Orissa High Court
M/S. Tata Sky Ltd vs State Of Orissa And Others ... Opp. ... on 24 April, 2012
Author: V.Gopala Gowda
Bench: V.Gopala Gowda
HIGH COURT OF ORISSA: CUTTACK
W.P.(C) No. 8966 of 2011
In the matter of an application under Articles 226 & 227 of the Constitution
of India.
--------
M/s. Tata Sky Ltd.,
at Miracle Star Net Store,
Plot No.17/10, Unit-VI, Bhubaneswar,
Odisha, represented through its
Managing Director and CEO,
Sri Harit Nagpal ... Petitioner
-Versus-
State of Orissa and others ... Opp. Parties
For Petitioner : M/s. Jagabandhu Sahoo
D.Panda, P.Mohapatra &
A. Mohapatra.
For Opp. Parties : Mr. R.P. Kar,
Standing Counsel (Revenue)
----------
P R E S E N T:
THE HONOURABLE THE CHIEF JUSTICE SHRI V.GOPALA GOWDA
AND
THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA
Date of Judgment: 24.04.2012
B.N.MAHAPATRA,J. In this writ petition, challenge has been made to certain
provisions of The Orissa Entertainment Tax Act, 2006 (for short,
"Entertainment Tax Act, 2006"), The Orissa Entertainment Tax
(Amendment) Act, 2010 (for short, "E.T. Amendment Act, 2010") (Annexure-
5) and The Orissa Entertainment Tax (Amendment) Rules, 2010 (for short,
"E.T. Amendment Rules, 2010") (Annexure-6) as being illegal, arbitrary and
unconstitutional and ultra vires Articles 246, 265, 301 & 19(1)(g) read with
Entry 92C/97 of List I and Entry 62 of List II, Seventh Schedule of the
Constitution of India, to the extent entertainment tax is sought to be levied
2
on DTH broadcasting Service. Further prayer of the petitioner is to quash
notice bearing No.1428(2)/CT dated 16.03.2011 (Annexure-10) issued by
opposite party no.4-Dy Commissioner of Entertainment Tax, IV-Circle,
Bhubaneswar and notice No.1279 dated 17.03.2011 (Annexure-8) issued by
Deputy Commissioner of Entertainment Tax, III Circle, Bhubaneswar, as
they suffer from illegality and are without jurisdiction.
2. Petitioner's case in a nutshell is that it is a company registered
under the Companies Act, 1956. It provides DTH broadcasting services to
the subscribers across the country. The Government of India has granted
licence to the petitioner under Section 4 of the Indian Telegraph Act, 1885
(for short, "Act, 1885") and the Indian Wireless Telegraphy Act, 1933 (for
short, "Act, 1933") on the terms and conditions contained in the licence
agreement for a period of 10 years. The petitioner has paid
Rs.10,00,00,000/- (Rupees Ten Crores) as non-refundable Entry Fee and
has also furnished a Bank Guarantee of Rs.40,00,00,000/- (Rupees Forty
Crores) as security, which is valid for the entire period of the licence. The
terms of licence further provide for payment of annual fee equivalent to 10%
of its gross revenue, as reflected in the audited accounts of the Company for
a particular financial year within one month from the end of that financial
year. The petitioner is also required to obtain a Wireless Operational Licence
for establishment, maintenance and operation of the DTH Platform/facility
from Wireless Planning and Coordination Wing of Ministry of
Communication and IT and pay licence fee, royalty for spectrum use as
prescribed by the Wireless Planning and Coordination Wing (WPC) under the
Department of Telecommunications. Pursuant to fulfilment of the eligibility
conditions, assurance and payment of requisite permission fee by the
3
petitioner, as per the "Guidelines for up linking from India" notified on 2nd
December, 2005 by the Union Government, the petitioner has also been
granted permission on non-exclusive basis for a period of ten years to
establish, maintain and operate an uplinking hub(Teleport).
3. Subsequent to obtaining licence, the petitioner launched its
services through out India from August, 2006 including the State of Orissa.
The petitioner has a single broadcasting centre at Chattarpur, Delhi. In view
of the teleport licence/permission granted by the, Ministry of Information
and Broadcasting, Government of India, the petitioner has set up an
uplinking hub (Teleport) which enables the petitioner to downlink signals
from various satellites of different Broadcasters of TV channels and then
uplinks to its own satellite Ku Band (INSAT 4A Satellite), the designated
transponders for transmission of signals in Ku Band. These signals are
received by the dish antenna installed at the subscriber's premises. The T.V.
signals uplinked from the broadcasting Centre at Chhattarpur, Delhi are in
encrypted format and are then decrypted/decoded by the Set Top Boxes and
the viewing card inside the Set Top Box makes the customers able to view
the service.
