2010 (7) TMI 946 - HC - VAT and Sales Tax

Levy tax on direct-to-home (DTH) broadcasting services - Held that - The amendments incorporated by the Uttarakhand Legislature through the Uttarakhand (the Uttar Pradesh Entertainments and Betting Tax Act 1979) (Amendment) Act 2009 notified on March 16 2009 were fully within its legislative competence and that the aforesaid amendments did not encroach upon an area over which the Parliament exclusively had the authority to legislate. The levy of entertainment tax on the petitioner-company under the Entertainments Act 1979 being fully justified the challenge raised by the petitioner to the same is liable to be declined and as such is hereby declined. W.P. dismissed.

Issues Involved:
1. Legislative competence of the Uttarakhand Legislature to levy entertainment tax on "direct-to-home" (DTH) broadcasting services.
2. Whether the levy of entertainment tax on "direct-to-home" (DTH) broadcasting service constitutes double taxation.
3. Distinction between "service" and "entertainment" in the context of taxation.

Issue-wise Detailed Analysis:

1. Legislative Competence of the Uttarakhand Legislature:
The primary contention was whether the Uttarakhand Legislature had the authority to levy entertainment tax on "direct-to-home" (DTH) broadcasting services. The court examined the legislative competence under Article 246 of the Constitution of India, which delineates the powers of the Parliament and State Legislatures. The court concluded that the subject of "entertainment" falls within the State List (Entry 62), giving the State Legislature the authority to levy taxes on entertainments. The court noted that the Uttarakhand Legislature had amended the definition of "entertainment" in the Entertainments Act, 1979, to include "direct-to-home" (DTH) broadcasting services. This amendment was within the legislative competence of the State Legislature, as it pertained to "entertainment" and not "service," which falls under the Union List (Entry 92C).

2. Double Taxation:
The petitioners argued that the levy of entertainment tax on "direct-to-home" (DTH) broadcasting services amounted to double taxation, as they were already paying service tax to the Central Government. The court distinguished between the two taxes, stating that service tax is levied on the "service" component under Entry 92C of the Union List, while entertainment tax is levied on the "entertainment" component under Entry 62 of the State List. The court emphasized that the two taxes are based on different taxable events: service tax is based on the provision of broadcasting services, while entertainment tax is based on the provision of entertainment to consumers. Therefore, there was no overlap or double taxation.

3. Distinction Between "Service" and "Entertainment":
The court examined the nature of "direct-to-home" (DTH) broadcasting services to determine whether they fall under "service" or "entertainment." The court referred to previous judgments, including Federation of Hotel & Restaurant Association of India v. Union of India and Bharat Sanchar Nigam Ltd. v. Union of India, to highlight the distinction between different taxable aspects of the same transaction. The court concluded that "direct-to-home" (DTH) broadcasting services involve an element of entertainment, as they provide consumers with access to television channels and programs. Thus, the levy of entertainment tax by the State Legislature was justified, as it targeted the entertainment aspect of the service.

Conclusion:
The court upheld the legislative competence of the Uttarakhand Legislature to levy entertainment tax on "direct-to-home" (DTH) broadcasting services. It found no merit in the contention that such a tax constituted double taxation or encroached upon the Union List's domain. The court dismissed the writ petitions, affirming the validity of the amendments made by the Uttarakhand Legislature to the Entertainments Act, 1979.

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