2009 (3) TMI 1026 - HC - VAT and Sales Tax

Summary

Issues involved:
The judgment involves issues concerning the levy and imposition of entertainment tax on Direct to Home (DTH) service providers under the U.P. Entertainments and Betting Tax Act, 1979 (1979 Act) and the constitutional validity of such levy.

Levy and Imposition of Entertainment Tax:
The writ petitioners, DTH service providers, argued that the nature of their service, utilizing satellite systems to transmit programs directly to subscribers, distinguished them from cable operators. They contended that DTH service falls under the control of the Central Government and is subject to service tax. The learned Single Judge considered two main challenges raised by the petitioners. Firstly, whether the 1979 Act authorized the imposition of entertainment tax on DTH service providers. Secondly, whether the State Legislature had the power to legislate on entertainment tax despite service tax being levied under a Union List legislation. The Single Judge found that the 1979 Act did not provide for the imposition of entertainment tax on DTH service providers, a view upheld by the High Court.

Constitutional Validity of Tax Levy:
The High Court affirmed that the State Legislature's power to levy entertainment tax under Entry 62 of the State List and the Union Parliament's authority to impose service tax under Entry 92 (c) of the Union List operate in distinct fields. The Court held that both legislatures were competent to legislate in their respective domains. Despite this, the Court deemed the challenge to the imposition of entertainment tax on DTH service providers as academic, given the absence of legal authorization for such levy at the relevant time. Consequently, the Special Appeals filed by the writ petitioners were deemed non-maintainable and dismissed.

Amendment Act Challenge:
Following the enactment of the 2009 Amendment Act, which introduced provisions related to DTH broadcasting services under the 1979 Act, the writ petitioners expressed intent to challenge this amendment. The High Court granted them liberty to challenge the Amendment Act, emphasizing that such a challenge would be considered on its own merits and in accordance with the law, without interference from the judgments under review.