4. When a new connection is given to the premises of a consumer,
such consumer/subscriber pays one time charges applicable for installation
of dish antenna in the premises of the petitioner. After installation, the
subscriber is required to pay monthly subscription/service charges for the
DTH broadcasting services availed by him. The service comprises of
transmission of DTH signals of T.V. channels which a subscriber has opted
directly to his home and are received by the Set Top Box of the subscriber
which is connected to his TV via a cable. A subscriber may purchase a Set
4
Top Box from a retailer, which becomes the property of the subscriber. The
service provided thereafter, to the customer is a prepaid service wherein the
subscriber is required to purchase a recharge voucher to top up his
connection balance. The monthly charges vary from Rs.150/- to Rs.350/-
per month depending on the number of channels subscribed by a customer.
On 15th March, 2001, the Government of India issued Guidelines for
obtaining Licence to provide DTH Broadcasting Service in India.
5. The DTH services were brought within the purview of service tax
with effect from 16th June, 2005 by the Finance Act, 2005. Under Section
65 (105) (zk) of the Finance Act, as amended, DTH service is covered under
the category of "Broadcasting service" and the service tax at the rate of
10.3% (including 0.3% Education Cess) is currently payable on the services
covered under this category.
6. The Entertainment Tax Act, 2006 got assent of His Excellency
the Governor of Orissa on 30th May, 2006 and for general information it
was published in the Orissa Extra Ordinary Gazette vide Gazette No.759
dated 02.06.2006. The said enactment was done by the State of Orissa in
exercise of power under Entry 62, List-II of the State List (Seventh Schedule)
of the Constitution of India which provides for "Taxation on luxuries
including taxes on Entertainments, Amusement, Betting and Gambling." It
was enacted to provide for levy and collection of Luxury-cum-Entertainment
and Amusement Tax in the State of Orissa for raising additional resources.
The principal Act was enacted, inter alia, for levy and collection of
entertainment tax and the said Act, as originally framed, did not cover DTH
operators.
5
7. The principal Act has now been amended vide Notification
which has been published in the Orissa Extraordinary Gazette bearing
Notification No.10568/1-2/10/Legis dated 24th September, 2010. By the
said amendment, the concepts of "service provider" "subscriber" and "cable
service" have been introduced with substantial amendment. The newly
added Section 2(a) defines cable service with several modifications. In the
aforesaid notification, Sections 7,9 and 15 of the Entertainment Tax Act
have been amended by including Direct to Home (DTH) Broadcasting Service
for the purpose of liability to pay Entertainment Tax and procedural
provisions under Sections 9 and 15 of the said Act. Thus, by virtue of the
said amendment the "Cable Service" now includes DTH broadcasting
service. The Orissa Entertainment Tax (Amendment) Act, 2010 came into
force w.e.f. 01.10.2010 as per Finance Department Notification dated 30th
September, 2010. The E.T. Rules originally framed by the State Government
in exercise of power conferred under Section 36 of the Entertainment Tax
Act, 2006 was also amended in 2010 which came into force on the date of
publication of the said amended Rules in the Orissa Gazette on 05.10.2010.
Rule 12 of the said amended Rules, 2010 provides provisions for obtaining
permission from the Commissioner in Form-XIIIA to operate cable television
network or connection for the DTH broadcasting service.
8. Pursuant to the said amended provisions of the Act and Rules,
opposite party No.5 vide Memo No.1279/CT dated 17.03.2011 called upon
the petitioner to obtain permission under the Orissa Entertainment Rules
and to deposit tax due for the months from October, 2010 to February, 2011
within seven days from the date of receipt of the notice failing which it has
been further stated that action as deemed proper shall be taken against the
6
petitioner as per the provisions of law. Responding to the said notice dated
17.03.2011 issued by opposite party No.5, the petitioner submitted its
objection. Similarly, opposite party No.4 by notice No.1428(2)CT dated
16.03.2011 also directed the petitioner to obtain permission in Form-XVIII
from opposite party No.3 under the Amended Rules, 2010 as a DTH Service
Provider failing which the tax liability would be assessed to the best of
judgment with appropriate penalty under Section 17(1a) of the said Act.
Responding to the said notices dated 16.03.2011 and 17.3.2011 issued by
opposite party Nos.4 and 5, petitioner submitted its objection challenging
the legality and validity of the impugned levy of entertainment tax on DTH
Broadcasting Service and proceedings for enforcement of such levy of tax. It
also requested the said opposite parties to clarify the aforesaid issues and
keep the proceedings in abeyance and filed the present writ petition.
