulation Ordinance 9 of 1954 and framed Cable Television Rules of 1954. It was contended by the petitioners therein that by reason of occupied field doctrine, the State Legislature had no power to pass the Act; that the impugned provision was violative of Article 19(1)(a) of the Constitution of India; the tax levied was not a tax on entertainment; further the petitioners challenged that the Act was a colourable legislation, since the tax levied was not on the profession or calling, falling within the scope of Entry 60 List II of VII Schedule of the Constitution of India, the petitioners attacked the Section as violative of Article 14 of the Constitution of India; that there was no nexus between the object of the Act and the provision contained in the Act; the tax levied was one on private enjoyment by people in the respective houses and not on public entertainment; the rate of tax was exorbitant and unreasonable. Hence, the State legislation had no competency to enact law under Entry 62 List II of Seventh Schedule to the Constitution of India and the rate levied was arbitrary and violative of Article 14 of the Constitution of India.

33. By judgment dated 30.11.1994 in batch of W.Ps. Nos. 16237, 16517 and 16272 of 1994 etc., this Court rejected all the contentions raised by the Cable TV operators and upheld the validity of Section 4-E of the Act, holding that Section 4-E was not offensive of Article 19(1)(a) and Article 14 of the Constitution of India. This Court rejected the contention taken on the legislative competence of the State to levy tax on entertainment through cable TV under Entry 62 of List II of VII Schedule of the Constitution of India. It also rejected the contention taken to the effect that the meaning of the expression ‘entertainment’ was to be limited to public entertainment and would not include private entertainment. This Court further rejected the contention based on the theory of occupied field and held that in pith and substance, the impugned legislation fell under Entry 62 List II of VII Schedule to the Constitution of India and not a tax on trade or calling and that the State was competent to pass the Act. Thus, all the contentions raised by the petitioners were rejected.

34. On appeal by the cable TV operators, as against the judgment of this Court referred to above, in the decision reported in A. Suresh v. State of Tamil Nadu AIR 1997 SC 1889, the Apex Court upheld the decision of this Court. While agreeing with the reasoning and conclusion of the High Court on all the issues, the Supreme Court pointed out that it was unnecessary to deal with all the issues except issue No.3 on the challenge based on Article 19(1)(a), Issue No. 4 the Amending Act was a colourable legislation and Issue No. 7 rate of tax was prohibitive, designed to kill the cable television in the interest of cinema theaters. After referring to Indian Express Newspapers (Bombay) (P.) Ltd. v. Union of India AIR 1986 SC 515, the Apex Court rejected the challenge based on Article 19(1)(a) of the Constitution of India. It observed that there was no reason as to why the entertainment part of it could not be taxed. Quoting from Corpus Juris Secundum (Vol. 16) the Supreme Court pointed out “….. The guarantee of freedom of the press does not forbid the taxation of money or property employed in the publishing business, or the imposition of reasonable licenses and license fees on trades or occupations concerned with the dissemination of literature or ideas.”

35. Thus the only other question required to be considered before the Apex Court was as to the challenge as to the rate of tax at 40% as arbitrary and unconstitutional. The Apex Court pointed out as follows:

“15. We are inclined to agree with the submission of the learned Counsel for the State of Tamil Nadu. The reason given by the State for imposing tax at the rate of 40 per cent is duly explained by the State and we do not see any flaw in it. Since the appellants also carry on business it is their duty to share the burden of the State by paying taxes like any other business. The entertainment tax is an indirect tax. It is meant to be and is passed on to the consumer i.e., subscriber. In the case of indirect taxes, levy at more than 100 per cent of the value of the goods is not unknown e.g., in the case of customs and central excise duties. As a matter of fact, even in the case of direct taxes, levy at a rate higher than 50% is a regular feature. Of course, these are instances not involving free speech right and stand upon a different plane.

16. We are also unable to see any substance in the grievance that taxes are only levied upon them and not upon the Doordarshan. We do not think that there can be any comparison between Doordarshan and the appellants. Doordarshan is a governmental organisation which is supposed to act in furtherance of public interest. It is not a business carried on by the Government. The revenues collected by it by permitting advertisements are only intended to defray part of the huge expenditure the Government incurs on establishing and maintaining the broadcasting system throughout the country. By no stretch of imagination can the appellants claim any similarity with Doordarshan.”

36. Subsequent to this decision, in the decision reported in Purvi Communication (P.) Ltd. (supra) in Purvi Communication (P) Ltd., (supra) the Apex Court considered the entertainment tax levy on cable television under Section 4A(4a) of the West Bengal Entertainment cum Amusement Tax Act and held as follows:

“37. In our view, the respondents as a cable operator, for the purpose of levy and collection of tax under sub-section (4-a) of Section 4-A 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 II of the Seventh Schedule to the Constitution to make law for the levy and collection of tax on such entertainments.”

37. It is now stated that under G.O. No. 34 dated 27.3.2004, with effect from 01.04.2008, the Government of Tamil Nadu granted exemption from tax in respect of cinematograph film exhibited on television screen through cable TV network and Television exhibition.

38. It may be seen that as in the State of Tamil Nadu, various other States amended their respective State’s Entertainments Tax Acts also, to charge the entertainment offered through DTH under the respective State Entertainments Tax Acts. The petitioners before the other respective Courts, who are now petitioners before this Court, accordingly challenged the provision on the levy of entertainment tax on DTH under the respective State enactments almost on similar grounds, as are taken now before this Court, that DTH is more in the nature of service, attracting service tax levy and hence, beyond the legislative competence of the State to legislate under Entry 62 List II of VII Schedule to the Constitution of India.

39. In the decision reported in Bharti Telemedia Ltd. v. Govt. of NCT of Delhi [2011] 33 STT 71, rejecting the contention and upholding the validity of Section 7 of the Delhi Entertainments and Betting Tax Act, 1996, held that the levy is on entertainment through DTH services. The Delhi High Court pointed out to the definition of “entertainment” in Section 2(i) as including “entertainment through cable service and DTH service”. The emphasis is on “entertainment” and not on the vehicle for such entertainment. The Delhi High Court further held that the tax on DTH service contemplated under the Act is, by its nature and character, irrespective of its nomenclature, a tax on entertainment and not a tax on services” and that it cannot be said that there is any trespass into Parliament’s exclusive domain of legislating on the field of “taxes on services” under Entry 92C of List I. Thus, “the tax is on the entertainment and not the manner in which the content of entertainment reaches the actual persons entertained. The tax is not on the content provider or the content transporter or the person entertained – it is on the entertainment. The subscriber may be the person on whom the incidence of the tax falls and the measure of the tax may be based on the subscription money but, as we have already seen, the incidence of a tax or the measure of a tax ought not to be confused with the subject matter of the tax.” It pointed out “The charging section itself makes it clear that the levy is on entertainment and it is paid on all payments for admission to an entertainment. There are three very important words used in Section 7(1) of the said Act and they are – “levied” (or levy), “paid” and “collected”. These words are used in distinct and different senses and must not be confused with each other. The tax is “levied” on “entertainment”, it is “paid” on all “payments for admission to an entertainment” and it is “collected” by “the proprietor” and “paid” to the Government in the manner prescribed. It is clear from this scheme that the tax is neither on provider of the DTH service nor on the DTH service nor on the person entertained. Though the incidence of the tax may fall on the ultimate subscriber and the tax may have to be collected by the DTH service provider and paid to the government but, those are matters concerning incidence and measure of the tax, which, we have seen, is irrelevant for determining the subject-matter of a tax.” It further pointed out “The DTH service provider, in a sense only acts as a conduit between the content providers (i.e., TV Channels) and the content viewers (i.e., subscribers). It is the entertainment derived from the content that is the subject matter of the tax under the said Act and not the service of enabling the flow of content through the DTH system. There is no scope of confusing one for the other. Even if we assume that the concepts are intertwined, the strands can easily be separated by employing the aspect theory. The DTH system had two aspects – (1) a service aspect; and (2) an entertainment aspect. The former is taxed as a service under the service tax regime and the latter is subjected to tax as an entertainment under the said Act read with entry 62 of List II. They are two separate and distinct taxable events in respect of each of the two aspects. In respect of the service aspect, the taxable event is flow of content through the DTH system, whereas, in respect of the entertainment aspect, the taxable event is the entertainment from the content.”

40. Dealing with the impact of technological advancement on the entertainment provided, the Delhi High Court pointed out – “Our drawing rooms have taken the place of the cinema hall or theater and the cable TV or DTH connection has taken the place of the paper ticket. Similarly, money paid for the ticket for entry into the theater has now been substituted by subscription money paid for the relevant connection (i.e., cable or DTH, as the case may be). Just as there could be no admission to a place of entertainment without a ticket, there cannot be admission to entertainment provided through a cable service or DTH service without a connection, for which charges are collected.” Thus upholding the charge of entertainment tax on DTH, the Delhi High Court rejected the writ petitions vide Bharti Telemedia Ltd. (supra).

41. The above-said question as to whether the State Legislature is competent to levy entertainment tax on DTH, was also considered by the Allahabad High Court vide order dated 20.07.2012 made in Writ Tax No. 1819 of 2009 (Sun Direct TV (P.) Ltd.. v. State of UP), Uttarakhand High Court vide order dated 26.12.2007 in W.P. No. 2562 of 2007, Madhya Pradesh High Court vide [2012] 53 VST 30 (Tata Sky Ltd. v. State of M.P.), Punjab and Haryana High Court vide [2011] 37 VST 1 (Tata Sky Ltd. v. State of Punjab) and Uttar Pradesh High Court in W.P. No. 1819 of 2009 etc. batch dated 20.07.2012 Sun Direct TV (P.) Ltd. (supra) almost on similar times as are now taken. Upholding the legislative competence of the State to levy entertainment tax on DTH under Entry 62 List II of VII Schedule to the Constitution of India, citing the decision of the Delhi High Court, Courts held that DTH is a vehicle for transporting the content which provides the entertainment to the subscriber and that the tax is on the entertainment; the manner in which the content of entertainment reaches the person entertained has nothing to do with the entertainment provided; tax may be levied on the content provider or content transporter or the person entertained, but nevertheless, the tax is on the entertainment provided by the content that flows through the DTH service providing system. Hence, it is the entertainment derived from the content that is the subject matter of the tax under the Entertainment Tax Act and not the service of enabling the flow of the content through DTH. Pointing out that DTH has two aspects service aspect and entertainment aspect, the consistent view of the Courts on the present petitioners’ case is that while the providing of service is taxed under the service tax legislation, the content of providing the entertainment is a subject of charge a subject falling under Entry 62 List II of VII Schedule to the Constitution of India and hence, both are two different taxable events and there is no overlapping. The Delhi High Court held that even assuming that the concepts are intertwined, the strands can easily be separated by employing the aspect theory. The direct-to-home system has two aspects- a service aspect and an entertainment aspect. The former is taxed as a service under the service tax regime and the latter is subjected to tax as an entertainment under the Delhi Entertainments and Betting Tax Act read with Entry 62 List II of VII Schedule to the Constitution of India. They are two separate and distinct taxable events in respect of each of the two aspects. In respect of the service aspect, the taxable event is the flow of content through the direct-to-home system, whereas, in respect of the entertainment aspect, the taxable event is the entertainment from the content.

42. Thus all the above-said High Courts have upheld the levy of entertainment tax on DTH as validly enacted, falling under Entry 62 List II of VII Schedule to the Constitution of India and there is no conflict or overlapping of the subject to fall under Entry 92C List I or Entry 60 List II of VII Schedule to the Constitution of India.

43. As far as the view of other High Courts on the constitutional validity is concerned, we are in respectful agreement with the view held by the above High Courts. So too on the allegation of overlapping of the provision under Entry 92C List I of VII Schedule to the Constitution of India. However, it must be pointed out herein that the provisions of the Tamil Nadu Entertainments Tax Act, 1935, in Section 4-I are not in pari materia with the other States’ legislation. Considering the fact that the validity of the charging provision in any enactment has to be considered on the strength of the provisions of the particular enactment and going by the provision contained in Section 4-I of the Act, except on the competency of the State Legislature to enact law to tax DTH, the application of aspect theory and the absence of any overlapping into the area of service tax, we do not think, the decisions of other High Courts would govern the issue raised in the cases before us.

44. As far as the challenge on the Tamil Nadu Entertainments Tax Act is concerned, the question that arises for consideration in W.P. Nos. 25721 and 27070 to 27072 of 2011 is as to whether the State has the competency to levy entertainment tax on DTH service, which is purely on the field of service tax falling under Entry 92C List I- Taxes on services. The question is raised de hors the challenge made to Section 4-I of the Act. Secondly, Entry 62 List II of VII Schedule to the Constitution of India is concerned about the entertainments offered in public places, for which a fee is charged. In other words, DTH, being a private entertainment provided direct to home, the same is not covered under Entry 62 List II of VII Schedule to the Constitution of India. As the providing of DTH service suffers service tax and falls under TRAI Regulations, the State cannot validly levy tax on DTH service as a subject falling under Entry 62 List II of VII Schedule to the Constitution of India. Hence, Section 4-I of the Act is ultra vires. Even assuming that the State could levy tax on the entertainment aspect in the providing of the service, in the absence of any apportioning of the charges between service element and entertainment element, the levy under Section 4-I of the Act, fails.

45. In this connection, Mr. Arvind P. Datar, learned senior counsel appearing for the petitioners in W.P. Nos. 25721, 27070 to 27072 of 2011, referred to the Constituent Assembly deliberations on 2nd September, 1949 on the introduction of Entry 44 List II of VII Schedule in the Draft Constitution Bill based on the deliberations and contends that the tax on entertainment under Entry 62 List II of VII Schedule to the Constitution of India could only be on public entertainment and if there is to be a tax on DTH, which is in the nature of private entertainment, it being outside the scope of List II of VII Schedule to the Constitution of India, not being a topic found under List II and List III of VII Schedule to the Constitution of India, it can only be under List I of VII Schedule to the Constitution of India. Thus, going by the limited meaning given to “entertainment”, by reason of the discussion as to the scope of Entry 44 List II of the Draft Constitution, presently Entry 33 List II of VII Schedule to the Constitution of India, viz., “Theatres, dramatic performances, cinemas, sports, entertainments and amusements, but subject to the provisions of List I with respect to the sanctioning of cinematograph films for exhibition”, the content and scope of Entry 62 List II of VII Schedule to the Constitution of India enabling the State Legislature to levy tax on entertainments, amusements, etc. has to be read as restricted to taxing public entertainment only. Applying the principle of ‘noscitur a sociis’, it is contended that the expression “entertainment” carries a limited meaning, referable to public entertainment in public places and not to private entertainment derived by an individual in his private capacity at a private place.

46. Drawing support from the decision reported in Hoechst Pharmaceuticals Ltd. v. State of Bihar [1985] 154 ITR 64 (SC), learned senior counsel pointed out that the intention of the Constitution makers is relevant in understanding the scope of the Entries and the discussions throw light on the scope of the subject and the understanding given to the Entry in question.

47. Learned senior counsel further submits that the taxable event considered for levying service tax is the activity of providing DTH. What is considered for levy of entertainment tax is not different from what is considered for service tax, namely, the provision of service to the subscribers. Thus when Parliament has the exclusive power to levy tax with respect to service under Article 246(1) read with Entry 92C/97 List I of VII Schedule to the Constitution of India, by artificially defining “DTH” service as “entertainment”, the State cannot legislate to levy tax on DTH Service. Pointing out that Section 4-I of the Act is an overlapping provision with that of service tax, he referred to the decision reported in State of West Bengal v. Kesoram Industries Ltd. [2004] 10 SCC 201 and submitted that the State had not pointed out how, and in what proportion, the charges collected are grouped and apportioned for levy under the Entertainments Tax Act. In other words, Section 4-I of the Act is a naked usurpation of the legislative function allotted to the Union under Entry 92C List I of VII Schedule to the Constitution of India. Given the fact that the discussion of the Constituent Assembly clearly discloses the intent in including all public entertainments alone under the State List, one cannot give a liberal interpretation to the word “entertainment”, appearing in Entry 62 List II of VII Schedule to the Constitution of India, to include private entertainments too; while all public entertainments could be taxed under Entry 62 List II of VII Schedule to the Constitution of India, private entertainment would fall only under the Union List.

48. Referring to the decisions reported in Supreme Court Advocates-On-Record Association v. Union of India AIR 1994 SC 268, Hinsa Virodhak Sough v. Mirzapur Moti Kuresh Jamat [2008] 5 SCC 33, Indra Sawhney v. Union of India [1992] Supp (3) SCC 217, S.R. Chaudhuri v. State of Punjab [2001] 7 SCC 126 and V.G. Rao v. State of Madras AIR 1951 Mad. 147, he submitted that the changing times and technology development cannot, however, be taken as a ground for expanding the word “entertainment” to include private entertainment under Entry 62 List II of VII Schedule to the Constitution of India. He submitted that the emphasis under Entry 62 List II of VII Schedule to the Constitution of India about levying tax has reference to the places of entertainment, namely, public entertainment. Thus, while the places of public entertainment may change from place to place and the technological development may have effect on the understanding of different types of entertainment, yet, the entertainment referred to in Entry 62 List II of VII Schedule to the Constitution of India has to have relevance only to the places of entertainment, namely, a public place, particularly in the context of Entry 33 List I of VII Schedule to the Constitution of India, making cinematographic film exhibition subject to Entry 60 List I of VII Schedule to the Constitution of India. Referring to the decisions reported in Purvi Communication (P) Ltd. (supra) and A. Suresh (supra), learned senior counsel pointed out that the challenge to Entry 62 List II of VII Schedule to the Constitution of India with reference to the private entertainment was not considered in those judgments and hence, the said judgments could not be taken to have decided the issue.

49. Countering the said claim, Mr. C.S. Vaidyanathan, learned senior counsel appearing for the State, pointed out that Entry 92C List I of VII Schedule to the Constitution of India relates to tax on the service of providing entertainment. If the content of the service provided through the vehicle of DTH is entertainment and luxury, the same would fall for consideration under Entry 62 List II of VII Schedule to the Constitution of India. In this, there is no overlapping of the subject essentially falling under Entry 62 List II of VII Schedule to the Constitution of India, as falling under Entry 92C List I also. The pith and substance of the levy herein under Entry 62 List II of VII Schedule to the Constitution of India is entertainment and a harmonious construction consistent with the above theory has to be made. He submitted that the introduction of Entry 92C List I of VII Schedule to the Constitution of India has not wiped out, or in any manner, reduced the vitality of Entry 62 List II of VII Schedule to the Constitution of India, to legislate on entertainment offered through the DTH service. As far as the question regarding the overlapping of two Entries or the nature of entertainment, per se, as a service is concerned, the writ petitioner herein in W.P. Nos. 25721 and 27070 to 27072 of 2011 have made a similar challenge before the Uttar Pradesh High Court, Gujarat High Court, Madhya Pradesh High Court and Delhi High Court and the same was rejected. The question as to whether there is any entertainment to be taxed at all, was also considered and negatived by the other High Courts. Hence, it is not open to the petitioners to raise the self-same question for a decision before this Court.

50. On the aspect theory, he submitted that the above issues were considered in a number of decisions as in the case of expenditure tax levied by the Central Government in the decisions reported in Elel Hotels & Investments Ltd. v. Union of India[1989] 44 Taxman 304 (SC)Federation of Hotel & Restaurant Association of India v. Union of India [1989] 3 SCC 634 and International Tourist Corpn. v. State of Haryana [1981] 2 SCC 318 in respect of levy of tax on passengers and goods under the Haryana Goods and Passengers Taxation Act of 1952, as falling under Entry 60 List II and service tax levy under Entry 92C/ Entry 97 List I and the decision reported in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 STT 245 (SC) as regards the levy of sales tax on the transaction on the mobile phone services vis-a-vis the levy of service tax. When in sum and substance the levy is on entertainment, as held in the decision reported in Godfrey Phillips (I.) Ltd. v. State of U.P. [2005] 2 SCC 515, the contention based on aspect theory is not sustainable.

51. In fact, in the decision reported in Bharti Telemedia Ltd. (supra), the petitioners therein, which includes the present petitioner before this Court, contended that DTH service is a broadcasting service, falling within the meaning of “taxable service” under Section 65(105)(zk) of the Finance Act, 1994, amenable to service tax at 10.33%, on the gross amount paid by the subscriber for providing the DTH broadcasting services. Learned senior counsel referred to the decision of the Apex Court on the distribution of legislative powers between the Union and the State and on the interpretation of the various Entries of List I, List II and List III, that the Entries in the Lists should not be read in a narrow or pedantic sense, but must be given their fullest meaning and widest amplitude and there is no overlapping anywhere in List I and List II of Schedule VII on the enumerated entries relating to taxation. Thus learned senior counsel appearing for the State submitted that whenever an apparent overlapping had occurred, Courts have held that the Legislative Entry should be liberally interpreted; competing Entries must be read harmoniously. Thus, the true nature and character of the legislation and not its ultimate economic result, has to be seen while considering a question of the nature raised herein. He pointed out that a transaction may involve two or more taxable events in its different aspects. The fact that there is an overlapping of the legislation, however, does not detract from the distinctiveness of the aspects of the taxable events covered under the respective Acts and the field of legislation under the relevant Entries. In the circumstances, relying on the reasoning of the Delhi High Court holding that the pith and substance of the legislation has to be looked into in deciding the true character and nature of the particular levy, he submitted that as far as the petitioners are concerned, it is not open to the petitioners to insist on the same line of argument taken before the other Courts, which were rightly rejected by those Courts.

52. The question raised by the petitioner herein centered on the question of the width of the legislative power to tax on entertainment, i.e., Entry 62 List II of VII Schedule to the Constitution of India operates only as regards the taxation of public entertainments. We may point out that we are in respectful agreement with the view expressed by other High Courts on this. We agree with the learned Senior Counsel appearing for the State that there can be no fresh dispute to raise before this Court on the self-same point.

