2008 (11) TMI 636 - HC - VAT and Sales Tax

Levy of entertainment tax under the U.P. Entertainments and Betting Tax Act, 1979, on Direct to Home (for short, DTH ) service provided by the petitioners challenged - Held that - Though, there is legislative competence of the State to levy entertainment tax on the entertainment provided by the petitioners (broadcasting agencies) to its subscribers, but same cannot be levied without there being specific provision in such local Act (U.P.Entertainments and Betting Tax Act, 1979). As such, the notices issued by the respondent District Magistrates for recovery of entertainment tax from the petitioners, being without authority of law, are liable to be quashed.

Issues Involved:
1. Levy of entertainment tax on Direct to Home (DTH) service under the U.P. Entertainments and Betting Tax Act, 1979.
2. Legislative competence of the State Government to levy entertainment tax on DTH services.
3. Distinction between DTH services and cable services.
4. Applicability of service tax on DTH services under the Union List.

Issue-wise Detailed Analysis:

1. Levy of Entertainment Tax on DTH Services:
The petitioners challenged the levy of entertainment tax on DTH services under the U.P. Entertainments and Betting Tax Act, 1979. They argued that DTH services, which use satellite technology to transmit TV signals directly to subscribers, are distinct from cable services that transmit signals through cables. The petitioners contended that the Act does not explicitly cover DTH services, and hence, the State Government cannot levy entertainment tax on them without amending the law, as done by the States of Maharashtra and Karnataka.

2. Legislative Competence of the State Government:
The respondents argued that the State Legislature is competent to levy entertainment tax on DTH services under entry 62 of List II (State List) of the Seventh Schedule to the Constitution of India. They relied on a judgment by the Allahabad High Court, which stated that no specific provision is required in the Act to bring DTH services under the tax net. However, the court noted that the U.P. Entertainments and Betting Tax Act, 1979, in its current form, does not cover DTH services, which use electromagnetic waves rather than cables.

3. Distinction Between DTH Services and Cable Services:
The court examined the definitions of "cable service" and "cable television network" under the Act, which involve transmission by cables. It also considered the definition of "broadcasting" under the Prasar Bharati Act and the Finance Act, which includes dissemination through electromagnetic waves. The court concluded that DTH services, which do not use cables, are not covered under section 4C of the U.P. Entertainments and Betting Tax Act, 1979. The court suggested that the State Legislature could amend the law to include DTH services, similar to the amendments made by Maharashtra.

4. Applicability of Service Tax on DTH Services Under the Union List:
The petitioners argued that DTH services are subject to service tax under entry 92C of List I (Union List) and, therefore, the State Government cannot levy entertainment tax on the same subject matter. The court acknowledged that service tax is levied by the Central Government and appropriated by both the Union and the States under Article 268A of the Constitution. However, it held that the power to levy entertainment tax on luxuries, including entertainments, under entry 62 of List II, is not fettered by the imposition of service tax by the Central Government. The court emphasized the need for a harmonious construction of the legislative fields to avoid conflicts.

Conclusion:
The court concluded that while the State Legislature has the competence to levy entertainment tax on DTH services, such a tax cannot be levied without a specific provision in the U.P. Entertainments and Betting Tax Act, 1979. Consequently, the notices issued by the District Magistrates for the recovery of entertainment tax from the petitioners were quashed. The court allowed the writ petitions to the extent that the impugned notices were without authority of law.

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