9. Mr. Jagabandhu Sahoo, learned counsel appearing for the
petitioner submitted that "Entertainment" in the Amended Act is defined in
Section 2(f) to mean exhibition, includes exhibition of news reels,
performance, amusement, and entertainment through DTH Broadcasting
service. The Proprietor of DTH Broadcasting service, itself is not undertaking
any of the activities included in the expression 'entertainment'. The said
expression can only refer to "dissemination of (this) form of communication"
in the shape of "pictures, images and sounds transmitted through space"
and "intended to be received by the general public". This is the meaning
assigned to "broadcasting" in Section 2(c) of the Prasar Bharti (Broadcasting
Corporation of India) Act, 1990. The definition of broadcasting, as contained
in Section 2(c), is incorporated in Section 65(15) of the Finance Act, 2001
and further includes programme selection, scheduling or presentation of
7
sound or visual matter for public viewing through space, cable direct to
home signals. "Any service" by a broadcasting agency or organization "in
relation to broadcasting in any manner" is taxable service under Section
65(105)(zk) of the Finance Act, 2001 as amended with effect from
16.06.2005. "In relation to" are words of comprehensiveness and need to be
expansively construed. In respect of his contention, Mr. Sahoo relied upon
the judgment in the case of M/s Doypack Systems Pvt. Ltd. vs. Union of India
and others, (1988) 2 SCC 299 at page 329. Thus, the expression
"entertainment" is in fact "taxable service" covered under Article 246(1) read
with Entry 92C/97 of List I of the Seventh Schedule and in the exclusive
domain of Parliament beyond the legislative competence of the Orissa State
Legislature. The "entertainment through DTH Broadcasting Service"
transmitted by proprietor of direct to home Broadcasting service is nothing
but the pictures, images and sound transmitted through space. Thus, the
Amendment Act insofar as it defines "entertainment" as "entertainment
through direct to home Broadcasting Service" and consequently imposes
entertainment tax is in its pith and substance dealing with the prohibited
field, i.e., "taxable service" and under the guise of entertainment indirectly
encroaches upon "taxable service". The activity sought to be taxed being
"taxable service", the Orissa State Legislature cannot assume competence to
tax it by deeming it to be an entertainment ("entertainment through direct to
home Broadcasting service") as mere nomenclature of a tax is not conclusive
unless the activity is taxable.
10. The List of Seventh Schedule being a limitation on legislative
authority cannot be unilaterally enlarged. The activity of transmission, thus,
cannot be segregated from pictures, images and sound transmitted as
8
exhibitions and performance being capable of categorization under a single
head of power under Entry 92C/97 read with Article 246, cannot fall in List
II of the Seventh Schedule. The real purpose of the Amendment Act as
extended to entertainment through DTH Broadcasting service is, thus,
different from the one that appears on its face and the real object of the said
legislation in fact lies within the exclusive field of Parliament. The amended
Act is a disguised, conversion and indirect transgression into a prohibited
field and clearly amounts to colourable legislation. If the form of the
impugned Act as amended and its outward appearance is disregarded and
reference, instead, is made to the subject matter of the statute the same
would be revealed as beyond the competence of the Orissa State Legislature.
A Legislature cannot violate the constitutional prohibitions by employing
any subterfuge and the effect of the legislation can always be examined to
decide upon the issue of competence. The State Legislature cannot assume
competence over a prohibited matter by deeming the prohibited matter as
one which is permitted as it has done in the instant case by artificially
defining service through DTH as entertainment through DTH.
11. Mr. Sahoo further submitted that under Article 270 of the
Constitution of India, all taxes and duties referred to in the Union List (with
certain exception) are levied and collected by the Government of India and
distributed between the Union and the States as per the recommendations
of the Finance Commission. Based on the recommendations of the 12th
Finance Commission, 30.5% of net proceeds of the service tax are
distributed among the States. The State of Orissa receives 5.229% of service
tax collected by Centre on the DTH broadcasting service and as the proceeds
of the service tax on broadcasting service is being shared between the
9
Centre and the States, the State Legislature is not authorized to levy
another tax on the same taxable event or activity. The levy of such
entertainment tax by the State violates the scheme of revenue
administration between the Union and the States, which is one of the basic
features of the Constitution of India. Such a levy by the State Government is
unconstitutional and ultra vires and infringes Articles 270 of the
Constitution of India. The amended Act seeking to impose tax upon DTH
operator is extra territorial, illegal and unconstitutional. The licence granted
to the petitioner under Section 4 of the Telegraph Act, 1885 is one of service
and not for providing entertainment. The substance of the contract in the
present case is of service and not of entertainment and if the DTH service is
deemed as entertainment under Entry 62 of List-II the same would be
violative of Article 268-A of the Constitution.