53. We hold that, we do not find any justifiable ground to restrict the meaning of the term ‘entertainment’ to public entertainment only. Secondly, in any event, we do not find any good ground to read an ‘entertainment’ through DTH as a private entertainment. We also do not find any overlapping of the Entries on taxation under the service tax levy and under the entertainment tax levy.

54. Before considering the contentions, the discussion of the Constituent Assembly on the introduction of Entry 44 List II of the Draft Constitution, which is the present Entry 33 List II of VII Schedule to the Constitution of India, on which heavy reliance is placed as to the scope of Entry 62 List II of the Constitution of India, needs to be noted. The discussion thereon goes as follows:

“Entry 44 List II of VII Schedule to the Constitution of India, originally proposed, reads as follows:

“Theaters, dramatic, performances, cinemas, sports, entertainments and amusements, but not including the sanctioning of cinematograph films for exhibition.”

Shri.H.V.Kamath objected to the inclusion of entertainment in any of the Lists.

The Amendment suggested by Shri. T.T. Krishnamachari and the discussion runs as follows:

With your permission, I move also amendment No. 287 standing in my name, viz.

“That in amendment No. 111 of List I (Sixth Week), in the proposed entry 4 of List II, for the words ‘not including’ the words ‘subject to the provisions of List I with respect to’ be substituted.”

The amended amendment will read thus:

’44. Theaters, dramatic, performances, cinemas, sports, entertainments and amusements, subject to the provisions of List I with respect to the sanctioning of cinematograph films for exhibition.”

The idea that the sanctioning of cinematograph films for exhibition should be transferred to the Center has been accepted. There is no further variation here except that ‘sports, amusements and entertainments’ have been added to the original entry in the Draft Constitution.”

Prof. Shibban Lal Saksena viewed that the proposed Entry 44 List II should be transferred to List III. He viewed:

“My only reason for moving this amendment is that I consider theatres, cinemas and dramatic performances to be very important modern means of promoting adult education. In our country, if we want to bring literacy to everybody, this entry should go to List III so that there can be co-ordination and regulation of the production and use of the films for educational purposes of the whole nation. By putting this in List III we would not be taking away anybody’s powers.”

22. Shri. T.T. Krishnamachari replied. On the suggestion to make Entry 44 transferred to List III rejected, Entry 44, reading as:

“44. Theatres, dramatic performances, cinemas, sports, entertainments and amusements, but subject to the provisions of List I with respect to the sanctioning of cinematograph films for exhibition.”

was adopted and Entry 44 amended was added to the State List. Thus the Entry in List II which deals with the above subject matter, is found under Entry 33, which reads as under:

“Theaters and dramatic performances, cinemas subject to the provisions of entry 60 of List I; sports, entertainments and amusements.”

55. On the relevance of the above debate in the Constituent Assembly throwing light on the scope of the Entry 62 List II of VII Schedule to the Constitution of India, learned Senior Counsel referred to the decision reported in Indra Sawhney (supra) and submitted that going by the debates as regards Entry 33 List II, it is clear that private entertainment cannot be the subject matter of Entry 62 List II of Schedule VII to the Constitution of India. The consideration on the speeches of the Members of the Constituent Assembly, no doubt, can be relied on as an aid to interpret the constitutional provision. The Apex Court pointed out that where the expression used are not defined in the Constitution, reference to such debates is permissible to ascertain the background, the context and the objective behind them. The amended Entry, as proposed and adopted under Entry 44 List II of VII Schedule to the Constitution of India in the Draft Bill, reads as – “Theaters, dramatic performances, cinemas, sports, entertainments and amusements but subject to the provisions of List I with respect to sanctioning of cinematograph films for Exhibition”.

56. The present Entry on this subject is Entry 33 List II of the VII Schedule to the Constitution of India. The same reads as “Theaters and dramatic performances; cinemas subject to the provisions of entry 60 of List I; sports, entertainments and amusements.” Entry 60 of List I of the VII Schedule to the Constitution of India reads as “Sanctioning of cinematograph films for exhibition.”

57. The Entry dealing with taxation on entertainment under List II Entry 62 corresponds to Entry 50 List II of the Government of India Act, 1935. We do not think, the decision relied on would be of any assistance to the petitioners in this case, for, the Entry with which we are concerned, is an Entry on taxation on entertainment. As is evident from the reading of Entry 33 List II of VII Schedule to the Constitution of India, entertainment and amusement is a class by itself, which is not made a subject of control under Entry 60 List I of VII Schedule to the Constitution of India. Cinemas and dramatic performances mentioned in Entry 33 List II of VII Schedule to the Constitution of India, though entertainment, are made subject to Entry 60 List I of VII Schedule to the Constitution of India relating to the sanctioning of cinematographic films for exhibition. Thus Entry 60 List I of VII Schedule to the Constitution of India could operate only in respect of matters theaters, dramatic performances and cinemas and not with respect to other forms of entertainments and amusements. It can, however, have no control or relevance to any other matter included in the general expression “entertainment”. In the decision reported in Y.V. Srinivasa Murthy v. State of Mysore AIR 1959 SC 894, dealing with the argument of the petitioner therein that the word “cinema” mentioned in Entry 33 List II of VII Schedule to the Constitution of India has been omitted from Entry 62 List II of VII Schedule to the Constitution of India and there could be no levy of tax under Entry 62, List II of VII Schedule to the Constitution of India, the Supreme Court observed that the expression “entertainments” and “amusements” are wide enough to include theaters, dramatic performances, cinemas, sports and the like; the word “cinemas” has been specifically included in Entry 33 List II of VII Schedule to the Constitution of India, in order to avoid any possible conflict between it and Entry 60 List I of VII Schedule to the Constitution of India. The Supreme Court further observed that Entry 33 List II and Entry 60 List I of VII Schedule to the Constitution of India have no relevance to Entry 62 List II of VII Schedule to the Constitution of India, with which we are concerned. In the decision reported in Purvi Communications (P.) Ltd. (supra), while dealing with the challenge on the levy of entertainment tax on Cable Television under the West Bengal Entertainment-cum-Amusement Tax Act, 1982 and the Cable Television Networks (Regulation) Act, 1995, made by the Union Parliament, the Supreme Court considered Entry 62 List II of the VII Schedule to the Constitution of India. The Apex Court observed:

“41. 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. The respondents admittedly engaged in the business of receiving broadcast signals and the instantaneously sending or transmitting such visual or audio visual signals by coaxial cable, to subscribers homes through their various franchise. It has been made possible for the individual subscribers to choose the desired channels on their individual T.V. sets because of cable television technology of the respondents and of sending the visual or audio visual signals to sub-cable operators, and instantly re-transmitting such signals to individual subscribers for entertaining them through their franchise. 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 or providing entertainment to the subscribers and/or viewers, the respondents receive charges, which are realised or collected by their franchise from the ultimate subscribers. Their franchise, called as sub-cable operator under the said 1982 Act having no independent role to offer or provide entertainments to the subscribers inasmuch as franchise 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. “

58. Thus after the law declared by the Supreme Court, we do not find any good reason to accept the petitioners’ case. Merely because the decision had been rendered before the advent of service tax levy, it does not mean that the law requires a fresh re look. The content of Entry 62 List II of VII Schedule to the Constitution of India remains as it is and has not undergone any change, to contend that the Entry has to be reconsidered consequent on a levy under Entry 92C List I of VII Schedule to the Constitution of India.

59. In this context, the decisions governing the interpretation given to various Entries under the Schedule need to be noted.

60. Touching on the principles guiding the interpretation of legislative power of federal legislature and provincial legislature under the Government of India Act, 1935, in the decision reported in the matter of the Central Provinces & Berar Sales of Motor Spirit & Lubricants Taxation Act, 1938, In re AIR 1939 FC 1 it was observed by Jayakar,J “the provisions of an Act, like the Government of India Act, 1935, should not be cut down by a narrow and technical construction, but, considering the magnitude of the subjects with which it purports to deal in very few words, should be given a large and liberal interpretation, so that the Central Government, to a great extent, but within certain fixed limits, may be mistress in her own house, as the Provinces, to a great extent, but again within certain fixed limits, are mistresses in theirs: (see H.M. Edwards v. Attorney General for Canada [1930] A C 124 at pp.136 and 137.

61. Thus being an organic living document, as observed in the decision reported in Kesoram Industries Ltd. (supra), the outlook on the expressions in the Lists, as perceived and expressed by the interpreters of the Constitution, must be dynamic and keep pace with the changing times. The Constitution Bench of the Apex Court considered the scheme of nature and scope of power to legislate under Entries in three Lists in Schedule VII of the Constitution of India, the allocation of subjects to the Lists and the Principles for interpretation, especially with respect to the Entries on taxation. Pointing out to the distinction between Entries empowering the particular Legislature to legislate on regulatory statutes and the Entries relating to taxation, the Supreme Court pointed out that if any power to tax is clearly mentioned with reference to the subjects in List II, the same would not be available to be exercised by the Parliament based on the assumption of residuary power. The primary purpose of taxation is to collect revenue. The power of levying tax is essentially for the very existence of the Government, though may be controlled by the constitutional provisions made in this behalf.

62. Thus the golden rule of interpretation on Entries in the Lists is that words should be read in their ordinary, natural and grammatical meaning, subject to the rider that in construing words in a Constitution conferring legislative power, the most liberal construction should be put upon the expression in the Lists, so that they may have effect in their widest amplitude Refer (Navinchandra Mafatlal v. CIT [1955] 1 SCR 829. Yet, as held in Central Provinces & Berar Sales of Motor Spirit & Lubricants Taxation Act, 1938 (supra), in a given case, to prevent conflict between two exclusive jurisdictions, restrictive meaning could be given as in the case of duties of excise to preserve the authority of the State Legislature to levy a tax on the sale of goods.

63. Holding that every Entry in the Lists in the Seventh Schedule of the Constitution of India has to be given a schematic interpretation, in the decision reported in All India Federation of Tax Practitioners (supra), the Supreme Court observed that the Constitutional Law, like taxing law, essentially concerns concepts and principles. The Supreme Court pointed out on an analysis of the Entries, that taxation is not intended to be comprised in the main subject in which an extended construction can be given. Taxing entries are distinct entries vis-a-vis the general entries and the distinction between the above-mentioned two groups of entries is manifest from the language of Article 248 Clauses 1 and 2, as also in the language of Entry 97 List I of Schedule VII of the Constitution of India.

64. The Supreme Court held that the competence to legislate flows from Articles 245, 246 and the other Articles in Part XI of the Constitution of India. In considering the challenge made on the levy of service tax on Chartered Accountants, Cost Accountants and Architects, the Supreme Court held that, for deciding the true character and nature of a particular levy with reference to the legislative competence, the Court has to look into the pith and substance of the legislation. Tax laws are governed by Part XII and Part XIII of the Constitution of India. The Apex Court held that taxes on services is a different subject as compared to taxes on professions, trades, callings, etc. Therefore, Entry 60 of List II and Entries 92C/ 97 of List I of the VII Schedule to the Constitution of India operate in different spheres. Considering the nature of levy, the Apex Court observed that the word “professions” under Entry 60 List II of VII Schedule to the Constitution of India cannot be made synonymous with the word “services” and therefore, service tax would fall under the residuary Entry 97 read with Entry 92C List I after 2003. Thus when the authority to legislate is clear in giving due weightage to the fact “with respect to” in Article 246(1), the Apex Court upheld the validity of legislation, as for example, levy of service tax on Chartered Accountants, Cost Accountants and Architects. The Apex Court held that taxes on service is a different subject as compared to the taxes on profession, trade, calling, that Entry 60, List II and Entry 92C/ 97 List I of schedule VII to the Constitution of India operate in different spheres.

65. In the context of understanding the width or the scope of the Entries enumerated and the expressions contained in the Entries, the Supreme Court considered the applicability of the concept of flexible construction in three landmark decisions of the Apex Court dealing particularly with Entries pertaining to taxation, one falling under Entry 54 List I of the Government of India Act, 1939 (Entry 82 List I of the Constitution of India, 1950 – Tax on income other than agricultural income) in the decision reported in Navinchandra Mafatlal (supra), Entry 48 List II of Government of India Act, 1935 (Entry 54 List II of Constitution of India, 1950) State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. AIR 1958 SC 560 and Godfrey Phillips India Ltd. (supra) in the context of Entry 62 List II of VII Schedule to the Constitution of India. These decisions lay down the principle guiding on the understanding of the expression used in the Lists.

66. In the decision reported in Navinchandra Mafatlal (supra), the Supreme Court considered the question as to whether the expression ‘income’ could be taken as fitting in within a precise general formula. The question that arose for consideration was as to whether the imposition of tax under the head of capital gains by the Central Legislature was ultra vires and whether the imposition of income tax under Section 12B of the Income Tax Act, 1922, was, in any way, invalid, on the ground that it was done by amending the Indian Income Tax Act.

67. Referring to the decision reported in State of Bombay v. F.N. Balsara [1940] F.C.R. 110 at 134, the Supreme Court pointed out:

“In construing an entry in a List conferring legislative powers the widest possible construction according to their ordinary meaning must be put upon the words used therein. Reference to legislative practice may be admissible for cutting down the meaning of a word in order to reconcile two conflicting provisions in two legislative Lists as was done in The C.P. and Berar Act case (supra), or to enlarge their ordinary meaning as in The State of Bombay and Another v. F.N. Balsara [1951] S.C.R. 682. The cardinal rule of interpretation, however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude.”

68. The Supreme Court pointed out that under a flexible construction or generic interpretation, while the power remains the same, new developments of the same subjects and new means of executing an unchanging power do arise from time to time and the extent and ambit of the Entry may grow in the progress of the society.

69. Referring to the judgment reported in Raja Bahadur Kamakshya Narain Singhof Ramgarh v. CIT [1943] 11 ITR 513 (PC) [1943] 11 ITR 513 (PC), the Supreme Court held that “income” is a word difficult and perhaps impossible to define in any precise general formula and pointed out that the ordinary English word “income” has not acquired a particular restricted meaning.

70. Pointing out that other than fiscal statutes like the Finance Act and the Income Tax Act where the word “income” has been used, the Apex Court held that it was not possible to say that the critical word “income” had acquired any particular meaning by reason of any legislative practice, meaning thereby, to the judicial interpretations of the word “income”, as appearing in the fiscal statutes. The Apex Court observed that while the Income Tax Act adopts an inclusive definition of the word “income” to bring to charge only such income as falling under certain specified heads, the meaning of the word “income” was ascertained by Courts in the context of the scheme of the Act. Hence, the Apex Court observed:

“The truth of the matter is that while Income-tax legislation adopts an inclusive definition of the word “income” the scheme of such legislation is to bring to charge only such income as falls under certain specified heads (e.g., the 5 Schedules of the English Act of 1918 and our section 6 read with the following sections) and as arises or accrues or is received or is deemed to arise or accrue or to be received as mentioned in the statute. The Courts have striven to ascertain the meaning of the word “income” in the context of this scheme. There is no reason to suppose that the interpretation placed by the Courts on the word in question was intended to be exhaustive of the connotation of the word “income” outside the particular statute. If we hold, as we are asked to do, that the meaning of the word “income” has become rigidly crystallized by reason of the judicial interpretation of that word appearing in the Income-tax Act then logically no enlargement of the scope of the Income-tax Act, by amendment or otherwise, will be permissible in future. A conclusion so extravagant and astounding can scarcely be contemplated or countenanced.”

71. Contrast this with Entry 48 List II as considered in the decision reported in Gannon Dunkerley & Co. (Madras) Ltd. After referring to a number of decisions on flexible construction, in the decision reported in Gannon Dunkerley & Co, (supra) the Supreme Court, observed:

“The principle of these decisions is that when, after the enactment of a legislation, new facts and situations arise which could not have been in its contemplation, the statutory provisions could properly be applied to them if the words thereof are in a broad sense capable of containing them. In that situation, “it is not”, as observed by Lord Wright in James v. Commonwealth of Australia (H), “that the meaning of the words changes, but the changing circumstances illustrate and illuminate the full import of that meaning”. The question then would be not what the framers understood by those words, but whether those words are broad enough to include the new facts.”

The Apex Court pointed out:

“The ratio of the rule of interpretation that words of legal import occurring in a statute should be construed in their legal sense is that those words have, in law, acquired a definite and precise sense, and that, accordingly, the legislature must be taken to have intended that they should be understood in that sense. In interpreting an expression used in a legal sense, therefore, we have only to ascertain the precise connotation which it possesses in law.”

72. In so holding, the Apex Court pointed out that legal terms having acquired a definite and precise meaning, the Legislature must be taken to have intended that they should be understood in that sense. Thus “Sale of Goods” has a well established legal meaning in the general law of the topic and that the expression in Entry 48 List II of the Government of India Act 1935 (now Entry 52 List II) must be interpreted as having the same meaning.

73. The hurdle that the States faced by reason of the decision in taxing indivisible contract like the works contract was, however, got over by the 46th Amendment to the Constitution, amending the definition of “sale” under Article 366(29A).

74. In the context of tax on luxuries occurring in Entry 62 List II of VII Schedule to the Constitution of India, in the decision reported in Godfrey Phillips India Ltd. (supra), the Apex Court cautioned thus:

“49.Under the three lists of the Seventh Schedule to the Indian Constitution a taxation entry in a legislative list may be with respect to an object or an event or may be with respect to both. Article 246 makes it clear that the exclusive powers conferred on Parliament or the States to legislate on a particular matter includes the power to legislate with respect to that matter. Hence, where the entry describes an object of tax, all taxable events pertaining to the object are within that field of legislation unless the event is specifically provided for elsewhere under a different legislative head. Where there is the possibility of legislative overlap, courts have resolved the issue according to settled principles of construction of entries in the legislative lists.”

75. Reading the Entries enumerated in the Lists, the Supreme Court held that certain Entries in List I involve a description, amounting it almost to a formal definition. But more often, there are most general names or general topics. When the enumeration is in general terms, one has to remember that the Entries are the fields under which laws are to be made and they are not a mere limit of the power of the State to declare what the law is to be. The Apex Court pointed out that the understanding of the scope or the meaning of the general words is to be, to borrow the phrase from Higgins, J. in NSW v Brewery Employees Union of NSW [1908] 6 CLR 469, ‘in a manner that the words have not withered or grown sterile with years’. Referring to a strict construction that an ordinary law is normally subjected to, the Apex Court observed that it is based upon the presumption that the Legislature intends to legislate on fields assigned to it under the respective entries in the List. Thus, when the Legislature is given power to make law, “with respect to”, the matters enunciated in the respective Lists, it is a matter to be determined in each case as to the true substance of the enactment, wherein the doctrine of pith and substance and aspect theory assume significance.

76. Pointing out to Entry 62 List II of VII Schedule to the Constitution of India, specifically to “Luxury” as indicating an attribute as a taxable event as well as a subject of tax by itself in contrast to other Entries on taxation where the objects of taxation are articles/ things, the Supreme Court pointed out that where articles have been made the object of taxation, either by way of a general Entry or as an object of taxation, the Entries in the Legislative Lists have specifically said so. Pointing out to the various Entries dealing with a levy of tax as for example, Entries 53, 56, 57 and 58, the Supreme Court held “there is no instance in any of the legislative lists of a tax being leviable only with reference to an attribute. An attribute as an object of taxation without reference to the object, it qualifies would lead to legislative mayhem, blur the careful demarcation between taxation entries and upset the elaborate scheme embodied in the Constitution for the collection and distribution of revenue between the Union and the States.” Hence, on an application of the general principles of interpretation, the Supreme Court held “the expression “luxuries” in Entry 62 List II of Seventh Schedule to the Constitution of India would mean the activity of enjoyment of or indulgence in that which is costly or which is generally recognised as being beyond the necessary requirements of the average member of the society and not articles of luxury.” Pointing out to the legislative history of the Entry, the Supreme Court held that given the language of Entry 62 and the legislative history, Entry 62 does not permit the levy of luxury tax on goods or articles and the word “luxuries” in the Entry refers to activities of indulgence, enjoyment or pleasure.

77. The Supreme Court pointed out that the solution as to the meaning of the expression ‘luxury’ must be found in the language of the Entry. Referring to the tax levied under Entry 62 List II of VII Schedule to the Constitution of India in the context of the decision of the Apex Court reported in Express Hotels (P.) Ltd. v. State of Gujarat [1989] 3 SCC 677, the Supreme Court held that “Luxuries” is capable of meaning an activity alone and has no relevance to articles or things.

78. Thus in the context of the above three decisions of the Apex Court, it is clear that unless the expression used in the Entries enumerated has attained a legal meaning, words of general impact must have a wide application. Going by the observation of the Apex Court in the decision reported in Godfrey Phillips (I.) Ltd. (supra), we do not find any legal ground to restrict the meaning of “entertainment” as public entertainment. The Supreme Court observed that the general meaning of “luxury” must be understood in a sense analogous to that of general words such as entertainment, amusements, gambling, betting, which are clubbed with that. However, “the word “luxuries” cannot be restricted to entertainments, amusements, betting and gambling, but this would only show an attribute which is common to the group”. It may not be out of place to refer herein to the decision of this Court in Cable TV operators’ case, wherein, this Court also repelled the contention based on Entry 31 of List I of VII Schedule to the Constitution of India. The argument that “entertainment” is a legal term was rejected by this Court in Cable TV Operators’ case, which was subsequently confirmed by the Supreme Court in the decision reported in A. Suresh (supra).

79. On aspect theory, in the decision reported in Kesoram Industries Ltd. (supra), the Apex Court pointed out that the machinery employed for assessing the tax must not be confused with the nature of tax and the amount may be measured in many ways; but the distinction between the subject matter of tax and the standard by which the tax is measured must not be lost sight of. The concepts are described as subject of tax and measure of tax. While the subject of tax is clear and well-defined, the amount of tax is capable of being measured in many ways for the purpose of quantification. The Apex Court pointed out that defining the subject of tax is a simple task, devising the method of taxation is a far more complex exercise and hence, the Legislature has to be given more flexibility in the latter field (Article 14).