12. Any State levy on "Entertainment" and/or "Amusement", to be
valid/intra vires, it has to be one relating to entertainment as understood in
common parlance. Entry 62 of List II of the Seventh Schedule should have a
direct and sufficient nexus with the factum of entertainment. Until such a
direct and proximate nexus between the transaction sought to be taxed and
the person who is required to pay the tax is clearly established, the levy
cannot be held to be constitutionally valid. The dominant position and
intention of a DTH operator such as the petitioner is to act as a conduit for
receipt and transmission of broadcasting signals and thus, in essence it
performs the role of a "carrier" and not an "entertainer". Therefore, as far as
the petitioner is concerned, there is neither intent to "Entertain" nor the
taxable fact of "Entertainment". Both animus and factum are therefore
missing. If all aspects of broadcasting services for the purposes of levying
10
the service tax are covered under the Finance Act, the State cannot tax
broadcasting services under Entry-62 of List-II as that would not only allow
the State to levy entertainment tax in contravention of Article 268-A but
would also amount to trespass upon the Legislative field of the Union under
Entry 92-C of List-I. The taxation of an object can only be with respect to
taxable events and all taxable events can be covered under single legislative
entry. Entry 62 speaks of tax on entertainment but it does not include the
right to impose taxes on the provision of DTH Broadcasting service as a
taxable event as in the case of broadcasting service taxable event is
separately provided under Entry 92-C. There cannot be overlapping in the
field of taxation and since the tax on provision of broadcasting service is
specifically provided under Entry-92C it narrows down the field of taxation
available under Entry 62 of List-II. No State can levy entertainment tax on
services covered under Section 65(15) of the Finance Act, 1994 as amended
from time to time in respect of the same taxable event, i.e., provision of
broadcasting services under the guise of entertainment. DTH services have
been categorically brought under the ambit of "Broadcasting Services" and
made liable for levy of service tax under Entry 92C of List I (Union List) of
the Seventh Schedule read with Article 246 of the Constitution. The
subscription payment made by the subscribers is towards the availment of
'broadcasting service' and not for any "entertainment". The subscription
paid by the customer is liable to service tax under Entry 92C of List-I of the
VII Schedule and service tax @ 10.3% is paid on the said subscription
amount received from subscribers for availing DTH Broadcasting service and
as such there is no question of levy of 'entertainment tax' by the State on
the said subscription charges. Notices issued and penalty proposed to be
11
imposed by opposite party Nos.4 and 5 on the basis of the Amended Act are
liable to be quashed.
13 Referring to the views of the Administrative Reforms
Commission constituted on 9th July, 1983 under the Chairmanship of R.S.
Sarkaria, Mr. Sahoo submitted that the demand for either a concurrent or
an exclusive power to the States with respect to broadcasting cannot be
supported.
Further drawing attention of this Court to the Notification
No.S.O.44(E) dated 9th January, 2004, it was submitted that the broad
casting services and cable services are to be telecommunication service.
Levy of entertainment tax on DTH Broadcasting services, is an arbitrary
action on the part of the State Government and hence violative of Article 14
of the Constitution of India and such levy of entertainment tax is an
unreasonable restriction on right to trade of the petitioner under Articles
19(1)(g) and 301 of the Constitution.
14. Placing reliance on the judgment of the Hon'ble Supreme Court
in the case of Godfrey Philips India Ltd. vs. State of U.P. (2005) 2 SCC 515,
Mr. Sahoo, submitted that the Indian Constitution is unique in that it
contains an exhaustive enumeration and division of legislative powers of
taxation of Centres and States. This mutual exclusivity is reflected in Article
246(1). Therefore, taxing entries must be construed with clarity and
precision so as to maintain such exclusivity, and a construction of a
taxation entry which may lead to overlapping must be eschewed. If the
taxing power is within a particular legislative field, it would follow that other
fields in the legislative lists must be construed to exclude this field so that
there is no possibility of legislative trespass.
12
15. Mr. R.P. Kar, learned Standing Counsel appearing on behalf of
the Revenue placing reliance on the judgment of the Punjab and Haryana
High Court in the case of Tata Sky Limited vs. State of Punjab and Another,
(2011) 37 VST 1 (P & H), submitted that provisions of the Orissa
Entertainment Tax (Amendment) Act, 2010 and the Amendment Rules, 2010
to the extent providing for levy of entertainment tax on entertainment
through DTH broadcasting services is constitutionally valid. It is further
submitted that the Central levy as well as State levy is on different aspect
and State levy could not be held to be in conflict with the Central levy.
Entertainment is the main activity and broadcasting service is only a
medium for entertainment.
16. On the rival contentions, the questions that fall for
consideration by this Court are as follows:
(i) Whether entertainment through DTH broadcasting service is
covered by Entry 62 of List II and Entertainment Tax is leviable
on such service or the same is covered by Entry 92C of List I on
which service tax is leviable?
(ii) Whether there can be two levies i.e. (i) levy of service tax on
service provided or to be provided to a client by a broadcasting
agency or organization covered under Section 65(15) of the
Finance Act, 1964 by the Union Government and (ii) another
levy of Entertainment Tax by the State Government on
entertainment through DTH broadcasting service on the ground
that such levy is on a different aspect/sphere and covered
under Entry 62 of List II ?
17. The above two questions being interlinked, they are dealt with
together.
18. To deal with the above questions, it is felt necessary to refer to
some of the constitutional provisions and statutory provisions of the
13
Finance Act, 2001, the Prasara Bharati (Broadcasting Corporation of India)
Act, 1990 and the Orissa Entertainment Tax Act, 2006 as amended by
Orissa Entertainment (Amendment) Act, 2010 and the Orissa Entertainment
Rules, 2006 as amended by The Orissa Entertainment (Amendment) Rules,
2010, which are relevant for our purpose. The same are extracted below:
19. The Constitution of India -
"Article 245. Extent of laws made by Parliament and
by the Legislatures of States.--(1) Subject to the
provisions of this Constitution, Parliament may make
laws for the whole or any part of the territory of India,
and the Legislature of a State may make laws for the
whole or any part of the State.
(2) No law made by Parliament shall be deemed to be
invalid on the ground that it would have extra-territorial
operation."
"Article 246- Subject matter of laws made by
Parliament and by the Legislature of States. (1)
Notwithstanding anything in clauses (2) and (3)
Parliament has exclusive power to make laws with respect
to any of the matters enumerated in List I in the Seventh
Schedule (in this Constitution referred to as the ("Union
List")
(2) Notwithstanding anything in clause (3) Parliament
and subject to clause(1), the legislature of any State also,
have power to make laws with respect to any of the
matters enumerated in List-III in the Seventh Schedule
(in this Constitution referred to as the "Concurrent List")
(3) Subject to clause (1) and (2), the legislature of any
State has exclusive power to make laws for such State or
any part thereof with respect to any of the matters
enumerated in List-II in the Seventh Schedule (in the
Constitution, referred to as the "State List")
(4) Parliament has power to make law with respect to
any matter for any part of territory of India not included
in a State notwithstanding that such matter is a matter
enumerated in the State List."
"248. Residuary powers of legislation.--(1)
Parliament has exclusive power to make any law with
respect to any matter not enumerated in the
Concurrent List or State List.
14
(2) Such power shall include the power of making any
law imposing a tax not mentioned in either of those
Lists."
"Entry 92C List I: "Taxes on services"
From the above, it is clear that the Parliament has the
exclusive power to tax DTH Broadcasting services."
"Entry 62, List II: "Taxes on luxuries, including taxes on
entertainments, amusements, betting and gambling."
20. Finance Act, 2001 :
"Section 65(15):
"Broadcasting" has the meaning assigned to it in
clause (c) of Section 2 of the Prasar Bharati
(Broadcasting Corporation of India) Act, 1990 and also
includes programme selection, scheduling or
presentation of sound or visual matter on radio or TV
channel i.e. in India for public listening or viewing as
the case may be; and in the case of broadcasting
agency or organization , having its head office situated
in any place outside India, includes the activity of
selling of time slots or obtaining sponsorships for
broadcasting any form of communication or collecting
the broadcasting charges or permitting the rights to
receive by transmission of electro-magnetic waves
through space or through cables, direct to home
signals or by any other means to cable operator
including multi-system operator or any other person
or behalf of the said agency or organization, by its
branch office or subsidiary or representative in India
or any agent appointed in India or by any person who
acts on its behalf in any manner."
"Section 65(105) (zk) of the Finance Act, 2001 as amended w.e.f.
16th June, 2005 'the taxable service' in relation to Broadcasting agency
means as follows :
"Taxable Service" means any service provided or to be provided
to a client, by a broadcasting agency or organization in relation to
broadcasting in any manner and, in the case of a broadcasting agency or
organization, having its head office situated in any places outside India,
includes service provided by its branch office or subsidiary or representative
15
in India or any agent appointed in India or by any person who acts on its
behalf in any manner, engaged in the activity of selling of time slots for
broadcasting of any programme or obtaining sponsorships for programme
or collecting the broadcasting charges or permitting the rights to receive any
form of communication like sign, signal, writing, picture, image and sounds
of all kinds by transmission of electro-magnetic waves through space or
through cables, direct to home signals or by any other means to cable
operator, including multi-system operator or any other person on behalf of
the said agency or organization.
Explanation : For the removal of doubts, it is hereby declared that so long as
the radio or television programme broadcast is received in India and
intended for listening or viewing, as the case may be, by the public, such
service shall be taxable service in relation to broadcasting, even if the
encryption of the signals or beaming thereof through the satellite might
have taken place outside India;"
21. The Prasar Bharati (Broadcasting Corporation of India) Act,
1990.
"Section 2 (c): 'broadcasting' means the dissemination of
any form of communication like signs, signals, writing,
pictures, images and sounds of all kinds by
transmission of electro-magnetic waves through space
or through cables intended to be received by the general
public either directly or indirectly through the medium
of relay stations and all its grammatical variations and
cognate expression shall be construed accordingly."
22. DTH Broadcasting Service has been described in the Guidelines
issued by Government of India on 15th March, 2012 as under:
"Direct-To-Home (DTH Broadcasting service) refers to
distribution of multi-channel TV programmes in Ku
Band by using a satellite system by providing TV
signals direct to subscriber's premises without passing
through an intermediary such as cable operator."
16
23. The Orissa Entertainment Tax Act, 2006 as amended by E.T.
Amendment Act, 2010:
"Section 2 (a): "ADMISSION TO AN ENTERTAINMENT"
includes admission to any place in which the entertainment is held and in
case of entertainment through cable service [or Direct-to-Home (DTH)
Broadcasting Service] each connection to a subscriber shall be deemed to be
an admission for entertainment".