80. In the unreported decision of this Court dated 30.11.1994 in W.Ps. Nos. 16237, 16517 and 16272 of 1994 etc. Tamil Nadu Cable TV Organisers (supra), this Court exhaustively considered the question as to whether the expression ‘Entertainment’ is a nomen juris. Holding that the principle laid down in the decision reported in Gannon Dunkerley & Co., (Madras) Ltd. (supra) could not be invoked, this Court referred to the Entertainments Tax Act first enacted in the year 1939 and to the further development thereon, wherein the definition of ‘entertainment’ included other forms of entertainment and not restricted to cinematographic exhibition alone and pointed out “there is nothing in the terms on Entry 62 of List II of the Seventh schedule to the Constitution that the words employed therein should be given a restricted meaning.” It observed that unless the Constitution had limited the scope of the expression, the Court cannot limit the meaning of the words used under the relevant Entry. The decisions cited at the Bar on the contentions now raised were extensively considered and rejected in the above referred to decision.

81. This Court also referred to the decision of the Apex Court reported in Geeta Enterprises v. State of U.P. AIR 1983 SC 1098 and held that the word ‘entertainment’ has been used in a wide sense so as to include within its ambit, entertainment of any kind, including the one which may be purely educative.

82. Thus going by the various decisions cited above, we do not find any ground to restrict the meaning of the expression “entertainment” to public entertainment only and to treat entertainment content in DTH as in the nature of private entertainment, that it cannot be a subject matter of taxation under Entry 62 List II of VII Schedule to the Constitution of India. We hold that the Entry does not contain any such qualifying words to restrict the expression “entertainment” to public entertainment and Entry 44 List I of VII Schedule of the Constitution of India has nothing to do with Entry 62 List II of VII Schedule to the Constitution of India.

83. In any event, the entertainment offered through DTH cannot be understood as a private entertainment merely because one has the advantage of deriving the pleasure by sitting in the comforts of his home. The entertainment received through the facility of DTH cannot be viewed and understood narrowly as restricted to the individual solely and per se, by reason of an individual entertainer viewing it in his home. The individual who forms part of the public derives the entertainment which is available to all those having the facility of DTH to have the entertainment content. The place from which the entertainer watches the entertainment does not make the ‘entertainment’ any the less, a public entertainment. Given the fact that the same entertainment is offered to all those who subscribe for the DTH and Cable TV, we do not find that the mode of receiving the entertainment would pronounce on the character as private entertainment and not a public entertainment. The entertainment offered in a theatre to the individual on payment of fee for admission does not make the entertainment any a degree greater as a public entertainment than an entertainment received in DTH on payment of subscription fee. Thus the facility of choosing the time, place, mode or the content, does not, in any manner, convert entertainment through DTH, a private entertainment. The subject matter of tax and the incidence of tax being entertainment itself, we find no justifiable ground to read any limitation into this expression. As in the case of “income”, the word “entertainment” is a word difficult and perhaps impossible to define in any precise formula as referable to or restricted to a particular form or a place or a mode. As pointed out in the decision reported in T. Aswathanarayana v. State of Andhra Pradesh AIR 1959 AP 461, the various Entries in the respective Lists are to be treated as topics or categories of legislation and we must assume that legislative power is granted in regard to any given subject to cover every conceivable aspect of it. Thus an interpretation which is beneficial to the widest possible amplitude must be adopted. We hold that the ambit of the expression “entertainment” cannot be understood by reference to any other Entry. Entry 33 operates on a totally different field and has no relevance in considering the general word like “entertainment”. The reference to Entry 60 List I and Entry 33 List II of VII Schedule to the Constitution of India are more on the field of regulatory laws on the exhibition of cinematograph films and have nothing to do with Entry 62 List II of VII Schedule to the Constitution of India. Thus, we reject the contention of the petitioners as to the scope of Entry 62 List II of Seventh Schedule to the Constitution of India as well as to the arguments based on Constituent Assembly Debates.

84. In Kesavananda Bharati Sripadagalavaru v. State of Kerala [1973] 4 SCC 225, the Apex Court observed that Constitution must be a vehicle of the life of a nation. It is a dynamic idea. It is the visible manifestation of the life of people. It must respond to the deep pulsation for changes from within. In the words of Justice Mathew, the generation of yesterday must know the needs of today. If yesterday is not to paralyse today, it seems best to permit each generation take care of itself- Paragraph 1563- Justice Mathew.

85. Mr. Arvind P. Datar, learned Senior Counsel, submitted that DTH is essentially an activity of service; hence, the same cannot be subjected to entertainment tax. Even applying the pith and substance theory herein and that the transaction having more than two aspects could be taxed under different Legislative Entries, there are no provisions for apportioning of the charges for levying service tax as well as entertainment tax.

86. In the decision reported in Chhotabhai Jethabhai Patel & Co. v. Union of India AIR 1962 SC 1006, the Supreme Court pointed out that under the Indian Constitution, the scheme of division of taxing powers between the States and the Centre is not based on any criterion depending on the incidence of the tax. The classic example is the levy of excise duty imposed by the Parliament and the General Sales Tax by the States. The decisions of the Apex Court reported in Province of Madras v. Boddu Paidanna & Sons [1941] 2 MLJ 607, Central Provinces & Berar Sales of Motor Spirit & Lubricants Taxation Act, 1938 (supra) and CIT v. M.P.V. Sundaramier & Co. [1977] 107 ITR 417, followed in a series of decisions, emphasize on the importance of the doctrine of pith and substance in deciding the scope of each of the Entries in the three Lists in the Schedule. In the decision reported in All India Federation of Tax Practitioners (supra), the Apex Court pointed out “The bottom line of the said doctrine is to look at the legislation as a whole and if it has a substantial connection with the entry, the matter may be taken to be legislation on the topic. That is why due weightage should be given to the words with respect to in Article 246 as it brings in the doctrine of pith and substance for understanding the scope of legislative powers.” Taxes on DTH service is a different subject when compared to taxes on entertainment through DTH.

87. In the above-said decision, the Supreme Court considered the levy of service tax with reference to Entry 97 List I of VII Schedule to the Constitution of India on any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists and Entry 60 List II of the VII Schedule on professions, trades, callings and employments. The Supreme Court held that the word “Profession” in Entry 60 List II of the VII Schedule to the Constitution of India cannot be made synonymous with the word “service” and therefore, service tax would fall under Residuary List I – Entry 97 read with Entry 92C. It pointed out that there is a distinction between tax imposed for the privilege of carrying on any trade or calling on the one hand and the tax on every receipts, that is to say, on every incidence of exercise of the particular trade or calling. Pointing out that the tax on professions, callings, trades and employments and the tax on the service provided by professionals as two aspects of the same item, service tax is a tax on every activity, undertaken by an Architect or a Chartered Accountant. From the point of view of Chartered Accountant, Cost Accountant and Architect, it is an activity undertaken by him based on his performance and skill, but from the point of view of the client, the Chartered Accountant or Cost Accountant is his service provider; hence, it is a tax on services.

88. Explaining what the aspect theory is, the Apex Court pointed out that Entry 60 List II of the VII Schedule to the Constitution of India is a tax on status and on the exercise of the activity, which is a service, service tax is leviable. Privilege of carrying on trade is not the same as the exercise of trade or profession which is “services”, amenable to service tax.

89. In the decision reported in Imagic Creative (P) Ltd. v. Commissioner of Commercial Taxes [2008] 12 STT 392 (SC), the Apex Court considered the aspect theory in the context of service tax liability on advertisement services as well as value added tax. The Supreme Court pointed out that payment of service tax, as also VAT, are mutually exclusive. A transaction or activity may consist of different elements providing for attracting different nature of levy.

90. Thus, applying the law declared by the Apex Court, particularly on the aspect of the interpretation of Entries and the transaction having more than one element, which may attract more than one field of operation on the Entries in the Lists, the pith and substance of the levy under Entry 62 List II of VII Schedule to the Constitution of India being tax on entertainments, as far as levy of entertainment tax is concerned, what is sought to be taxed is not the service provided by the service provider, but the aspect or the content in the service, namely, ‘entertainment’ which is not the same as service itself. In this, we do not find any clash of Entries as had been spoken to by the petitioners herein or overlapping of the fields of legislation to hold that entertainment tax is not leviable.

91. In the decision reported in Kesoram Industries Ltd. (supra) referring to the aspect theory, the Supreme Court pointed out that the transaction may involve two or more taxable events in its different aspects. Merely because the aspects overlap, the same does not detract from the distinctiveness of the aspects. Thus, there could be no question of a conflict solely on account of two aspects of the same transaction being made a subject matter of legislation by two legislatures falling within two fields of legislation respectively available to them. So long as the essential character of the levy is not departed from within the four corners of the particular Entry, the measure of tax or the manner of levying the tax would not have any vitiating effect.

92. In the decision reported in Tata Sky Ltd. (supra), the Punjab and Haryana High Court considered this issue and held that levy of service tax on the providing of service and levy of entertainment tax covered by Entry 62 List II of VII Schedule to the Constitution of India can co-exist and can be harmonised on being different aspects. The transaction of providing broadcasting services and entertainment cannot be treated as an indivisible contract so as to include the aspect of entertainment by holding that the predominant transaction is broadcasting and not entertainment. It further observed that only when the transaction is treated as a composite one, the need for splitting up entertainment from broadcasting would arise. Referring to the aspect theory, the High Court held that tax is on entertainment aspect and the levy of service tax is on the providing of the service.

93. We are in entire agreement with the view expressed by the Punjab & Haryana High Court. So are the views expressed by the Uttaranchal High Court dated 26.7.2010 in the case of Tata Sky Limited v. State of Uttarkhand; the Madhya Pradesh High Court in the case of Tata Sky Ltd. (supra).

94. Keeping the aspect theory in the background, as propounded by the Supreme Court in the decisions referred to above, as far as the pith and substance of entertainment tax on the entertainment content received through DTH is concerned, the levy herein is essentially one on the entertainment and not on the service of providing DTH.

95. Learned Senior Counsel appearing for the petitioners in W.P. Nos. 25986, 25987, 28978 and 28979 of 2011 referred to the decisions reported in RR. Engg. Co. v. Zila Parishad [1980] 3 SCC 330 and State of Rajasthan v. Rajasthan Chemists Association [2006] 155 Taxman 20 (SC) and submitted that the measure of tax must relate to the subject of tax. Since the measure of tax is taken as the gross amount collected, the levy essentially is a service tax. The decision of the Apex Court relied on by the petitioners reported in Rajasthan Chemists Association (supra) relates to a case on the levy of sales tax under the Rajasthan Sales Tax Act on the sale of notified goods on the statutory retail price declared on the package of such goods. The measure with which total turnover was to be determined there was not part of the sale which attracted tax, but it was based on MRP which a wholesaler could charge, which was also fixed by the Control Order. Referring to the scheme of the Act, the Supreme Court held that a maximum retail price as a pack had no rational connection with the taxable sale with the wholesales and that there was no nexus between the measure of levy and subject of levy. Pointing out to the meaning of expression “sale of goods” or price or consideration, element of such “sale of goods” as taxable event, the Supreme Court held that if price was to be the basis for measuring tax, it must relate to actual transaction of sale which was the subject of tax and not to a different transaction that might take place in future at a price. The Supreme Court observed that if the legislation could provide for a measure of tax and subject of tax by substituting any notional value which at no point of time was part of or related to subject of tax, namely, sale of goods that it is related to MRP, then the measure of tax lost its significance altogether, vis-a-vis, the subject of tax. “Substitution of an assumed price or an assumed quantity in the place of actual price/ quantity in a completed transaction of sale takes away the subject matter of tax from the character of sale of goods.” In that context, the Supreme Court held “if Section 4-A is designed to bring a levy into existence, which is divorced from the “sale”, it is beyond the legislative competence under Entry 54 of List II of the Seventh Schedule.”

96. Referring to the decision in the case of Builders Association of India v. Union of India [1989] 2 SCC 645 as well as Bengal Immunity Co. Ltd. v. State of Bihar AIR 1955 SC 661, Govind Saran Ganga Saran v. CST AIR 1985 SC 1041 and Gannon Dunkerley & Co. (Madras) Ltd. (supra), the Supreme Court pointed out that even in the matter of introducing a fiction into the concept of sale, such fiction should be carried to its logical end; that a deemed sale is also subject to the same restrictions and conditions as in a normal sale. Referring to the decision reported in RR. Engg. Co. (supra), the Apex Court pointed out that measure of tax, though not always a determining and conclusive factor to judge the nature of levy, yet, is a relevant consideration. Referring to the decision reported in Hotel Balaji v. State of Andhra Pradesh [1993] Supp (4) SCC 536 the Apex Court held “the measure to which tax rate is to be applied must have a nexus to the taxable event of sale and not divorced from it “.

97. The decision referred to by the learned Senior Counsel does not, in any manner, assist the petitioner’s case. Thus, when the levy operates in two different fields falling for consideration by reason of two different Entries, it is difficult to accept the case of the petitioner herein that the levy under the Entertainments Tax Act is only on the service aspect. The answer to the issue lies in the decision reported in Kesoram Industries Ltd. (supra). The Supreme Court pointed out:

“(3) The nature of tax levied is different from the measure of tax. While the subject of tax is clear and well defined, the amount of tax is capable of being measured in many ways for the purpose of quantification. Defining the subject of tax is a simple task; devising the measure of taxation is a far more complex exercise and therefore the legislature has to be given much more flexibility in the latter field. The mechanism and method chosen by the legislature for quantification of tax is not decisive of the nature of tax though it may constitute one relevant factor out of many for throwing light on determining the general character of the tax.”

98. Referring to the decision reported in Ralia Ram v. Province of East Punjab AIR 1949 FC 81, Sainik Motors v. State of Rajasthan AIR 1961 SC 1480, D.G. Gous & Co. (P) Ltd. v. State of Kerala [1980] 2 SCC 410, Hingir-Rampur Coal Co. Ltd. v. State of Orissa AIR 1961 SC 459, Buxa Dooars Tea Co. Ltd. v. State of West Bengal [1989] 3 SCC 211, Goodricke Group Ltd. v. State of West Bengal [1995] Supp (1) SCC 707 and R.R. Engg. Co. (supra), the Supreme Court pointed out:

“126. (i) a financial levy must have a mode of assessment but the mode of assessment does not determine the character of a tax. The nature of machinery for assessment is often complicated and is not of much assistance except insofar as it may throw light on the general character of the tax. The annual value is not necessarily an actual income but only a standard by which income may be measured. Merely because the same standard or mechanism of assessment has been adopted in a legislation covered by an entry under the Union List and also by a legislation covered by an entry in the State List, the latter legislation cannot be said to have encroached upon the field meant for the former; (SCC pp. 719-20, para 14)”

99. Thus, as far as the present case is concerned, the subject matter of taxation under Entry 62 List II of VII Schedule to the Constitution of India is “entertainment”. As pointed out in the decision reported in Godfrey Phillips India Ltd. (supra), the taxable event or the charge under Entry 62 List II of VII Schedule to the Constitution of India is entertainment itself. Thus, the nature of machinery by which tax is to be assessed, often complicated, is left to the statue law to deal with the same and if at all it has any relevance, it is only at the stage of considering under the particular charging provision of the Act. Thus, the question as to whether entertainment tax levied is service tax or entertainment tax is a matter which has to be considered only by the taxing provision concerned and not by the measure of tax.

100. Learned senior counsel further pointed out to the decision in the case of Purvi Communication (P.) Ltd. (supra) and submitted that the said decision could not be taken as having a bearing on the challenge now made, since the said decision was much prior to the introduction of service tax levy; consequently, the Supreme Court had no occasion to consider the challenge, as had now been made.

101. In the decision reported in Purvi Communication (P.) Ltd. (supra), the Supreme Court considered the legislative competence of the State to levy tax on luxuries including taxes on entertainments, amusements, betting and gambling, falling under Entry 62 List II of VII Schedule to the Constitution of India, with reference to the enactment of The Cable Television Networks (Regulation) Act, 1995 by the Parliament. The Supreme Court pointed out that the cable operator, for the purpose of levy and collection of tax under the Entertainments Tax Act, has direct nexus with the entertainment made, and hence a taxable person. The purpose or the programme shown to the viewers through the cable television network come within the meaning of entertainment; therefore, within the legislative competence of the State Legislature under Entry 62 List II of VII Schedule on such entertainment.

102. The reasoning given by the Supreme Court, in effect, is no different from what was considered in the decision reported in All India Federation of Tax Practitioners (supra) on the applicability of the principles of pith and substance. The fact that the decision was given prior to the introduction of the service tax, does not, in any manner, lose its significance on the rationale of the decision, namely, the emphasis on the theory of pith and substance. Even though Entry 92C List I VII Schedule to the Constitution of India might not have been an issue before the Court in the case of Purvi Communication (P.) Ltd. (supra), yet, the contentions similar to the one taken by the petitioners was already considered by the Apex Court in the decision reported in All India Federation of Tax Practitioners (supra) as well as in the decision reported in Imagic Creative (P) Ltd. (supra).

103. In the light of the above discussion, we hold that the contention of the petitioners as to the scope of Entry 62 List II of VII Schedule to the Constitution of India as covering entertainment in public places, fails. So too, the contention that the tax on entertainment is, in pith and substance, the tax on service, stands rejected. Consequently, the other contentions raised on the basis of aspect theory and the absence of provision on apportionment for levy of service tax and entertainment tax also fails.

Contentions on Article 19(1)(a) and 19(1)(g) of the Constitution of India:

104. Apart from the above-said submissions, Mr. Arvind P. Datar, learned Senior Counsel appearing for the petitioners in W.P.Nos.25721, 27070 to 27072 of 2011, also made submissions on the charging provision failing to specify the taxable event as well as on the unreasonable classification made in violation of Article 14 of the Constitution of India in treating DTH as a class different from Cable TV.

105. Mr. C. Natarajan, learned Senior Counsel appearing for the petitioners in W.P.Nos.25986, 25987, 28978 and 28979 of 2011, made his submissions on the validity of Section 4-I of the Tamil Nadu Entertainments Tax Act as violative of Articles 14 and 19(1)(a) and 19(1)(g) of the Constitution of India. He also submitted that the charging provision in Section 4-I of the Act suffers from a fundamental flaw in not spelling out the subject matter of tax in clear terms and hence, the charge under Section 4-I of the Act fails.

106. Referring to the rate of tax at 30% on the gross charges excluding the service tax fixed under Section 4-I of the Act as confiscatory in character and hence, violative of Article 14 of the Constitution of India, he pointed out that the levy under Section 4-I of the Act is effectively 39%, since it is on the gross charge, which included entertainment tax. When compared to the levy under Section 4-E of the Act, which, again, is exempted under G.O.Ms.No.34 dated 27.3.2008, the user of a DTH has to pay 39% towards tax. Referring to the TRAI recommendations to change over from analog system to addressable system, the present levy, apart from being arbitrary and hence offensive of Article 14 of the Constitution, will have a serious impact on the freedom of expression guaranteed under Article 19(1)(a) of the Constitution of India. Referring to the contentions raised in the counter justifying this discriminatory levy on the ground that DTH provides better and superior quality and service as well as clarity in its content, which is absent in cable TV, he submitted that this, however, does not provide a rational basis for a classification and has no nexus to the object of the Act. The flat rate of 30% throughout the State is unjustified and DTH has been singled out, to promote Arasu TV Corporation.

107. Learned senior counsel placed heavy reliance on the decision of the Apex Court reported in Indian Express Newspapers (Bombay) (P.) Ltd. (supra), particularly to paragraph 45, in support of the contention that right to entertainment is also included in the content of Article 19(1)(a) of the Constitution of India, that a citizen has a right to use the best means of imparting and receiving information. The tax levied must also respect the right guaranteed under Article 19(1)(a) of the Constitution of India.

108. Contending that the classification made on the entertainment through DTH, as a separate class, has no reasonable and rational basis and hence violative of Article 14 of the Constitution of India, he submitted that even though in the decision reported in A. Suresh (supra), the Apex Court upheld the levy of entertainment tax on cable TV operators and rejected the stand of the petitioners on Section 4-E of the Act based on Articles 14 and 19(1)(a) of the Constitution of India, this was only after comparing the rate structure of Section 4-E with Section 4 of the Act, which referred to cinematographic exhibition. The Apex Court found that there was parity of rate of tax at 40% levied under Section 4 and that of cable television under Section 4-E of the Act. Given the fact that the content of entertainment provided under cable TV and DTH is one and the same, there is no rational nexus between the classification of DTH as a separate class to levy tax at 30% and the object sought to be achieved or the objects of the Act.

109. Mr. C. Natarajan, learned senior counsel, also referred to the decisions of the Apex Court reported in Aashirwad Films v. Union of India [2007] 7 VST 714 (SC) and P. Sankara Narayanan v. State of Tamil Nadu [2007] 9 VST 401 (Mad.) in support of the above contention based on Articles 14 and 19(1)(a) of the Constitution of India.

110. He further pointed out to the various rates as given under the various States’ Entertainments Tax Act, that in none of the States, entertainment through the DTH system of multiple channel television is subjected to such hostile treatment and crushing rate. Irrespective of whether the entertainment is offered to rural area or urban area through DTH or cable, the content is one and the same. Pointing out that DTH is a mere phraseology and a means of delivery of the content of entertainment obtained from the same source of broadcasters to the ultimate end of subscribers, the classification and structure of levy under Section 4-I, as a class different from Section 4-E, has no rationality and nexus to the object of the Act. He further pointed out that the respondents have not denied even in their second counter affidavit that the standards of Tariff structure ordered by the Telecom Regulatory Authority of India, under several orders, maintain parity of the rate between the multi-channel television services, be it through analog Cable TV, Cable TV with addressable system through set top box or DTH. Addressable system has been defined by Clause 2(a) of the Telecommunication (Broadcasting and cable services) Inter connection Regulations, to include all such distributors of TV channels, who provide at the premises of the subscribers, a device to decode encrypted or unscripted signals, i.e., all distributors of TV channels including DTH. This Regulation, read with Tariff Order No.1 of 2010 dated 21.7.2010, shows that various stakeholders treated cable TV service and DTH service through addressable system as equals, as far as the entertainment content is concerned. The Statutory Authorities constituted under the Telecom Regulatory Authority of India Act, 1987, recognised this for treatment of tariff parity.