"Section 2 (d): "CABLE TELEVISION NETWORK" means any
system consisting of a set of closed transmission paths and associated
signal generation, control and distribution equipment, designed to provide
cable service for reception by multiple subscribers."
"Section 2(e1): "DIRECT-TO-HOME (DTH) BROADCASTING
SERVICE" means system of distribution of multi-channel television
programme in KU Band by using a Satellite System, by providing television
signals to a television set with the aid of set-top box direct to subscribers
without passing through an intermediary such as Cable Operator.
Explanation.--
For the purpose of this clause and clause (k1) "KU BAND"
ordinarily means the 11.7-12.7 Ghz. (Gigahertz) frequency band which splits
into two segments viz. the first having the frequency of 11.7-12.2 Ghz.
Known as FSS (Fixed Satellite Service) and the other having the frequency of
12.2-12.7 Ghz. Known as BSS (Broadcasting Satellite Service),or it may have
such other brand width as may be approved by the Government of India
from time to time."
"Section 2(f) "ENTERTAINMENT" means any cinematographic
exhibition including exhibition of news reels, documentaries, cartoons,
17
advertisement shots or slides, whether before or during exhibition of a
feature film or separately, and includes any other exhibition, performance,
amusement and entertainment through cable service (or Direct-to-Home
(DTH) Broadcasting service)"
"Section 7. Tax on cable and DTH service.-
(1) The proprietor of a cable television network providing cable
service (and of a Direct-to-Home (DTH) Broadcasting Service)
shall be liable to pay entertainment tax at such rate as specified
in Part II of the Schedule.
(2) The tax payable under this section shall be paid, collected or
realized in such manner as may be prescribed."
"Section 9. Intimation before holding entertainment.-
(1) No entertainment on which tax is leviable shall be held without
prior information being given to the Commissioner in the
manner prescribed.
(2) No proprietor of a cable television network (or Direct-to-Home
(DTH) Broadcasting Service) shall provide entertainment, unless
he obtains permission from the Commissioner in the manner
prescribed.
xx xx xx
(3a) Notwithstanding anything contained in sub-sections (2) and (3)
where any proprietor of a Direct-to-Home (DTH) Broadcasting
Service is providing entertainment immediately before the
commencement of the Orissa Entertainment Tax (Amendment)
Act, 2010 he may continue to provide entertainment,-
(a) for a period of three months from the date of
commencement of said amendment Act, or
(b) till the permission under sub-section (2) is granted by
the Commissioner, if an application to that effect is made in the
prescribed manner within the period specified in clause (a)."
24. The Orissa Entertainment Tax Rules, 2006 as amended by
Orissa Entertainment Amendment Rules, 2010.
18
"Rule 12. Permission to operate cable television
network or connection for the Direct-to-Home (DTH)
Broadcasting Service.-
(1) The proprietor of a cable television network or a
Direct-to-Home (DTH) Broadcasting Service shall
submit to the Commissioner an application in Form
XA within fifteen days from the date of commencement
of these rules bringing the Direct-to-Home (DTH)
Broadcasting Service under purview of the Act or at
least fifteen days before the date of such
entertainment and shall furnish any other information
which may be so required by the Commissioner for the
purpose.
(2) The Commissioner, after making such enquiry
as he may deem proper and after being satisfied that
the application is in order, shall issue certificate in
form XIIIA permitting the proprietor of a cable
television network or a Direct-to-Home (DTH)
Broadcasting Service."
25. The Entertainment Tax Act, 2006 has been amended vide
Notification No.10568/1-2/10/Legis dated 24th September, 2010 and by the
said amendment, the concepts of "service provider" and "subscriber" and
"cable service" have been introduced with substantial amendment. The
newly added Section 2(a) defines cable service with several modifications. In
the aforesaid notification Sections 7, 9 and 15 of the Orissa Entertainment
Tax has been amended by including DTH broadcasting service for the
purpose of liability to pay Entertainment Tax and procedural provisions
under Sections 9 and 15 of the said Act. Section 7 of the Orissa
Entertainment Tax Act is the charging provision which has also been
amended and by virtue of the said amendment "cable service" now includes
DTH broadcasting service. Section 7(2) of the Act provides that the tax
payable under the Entertainment Tax Act shall be paid, collected or realized
in the manner prescribed by Entertainment Tax Rules. Under Section 9(1) of
the Entertainment Tax Act, the proprietor of cable television network
providing cable service and DTH broadcasting service shall be liable to pay
19
Entertainment Tax at such rate as specified in Part II of the Schedule. As
per Part-II of the Schedule, the proprietor of the cable television network
providing cable service and DTH broadcasting service shall be liable to pay
Entertainment Tax @ 5% of his monthly gross receipt. The State
Government vide Finance Department Notification dated 30.10.2010 has
notified the date of effect of the Act w.e.f. 1.10.2010.
26. The State Government in exercise of power conferred by Section
36 of the E.T. Act framed rules vide Entertainment Tax (Amendment) Rules,
2010 which came into force w.e.f. 5.10.2010. Rule 12 of the said
amendment Rules, 2010 provides for obtaining permission from the
Commissioner in Form XIII-A to operate cable Television network or
connection to DTH broadcasting service.