111. In support of his contention on Article 14 violation, he further referred to the Government of India’s Cable TV Network Regulation Ordinance, 2011, emphasizing the need for digital addressable system from analog TV system to promote transparency to check signal piracy and to check evasion of service tax prevalent in analog cable TV operation. The Authority also found the addressable digital form as akin to DTH. Referring to the various explanatory memorandum and the recommendation for implementing the digital Cable TV System, the consultative process that had gone in for giving parity treatment to Cable TV and DTH, learned senior counsel submitted that the counter filed, failed to make out a case for differential treatment meted out to DTH.

112. Countering the submission of the petitioners on the charging provision not providing for the chargeable event in clear terms, Mr. C.S. Vaidyanathan, learned senior counsel appearing for the State, pointed out that looking at the object of the legislation, the heading of the provision and the definition of “entertainment”, there can be no doubt that the charge is on entertainment provided by DTH. The intention of the legislature, through the statement of objects and reasons, thus give a clear picture as to the chargeable event. Learned senior counsel, referred to the decision reported in Gujarat Steel Tubes Ltd. v. Gujarat Steel Tubes Mazdoor Sabha [1980] 2 SCC 593, particularly to paragraph 89, holding that law should be liberally interpreted, in order that the intention is preserved. Learned senior counsel submitted that when the intention on the legislation is clear, it would not be open to the Court to ignore this to hold that the charge fails. In the same breath, learned senior counsel admits that the provision could have been worded in a better manner and there exists a drafting defect. However, when the tax to be levied is on the entertainment contained in the DTH, the charge must be given effect to. Referring to the decision reported in State of Karnataka v. Hansa Corpn. AIR 1981 SC 463, he further submitted that one cannot take a superficial view of the charging provision. The policy enacting the legislation has to be kept in mind. He further submitted that there is always a presumption of constitutionality of a statute and where the language of the provision is not precise as it ought to be, it should be the endeavour of the Court to ascertain the intention of the legislature and go for a construction which would lean in favour of the constitutionality. Thus the imperfection in the drafted Section cannot be a ground for defeating the charge created under the amending provision. The rules of interpretation on a charging provision cannot be a different one from that of any other provision in the Act. Thus a purposive interpretation should be given to the charging provision herein.

113. Learned senior counsel further referred to the decision reported in Municipal Council, Kota v. Delhi Cloth & General Mills Co. Ltd. [2001] 3 SCC 654 that once the legislature is found to possess the required legislative competence to enact a law imposing tax, the charge created under the provision, cannot, in any manner, be defeated by a literal reading of the Section.

114. Mr. C.S. Vaidyanathan, learned senior counsel appearing for the State, referred to Paragraph 17 of the decision of the Apex Court reported in State of Bihar v. Bihar Distillery Ltd. [1997] 2 SCC 453, holding that the Court should recognise the fundamental nature and importance of a legislative process and accord due regard and reference to it.

115. On the question of the challenge made on the provision being discriminatory, hence, violative of Article 14, learned senior counsel reiterated the contentions as given in the counter that in considering the question, one must keep in mind the quality of service and the facility provided through digital communication and the kind of entertainment provided by the channels through DTH, which is not available in cable TV.

116. DTH is a capital intensive one run by big industrial houses, employs few hands to reach the consumers directly; the competition that it throws to the cable TV is totally a different one. The capacity to pay for entertainment through DTH is vastly different from those who opt for cable TV. The present attempt on digitization cannot be taken into consideration in considering the position of law which existed prior to this. There is no unequal treatment of equals in making entertainment through DTH as a class by itself, under the separate charging Section. Thus, going by the socio economic aspect on the employment generated by cable TV and which does not require huge investment, the classification is valid. The classification made on a rational basis and the nexus to the object sought to be achieved thus goes to show that there is no arbitrariness in making the classification. He also referred to the TRAI Regulations and the order of the Competition Commissioner treating cable TV and DTH as different entities.

117. In sum and substance, he submitted that the allegations based on Articles 14 and 19(1)(g) of the Constitution of India and the absence of charging provision lack merit and after the decisions of the Apex Court reported in Purvi Communications(P.) Ltd. (supra) and A. Suresh (supra), the issues raised are no longer res integra.

118. Mr C.S. Vaidyanathan, learned senior counsel appearing for the State, further submitted that on the mere allegation of the tax being excessive, there cannot be a challenge under Articles 14 and 19(1)(a) of the Constitution of India. The provider of the service has nothing to do with the production of the programme and if at all anybody could complain of the same, it could only be the broadcaster. Even viewing the tax levied as a passed-on liability, the petitioners have no locus standi to complain of violation of Article 19(1)(a) and Article 19(1)(g) of the Constitution of India. He further pointed out that the petitioners have not placed any material to substantiate their contention on the excessive nature of the rate of tax.

119. We have carefully considered the above submission in the background of the various decisions cited at the Bar.

120. As for the challenge made based on Article 19(1)(a) of the Constitution of India, we do not find any ground to accept the plea of the petitioners based on the decision of the Apex Court reported in Indian Express Newspapers (Bombay) (P.) Ltd. (supra). Similar such contention, already raised by the Cable TV Operators, was rejected by this Court by judgment dated 30.11.1994 relating to levy of entertainment tax on Cable TV under Section 4-E of the Act in the case of Tamil Nadu Cable TV Organisers (supra) etc. This Court considered the challenge based on Article 19(1)(a) of the Constitution of India extensively and it is not necessary for us to once again burden this judgment by repeating the same once again in extenso. The said decision was affirmed by the Apex Court in the decision reported in A. Suresh (supra). The Apex Court considered the submission of the petitioners that the immediate and direct effect of taxation at the rate of 40% of the petitioner’s collection was to deprive the petitioners of their fundamental right of freedom of speech and expression. The Supreme Court rejected such a contention and pointed out to the nature of activity carried on by the petitioners therein. It pointed out that by means of cables, the TV sets in the homes of the subscribers are linked to their apparatus, so as to enable the subscribers to receive the programme relayed by the telecasters. For this service, the subscriber is charged an amount every month. Thus, the fact remains that the petitioner’s activity is a combination of two rights i.e., business and speech – Articles 19(1)(g) and 19(1)(a) of the Constitution of India. It observed that there is no reason why the business part of it cannot be taxed. “If tax can be levied upon entertainment provided by cinemas, if tax can be levied upon the Press, it is un-understandable why the appellant’s activity could not be be taxed …” Upholding the provisions levying tax at 40%, the Apex Court pointed out that no material was placed before it to substantiate the contention that tax imposed was heavy and was intended to drive them out of the business with a view to help the cinema theatres. Thus the contention made based on Article 19(1)(a) was rejected.

121. The Apex Court further held that the rate of tax was brought down to 20% and even otherwise, the rate of tax at 40% on cable TV under Section 4-E which was also there on cinema theatres is not impermissible, the levy of entertainment tax at the same or lesser rate on cable television could not be held to be bad. It further viewed that the guarantee of freedom of the Press does not forbid the taxation of money or property employed in the publishing business, or the imposition of a reasonable licences and licence fees on trades or occupations concerned with the dissemination of literature or ideas – vide Corpus Juris Secundum (Vol. 16) page 1132.

122. A reading of the above-said decision thus shows that unless the levy is of a confiscatory character, for which an assessee must produce necessary materials, on a general allegation, it is difficult to hold that the levy of tax at 30% of the gross amount violates Article 19(1)(a) of the Constitution of India. The working given by the petitioner (SUN DTH) that the levy would amount to 39% of the collection, however, does not make the levy confiscatory or arbitrary to strike down the provision as violative of Article 19(1)(a) of the Constitution of India.

123. As already seen, the sum and substance of the levy of entertainment tax is on the entertainment. The tax can be imposed as either on the person entertained or the provider of an entertainment. The petitioner does not dispute the fact that it does not, by itself, provide entertainment. The petitioner admits that it has no right to change the content of entertainment or change the entertainment’s scope itself. Being a provider of DTH service, the legislature is competent to choose the person from whom the tax levied on entertainment is to be collected.

124. In the context of the decisions of the Apex Court thus recognising the greater latitude available to the State in fixing the rate of tax at 30%, we do not find any justifiable ground to accept the plea of the petitioners that the levy of 30% tax infringes on the fundamental rights guaranteed under Articles 19(1)(a) and 19(1)(g) of the Constitution of India.

125. The decisions relied on under Article 19(1)(a) of the Constitution of India do not have any relevance as far as the tax levied on entertainment and collected from the provider of entertainment are concerned. In the circumstances, we reject the contention of the petitioner based on Article 19(1)(a) and 19(1)(g) of the Constitution of India.

Charge under Section 4-I of the Tamil Nadu Entertainments Tax Act:

126. One of the questions raised in the writ petition filed in W.P.No.25987 of 2011 is on the fundamental flaw in the charging provision contained in Section 4-I of the Act. The said issue is raised as an additional issue in M.P.No.2 of 2012. The petitioners state that when the charging provision fails to spell out the subject matter of charge, the Section fails. The petitioners state that the charging provision has to clearly spell out the three components of levy, namely, subject of tax, person who is to be taxed, the rate and the measure of tax on which the tax has to be worked out. Even if any one of the components is vague or absent, the charge fails. Shri. C. Natarajan, learned senior counsel appearing for the petitioners in W.P.Nos.25986, 25987, 28978 and 28979 of 2011, pointed out that while Section 4-I of the Act refers to the rate of tax and the measure of tax, it nowhere touches on the subject of levy, namely, entertainment. Thus, except for identifying the person for recovery, rate and measure, Section 4-I of the Act does not identify the important component in a charging provision, namely, the subject of levy. In this connection, he placed reliance on the decisions reported in Govind Saran Ganga Saran v. CST [1985] 60 STC 1 (SC), Mathuram Agrawal v. State of M.P. [1999] 8 SCC 667, Kesoram Industries Ltd. (supra), Federation of Andhra Pradesh Chambers of Commerce & Industry v. State of Andhra Pradesh [2000] 6 SCC 550 as well as Gujarat Ambuja Cements Ltd. v. Union of India [2005] 1 STT 41 (SC). He submitted that it is no doubt true that the Tamil Nadu Entertainments Tax Act seeks to levy tax on entertainment. Given the nature of the DTH operation, the Section must specify which aspect of DTH is now sought to be taxed under the impugned Section. The mere fact of the Act being an enactment made by reason of Entry 62 List II of VII Schedule to the Constitution of India, per se, is not sufficient to fill up the gap or provide for the link absent under Section 4-I of the Act. In the absence of any express link between the subject of levy and the incidence to the measure of levy, the Section fails. While Section 3(3b) defining “entertainment” focuses itself on DTH service as an activity, Section 3(14) defining “entertainment” refers to DTH service, which is nothing but an activity. Given the fact that the subject matter of the levy under the Entertainments Tax Act is ‘entertainment’ only, the tax under Section 4-I of the Act, hence, has to be on the result of the activity, namely, the entertainment provided through the medium of DTH services. Thus the subject of levy and the incidence must have an express link to the levy. Referring to the limitation on the interpretation of a charging provision, he submitted that on a reading of Section 4-I of the Act, it is evident that the charging Section fails to measure up the levy, as referable to the product of the activity, namely, entertainment. Thus, the reference to an activity of providing DTH services is not the same as the entertainment content flowing from that activity. Pointing out to sub-section (2) of Section 4-I of the Act as providing for the machinery on recovery of the tax levied under Section 3(1), he submitted that the measure of levy cannot be taken as suggestive of the nature of tax levied on the taxable event. Referring to the decision reported in Kesoram Industries Ltd. (supra), he drew our attention particularly to paragraphs 104, 105, 106 and 107, that the tax may be measured in many ways, but the distinction between the subject matter of tax and the standard, the amount of tax by which the tax is measured must not be lost sight of. While pointing out to the competency of the legislature to legislate an Act to levy entertainment tax, the charge has to be specific in all aspects. The measure of tax and the recovery provisions, by itself, cannot fill up the gaps seen in the charging provision as regards the taxable incident and where the incidence of tax falls. Referring to the decisions of the Apex Court reported in Govind Saran Ganga Saran (supra), he pointed out that the principles governing the interpretation of a charging provision are not the same as the one that are adopted for understanding or interpreting the provisions relating to machinery or other statutes.

127. He stressed that the well laid down principle that subject is not to be taxed without clear words, cannot be lost sight of, when reading the provision contained in Section 4-I of the Act. The principles relating to liberal construction or literal construction or equitable construction are not available while reading a charging provision. Borrowing the oft-quoted statement from Rowlett, J, learned senior counsel pointed out that in a taxing Act, one has to look only at what is clearly said and nothing is to be read in and nothing is to be implied, and one can only fairly look at the language.

128. Countering the claim of the petitioners, learned senior counsel appearing for the State of Tamil Nadu submitted that the principles of interpreting a charging provision and other provisions in a taxing enactment cannot be different, and in reading a charging provision, superficial view cannot be adopted. Thus, a purposive interpretation has to be given to the charging provision under Section 4-I of the Act. While admitting that there is a defect in the provision contained in Section 4-I of the Act and that the Section could have been happily worded, he nevertheless cautioned that what is sought to be taxed under Section 4-I of the Act is not on the providing of a service but on entertainment, which is the content derived through DTH. He referred to the intention of the legislature in enacting Section 4-I of the Act and looking at the body of the provision, there can be no doubt that the charge is on entertainment. Thus, the provisions are clear enough to reject the claim of the petitioners. In this connection, he placed reliance on the decisions reported in Gujarat Steel Tubes Mazdoor Sabha (supra), at paragraph 38 Hansa Corpn. (supra) and Delhi Cloth & General Mills Co. Ltd. (supra). He also placed reliance on a series of decisions guiding on the principles of interpretation of statutes, namely, at paragraph 10 CWT v. Kirpashankar Dayashankar Worah AIR 1971 SC 2463, (I) at paragraphs 33 and 37 Shree Sajjan Mills Ltd. v. CIT [1985] 23 Taxman 37 (SC) at paragraphs 3, 4 and 5 Administrator, Municipal Corpn., v. Dattatraya Dahankar AIR 1992 SC 1846, at paragraphs 7, 10 and 11 C.W.S. (India) Ltd. v. CIT [1994] 73 Taxman 174 (SC) at paragraph 14 Padmasundara Rao v. State of Tamil Nadu [2002] 37 SCL 425 (SC) and at paragraphs 23, 25 and 27 ITC Ltd. v. CCE [2004] 7 SCC 591.

129. Learned senior counsel appearing for the State further pointed out that given the normal presumption that the provision is a valid one, the endeavour of the Court should be to uphold the charging provision. In order to do so, the Court can even iron out the imperfection in the language used. Consequently, the provision has to be viewed with greater flexibility. Learned senior counsel appearing for the State referred to the theory of pith and substance of tax and not merely to the form. When the Section refers to the gross amount received by the provider of DTH, it is clear that what is sought to be taxed is only entertainment; hence, the incidence of tax is on entertainment.

130. The challenge that the petitioners make herein is that the charging Section does not, in clear and explicit terms, lay down the taxable event under Section 4-I of the Act. Going by the well laid down principles considered in various decisions of the Apex Court relating to the understanding of the components of a charging provision, in the absence of clear terms identifying the chargeable event, it being a serious legal infirmity, the charge cannot be fastened under the existing provisions and hence the charge fails. We agree with the submissions of the learned senior counsels appearing for the petitioners in W.P.Nos.25721 and 27070 to 27072 of 2011, 25987, 28978, 25873 and 25927 of 2011.

131. The petitioners herein are carrying on business as Direct to Home operators in receiving and providing TV signals to the viewers. In the decision reported in Express Hotels (P.) Ltd.(supra), V. State of Gujarat and another), the Apex Court pointed out that once the legislative competence and the nexus between the taxing power and the subject of taxation is established, the other incidents are matters of fiscal policy behind the taxing law. In the decision reported in Aashirwad Films (supra), the Apex Court pointed out that given the field of legislation, the State undoubtedly enjoys a greater latitude in the matter of a taxing statute to pick and choose persons and objects for levying tax. The Apex Court pointed out that it may impose a tax on a class of persons while it may exclude some from the purview of the operation of the Act.

132. Upholding the provisions under Section 4A(4a) of the West Bengal Entertainment-cum-Amusement Tax Act as within the legislative competence of the State Legislature under Entry 62 List II of Schedule VII to the Constitution of India, in the decision reported in Purvi Communications (P.) Ltd. (supra), the Supreme Court pointed out that what are taxed are the “entertainments”, which is very much within the ambit of Entry 62 List II of Seventh Schedule to the Constitution of India. Observing that it is within the legislative competence of the State to choose the persons from whom the tax levied on entertainment is to be collected, the Supreme Court referred to the decision of the Constitution Bench reported in Western India Theatres Ltd. v. Cantonment Board [1959] Supp (2) SCR 63 and pointed out that the existence of means of providing entertainment would be sufficient to support a law imposing tax thereon and that, means of providing entertainment provides the nexus between the taxing power and the subject of tax.

133. In the decision reported in Cope Brandy Syndicate v. IRC [1921] 1 KB 64 at p 71, Rowlatt, J held as follows:

In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

134. Dealing with the components which enter into the concept of taxing provision, in the decision reported in Govind Saran Ganga Saran (supra), the Apex Court pointed out:

“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.”

135. In the decision reported in Kesoram Industries Ltd. (supra), the Constitution Bench of the Apex Court referred to the decision reported in Ralia Ram (supra) that a measure adopted could not be identified with the nature of the tax levied. In paragraph 105 of the judgment, the Apex Court extracted the principles of construction from Justice G.P. Singh’s Principles of Statutory Interpretation (8th Edition 2001), which may usefully be extracted herein too, as under:

“105. Justice G.P. Singh in Principles of Statutory Interpretation (8th Edn., 2001) while dealing with general principles of strict construction of taxation statutes states:

A taxing statute is to be strictly construed. The well-established rule in the familiar words of Lord Wensleydale, reaffirmed by Lord Halsbury and Lord Simonds, means: The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words. In a classic passage Lord Cairns stated the principle thus: If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute. Viscount Simon quoted with approval a passage from Rowlatt, J. expressing the principle in the following words: In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. (at p. 635)” It observed, “A tax has two elements: first, the person, thing or activity on which the tax is imposed, and second, the amount of tax.” While the amount may be measured in many ways, it emphasized that the distinction between the subject-matter of a tax and the standard by which the amount of tax is measured must not be lost sight of. Thus, it observed:

“It is true that the standard adopted as a measure of tax may be indicative of the nature of the tax, but it does not necessarily determine it. The nature of mechanism by which the tax is to be assessed is not decisive of the essential characteristic of the particularly tax charged, though it may throw light on the general character of the tax.”

136. Section 4-I of the Tamil Nadu Entertainments Tax Act was inserted by Amendment Act 25 of 2011 with effect from 27th September 2011. Although we have already extracted the charging Section under Section 4-I of the Act at the beginning of this judgment, for convenience sake and ready reference, we need to extract it herein. Section 4-I of the Act reads as under:

“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 relation to the tax payable under sub-section (1).”

137. A reading of Section 4-I of the Act, which is the charging Section, shows that it is a code by itself. It begins with a non-obstante clause that the provisions under Section 4 and Section 7 have nothing to do with the charge under Section 4-I ‘Tax on Direct-to-Home Service”. Section 4 of the Act is concerned about tax on payment for admission to entertainment provided through any cinematograph exhibition in theatres. Section 7 of the Act is concerned about the manner of payment of tax. Thus, the levy under Section 4-I of the Act has nothing to do with Sections 4 and 7 and the charge under Section 4-I is distinct from Section 4 of the Act; Sub Section (2) to Section 4-I of the Act states that the tax levied under Sub Section (1) shall be recoverable from the Proprietor. As already noted Section 4-E of the Act is the only other charging provision dealing with television exhibition. Section 3(3B) of the Act defines “Direct-to-Home Service” to mean 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. Entertainment is defined in Section 3(4) of the Act, to mean among other enumerated forms as “…. 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.”

138. As in Section 4-I, Section 4-E also begins with a non-obstante clause to exclude the operation of Sections 4 and 7 of the Act. Thus, Cable TV, being a television exhibition with the type of antenna with a cable network attached charged under Section 4-E, Section 4-I of the Act, concerned with DTH, does not exclude the operation of Section 4-E and the Section is silent on this aspect. Thus, after excluding the operation of Sections 4 and 7, Section 4-I of the Act proceeds to state that the tax shall be levied at 30% of the gross charges received by the provider of the DTH. The gross charges received shall be exclusive of service tax. Thus all that the Section provides herein is the rate of tax and the measure of tax and nothing beyond. As pointed out in the decisions referred to above, even though the standard adopted as a measure of levy may be indicative of the nature of the tax as a direct or indirect tax, yet, it does not necessarily determine it. If one has to read the heading and the purpose of the amendment and the measure of tax as indicative of the chargeable event into the Section as has been contended by the State, this will amount to judicial legislation of introducing a vital link absent in the charging provision for the sake of sustaining the charge. We do not approve this line of reasoning of the State and what the legislature has failed to do, it is not for the Court to supply it. While we do not deny that on a challenge made to a provision of law, the Court must make every endeavour to uphold the constitutionality of the provisions, we are also conscious of the law that no citizen shall be charged with any liability in the absence of clear charging provision in a taxing enactment. Thus, with the defects pointed out, the charge fails and as had been held in several decisions, no word can be added or subtracted from a charging provision and the Section has to be read as it is. This, we hold so by reason of the defect one notices in the definition of entertainment under Section 3(4) of the Act. The definition, at best, can only denote the kind of service provided and nothing beyond. If the Section has been worded explicitly to indicate the taxable event and the incidence of tax, then as had been done in the other Courts, certainly there could be no difficulty in upholding the charge. The defective drafting of the Section in not stating the taxable event, thus compels us to agree with the petitioners that as an imperfect charging provision, Section 4-I of the Act cannot be enforced.