27. Mr. Sahoo, learned counsel for the petitioner though argued the
questions involved in this case from different angles, the essence of the
argument is same i.e. levy of entry tax on DTH Broadcasting service is
beyond the competency of State legislature. According to Mr. Sahoo,
broadcasting service is covered by Entry 92C of List I and not covered by
Entry 62 of List II. Under Article 246 (3) of the Constitution, legislative
power of States is subject to legislative powers of the Centre under Article
246(1). Since the subject-matter of broadcasting service is covered by Entry
92C of List I, the same cannot be covered by Entry 62 of List II of the
Seventh Schedule. The same is excluded from List II on the principle of
federal supremacy. In pith and substance, the levy is on broadcasting
service as apart from broadcasting, no other taxing event has taken place.
The event of broadcasting service itself has been covered in the definition of
entertainment which is the basis for levy for entertainment tax. When there
20
is no separate taxing event, aspect theory cannot be invoked to justify State
levy on an event which is covered by Central levy.
28. On the contrary, the contention of the State is that the Central
levy as well as the State levy is on different aspects and by applying
principles of harmonious construction, the State levy could be held not to be
in conflict with the Central levy. In pith and substance, the State levy is not
on broadcasting service but on entertainment and falls under Entry 62 of
List II. Entertainment is the main activity for which chargers are collected by
the petitioner and broadcasting service is only a medium for the
entertainment.
29. At this juncture, it would be beneficial to have an idea about
distribution of legislative power between the Union and the State
Legislature.
Article 246 of the Constitution of India deals with distribution of
legislative powers between Union and the State Legislatures. Parliament has
exclusive power to legislate with respect to matters in List I. The State
Legislature has exclusive power to make laws for the matters in List-II. Both
Parliament and State Legislatures have concurrent power of legislation with
respect to matters in List III subject to central legislation prevailing in case
of repugnancy.
30. In Hoechst Pharmaceuticals Ltd. vs. State of Bihar and
others, (1983) 4 SCC 45, the Hon'ble Supreme Court held as under:
"38. It is obvious that Article 246 imposes limitations
on the legislative powers of the Union and State
legislatures and its ultimate analysis would reveal the
following essentials:
1. Parliament has exclusive power to legislate with
respect to any of the matters enumerated in List I
notwithstanding anything contained in clauses (2) and
21
(3). The non obstante clause in Article 246(1) provides
for predominance or supremacy of Union legislature.
This power is not encumbered by anything contained
in clauses (2) and (3) for these clauses themselves are
expressly limited and made subject to the non
obstante clause in Article 246 (1). The combined effect
of the different clauses contained in Article 246 is no
more and no less than this: that in respect of any
matter falling within List I, Parliament has exclusive
power of legislation.
2. The State legislature has exclusive power to
make laws for such State or any part thereof with
respect to any of the matters enumerated in List II of
the Seventh Schedule and it also has the power to
make laws with respect to any matters enumerated in
List III. The exclusive power of the State legislature to
legislate with respect to any of the matters enumerated
in List II has to be exercised subject to clause (1) i.e.
the exclusive power of Parliament to legislate with
respect to matters enumerated in List I. As a
consequence, if there is a conflict between an entry in
List I and an entry in List II which is not capable of
reconciliation, the power of Parliament to legislate with
respect to a matter enumerated in List II must
supersede pro tanto the exercise of power of the State
legislature.
3. Both Parliament and the State legislature have
concurrent powers of legislation with respect to any of
the matters enumerated in List III.
39. Article 254 provides for the method of resolving
conflicts between a law made by Parliament and a law
made by the legislature of a State with respect to a
matter falling in the Concurrent List, and it reads:
254. (1) If any provision of a law made by the
Legislature of a State is repugnant to any provision of
a law made by Parliament which Parliament is
competent to enact, or to any provision of an existing
law with respect to one of the matters enumerated in
the Concurrent List, then, subject to the provisions of
clause (2), the law made by Parliament, whether
passed before or after the law made by the Legislature
of such State, or, as the case may be, the existing law,
shall prevail and the law made by the Legislature of
the State shall, to the extent of the repugnancy, be
void.
(2) Where a law made by the Legislature of a State with
respect to one of the matters enumerated in the
22
Concurrent List contains any provision repugnant to
the provisions of an earlier law made by Parliament or
an existing law with respect to that matter, then, the
law so made by the Legislature of such State shall, if it
has been reserved for the consideration of the
President and has received his assent, prevail in that
State:
Provided that nothing in this clause shall prevent
Parliament from enacting at any time any law with
respect to the same matter including a law adding to,
amending, varying or repealing the law so made by the
Legislature of the State.