139. Mark the difference in the language of the provisions under the Delhi Entertainments and Betting Tax Act which defines “entertainment” in Section 3(i), “payment for admission” under Section 3(m) and the charging provision under Section 7:

“Section 3(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;

Section 3(m) payment for admission includes –

(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 or 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;

Section 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, notify in this behalf, which shall be collected by the proprietor and paid to the Government in the manner prescribed.”

140. Learned Senior Counsel appearing for the State placed great emphasis on the collection of tax from the provider of DTH as indicative of the levy being on entertainment, that the object of the legislation clearly throws light on what is sought to be taxed and that the interpretation of the charging provision cannot be different from that of the machinery provided.

141. It is worthwhile herein to remember what was held in the decision reported in Cope Brandy Syndicate (supra). In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

142. The law declared is an evergreen principle, having relevance even to this date in the matter of understanding the charging Section. In the decision reported in Mathuram Agrawal (supra), cited by the learned senior counsel appearing for the Petitioners in W.P. Nos. 25986, 25987, 28978 and 28979 of 2011, the Apex Court pointed out that it is impermissible to assume any intention, particularly in a charging provision where the statute should convey clearly and unambiguously the three components of tax law, namely, subject of the tax, person who is liable to pay the tax and the rate at which the tax is to be paid and the measure of tax. If there is any ambiguity regarding any one of its ingredients in a taxing statute, then it is for the legislature to do the needful in this regard to fill the lacuna, so that the charging provision could stand for its enforceability.

143. As has been observed by the Apex Court in the decision reported in Gujarat Ambuja Cements Ltd. (supra), the point at which the collection of tax is to be made, is a matter of legislative convenience and part of the machinery for realisation and recovery of tax. The manner of collection has been described as “an accident of administration; it is not the essence of the duty”.

144. As rightly pointed out by Mr. C. Natarajan, learned senior counsel appearing for the writ petitioners in W.P. Nos. 25986 and 25987 and 28978 and 29979 of 2011, Section 4-I(2) of the Act does not speak on the essential nature of the tax and the person on whom the incidence falls. The sub-section speaks about the machinery for recovery from the provider of the DTH. Given the complexity of the diverse elements in the field of levying tax, the legislature has the discretion not only to determine what would be taxed, but also the manner in which the tax may be imposed. This includes the machinery specified for recovery too.

145. None of the decisions relied on by the State relate to the issue relating to a charging provision in the taxing enactment. The intention of the legislature in a taxing statute is to be gathered from the language of the provisions and it is not possible to assume any intended charge and incidence of tax by the economic results sought to be obtained by enacting the provision like Section 4-I of the Act.

146. In the decision reported in CIT v. B.C. Srinivasa Setty [1981] 5 Taxman 1 (SC), the Supreme Court pointed out to the qualitative difference between the charging provision and a computation provision and ordinarily, the charging provision’s tariff is not affected by the construction of the computation provision. While pointing out that the taxing statute has to be construed strictly, in the decision reported in Goodyear India Ltd. v. State of Haryana [1990] 2 SCC 71, the Apex Court observed that though the standard of the measure at which tax is levied may be a relevant consideration in considering the nature of tax, it is not a conclusive consideration. Referring to the decision reported in Goodricke Group Ltd. (supra), in the decision reported in Kesoram Industries Ltd. (supra), the Apex Court held that “a 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 with two fields of legislation respectively available to the two. “Referring to the decisions reported in Ralia Ram (supra), Kunnathat Thathunna Moopil Nair v. State of Kerala AIR 1961 SC 552 and Ajoy Kumar Mukherjee v. Local Board of Barpeta AIR 1965 SC 1561, the Apex Court pointed out that the validity of cess upon the land quantified by reference to the quantity of its produce was held to be a levy on the land and hence constitutional. This, however, would not become excise duty on manufacture and production yielded of the land. Applying the above law, there are two aspects about the DTH service, namely, one of providing the service and the other, the content or result of service provided, namely, “entertainment”. Insofar as the tax on entertainment is concerned, the same is referable to the State List while, the transaction of providing a service is referable to the Union List under Entry 92C on levy of service tax. Thus, in understanding the charging provision contained in Section 4-I of the Act, in the context of Entry 62 List II of VII Schedule to the Constitution of India, it is of fundamental requirement that the Section must specify which aspect of the transaction is charged to tax under Section 4-I of the Act. If the legislature has failed to clarify by use of an explicit and clear language, the benefit thereof must go necessarily in favour of the tax payer.- Refer Federation of Andhra Pradesh Chambers of commerce & Industry (supra).

147. Thus, as is evident from a reading of the Section, except for giving the rate of tax and the measure of tax, sub section (1) of Section 4-I speaks nothing about what the taxable event is and where the incidence of tax would fall. As already seen in the preceding paragraph, a charging Section must be clear in its intent and must provide for all the components, namely, a taxable event, the taxable person, the rate and the measure of tax. If any one of these components is absent in the charging provision, then the charge fails. The use of the words in the Section that “there shall be levied and paid to the State Government”, cannot be construed as referable to a charge created under the said provision to tax the entertainment. As had been held by the Supreme Court, ‘levy’ has to be construed as referable to the process of assessment and not to a taxable event or the person on whom the levy is made. So too, the reference to the gross charges received by the provider of a Direct to Home Service, as a measure of tax, cannot be construed as specifying the chargeable event or where the incidence of tax falls. The entire phrase “gross charges excluding the service tax received by the provider of Direct to Home Service” is given only to indicate the measure of tax, namely, the gross charges received by the provider of Direct to Home Services and this has nothing to do with showing the charge and the incidence of tax in clear and explicit terms with certainty. Thus, going by the well laid down principles in the case of Cope Brandy Syndicate (supra), which has been consistently followed ever since the time of its pronouncement, there can be no doubt that the charging Section does not go for an interpretative process to search for where the chargeable incident is provided and on whom the liability falls. There is no equitable consideration while construing a charging provision. The charging Section has to be explicit, certain and clear, in order to bind the subject. In the decision reported in M.P. Cement Manufacturers’ Association v. State of MP [2004] 2 SCC 249, the Apex Court pointed out “it is not for the Court, particularly when legislative clarity is required since the statutory provision imposes a tax, to untangle the legislative confusion.” No doubt, while considering a challenge to the constitutionality of a statutory provision, the Court will lean in favour of upholding its validity. But this does not mean that in this process of leaning, to borrow the phrase from the above decision, that the Court must “perform verbal gymnastics” to fill up the gaps by bringing the heading into the text of the Section to overcome a patent omission in not specifying the charge and where the incidence falls. As has been repeatedly held, one has to simply adhere to the words of the statute and the question of the Court undertaking any ironing out of the deficiencies does not arise.

148. The contention that the incidence of tax can be presumed by reference to the objects or the Heading, again deserves no consideration and has to be rejected by reason of the decisions referred to above. If the argument of the State is to be accepted, then there is no necessity at all to have any separate Section for the different entertainments to speak on the charge, but rest content with just the heading alone to indicate the charge created under the Act to the various forms of entertainment sought to be taxed under the Act.

149. Thus the heading to the Section cannot do the act of filling up of the gap and the lacuna in the charging Section to provide for the taxable event. The Heading to the Section indicates what the Section is about. As such, at best, it may give us a clue as to what the Section proposes to say. Beyond that, one cannot borrow the terms under the Heading to supply all those omissions, which, out of sheer statutory necessity, ought to have been specified in clear terms that the Section is confusion-free in all its intent and purpose, to levy tax on the entertainment provided through DTH.

150. Touching on the role of headings to the Section, in the decision reported in Frick India Ltd. v. Union of India [1990] 1 SCC 400, the Apex Court held as follows:

“8. It is well settled that the headings prefixed to sections or entries cannot control the plain words of the provision; they cannot also be referred to for the purpose of construing the provision when the words used in the provision are clear and unambiguous; nor can they be used for cutting down the plain meaning of the words in the provision. Only, in the case of ambiguity or doubt the heading or sub-heading may be referred to as an aid in construing the provision but even in such a case it could not be used for cutting down the wide application of the clear words used in the provision. Sub-item (3) so construed is wide in its application and all parts of refrigerating and air-conditioning appliances and machines whether they are covered or not covered under sub-items (1) and (2) would be clearly covered under that sub-item. Therefore, whether the manufacturer supplies the refrigerating or air-conditioning appliances as a complete unit or not is not relevant for the levy of duty on the parts specified in sub-item (3) of Item 29-A. “

What holds good for the heading holds good for the objects and reasons leading to the enactment of Section 4-I of the Act. If the contention of the State is to be accepted, it would amount to the Court supplementing the charging Section by including the expression which the Section does not contain. The charging provision has to be tested on the strength of what is explicitly stated and it is not for the Court to supply the missing links to make it workable.

151. The validity of levy of entertainment tax on DTH came up for consideration before the Punjab and Haryana High Court in the decision reported in Tata Sky Ltd. (supra), Delhi High Court in Bharti Telemedia Ltd. (supra), Madhya Pradesh High Court vide Tata Sky Ltd. (supra), Uttar Pradesh High Court in W.P. No. 1819 of 2009 etc. batch dated 20.07.2012 Sun Direct TV (P.) Ltd. (supra) and Allahabad High Court vide order dated 20.07.2012 made in Writ Tax No. 1819 of 2009 Sun Direct TV (P.) Ltd. (supra).

152. As far as the decision reported in Tata Sky Ltd. (supra) is concerned, the Punjab and Haryana High Court held that the expression “entertainment” in Punjab Entertainment Duty Act of 1955 is used in a very wide sense to cover entertainment of any kind. Independent of service tax on broadcasting service, which is a different aspect of the transaction, levy of entertainment duty on entry aspect was thus held as fully justified. Thus, the High Court held that levy of entertainment duty under Section 3(3C) of the Punjab Entertainment Duty Act, 1955 for providing entertainment by broadcasting signals on TV sets is intra vires the powers of the State Legislature. A reading of the judgment shows that the question that came up for consideration therein was as to whether the levy of entertainment tax is covered by Entry 62 List II of VII Schedule to the Constitution of India or is a tax on broadcasting service covered by Entry 92C of List I of VII Schedule to the Constitution of India. After referring to the decisions of the Apex Court on the principle of interpretation on the scope of taxing entries, the Punjab and Haryana High Court pointed out that the tax on DTH under the Punjab Entertainment Duty Act is on entertainment aspect and the calculation of tax is on the basis of charges recovered for providing entertainment. The provisions under the Punjab Entertainment Duty Act under Section 3(3C) reads as under:

“(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 10 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.”

153. The provisions of the Delhi Entertainments and Betting Tax Act, 1986 and that of other States are not clear in what the charging provision seeks to tax. The respective provisions, as extracted in the various judgments, clearly point out the marked difference in the language used there, from the one contained in Section 4-I of the Tamil Nadu Entertainments Tax Act.

154. The question raised before the Delhi High Court in the decision reported in Bharti Telemedia Ltd. (supra) related to the levy of entertainment tax on the entertainment provided through DTH. After referring to the decision of the Supreme Court on the principles concerning interpretation of taxing entries in the Union List and the State List, from the standpoint of legislative competence, the Delhi High Court held that the programmes shown through DTH come within the meaning of “entertainment” and therefore within the legislative competence of the State Legislature to levy tax under Entry 62 List II of VII Schedule to the Constitution of India. On an analysis of the provision, the Delhi High Court held that the charging provision thus makes it clear that the levy is on entertainment; that the tax levied under the Delhi Entertainments and Betting Tax Act is neither on the provider of the DTH service, nor on the DTH service, nor on the person entertained; that the incidence of tax would fall on the ultimate subscriber; tax may have to be collected by the DTH service provider and paid to the Government. These are matters concerning the incidence and measure of tax dues, irrelevant for determining the subject matter of the tax. Comparing it with the viewing of films in a theatre on payment for a cinema ticket or a theatre ticket, the Delhi High Court observed that the drawing rooms have taken the place of cinema hall or theatre and the cable TV or DTH connection has taken the place of paper ticket. Each connection to a subscriber is an admission for entertainment. Thus, a licensed DTH service provider is only a collector of an entertainment tax on behalf of the Government. He is not the receiver of tax nor is a service provided by him, viz., the subject matter of entertainment tax. The tax is on the activity of entertainment. The true nature and character of the tax, therefore, is within the legislative field of Entry 62, List II of VII Schedule to the Constitution. Hence, there is no scope for confusing the levy of service tax under Entry 92C List I for the levy under Entry 62 List II, namely, entertainment tax. They are two separate distinct taxable events in respect of each of the two aspects. In respect of the service aspect, the taxable event is same through DTH system, whereas, in respect of entertainment tax aspect, the taxable event is the entertainment in the content.

155. Thus, a comparative reading of the provisions of the Tamil Nadu Entertainments Tax Act in Section 4-I and the provisions of other States, which were considered by the Punjab and Haryana, Delhi, Uttar Pradesh and Madhya Pradesh High Courts, show a marked difference that while the Tamil Nadu Act stops with the measure of levy and the rate of tax and there is no chargeable event specified, the other States’ enactments show the comprehensive definition on entertainment as well as the charging Section levying entertainment tax on entertainment through Direct to Home (DTH) made through cable television network or addressable system or otherwise.

156. Thus, with the total absence of a taxable event and the incidence of the tax to fall on any particular person being absent and the provisions of the Tamil Nadu Act thus differently worded, we reject the reliance placed by the State on the decisions of the other High Courts, contending that the issue on the levy of entertainment tax on DTH, now raised in these petitions, are covered by the decisions of the other High Courts.

157. The Supreme Court, in the decision reported in Kesoram Industries Ltd. (supra), pointed out as follows:

“106. The judicial opinion of binding authority flowing from several pronouncements of this Court has settled these principles: (i) in interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature’s failure to express itself clearly. (See Justice G.P. Singh, ibid., pp. 638-39.)”

158. The defect in the said Section in not providing for the taxable event and on whom the incidence of tax falls, certainly makes Section 4-I an incomplete weak provision as a charging Section and hence, with defects writ large, the entire charge fails. In fact, as rightly pointed out by Mr. C. Natarajan, learned senior counsel, the definition of “DTH services” under Section 3(3B)- 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, may pass the test as a good definition for the purpose of service tax levy. The definition of entertainment under Section 3(4) referring to DTH services, in all probability, may refer to the service aspect rather than to the content of entertainment. Thus whatever be the strength of Section 3(3B), the definition of entertainment in Section 3(4) of the Tamil Nadu Entertainments Tax Act, insofar as inclusion of DTH service on the entertainment aspect of DTH is concerned, is again imperfectly worded and makes no reference to the aspect of DTH service required for inclusion under this definition. Thus, even though we have upheld the power of the legislature to enact law to tax entertainment through DTH, in the absence of clear and explicit words to indicate the taxable event and on whom the incidence falls under Section 4-I of the Act, the charge fails. Although the State contended that the heading to the Section provides the taxable event, we fail to understand how the heading can supplement the absence of a chargeable event being prescribed in the text of the Section. If heading alone would be sufficient to act as a charging provision, the Act could have stopped just with a heading alone with a table prescribing the rate of tax and the measure of tax.

159. In the light of the decision of the Apex Court referred to above, we reject the contention of the State that the principles of interpretation of a charging provision have to be the same as regards other provisions.

160. It is a matter of record that even prior to the introduction of entertainment in DTH as a subject matter of levy under the Tamil Nadu Entertainments Tax Act, providing DTH service was brought within the purview of the service tax net under Section 65 (105) of the Finance Act 2001, with effect from 16.7.2001.

161. Section 65 sub-clause (105 zk) defines ‘taxable service’ from broadcaster to customer as taxable service, any service provided or to be provided to a client by broadcasting agency or client or organisation in relation to broadcasting in any manner. The measure of taxation therein is the gross amount charged by the service provider. There is no dispute on the fact that the competency to legislate flows from Articles 245 and 246 of the Constitution of India.

162. DTH service has two aspects, one is providing of service and the other is providing of entertainment. We have seen in the preceding paragraphs that the levy of service tax as well as entertainment tax can co-exist and both are mutually exclusive, taxable under Entry 92 C List I and Entry 62 List II of VII Schedule to the Constitution of India respectively.

163. With all the distinct legislative field of activities, we may have to see what Section 4-I seeks to tax, particularly in the context of the absence of a taxable event specified.

164. A reading of Section 4-I of the Act shows that what is sought to be taxed herein appears to be a tax essentially on the amount collected by the provider of the DTH services. The definition of DTH services shows that it is a distribution of multi-channel television programme by providing television signals by using a satellite system direct to the subscriber’s premises without passing through an intermediary, such as cable operator. Yet, with this definition, it is difficult to read into the Section, ‘entertainment’ as a chargeable event to uphold the levy as one saved by Entry 62 List II of VII Schedule to the Constitution of India. The present form of Section 4-I deals more on the side of service tax rather than as an enactment for taxing entertainment to fall under Entry 62 List II of VII Schedule to the Constitution of India.

ARTICLE 14:

165. Shri. C. Natarajan, learned senior counsel appearing for the writ petitioners in W.P. Nos. 25986, 25987, 28978 and 28979 of 2011, also questioned the amended provisions as violative of Article 14 of the Constitution of India. He pointed out that the differentiation made being one on technology, the same fails to have any reasonable relationship with the object of the Act sought to be achieved. Commenting on the averments in the counter that there is no case made out by the petitioners in treating DTH as different from cable TV, he submitted that the entertainment through DTH, though based on the technology development, in the absence of any entertainment difference shown in DTH, Article 14 stands attracted to the case and hence, the Section has to be held as discriminatory in character. Referring to the reliance placed on the decisions of the Supreme Court reported in Express Hotels (P.) Ltd. (supra). Elel Hotels & Investments Ltd. (supra), he submitted that these decisions have no relevance in deciding the issue on entertainment tax and are distinguishable. He submitted that with all the technology difference, the tax is on entertainment. Thus, when the broadcasters and programmes are one and the same and subscribers are all similarly situated, as far as entertainment is concerned, the tariff order under TRAI treats them as forming one single class and there is no basis for classifying DTH with different rate structure. Referring to sub section (2) of Section 4-I, he submitted that the facility of recovery from the provider of DTH cannot provide a rational basis for the differential treatment contemplated under Section 4-I of the Act. While luxury and entertainment may provide classification, the levy being entertainment, there could be no rationality of treating the same class – cable TV and DTH, as distinct from each other for a differential treatment. Given the fact that the subscriber of Cable TV and DTH derive the same entertainment content from one source, a distribution through satellite and analog system does not change the content of entertainment. Thus, the object of the Act being to tax “entertainment”, there could be no legal base for a classification, as has been done under the impugned provision. The number of channels provided and the technical refinement in telecasting, however matters very little while considering the subject matter of taxation, viz., entertainment. Referring to the tariff notification of Telecom Regulatory Authority of India, he pointed out that given the similarity in the content of entertainment offered, TRAI has not made any such distinction in the matter of tariff fixation too. Thus, with all attributes of entertainment in cable TV being there in DTH, the claim of the State based on technical difference fails to take note of this fundamental aspect in bringing the amendment to charge the entertainment. Thus, even assuming that the Section could stand as it is, it fails to satisfy the test of Article 14 of the Constitution. Touching on the submission of the State on the aspect of segment of the public covered by DTH and the principle of ability and capacity to pay having relevance in considering the differential treatment, learned senior counsel submitted that the State does not deny the source content and the broadcasters are the same for cable TV and DTH; the content that goes for telecasting does not undergo any change or differ on account of socio-economic and geographical aspects, nor the language a good basis for differential tax treatment; the fact that the State has the absolute authority to fix the rate of tax, by itself, would not be the end of the enquiry on Article 14 of the Constitution of India.

166. Referring to the decision reported in Aashirwad Films (supra) holding “the extent of reasonability of any taxation statute lies in its efficacy to achieve the object sought to be achieved by the statute”, he submitted that the classification made only on the basis of the technology difference without anything more, is ex facie arbitrary, particularly when the State has not proved that in imposing different rate of tax, the State intends to achieve an avowed object envisaged under Part IV of the Constitution of India. Referring to the decision of the Supreme Court reported in State of Karnataka v. Drive-in-Enterprises AIR 2001 SC 1328 that luxury of watching the movie was considered as an attribute of enjoyment and that the levy is on the person entertained, who takes the car inside the theatre and watches the film, AND NOT on the admission of the car or motor vehicle, learned senior counsel submitted that the pith and substance of the levy under DTH and cable TV being on one and the same entertainment, the differential treatment under Section 4-I of the Act is violative of Article 14; the theory propounded by the State on the ability to pay and the capacity to pay, fails. Thus the manifestly excessive rate of tax is also arbitrary and offensive of Article 14 of the Constitution of India.

167. Mr. C. Natarajan, learned Senior Counsel appearing for the Writ Petitioners referred to the decisions reported in Shashikanth Laxman Kale v. Union of India [1990] 4 SCC 366; Arya Vaidya Pharmacy v. State of Tamil Nadu [1989] 73 STC 346, State of U.P. v. Deepak Fertilizers & Petrochemical Corporation Ltd. [2007] 7 VST 535 (SC) Mohta & Co. v. Visvanatha Sastri AIR 1954 SC 545, P. Sankara Narayanan (supra), Drive-in-Enterprises (supra) and pointed out that the consistent view of the Court is that the State, undoubtedly, enjoys a greater latitude in the matter of taxing statute. However, the classification in arbitrary rate and the extent of reasonableness lie in showing a nexus with the object sought to be achieved. He also referred to the decisions reported in Federation of Hotel & Restaurant Association of India (supra), Express Hotels (P.) Ltd. (supra) and Elel Hotels and Investments Ltd. (supra), only to point out the reasoning of the Supreme Court in upholding the classification, the nexus between those classifications and object sought to be achieved, vis-a-vis the object of the Act.

168. Learned senior counsel appearing for the State submits that the differential treatment made by treating DTH as a class, is based on the principle of ability and capacity to pay. Referring to the comparative study made, of the cable TV and DTH, as discussed in the counter, learned senior counsel pointed out that going by the decisions of the Apex Court laying down the law that tax enactments are not immune from the challenge made based on Article 14, referred to the Competition Commissioner’s order in Case No. 36/2011 in the case of Kansan News (P.) Ltd. v. Fast Way Transmission (P.) Ltd. [2012] 114 SCL 82  and others dated 03.07.2012 and submitted that as per the Director General’s report, the market players in cable TV, DTH, IPTV and Terrestrial TV are different players and one is not the perfect substitute for the other. In terms of technology, price, reach, network and quality, cable TV is different from DTH. The Commissioner had noted that cable TV is a distinct mode and is not a perfect substitute of other platforms of TV channel transmission such as DTH, IPTV, etc. The classification made has rational basis with substantial distinction and nexus to the object of the enactment. Thus he submits that there are no merits in the contention based on Article 14 of the Constitution of India.

169. Learned senior counsel appearing for the State pointed out that in considering the issue on Article 14, one has to look at the nature of the industry and the technology development therein. From cable television network, advanced technology has taken one to receipt of signals through satellite. He contended that cable TV operators generated substantial employment to persons apart from providing self-employment to several cable operators. Pointing out that though the quality of service and the number of channels offered in Cable TV might not be of high definition as in the case of DTH, yet, the target group, which are catered by the cable operators, cannot be, in any manner, ignored. The niche provided by channels through DTH is certainly not available in a cable TV system. Thus DTH is a class apart from the cable TV which are run by large industrial houses. DTH is capable of employing few, which reaches the consumers directly. The nature of competition between DTH and cable TV is totally different; so too the subscriber’s capacity to subscribe to DTH is vastly different from persons who opt for cable TV. He further pointed out that the industry, trade, the State and the Centre have treated cable TV and DTH as different groups. Going by the present effort for digitisation, it is clear that difference that exists stands as an ample testimony to the class differentia between cable TV network and DTH. In the circumstances, entertainment through DTH and Cable TV are different and there is no unequal treatment of equals. The classification made thus has nexus with the object, it being to raise money for use by the State. Judging by the socio-economic aspect too in providing an employment to many a person, cable TV stands apart from DTH. Cable TV is operated by small investors and small business houses and does not require huge investment.

170. Referring to the decisions reported in State of Bombay v. United Motors (India) Ltd. AIR 1953 SC 252 at paragaraph 29 and British India Corpn. Ltd. v. Collector of Central Excise AIR 1963 SC 104 at paragraphs 11 and 12, he submitted that the legislature has the authority to make law for a definite class, taking into consideration the ability and capacity to pay tax. Thus, classification has been recognised as a legally permissible method.

171. In this connection, he referred to the decisions reported in Bhagatram Rajeevkumar v. CST [1995] Supp. (1) SCC 673; Real Food Products Ltd. v. Andhra Pradesh State Electricity Board [1995] 3 SCC 295 at paras 7 & 9 and at Paras 24 and 27; State of Jharkhand v. Tata Cummins Ltd. [2006] 4 SCC 57 at para 16; Mohan Das N.Hegde v. State of Karnataka [2005] 4 SCC 64 at para 6; Shivananjundappa v. State of Karnataka AIR 1992 SC 231; State of West Bengal v. Rash Behari Sarkar [1993] 1 SCC 479 at para 4; Kamla Palace (supra); Malwa Bus Service (P) Ltd. (supra) and Kerala Hotel & Restaurant Association (supra)

172. As far as this issue based in Article 14 is concerned, in the decision reported in Kerala Hotel & Restaurant Association (supra), the Supreme Court observed “no economic measure has yet been devised, which is free from all discriminatory impact and in such a complex arena, when no perfect alternatives exist, the Court does well not to impose too vigorous a standard of criticism under the equal protection clause while reviewing fiscal enactments.”

173. Given the wide variety of diverse economic criteria that go into the formulation of a fiscal policy and the wide latitude enjoyed by the legislature in the matter of selection of persons, subject-matter, events, etc. for taxation, the tests on the vice of discrimination in a taxing law are less rigorous – Federation of Hotel & Restaurant Association of India (supra). Even with the inherent complexity of the fiscal adjustment of diverse elements and a larger discretion recognised in the legislature to pick and choose objects of taxation, the Apex Court pointed out “The classification must be rational based on some qualities and characteristics which are to be found in all the persons grouped together and absent in the others left out of the class. But this alone is not sufficient. The differentia must have a rational nexus with the object sought to be achieved by the law. … The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience.”

174. Thus, in the decision reported in S.K. Dutta, ITO v. Lawrence Singh Ingty AIR 1968 SC 658, the Apex Court held that a taxation law will be struck down as violative of Article 14 of the Constitution of India, if there is no reasonable basis behind the classification made by it or if the same class of property, similarly situated, is subjected to unequal tax treatment. If there is no reason for the classification, then also the law will be struck down. Thus the palpable arbitrariness in a provision, lack of intelligible differentia and the rational nexus to the object of the Act are often considered as touchstones on which the challenge based on Article 14 has to be considered by the Court.

175. The question raised based on Article 14 herein with reference to the levy of the entertainment tax demands a treatment a little different from how the challenge based on Article 14 was considered by the Apex Court in matters falling under tax enactments referring to Entries other than Entry 62 List II of VII Schedule to the Constitution of India. Three decisions of the Apex Court, in this context, need to be seen:

(i) Spences Hotel Pvt. Ltd. v. State of West Bengal [1991] 2 SCC 154,

(ii) Godfrey Phillips (I) Ltd. (supra)

(iii) Aashirwad Films (supra).

176. While considering the above guidelines generally taken as the guiding principles in the matter of considering the challenge raised based on Article 14, in the decision reported in Spences Hotel (P.) Ltd. (supra), the Supreme Court laid down the finer nuances involved in considering the challenge based on Article 14. It pointed out “Taxation will not be discriminatory if, within the sphere of its operation, it affects alike all persons similarly situated.” Thus, “whether a particular tax is discriminatory or not must necessarily be considered in light of the nature and incidence of that particular tax and cannot be judged by what has been held in the context of other taxes except the general propositions. The precedents relating to property taxes such as land tax, building tax, plantation tax, and even income tax or a service tax will not be of direct relevance to a luxury tax, as it is neither a property tax, nor an income tax but a tax on the provision for luxury. In case of tax on provision for luxury different aspects peculiar to the tax have to be borne in mind. … What, exactly is meant by equality in taxation may have to be looked at from different angles in different kinds of taxes.” While upholding Section 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972, levying luxury tax at flat rate on air-conditioned floor space in hotels and restaurants irrespective of locality, quality, standard, size of hotels and restaurants, the Apex Court held that the concept of equality has to be viewed in the context of distributive justice and perfect equality cannot be achieved in taxation. The Apex Court pointed out that the provisions of luxury tax, to be equal and uniform, has to be interpreted in the light of its characteristics. The Act requires luxury tax to be in proportion of or proportional to the air-conditioning spaces and it requires the tax to be uniform upon the same class of owners of air-conditioned hotels and restaurants, which means that all similarly situated owners shall be treated alike; the question that different proportions of air-conditioned spaces are used in different hotels and restaurants earning different proportions of income is also not relevant, as the tax is not based on use of the space. The kinds of air-conditioning or the implements used are also not relevant. It is a tax on the mere provision for luxury and not on the hotel property or equipments. Pointing out to the decision reported in East India Hotels Ltd. v. State of West Bengal AIR 1990 SC 2029 holding that taxable event need not necessarily be the actual utilisation and consumption of the luxury and that the luxury which can reasonably be said to be amenable to a potential consumer does provide the nexus for a valid enactment, the Apex Court pointed out the taxable event is the provision for air-conditioning in hotels and restaurants as a luxury. It pointed out that keeping in mind the nature of taxable event, further classification within the group was not considered necessary by the legislature, which has the wide latitude in the matter of classification. Thus when the statute divides the objects of tax into groups or categories, so long as there is equality and uniformity within each group, the tax cannot be attacked as violative of Article 14 of the Constitution of India.

177. The above-said decision thus brings out the distinct principle that in the matter of considering the challenge under Article 14 of the Constitution of India on taxation laws, the issue has to be considered from different angles in different kinds of taxes and from the nature and incidence of that particular tax. Once classification is made within the group, there could be no further classification. Where tax is on the mere provision of an aspect or activity, the different instrumentalities of providing the aspect, which is the taxable event, cannot provide a basis for classification. Thus what is true of Luxury tax is true of entertainment tax too.

178. Although we have already referred to the decision reported in Godfrey Phillips India Ltd. (supra) in the preceding paragraphs with reference to the content of Entry 62 List II of VII Schedule to the Constitution of India, yet, we may have to refer again to the said decision in the context of Article 14 and what the Entry seeks to list.

179. In the decision reported in Godfrey Phillips India Ltd. (supra), the Apex Court pointed out that as in the case of Entry 62 List II of VII Schedule to the Constitution of India, there is no instance in any of the legislative lists of a tax being leviable only with reference to the attribute. “If luxuries is understood as meaning something which is purely for enjoyment and beyond the necessities of life, there can be no doubt that entertainments, amusements, betting and gambling would come within such understanding.” The Apex Court pointed out “the coupling of these entries under one head was not fortuitous but because of these common characteristics.”

180. The Apex Court, in the above-said decision, pointed out to the distinct entries dealing with tax on a person or thing or activity and held that when the Entry lists the field of legislation as tax on activity, the taxable event is the activity itself and the subject matter of tax itself is the taxable event. Thus under Entry 62 List II of VII Schedule to the Constitution of India- Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling, the taxable event and the subject matter of tax are one and the same namely, luxury, entertainments, amusements, as the case may be. Comparing Entry 62 List II of VII Schedule to the Constitution of India with other Entries where the tax is on objects or person, the Apex Court pointed out in the context of the luxury tax, Entry 62 List II of VII Schedule to the Constitution of India does not permit the levy of tax on goods and articles and luxury refers to activities of indulgence, enjoyment or pleasure itself is the subject of taxation and the incidence of tax falls on the subject itself.

181. Thus, guided by the above two decisions, when the taxable event under the Act itself is the subject matter falling under the legislative Entry 62 List II of VII Schedule to the Constitution of India, can there be a classification of a taxable event? The object of the enactment is to tax entertainment as an event. Unlike in the case of Entry 62 List II of VII Schedule to the Constitution of India, excise duty levy or sales tax, customs duty, where the taxable event is manufacture, sale or export or import as the case may be, tax levied on goods is with reference to the taxable event. In none of the cases could it be validly stated that the excise duty or sales tax is directly on goods as a taxable event. The taxable event is within the incidence of tax on goods and that the taxable event is not shifted directly on the goods or persons merely by reason of a classification made. Thus wherever challenge was made as regards the classification of goods and persons with reference to sales tax or other revenue laws, this Court had upheld the classification, it having nexus to the taxable event. Under every one of the above categories, goods or article is taxed only with reference to the taxable event. In the decision reported in A. Suresh (supra), on the charge under Section 4-E of the Act, the Apex Court rejected the plea of the petitioner therein, having regard to the distinct character of the entertainment offered by Cable TV, which is totally different from the form of entertainment given by the cinematographic exhibition.

182. The decision reported in Aashirwad Films (supra), cited by the petitioners in W.P. Nos. 25986, 25987, 28978 and 28979 of 2011, is yet another decision which also gives the guidance in considering the question of Article 14 of the Constitution of India. In the context of the discrimination made in the rate of tax levied at 10% on Telugu films and 24% on films on other languages, the Supreme Court considered the classification and the arbitrary treatment meted out by adopting different rate of tax based on language. Reiterating the principle that taxing laws must also pass the test of Article 14 of the Constitution of India and the taxing statute can pick and choose persons and articles to tax on, the Supreme Court held that classification must bear a nexus with the object sought to be achieved. The extent of reasonability of any taxation statute lies in its efficiency to achieve the object sought to be achieved by the statute; that the classification must not be arbitrary, artificial or evasive and there must be a reasonable, natural and substantial distinction in the nature of the class or classes upon which the law operates. Emphasizing the need for reading the taxation statute on the touchstone of social values as mentioned in the Constitution of India, the Supreme Court held that an adverse conclusion can be drawn when a taxation statute disturbs the social fabric. Thus, the Supreme Court held that having regard to the difference in the rate of tax, a classification made only on the basis of language without anything more, is ex facie arbitrary. The Supreme Court held “Different rates of entertainment tax had not been levied having regard to the nature of theatre, the area where they were situated or extent of occupancy, etc. … Although the Legislature enjoys a greater freedom and latitude in choosing the person upon whom and suggest upon which it can levy tax, it is trite that taxing legislations are not immune from attack based on article 14.” Pointing out that the State had not explained as to why the same theatre where films in different languages are exhibited would be a class apart, only because at different times it exhibits films from different languages and that it has not been stated as to how theatres showing Telugu films have been treated as a separate class and whether cinema theatres exhibiting Telugu films suffer from any disadvantage which others had not been, the Supreme Court held that in the matter of imposing different rate of tax, the State is bound to show the intention to achieve an avowed object envisaged under Part IV of the Constitution of India.

183. Thus, viewed in the context of the decisions cited above, in particular, the decision reported in Godfrey Philips India Ltd. (supra), the decision on Entry 62 List II of VII Schedule to the Constitution of India, we have no hesitation in holding that the levy suffers from arbitrariness in classifying DTH as a separate class from Section 4-E- Cable TV, for adopting different rate of tax. Apart from there being no reasonableness as to the different rate adopted under Section 4-I from Section 4-E, the classification made fails to show the nexus with the object of taxation, namely, to levy tax on entertainment.

184. As already seen in the preceding paragraphs, both Sections 4-E and 4-I of the Act start with the same non-obstante clause as referring to Sections 4 and 7 of the Act. Section 4-I does not exclude Section 4-E for the reasons best known to the legislature. Thus the event and object of taxation remaining one and the same both under Sections 4-E and 4-I namely, entertainment and entertainments other than entertainment through cinematographic film, the discrimination made just on the basis of superior technology cannot offer a sound and legally justifiable basis to uphold the arbitrary rate of tax under Section 4-I as passing the test of Article 14 of the Constitution of India.

185. As already noted, in the decision reported in Aashirwad Films (supra), the classification based just on language to impose a different rate of tax was held as ex facie arbitrary. When we look at the entertainment tax levied under the Act as a whole, we find from the definition of “entertainment” and the charging provisions, the various kinds of entertainments sought to be taxed, such as horse race, cinematographic exhibition to which persons are admitted on payment, television exhibition for which persons are required to make payment by way of contribution or subscription or installation or connection charges, amusements, recreation parlour, or direct to home services or cricket programme conducted by IPL. The incidence of tax on every form of entertainment is on the taxable event of entertainment. Hence, being different subjects of entertainment, this Court upheld the levy of tax on cable TV under separate charging Section 4-E as valid and not offensive of Article 14 of the Constitution. The classification based on geography, the nature of comfort offered and the place of entertainments thus were recognised, give a good rational basis for classification and the provisions made to tax theatres situate at different geographical locations classifying theatres into different classes and as semi-permanent, permanent, and touring and temporary theatres, alteration in the mode of levy as compounding system of levy of tax, on gross collection or per payment of admission was upheld by the Apex Court in the decisions reported in Venkateshwara Theatre v. State of Andhra Pradesh [1995] 96 STC 130 and Srinivasa Theatre v. Govt. of Tamil Nadu AIR 1992 SC 999. The Apex Court pointed out that there can be no dispute on the principle that it is for the legislature to decide the particular mode of levy to be adopted. However, as far as the present case is concerned, having grouped different forms of entertainments as individual subjects of taxation, chargeable under different charging provisions, if within the classification the subject of entertainment lacked any differentiation on the entertainment as the chargeable event for differential tax treatment, then, as pointed out in the decision reported in Aashirwad Films (supra), the classification becomes ex facie arbitrary. The chargeable event in each one of these classifications is the “entertainment” content.

186. Rightly, as far as cinematographic exhibition is concerned, we have a charging Section under Section 4 Tax on payment for admission to entertainments; Section 4-D Tax on cinematograph film exhibited on Television Screen through Video Cassette Recorder or through Cable Television Network; Section 4-E Tax on television exhibition; Section 4-F Tax on amusement; Section 4-G Tax on recreation parlour; Section 4-H Tax on dubbed film; Section 4-I Tax on direct to home service and Section 4-J Tax on Cricket Tournament conducted by Indian Premier League (IPL). As far as DTH is concerned, the distinction that is sought to be explained by the State was only a technological difference in the delivery system. While cable TV programmes reach the person entertained through analog system linked by metallic co-axial cable or optic fibre cable to a central system called head-end, in DTH service, the subscribers receive the content by using an antenna, receiving the signals through the satellite system. In this, there is no intermediary called “a cable operator”. Beyond that, we do not find any difference in the content of the entertainment provided by means of Cable Television or through DTH. The counter filed and the arguments advanced merely reiterate the difference in technology and quality of presentation and the number of channels available. The pattern or content of entertainments remaining the same but under Sections 4-E and 4-I, we do not think, the mere choice of more number of channels, or finer picture quality, would, in any manner, bring about a difference in the entertainment content from the standpoint of the viewer.

187. We do not find any justifiable ground in the counter or in the arguments of the learned Senior Counsel appearing for the State or any rationality on the differential tax treatment meted out to DTH. The choice available to a viewer to go for more number of channels or the possibility of a recording facility or a payment facility, per se, are not legally sustainable grounds for this differentiation made by the Statute.

188. In this connection, the decision reported in P. Sankara Narayanan (supra) needs to be seen, wherein, this Court considered the differential tax treatment between films originally produced in Tamil and films originally produced in any other language, but subsequently dubbed in Tamil. This Court pointed out that from the point of view of a movie-goer, it makes no difference to him, whether a film, good, bad or indifferent, is made originally in Tamil or such a film made in any other language is subsequently dubbed in Tamil. This Court pointed out that in making the classification, there is no basis, far less any reasonable basis nor there is any nexus between the classification and object to be achieved. If the object is to discourage people from watching dubbed Tamil films mainly because such films are ordinarily produced by outside producers, such a provision cannot stand the test of Article 14 relating to equality, nor can it be construed as a reasonable restriction in the interest of the general public.

189. As already seen, the definition of entertainment contains nearly as many as seven types of entertainments, it having classified them as different forms of entertainment. Inclusion of cable TV as a class of entertainment, as a class standing apart from entertainment through cinematograph films, was considered by this Court in the unreported decision dated 30.11.1994 in the case of Tamil Nadu Cable T.V. Organisers (supra) in W.Ps. Nos. 16237, 16517 and 16272 of 1994 etc.), and affirmed by the Apex Court in the decision reported in A. Suresh (supra). So too Section 4-D- Tax on Cinematograph films exhibited on Television Screen through Video Cassette Recorder or through Cable Television Network, stands as a class by itself. But, in the matter of classification, we do not find any of those principles laid down by the Apex Court on Article 14 of the Constitution of India would come to the rescue of the State, treating DTH as a class by itself to be treated differently from cable TV. In the circumstances, we have no hesitation in upholding the contention of the petitioners that the classification fails the test of Article 14 of the Constitution of India.

190. Learned Senior Counsel appearing for the State sought to support this differential rate between Cable TV and DTH on the ground of Cable TV run mostly by self-employed persons and DTH by the corporate entities and that the reach of Cable TV is much more to cater to distant remote villages. Given the fact that dissemination of knowledge through TV is also treated as a form of entertainment, if the interest of the State is towards promoting dissemination of knowledge and considering the technological superiority spoken to about DTH in the counter of the State, the higher rate of tax adopted under Section 4-I of the Act, in any manner, does not advance any of those laudable objects of Part IV of the Constitution of India. The contention based on the reach of cable TV to distant remote villages does not appear to be a correct one, since, even as per the current policy of the Central Government, digitization of cable TV with the addressable system to have a better reach to the rural areas, has been made a mandatory requirement. Thus, looking at from the point of classification, the objects sought to be achieved, the rationality of such a classification and the nexus to the object sought to be achieved thus absent and writ with arbitrariness, there being no difference in the content of the entertainment offered in DTH from the one through cable television, we have no hesitation in agreeing with the contentions of the petitioners that apart from Section 4-I suffering from an inherent defect of not providing the chargeable event and the object of taxation, it also suffers from the vice of arbitrariness and hence, hit by Article 14 of the Constitution of India. Once there is a classification on the form of entertainment through television, there could be no further sub-classification on the basis of technology or in any manner of providing of the entertainment.

191. The issue on classification between State owned Television Channel and Cable TV was considered and rejected already by this Court in the unreported decision dated 30.11.1994 in the case of Tamil Nadu Cable T.V. Organisers (supra) in W.Ps. Nos. 16237, 16517 and 16272 of 1994 etc.), and affirmed by the Apex Court in the decision reported in A. Suresh (supra). In the circumstances we do not find any ground to accept the plea of the petitioners as regards the allegation of discrimination on account of Arasu Cable TV being given a different treatment.

192. Mr. C. Natarajan, learned Senior Counsel appearing for the petitioners in W.P. Nos. 25986, 25987, 28978 and 28979 of 2011 referred to the Cable Television Networks (Regulation) Amendment Act, 2011, the Telecommunication (Broadcasting and Cable) Services (fourth) (Addressable systems) Tariff (first amendment) Order, 2012, amending the definitions of addressable system, cable operator, multi system operator, pay channel and the tariff be paid thereon. Clause 6 of the principal Tariff Order also underwent changes.

193. In considering whether the DTH differs from the cable television, Mr. C. Natarajan, learned senior counsel, referred to the Telecom Regulatory Authority of India Act, 1997 and the Telecommunications (Broadcasting and Cable services) Interconnection Rules, issued under Sections 36 and 11 of the Telecom Regulatory Authority of India Act, 1997, Telecommunications (Broadcasting and Cable services) (Addressable System ) Tariff order, 2004 and the subsequent Tariff Orders in 2007, 2008, 2010 and 2012, to highlight the treatment of cable network and DTH services at par, both as regards the regulation and tariff fixation. He also referred to the Government of India Ordinance on 25.10.2011 called The Cable Television Networks (Regulation) Amendment Ordinance, 2011, the object being to ensure migration of the services to addressable system to ensure quality transmission as well as optional choice of channels at reasonable price to the consumers.

194. A reading of the Explanatory Memorandum reveals changes brought in, in the tariff structure of DTH operator, multi system operator or cable service operator using digitized addressable system, that they shall offer a package of a minimum of one hundred free to air channels as basic service tier including the channels of Prasar Bharati. It is open to the subscriber to choose any combination of free to air channels upto one hundred channels, in lieu of the basic service tier offered by the multi-system operator on a minimum monthly subscription, not exceeding Rs. 100/- per subscriber. If a digital addressable cable TV subscriber subscribes to the pay channels, in a-la-carte or bouquet or a combination of a-la-carte and bouquet, with or without free to air channels, it shall be open to the multi-system operator to specify a minimum monthly subscription, not exceeding Rs. 150/-.

195. Referring to private DTH operators competing among themselves, the Explanatory Memorandum pointed out to the non-level playing field between the upcoming addressable systems vis-a-vis the incumbent analog systems and the need for regulating the tariff for addressable system. It pointed out that out of a single tariff framework, the different addressable systems can be accommodated with suitable provisions. Based on the information submitted by the stake-holders to TRAI, an analysis was carried out to assess the price at which broadcasters provided TV channels to DTH operators.

196. The Explanatory Note was thus presented as treating the cable television network and DTH as pari-materia. Secondly, the intention of the Government of India to make it mandatory for cable operator to transmit/ re-transmit programmes of every pay channel through addressable system in the metropolitan cities within six months from 15th January, 2003, which was subsequently amended. This led to the Government of India amending the Act to include in the expression “telecommunication services” the “broadcasting and cable services also”. The Telecom Regulatory Authority of India was directed to specify standard norms and for periodicity of revision of pay channels including interim measures. The Explanatory Memorandum to the Regulation of 2004 reveals the discussion among the various stakeholders and the variation in the price in different geographical areas.

197. The discussion also shows the contemplation of complete digitalisation with addressability in the Cable TV network with a rate card for its purpose. In this context, it felt that setting a retail tariff for set top boxes is not necessary.

198. On 5th August, 2010, the Telecom Regulatory Authority of India brought out a framework of implementation of Digital Addressable Cable TV Systems in India by December, 2013. The Authority thus recommended that for implementing the sunset date for Analog Cable TV services, the Cable Television Networks (Regulation) Amendment Act, 2002, be suitably amended and that the migration to a digital addressable cable TV system be implemented with sunset date for analog cable TV Services as 31st December, 2013 in four phases starting from four metros to other places.

199. The pricing of the services thus shows that cable TV operators and DTH operators are on level playing field and the tariff rate is one and the same. In fixing this tariff, the consumers’ interest has been taken as of paramount importance.

200. The affidavit filed by the Writ Petitioners in W.P. Nos. 25986, 25987, 28978 and 28979 of 2011 details the tariff structure under order dated 26.12.2008 in non-CAS areas and CAS areas, as follows:

1. Non-CAS Area:

Free Channels Pay Channels plus >45	Nos. 30 plus 20	30 plus 30	30 plus 45	30
X Class Citites [**]	Rs. 171	214	250	278
Y Class Citites	Rs. 150	182	214	235
Z Class Cities	Rs. 139	171	198	214

[**] X class Cities covering Bangalore and Hyderabad, but excluding Metro cities as covered by CAS.

Price for pay channels not separately fixed. But a composite of free and pay channels rates are fixed with minimum pay and free channels

Free Channels plus	Nos. 20	30 plus	30 plus	30 plus	30
Pay channels [**] channels)	Nos. Not fixed	20	30	45 >45	(60 channels)
Metro Cities [*]	Rs. 82	189	243	323	403

[*] X Class cities covering Chennai, New Delhi, Mumbai and Kolkata but excluding Hyderabad and Bangalore.

[**] Pay Channels @ Rs.5.35 per channel and @ Rs.82 for 30 Nos. Of Free Channels as per Order No. 5 of 2008, dated 26.12.2008, as amended. Hence, pay channels worked on the basis of mandated free and pay for Non-CAS area.

201. The contention of the petitioners herein is that the Central Authority treated cable TV Operator and a DTH provider alike in fixing the tariff with effect from 30.4.2010, i.e., for free channels, the minimum being fixed at Rs. 100/-; for pay channels it is at Rs. 150/-, be it a DTH or Cable TV. Thus, while the rate for DTH remain as before, cable addressable system is now brought on par with DTH, learned Senior Counsel pointed out that the tariff arrived at by the Central Authority was the result of a consultation process among the various stakeholders. The equiry tariff maintained on the pricing of services show DTH and Cable TV operators have to be placed on the same level playing field by reason of the nature of services offered, being one and the same.

202. A reading of the documents in this regard, thus establishes that as far as the Telecommunication (Broadcasting and cable) Services Interconnection Regulation Act as well as the Tariff Order issued by the Telecom Regulatory Authority of India are concerned, no discrimination is made between Cable TV and DTH.

203. Considering the parity maintained in the tariff, when one looks at the counter affidavit filed in support of the differential treatment is concerned, the emphasis given therein for such a discrimination was the viewers’ interest. Given the fact that the content of providing of the service remaining one and the same, one does not find any substance or logic in the contention of the respondent that there is no discrimination or violation of Article 14 while treating DTH differently.

204. The contention of the respondents on the aspect of discrimination fails on the strength of its own contention. The parameters as regards the consideration of the issue on Article 14, particularly in a taxing statute, has been referred to in the preceding paragraph and does not require reiteration once again. The Act, enacted as early as 1939, originally considered two forms of entertainment. A reading of the definition of ‘entertainment’ under Section 3(4) of the Tamil Nadu Entertainments Tax Act, 1939 referred to a horse race or cinematograph exhibition to which persons are admitted on payment. Impliedly, all other forms of entertainments were excluded from the purview of the Act. Section 4 of the Tamil Nadu Entertainments Tax Act, 1939 was the charging provision, which stated that on each payment for admission to any entertainment, there shall be levied and paid to the State Government, a tax calculated at the rates prescribed therein. Section 4-B levied additional surcharge. In 1984, under the Tamil Nadu Act 25 of 1984, Section 4-D – tax on Cinematograph film exhibited on television screen through video cassette recorder or through cable television network was inserted, as a separate charging section distinct from Section 4 and was subsequently amended under Act 37 of 1994, effective from 1.9.1994. Section 4-E  Tax on television exhibition was inserted first under Amendment Act 37 of 1994 from 1.9.1994 with the object of levying tax on entertainment through cable television, but sought to levy tax at 40% 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. The rate of 40% was subsequently reduced to 20% from 1.4.1995 by Section 2 of the Amendment Act 21 of 1995. The provisions were further substituted by Amendment Act 38 of 1997, with effect from 1.4.1997 and again substituted under Act 18 of 2000, with effect from 12th June, 2000, enabling the local authorities to determine the rate of tax subject to the maximum rate prescribed in the table under the Section. The substitution with effect from 1.4.1997 prescribed the rates in the municipal areas, industrial townships, town panchayats and village panchayats. Thus, from a system of levy based on collection by the Cable Operator made for each connection, the levy was substituted fixing the rate based on the geographical location on the entertainment offered. The definition of entertainment was amended to include ‘cable television’ under Section 3(2B). So too the definition of ‘proprietor’ under Section 3(9) and ‘television exhibition’ under Section 3(11). The present provisions under Section 4-I of the Act now seeks to treat DTH as a class by itself distinct from Cable TV. Admittedly, the entertainment through DTH is received through satellite; that the petitioners herein, who are limited companies, are awarded licence by the Government of India under Section 4 of the Indian Telegraph Act, 1885 and the Indian Wireless Telegraph Act, 1993, for providing DTH services.

205. A reading of the Ordinance and the Notification thereon shows the efforts taken to digitalize all metros by December 2012, so that analog service through cable TV is taken over by this digitalisation. It is further seen that such a move was taken to put an end to the persisting complaint against analog system; that there was no account maintained/ available as to the subscribers’ strength, which ultimately led to loss of service tax revenue to the State. Thus in all these efforts, all the stakeholders’ interests were taken note of and there was a consultative process undertaken by the concerned Authorities with all the stakeholders. The tariff order dated 26.12.2008 recognised a minimum of Rs. 82/- per subscriber per month, as tariff for 30 free air channels.

206. Under Notification dated 15th January, 2004, Telecommunication (Broadcasting and cable) Services Tariff Order, 2004 was made to provide for the rates at which the charges would be paid by the subscribers to cable operator, cable operators to multi-service operators/ broadcasters (including their authorised distribution agencies) and multi-service operators to broadcasters (including their authorised distribution agencies). This will be relevant both for CAS and non-CAS areas until final determination by Telecom Regulatory Authority of India on the various issues concerning these charges were taken. “Direct to Home Operator” was defined to mean an operator licensed by the Central Government to distribute multi-channel TV programmes in Ku band by using a satellite system directly to the subscribers’ premises without passing through an intermediary such as cable operator or any other distributor of TV channels.

207. Dealing with the general provisions relating to non-discrimination in interconnect agreements, in the Explanatory Memorandum annexed thereto, that the broadcaster shall provide, on request, signals of its TV channels on non-discriminatory terms to all distributors of TV channels which may include but not limited to cable TV operator, DTH multi-system operator, head-ends in the sky operator, it was pointed out that DTH platform would have to compete on the strength of the quality of service, tariffs and packaging of the TV channels and not on the content. The Authority viewed that being the most effective competitor for cable TV, the competition between cable TV and DTH would be enhanced if all the contents are available on both platforms. It pointed out that it would be illogical for a consumer to establish arrangements to view the differing content of the two platforms, when he has access to the entire content through the cable TV. Taking note of the interests of the consumers, it was viewed that all channels are to be available on all platforms on a non-discriminatory basis. This would promote competition amongst different platforms and thus would be beneficial to the consumers.

208. The petitioners have Signal Broadcasting Centres, which downlinks the signals from satellite and then uplinks to the designated transponders for transmission of signals in Ku band. The signals are received by the dish antennas installed at the subscribers’ premises. The TV signals transmitted from the Broadcasting Centres are in encrypted format. They are decrypted/ decoded by the set top box with the help of the viewing card inside the set top box for the customers to be able to view the service. To receive the entertainment through satellite, the subscribers have to pay monthly charges. Apart from the free channels, based on the choice of the channels selected by the subscriber, subscription charges are calculated. The connection is a pre-paid service and the subscriber is required to purchase recharge vouchers for the choice of channels. This is a convenient mode of payment. As far as the entertainment received through cable television is concerned, the cable TV operator receives the signals through his dish antenna and transmits the same to the subscribers through cable. As far as the entertainment aspect is concerned, neither the cable TV operator can control, edit, modify the content, nor the DTH operator can. The content in both the system are one and the same.

209. A reading of Section 4-I of the Act shows that notwithstanding anything contained in Sections 4 and 7 of the Act, there shall be levied and paid to the State Government, a tax on the entertainment at the rate of 30% of the gross charges received by the Provider of a direct to home service excluding service tax. The tax levied under sub-section (1) as per sub-section (2) shall be recoverable from the Proprietor. Thus, while sub-section (2) provides the recovery mode, sub-section (1), except for prescribing rate of tax and the measure of tax, fails to address itself to the taxable event and the taxable person. Although this reasoning goes along with our reasoning in the preceding paragraphs on the absence of a charge, this takes us further to the fact that the non-obstante clause referred to in Section 4-I of the Act is with reference to Sections 4 and 7 of the Act alone – Section 4 being tax on entertainment through admission to cinematographic exhibition and Section 7 regarding the manner of payment of tax. If the State intended that Sections 4-E and 4-I are to act on different fields, then Section 4-I should have made a reference to this too, apart from Sections 4 and 7, in the non-obstante clause. The reason why Section 4-E has not been included as by way of a non-obstante clause has not been explained. Apparently, conscious of the content of entertainment under Section 4-E and Section 4-I being one and the same, there is a conscious omission to include Section 4-E in the non-obstante clause along with Sections 4 and 7 of the Act. As far as the consumer is concerned, what matters is the entertainment content and not the mode. The number of channels available also matters very little to a consumer, particularly in the context of the fact that be it a cable service or a DTH, there is a compulsion on the part of the DTH provider to give free channels too, apart from the choice of the channels that the consumer may pay for. Thus the parity of treatment and the content in each of the channels are from the broadcaster, who happens to be the same person in cable TV and DTH.

210. Learned senior counsel appearing for the State was quick to point out that as the taxes are for raising revenue and for getting a better revenue, the State is entitled to treat the DTH as a class by itself. We do not think that raising revenue, per se, could be a good ground for differentiating Section 4I from Section 4-E of the Act. As already noted in the preceding paragraphs, the decision of the Apex Court reported in Spences Hotel (P.) Ltd. (supra) clearly points out that the question as to whether a particular tax is discriminatory or not must necessarily be considered in the light of the nature and incidence of the particular tax and cannot be judged by what has been held in the context of other taxes. The ability or capacity to pay, no doubt, has been regarded as a test in determining the justness or equality of taxation, but then, that, by itself, cannot justify the differentiation of the classification. As pointed out by the Apex Court, what exactly is meant by equality in taxation has to be looked at from a different angle in different kinds of taxes levied under different contexts. Heavy reliance was placed by the State on the decisions of the Apex Court reported in Federation of Hotel & Restaurant Association of India (supra) Express Hotels (P.) Ltd. (supra), Elel Hotels & Investments Ltd. (supra), East India Hotels (supra).

211. As far as the decision reported in Federation of Hotel & Restaurant Association of India (supra) is concerned, the Apex Court considered the validity of the provisions of the Expenditure Act of 1987 and with reference to the competency of the Parliament to legislate thereon. The petitioners therein also questioned the classification made on the hotels as violative of Article 14 of the Constitution of India, the Apex Court pointed out that there is no precise or set formulas or doctrinaire tests or precise scientific principles of exclusion or inclusion are to be applied. The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience. Upholding the classification based on charges for accommodation, the Apex Court held “judicial veto is to be exercised only in cases that leave no room for reasonable doubt”. The Apex Court pointed out that the pith and substance of the Central Act would well be described as expenditure and not luxuries. The object of a tax on luxury is to impose a tax on the enjoyment of certain types of benefits, facilities and advantages on which the legislature wishes to impose a curb.

212. The decision reported in Express Hotels (P.) Ltd. (supra) related to Gujarat Tax on Luxuries (Hotels and Lodging Houses) Act; Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act; Karnataka Tax on Luxuries (Hotels and Lodging Houses) Act and West Bengal Entertainments and Luxuries (Hotels & Restaurants) Tax Act. The decision reported in Elel Hotels & Investments Ltd. (supra) related to Hotel Receipts Ac, 1980 falling under Entry 82 List I of VII Schedule to the Constitution of India. The decision reported in East India Hotels (supra) related to Jammu & Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980.

213. In the light of the law declared in the decision reported in Spences Hotel (P.) Ltd. (supra), we do not think, the decisions in Elel Hotels & Investments Ltd. (supra) Federation of Hotel & Restaurant Association of India (supra) and East India Hotels (supra), relied on by the State, would be of any assistance to them.

214. In the decision reported in Godfrey Phillips India Ltd. (supra), the Apex Court considered the above three decisions and clarified that as far as Luxury Tax on goods is concerned, the Supreme Court pointed out that given the language of Entry 62 List II of VII Schedule to the Constitution of India and the legislative history, it is held that Entry 62 List II of VII Schedule to the Constitution of India does not permit the levy of tax on goods or articles. The word “luxuries” in the entry refers to activities of indulgence, enjoyment or pleasure in that which is costly or which is generally recognised as being beyond the necessary requirements of an average member of society and not articles of luxury. Since the Act challenged before the Supreme Court sought to tax goods described as luxury goods and not any activity, the said Act must be declared to be legislatively incompetent.

215. Therefore, in understanding the challenge on Article 14 of the Constitution of India, one must keep in the background the law declared by the Apex Court in the decision reported in Spences Hotel (P.) Ltd. (supra).

216. Thus on a reading of the provision relating to Section 4-E and Section 4-I of the Act, the only difference that one can see between cable TV and DTH is that while television exhibition goes through transmission of television signals by wire, where the subscriber’s television sets are linked with metallic coaxial cable or optical fibre cable to a central System, DTH, as its name suggests, goes by a direct to home delivery with the aid of an antenna, through which the signals are decoded and encrypted for the viewer to enjoy the entertainment. Except for the technology difference, one does not find any qualitative difference between the cable TV and DTH. Given the fact that the object of the Tamil Nadu Entertainments Tax Act is to levy tax on entertainment, when the content of entertainment does not undergo any change, except for the medium through a technique of receiving signals through the satellite and that both are treated alike in the service tax levy, we have no hesitation in holding that the classification is arbitrary insofar as the differential tax treatment meted to DTH as a separate class distinct from Section 4-E and hence, offends Article 14 of the Constitution of India.

217. The contention of the State as regards the cable services providing or generating substantial employment of persons, cannot sustain the nexus plea to uphold the provisions as not violative of Article 14 of the Constitution of India. On the contention that the channels provided through DTH through the choice exercised by the customer is not available to the customers of cable TV and that the DTH is done by large industrial units, we do not find any logical reason in differentiating these two class, i.e., DTH and cable TV as a source of entertainment, for, entertainment is a pleasurable occupation of the senses, and that which occupies the attention agreeable to the viewer.

218. In the decision reported in Twyford Tea Co. Ltd. (supra), in paragraph 18 the Apex Court observed:

“18. What is meant by the power to classify without unreasonably discriminating between persons similarly situated, has been stated in several other cases of this Court. The same applies when the Legislature reasonably applies a uniform rate after equalising matters between diversely situated persons. Simply stated the law is this: Differences in treatment must be capable of being reasonably explained in the light of the object for which the particular legislation is undertaken. This must be based on some reasonable distinction between the cases differentially treated. When differential treatment is not reasonably explained and justified the treatment is discriminatory. If different subjects are equally treated there must be some basis on which the differences have been equalised otherwise discrimination will be found. To be able to succeed in the charge of discrimination, a person must establish conclusively that persons equally circumstanced have been treated unequally and vice versa. However, in Khandige Sham Bhat v. Agricultural Income Tax Officer [1963] 3 SCR 809 at p. 817 it was observed:

If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment. Taxation law is not an exception to this doctrine: vide Purshottam Govindji Malai v. Shree B.N. Desai, Additional Collector of Bombay [1955] 2 SCR 887 and Kunnathat Thatunni Moopil Nair v. State of Kerala [1961] 3 SCR 77. But in the application of the principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the Legislature in the matter of classification, so long it adheres to the fundamental principles underlying the said doctrine. The power of the Legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways.

219. We are conscious of the decisions of the other High Courts, particularly Delhi High Court, Punjab & Haryana High Court, Uttranchal High Court, Allahabad High Court and Madhya Pradesh High Court, upholding the provisions of the respective State enactments and its constitutional validity, particularly in the context of Article 14 of the Constitution of India.

220. The question raised before the Punjab & Haryana High Court was as to whether the levy of entertainment tax through DTH is intra vires the provisions of the State Legislature.

221. In the decision reported in Tata Sky Ltd. (supra), the Punjab and Haryana High Court negatived the contentions of the petitioners made as regards the overlapping of Entry 62 of List II and Entry 92C List I. We have expressed our agreement with the reasoning of the Punjab & Haryana High Court as to the scope of Entry 62 List II of VII Schedule to the Constitution of India. However, considering the provisions of the Punjab Entertainment Duty Act, 1955, different from the Tamil Nadu Entertainments Tax Act, 1939, for the reasons already stated, on the wording of Section 4-I, we have no hesitation in rejecting the contention of the State and thereby allowing the contention of the petitioners.

222. As far as the decision of the Delhi High Court reported in Bharti Telemedia Ltd. (supra) is concerned, here again, the Delhi High Court considered that tax on service under Entry 92 C List I and Entry 62 List II of VII Schedule to the Constitution of India providing for taxing on luxury including tax on entertainment, amusements, betting and gambling operate on entirely different field and there is no overlapping in so far as two entries are concerned. The decision of the Delhi High Court thus rested on the terms of the charging Section under the Delhi Entertainments and Betting Tax Act.

223. As far as the decision of the Allahabad High Court dated 20.07.2012 made in Writ Tax No.1819 of 2009 Sun Direct TV (P.) Ltd. (supra) is concerned, the writ petitioners herein were also writ petitioners before the Allahabad High Court; so too before the Punjab and Haryana High Court. The questions raised before the Allahabad High Court and Uttaranchal High Court dated 26.7.2010 in the case of Tata Sky Ltd. (supra) related to the scope of Entry 62 List II and Entry 92C List I of VII Schedule to the Constitution of India and the validity of the charging provision.

224. As far as the decision of the Madhya Pradesh High Court vide Tata Sky Ltd. (supra) is concerned, the issue raised therein is also similar to what had been raised before the other High Courts and the upholding of the charging provision was based on the wordings of the Section of the State enactment.

225. We hold, 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 of VII Schedule to the Constitution of India is a levy on “entertainment” and is different from the service tax levy on providing of service. As had been done in other High Court, following those decisions and the decisions of the Apex Court, we reject the case of the petitioners based on aspect theory as to the levy of entertainments tax on DTH, which already suffers service tax. We have also upheld the levy of tax on DTH and thereby rejected the petitioners’ interpretation placed on Entry 62 List II of VII Schedule to the Constitution of India, as referable to public entertainment only and not to an entertainment through DTH, which the petitioners called as private entertainment.

226. We, however, accept the case of the petitioners on the validity of Section 4-I of the Act, as a colourable legislation, resting our decision on the wording of Section 4-I of the Act. So too, we have accepted the case of the petitioners named above, as to the inadequacy of the charging provision Section 4-I, not explicitly mentioning the chargeable event and the incidence of tax. We also accept the challenge made to the levy under Section 4-I of the Act, based on Article 14 of the Constitution of India that the classification is discriminatory and the differential tax as arbitrary.

227. A reading of Section 4-I of the Act, in terms of the definition ‘entertainment’ under Section 3(4) including DTH, points out that what is sought to be taxed is DTH, meaning thereby, distribution of multi-channel television programmes by using a satellite system by providing television signals direct to the subscriber’s premises without passing through an intermediary such as cable operator, which makes the levy more akin to a service tax levy, which is beyond the competence of the State legislature to levy tax. The providing of machinery for recovery, or providing of the rate of tax and measure of tax cannot fill the vacuum seen in the charging Section by the absence of the taxable event and where the incidence of tax falls. Hence, we are constrained to hold that the charging provision under Section 4-I, insofar as it fails to prescribe the taxable event and where the incidence fall, fails in its purport and in the absence of an explicit charge laid in clear terms, the Section cannot be enforced. Even otherwise, the discrimination in the classification and the arbitrary character of the rate of tax levy therein are violative of Article 14 of the Constitution of India. Entry 62 List II of VII Schedule to the Constitution of India provides for levy of tax on entertainment as a concept, which is a general term and not a legal term. Hence, being a subject of pleasurable occupation of the senses, which occupies the attention of the viewer agreeably, with common content of entertainment in cable TV and DTH service, we do not find any rationality in differentiating the self-same taxable event to a differential tax treatment; consequently, we uphold the contention of the petitioners that the classification and differential treatment in the tax structure is offensive of Article 14 of the Constitution. Hence, even though we have held that by reason of the imperfections pointed out as to the absence of chargeable event not being specified in explicit, unambiguous and clear terms in Section 4-I, the charge cannot be effectuated, yet, on the grounds of violation of Article 14 and the imperfection in the Section creating the impression as though the charge is in the nature of service tax and hence, colourable in character, we have no hesitation in declaring the provision as unconstitutional.

228. In the light of the decision thus arrived at, we do not find there is no any necessity to go in detail on the petitioners’ contention based on Arasu Cable TV. We may point out that similar such contention was rejected by the Apex Court in the decision reported in A. Suresh (supra). On other grounds, we have distinguished the said case. As regards the contention of a private individual, who is the second petitioner in W.P. Nos. 25986 and 25987 of 2011, when the consistent case of the main petitioner in the said writ petition is that the content in cable TV and DTH is one and the same, we do not find any merit in the contention of the second petitioner that the rate for DTH would drive him to take to Cable TV. In any event, since we have already considered Article 14 and agreed with the petitioners, it is not necessary for us to deal with it separately.

229. As far as the contentions on Article 19(1)(a) and 19(1)(g) are concerned, we do not find any good ground to accept the plea of the petitioners that levying tax on entertainment is a tax on the premium of expression. Following the decision of the Apex Court, we reject this contention.

230. For the reasons stated already on the scope of Entry 62 List II of VII Schedule to the Constitution of India, we reject the prayer in W.P. Nos. 25721, 27070 to 27072 of 2011. However, on the question of the chargeable event not specified in Section 4-I of the Act, as to the colourable character of Section 4-I, and on the violation of Article 14, we allow W.P. Nos. 25721, 27070 and 27071 of 2011 holding Section 4-I of the Tamil Nadu Entertainments Tax Act as unconstitutional. In the light of the above-said reasoning, we also allow W.P. No. 27072 of 2011, filed for declaring the notice dated 11.11.2011 demanding the furnishing of security deposit of Rs. 46,50,000/- as perverse and arbitrary and without jurisdiction and also declare the proposition notice dated 14.11.2011, as without authority and jurisdiction.

231. For the reasons stated above and on the grounds stated above, particularly regarding the imperfection in the charging Section 4-I of the Tamil Nadu Entertainments Tax Act, and on the challenge made under Article 14, we allow W.P.Nos.25987 and 28978 of 2011. We however, reject the prayer made on Article 19(1)(a) and 19(1)(g) of the Constitution of India. As far as service tax levy is concerned, no serious argument or grievance was made in the course of the hearing of the writ petitions, even though separate writ petitions were filed. In the circumstances, W.P.Nos.25986 and 28979 of 2011 stand dismissed.

232. We also allow the W.P. Nos. 25927 and 25873 of 2011 challenging the entertainment tax levy as in the case of the above W.Ps.

233. This leaves us with yet another set of writ petitions. W.P.No.25928 of 2011 is filed by Bharati Telemedia Limited seeking to declare Section 65(105(zk) of the Finance Act, 1994 as ultra vires Entry 62 List II of Seventh Schedule to the Constitution of India and Articles 14, 19(1)(g) and 245 of the Constitution of India.

234. W.P.No.25929 of 2011 is also filed by M/s.Bharati Telemedia Limited seeking to declare Section 65(105)(zzzx) of the Finance Act, 1994 as ultra vires Entry 62 List II of Seventh Schedule to the Constitution of India and Articles 14, 19(1)(g) and 245 of the Constitution of India.

235. W.P. No. 25872 of 2011 is filed by M/s. Bharat Business Channel seeking to declare Section 65 (105)(zk) read with Section 65(15) and Section 65(16) of the Finance Act, 1994 insofar as it relates to the provisions of Direct To- Home Service as being ultra vires and violative of Articles 14, 19, 246 (read with Entry 62 List II of Seventh Schedule to the Constitution of India of List II of Schedule VII) and 265 of the Constitution of India, and thereby as being null and void insofar as the petitioner is concerned.

236. The Union of India filed a counter affidavit in W.P. Nos. 25986, 25987, 25872, 25873, 25927 to 25929, 28978 and 28979 of 2011 supporting the levy of service tax on DTH services. The Union of India states that the entertainment tax levy imposed by the State Government and service tax levy imposed under the Finance Act of 1994 fall under two different categories and it is incorrect to state that the same activity is taxed twice. While the service tax levy by the Central Government is for the services rendered by the petitioners in enabling the subscribers to view the programmes transmitted, the State levy is for the content viewed by the subscribers, namely, the entertainment derived.

237. Referring to the decision reported in Tamil Nadu Kalyana Mandapam Assn. v. Union of India [2006] 4 STT 308 (SC) , the Union of India states that the measure of tax could not affect the nature of taxation. The taxable event for the levy of service tax thus being on the rendering of service, there is no conflict to these two enactments. The taxable events being separate and distinct in respect of two aspects, the petitioners are not justified in their contention that DTH service being an entertainment, cannot be again taxed under the service tax provisions, it being within the ambit of State Legislative Authority. Drawing support from the decision of the Delhi High Court reported in Bharti Telemedia Ltd. (supra), the counter states that there is no constitutionality of taxing the service aspect under the Finance Act of 1994 read with Entry 92C List I of VII Schedule to the Constitution of India.

238. It may be seen that the petitioners, namely, Bharati Telemedia Limited and Bharat Business Channel, filed Writ Petitions before the Delhi High Court along with other Writ Petitioners herein. Dealing with the rival contentions, in the decision reported in Bharti Telemedia Ltd. (supra), the Delhi High Court stated as follows:

“2. Mr Ganesh, senior advocate, appearing for Bharti Telemedia Ltd and Mr Aman Lekhi, senior advocate, appearing for Tata Sky Ltd and Bharat Business Channel Ltd, contented on behalf of the petitioners that the DTH service is a broadcasting service falling within the meaning of taxable service under section 65(105)(zk) of the Finance Act, 1994 and is amenable to service tax @10.33% on the gross amount paid by a subscriber for providing the DTH broadcasting service. The service tax is imposed by the Finance Act, 1994 in exercise of Parliament’s exclusive power to levy a tax on services under article 246(1) read with Entry 92C of List I of the VIIth Schedule to the Constitution of India. It was also contended on behalf of the petitioners that Parliament alone has the exclusive power to tax DTH services and that the States do not have any power to tax the said service by any name called. It is argued that the State legislature cannot, in the guise of imposing a tax on entertainments, in exercise of its powers under Entry 62 of List II of the VIIth Schedule to the Constitution, impose a tax on the DTH service. Consequently, it was submitted that the said Act, to the extent it attempts at encompassing DTH services within the ambit of entertainment tax, is unconstitutional. It is further argued on behalf of the petitioners that the taxable event for the levy of service tax is exactly the same as the taxable event for the levy of entertainment tax, which is, the provision of DTH service by transmitting DTH signals. And, therefore, there is a clear trespass into Parliament’s exclusive domain. Mr Varun Sarin, appearing for Dish TV India Ltd, adopted the arguments of Mr Ganesh and Mr Lekhi.”

239. The provisions challenged before the Delhi High Court were Sections 2(a), 2(aa), 2(m)(vi), 7(1), 8(2) of the Delhi Entertainments and Betting Tax Act, 1996 and Rules 12A, 26A, 31, as amended by the Delhi Entertainments and Betting Tax (Amendment) Rules, 2010.

240. Analyzing the tax in question under the the Delhi Entertainments and Betting Tax Act, 1996, the Delhi High Court pointed out to the arguments advanced on the aspect theory and held that DTH system has two aspects, one service aspect and another entertainment aspect. In respect of the service aspect, the taxable event is flow of content through the DTH system, whereas, in respect of the entertainment aspect, the taxable event is the entertainment from the content. Thus, the Delhi High Court upheld the levy of tax under the the Delhi Entertainments and Betting Tax Act, 1996 on DTH services.

241. Reading the judgment, we find that the petitioners in the writ petition took a definite stand that the activity of the petitioner in providing the DTH service attracted service tax liability and that the challenge was to the levy of entertainment tax alone on the DTH services. As far as the writ petition filed before this Court is concerned, the petitioners in W.P. Nos. 25928, 25929 and 25872 of 2011, who have also challenged Section 4-I, stated in the affidavit in paragraph No. 4, that the questions raised as to whether the activity of the petitioner would attract service tax liability and whether the levy by the State under the Tamil Nadu Entertainments Tax Act would amount to transgression of powers under Entry 62 List II of Seventh Schedule to the Constitution of India. When the contrary stand taken as regards the challenge on service tax was pointed out to the attention of the learned senior counsel, initially, we were informed that the petitioner had filed a Writ Petition before the Delhi High Court in July, 2012 questioning the levy of service tax. When the petitioner was asked to file an affidavit explaining their conduct in not disclosing the above-said facts of taking diametrically opposite stand from the one conceded before the Delhi High Court, the petitioner had filed an affidavit stating that realising that 88th Constitution Amendment introducing Entry 92C of List I of VII Schedule to the Constitution of India was not notified, the imposition of service tax thus not valid, after obtaining advice from the senior counsels in Delhi, the petitioner has filed the Writ Petition in W.P. No. 4302 of 2012 before the Delhi High Court also. Thus the petitioners made the plea that in the absence of Entry 92C List I of VII Schedule to the Constitution of India notified, the Union cannot impose service tax. Before this Court, the petitioner conceded that being a subject falling under Entry 62 List II of VII Schedule to the Constitution of India to tax entertainment, the exclusive power to tax entertainment rested with the State, and the Centre cannot levy service tax. As already seen from the extract from the judgment of the Delhi High Court, the petitioner conceded about its liability to service tax and all that it challenged was the levy of entertainment tax under the Delhi Entertainments and Betting Tax Act.

242. A reading of the affidavits filed in the Writ Petitions before this Court dated 7.11.2011 and 5.11.2011 respectively, shows that there is no reference at all to the Writ Petition filed in Delhi High Court and the position conceded therein. The batch of cases were initially posted before two other Benches before it was posted before us and we are informed that the case was taken up for hearing and later on adjourned.

243. It may be seen that when the Writ Petition was heard by this Court on 17.8.2012, admittedly, the petitioner did not make any reference at all to the Delhi High Court decision. It was only when learned Standing Counsel appearing for the Union referred to the decision of the Delhi High Court and the stand of the petitioner therein, that this Court came to know about the diametrically opposite stand taken by the petitioner and the absence of any reference and explanation for such stand taken in the affidavit before this Court. It is a matter of record that the petitioner had gone on appeal before the Honourable Supreme Court as against the order of the Delhi High Court upholding the levy of entertainment tax under the Delhi Entertainments and Betting Tax Act. The petitioner contends that before the Supreme Court, what is under challenge is that the State cannot levy entertainment tax on the service provided through DTH.

244. The counter filed by the State gives the details of the appeals filed before the Apex Court by all the petitioners before this Court as against the judgments of other High Courts which had rejected the petitioners’ cases, one of whom happens to be the present petitioner too. In the above-said background, when the petitioner was questioned as to the suppression of these material facts and the arguments advanced without even disclosing these facts and the contra stand taken, the petitioner sought to explain its stand that the issues raised before this Court and the Delhi High Court were not the same and that Entry 92C List I of VII Schedule to the Constitution of India had not been notified. Learned counsel submitted that the petitioner may even withdraw their appeal before this Court. The petitioner was directed to file an affidavit, explaining the conduct. Paragraph 3 of the affidavit shows the admitted factual position that before the Delhi High Court, they had not challenged the imposition of service tax and they had conceded that by virtue of Entry 92C List I of VII Schedule to the Constitution of India, the Union of India has the exclusive power to impose service tax. The affidavit states that the lapse in not specifically referring to the stand taken before the Delhi High Court was unintentional and bona fide. The petitioner further states that during the course of the arguments, earnest attempts were made by the petitioner to demonstrate the error in the judgments of the High Court and lapse was there in the affidavit in not specifically referring to the inconsistent stand and there was no intention to suppress the material.

245. It is a matter of record that the second Writ Petition in W.P. No. 4302 of 2012 before the Delhi High Court, challenging the levy of service tax, was rejected by the Delhi High Court, by order dated 20th July, 2012, by referring to the earlier decision of the Delhi High Court as to the sustainability of service tax as well as entertainment tax and the decision of the Delhi High Court on the Delhi Entertainments and Betting Tax Act was challenged before the Supreme Court in Civil Appeal No.2147 of 2012 and the same is pending.

246. A reading of the affidavit of the first Writ Petition filed before the Delhi High Court, dated 19.3.2010, challenging the levy of entertainment tax, reveals that the grounds were confined to entertainment tax only. The prayer in the writ petition was for Writ of Mandamus to declare the provisions of Section 2(a) and 2(aa), 2(m) (vi), Section 7(1) and Section 8(2) of the Delhi Entertainments and Betting Tax Act, 1996 and Rules 12A, 26A and 31 of the Delhi Entertainments and Betting Tax, (Amendment) Rules, 2010 enacted to include DTH services under the ambit of the Act as unconstitutional and ultra vires the Constitution of India. The grounds raised before the Delhi High Court from A to X, reveal that the challenge is only on the levy of entertainment tax. Referring to the definition of “taxable service” under Section 65(105)(zk), the petitioner contended that the State does not have the legislative competence to levy entertainment tax on the same amount. Having regard to the introduction of Entry 92C List I of VII Schedule to the Constitution of India in the Union List for levy of tax on service, Parliament alone has the jurisdiction and legislative competence to levy tax on service and the State cannot, by terming a service as entertainment, levy the tax under Entry 62 List II of VII Schedule to the Constitution of India, when the substance of the contract is of service and not of entertainment. The petitioner contended that the aspect theory would not apply to enable the value of the services to be included for taxing the entertainment aspect; that DTH services, which are telecommunication services, have been brought under the ambit of broadcasting services and made liable for levy of service tax under Entry 92C List I (Union List) of the VII Schedule (Article 246 of the Constitution). “Thus the NCT of Delhi in colourable exercise of Legislative Power under Article 239 AA- clause 3(a) of the Constitution of India in enacting the Delhi Act No. 2 of 2010 has played fraud so as to transgress its legislative limits and encroach upon the field exclusively within the domain of the Union Government.” Further, the contention of the petitioner is that no State can levy entertainment tax on services covered under Section 65(15) of the Finance Act, 1994 and 2001, as amended from time to time in respect of the same taxable event, i.e., provision of broadcasting services just by describing these services as entertainment.

247. As already pointed out, one may note from the affidavit in the Writ Petition filed before the Delhi High Court that there is hardly any challenge made to the service tax provision.

248. As far as the second Writ Petition filed before the Delhi High Court is concerned, the same was filed before the Delhi High Court on 18th July, 2012. Referring to the earlier decision of the Delhi High Court, the petitioner contended that once it is held that DTH service is taxable as entertainment, service tax cannot be levied and every aspect of the broadcasting was included under Entry 62 List II of VII Schedule to the Constitution of India. The affidavit contains the provisions of the Delhi Entertainments and Betting Tax Act. The petitioner states that even though the service tax levy was not the issue before the Delhi High Court and the petitioners were not heard on the issue whether service tax can be leviable when the entertainment tax is also levied, the Delhi High Court held that service tax is also leviable on the DTH. The petitioner takes the contention that service tax cannot be levied on DTH services, as the same is, in pith and substance, a tax on entertainment and covered exclusively under Entry 62 List II of VII Schedule to the Constitution of India. The transmission signals cannot be segregated into a service and an entertainment, and aspect theory has no application to the facts of the case. Thus the Writ Petitioner challenged the levy of service tax under Section 65(105)(zk) of the Finance Act, 1994. In paragraph 18 of the grounds, the petitioner made a reference to the challenge on the levy of entertainment tax before the Karnataka High Court and in the alternative, also challenged the levy of service tax.

249. As far as the contention before the Delhi High Court in the second writ petition is concerned, applying the earlier decision in the petitioner’s own case, the Delhi High Court had rejected the present petition.

250. Leaving aside the merits of the contention before the Delhi High Court and the order passed therein, it is a matter of record that the petitioner had challenged the decision of the Delhi High Court upholding the provisions of the Delhi Entertainments and Betting Tax Act before the Apex Court and the same is admitted and pending. Even though the petitioner contended before us that they had raised an issue on service tax levy before the Delhi High Court in the first round, we do not find any such claim made in the affidavit, about which we had already referred to in the preceding paragraph and in fact, the Delhi High Court begins its judgment by referring to the admitted position by the petitioner’s counsel, which we had already extracted in the preceding paragraph. The affidavit filed before this Court does not offer any convincing explanation as to the suppression of the facts regarding the admitted stand taken as stated in the judgment of the Delhi High Court and the stand taken now before this Court and the appeal filed before the Supreme Court questioning the correctness of the order of the Delhi High Court upholding the levy of Delhi Entertainments and Betting Tax Act. The grounds before this Court at page 11, while attacking the State legislative power to levy entertainment tax and overlapping of Entries in Lists II and I, questioned Section 4-I of the Act. The prayer contains a declaratory relief on Section 4-I of the Tamil Nadu Entertainments Tax Act as violative of Entry 62 List II of VII Schedule to the Constitution of India and hence, ultra vires and violative of Articles 14, 19(1)(g) and 265(1) of the Constitution of India and a declaratory prayer to declare Section 65(105)(zk) of the Finance Act, 1994 as ultra vires. The affidavit makes no mention about Entry 92C List I at all as the basis for the challenge. The petitioner, as a corporate entity, cannot plead ignorance of the stand taken before the other High Court, conceding a particular position on its liability. When the petitioner had not disclosed the basis of the shift in the stand and the arguments were advanced without even making a reference about this, we can only record our displeasure at the attitude of the petitioner in going for forum shopping, taking different stands at different point of time before different Courts. Even though learned senior counsel appearing for the petitioners pointed out that the petitioners had, in fact, taken the question of levy of service in the first round of litigation itself, the observation of the Delhi High Court as to the admitted case of the petitioners that service tax is leviable, as recorded by the Delhi High Court may not be correct, we are not prepared to accept this plea when admittedly the petitioners had not taken any steps to set the record right.

251. We may point out herein that there are other Writ Petitioners, who had also filed Writ Petitions before other High Courts, challenging the levy of entertainment tax under the respective State enactments. We have also dealt with the same in the preceding paragraphs about the difference in the language between the Tamil Nadu Act and the other State Acts. But on the width of Entry 62 List II of VII Schedule to the Constitution of India, the contentions taken by those petitioners before this Court are on the same lines of the contention taken before the other High Courts and hence, there could be no serious cause or concern to voice about.

252. In this background of the facts, we do not appreciate the attitude shown by the petitioner in suppressing the material fact about its conceding a particular state of affairs on its liability under the Service tax levy. Even though learned counsel appearing for the petitioner submitted that there was no intention, the question is not one of intention, but a question of fairness to the Court in the matter of placing statement of facts truthfully, which, we think, is the basis of the justice delivery system. We may once again point out that but for the State’s argument pointing out to the different stand taken, the case would have gone for further argument from the petitioners’ side. We wish that the petitioners do not repeat the same tactics before other High Courts. In the light of the material suppression made, we do not find that the petitioners would be justified in advancing its argument further on its challenge on the levy of service tax. We may also point out that when this Court pointed out to the appeal filed before the Supreme Court challenging the levy of entertainment tax, there is no direct answer explaining the conduct of the petitioners. The petitioners cannot speak in two tongues. With this observation, we do not think that W.P. Nos. 25872, 25928 and 25929 of 2011 call for any hearing on merits and for the suppression of facts, we deem it fit to reject the Writ Petitions. Accordingly, W.P. Nos. 25872, 25928 and 25929 of 2011 stand dismissed.

In the result, W.P. Nos. 25721, 27070 to 27072, 25987, 28978, 25873 and 25927 of 2011 are allowed and W.P. Nos. 25986, 28979, 25872, 25928 and 25929 of 2011 are dismissed. No costs. Consequently, M.P.Nos.1,1,1,1,1,1,1,1,1,1 and 1 of 2011 are closed and M.P. Nos. 2 and 3 of 2011 in W.P. No. 25987 of 2011 are allowed.