xx xx xx
41. The words "notwithstanding anything contained in
clauses (2) and (3)" in Article 246(1) and the words
"subject to clauses (1) and (2)" in Article 246(3) lay
down the principle of federal supremacy viz. that in
case of inevitable conflict between Union and State
powers, the Union power as enumerated in List I shall
prevail over the State power as enumerated in Lists II
and III, and in case of overlapping between Lists II and
III, the former shall prevail. But the principle of federal
supremacy laid down in Article 246 of the Constitution
cannot be resorted to unless there is an
"irreconcilable" conflict between the entries in the
Union and State Lists. In the case of a seeming conflict
between the entries in the two Lists, the entries should
be read together without giving a narrow and
restricted sense to either of them. Secondly, an
attempt should be made to see whether the two entries
cannot be reconciled so as to avoid a conflict of
jurisdiction. It should be considered whether a fair
reconciliation can be achieved by giving to the
language of the Union Legislative List a meaning
which, if less wide than it might in another context
bear, is yet one that can properly be given to it and
equally giving to the language of the State Legislative
List a meaning which it can properly bear. The non
obstante clause in Article 246(1) must operate only if
such reconciliation should prove impossible. Thirdly,
no question of conflict between the two Lists will arise
if the impugned legislation, by the application of the
doctrine of 'pith and substance' appears to fall
exclusively under one list, and the encroachment upon
another list is only incidental.
xx xx xx
23
46. The general scheme of the British North America
Act, 1867 with regard to the distribution of legislative
powers, and the general scope and effect of Sections
91 and 92, and their relations to each other were fully
considered and commented upon in the case of
Citizens Insurance Company case8. Sir Montague
Smith delivering the judgment for the Board evolved
the rule of reconciliation observing:
In these cases it is the duty of the Courts, however
difficult it may be, to ascertain in what degree and to
what extent, authority to deal with matters falling
within these classes of subjects exists in each
legislature, and to define in the particular case before
them the limits of their respective power. It could not
have been the intention that a conflict should exist;
and, in order to prevent such a result, the two sections
must be read together and the language of one
interpreted and, where necessary, modified by that of
the other. In this way it may, in most cases, be found
possible to arrive at a reasonable and practical
construction of the language of the Section, so as to
reconcile the respective powers they contain and give
effect to all of them.
xx xx xx
74. It is equally well settled that the various entries in
the three Lists are not 'powers' of legislation, but
'fields' of legislation. The power to legislate is given by
Article 246 and other Articles of the Constitution.
Taxation is considered to be a distinct matter for
purposes of legislative competence. Hence, the power
to tax cannot be deduced from a general legislative
entry as an ancillary power. Further, the element of
tax does not directly flow from the power to regulate
trade or commerce in, and the production, supply and
distribution of essential commodities under Entry 33
of List III, although the liability to pay tax may be a
matter incidental to the Centre's power of price
control."
31. The Hon'ble Supreme Court in the case of State of West
Bengal vs. Kesoram Industries Ltd., (2004) 10 SCC 201, held as under:
"31. Article 245 of the Constitution is the fountain
source of legislative power. It provides -- subject to the
provisions of this Constitution, Parliament may make
laws for the whole or any part of the territory of India,
and the legislature of a State may make laws for the
24
whole or any part of the State. The legislative field
between Parliament and the legislature of any State is
divided by Article 246 of the Constitution. Parliament
has exclusive power to make laws with respect to any of
the matters enumerated in List I in the Seventh
Schedule, called the "Union List". Subject to the said
power of Parliament, the legislature of any State has
power to make laws with respect to any of the matters
enumerated in List III, called the "Concurrent List".
Subject to the abovesaid two, the legislature of any
State has exclusive power to make laws with respect to
any of the matters enumerated in List II, called the
"State List". Under Article 248 the exclusive power of
Parliament to make laws extends to any matter not
enumerated in the Concurrent List or State List. The
power of making any law imposing a tax not mentioned
in the Concurrent List or State List vests in Parliament.
This is what is called the residuary power vesting in
Parliament."
32. In Central Bank of India v. State of Kerala and others,
(2009) 4 SCC 94, the Hon'ble Supreme Court has held as under:
"30. While negating challenge to the State legislation, a
three-Judge Bench laid down the following principles:
(1) The various entries in the three lists are not
"powers" of legislation but "fields" of legislation. The
Constitution effects a complete separation of the taxing
power of the Union and of the States under Article 246.
There is no overlapping anywhere in the taxing power
and the Constitution gives independent sources of
taxation to the Union and the States.
(2) In spite of the fields of legislation having been
demarcated, the question of repugnancy between law
made by Parliament and a law made by the State
Legislature may arise only in cases when both the
legislations occupy the same field with respect to one of
the matters enumerated in the Concurrent List and a
direct conflict is seen. If there is a repugnancy due to
overlapping found between List II on the one hand and
List I and List III on the other, the State law will be ultra
vires and shall have to give way to the Union law.
(3) Taxation is considered to be a distinct matter for
purposes of legislative competence. There is a distinction
made between general subjects of legislation and
taxation. The general subjects of legislation are dealt
with in one group of entries and power of taxation in a
25
separate group. The power to tax cannot be deduced
from a general legislative entry as an ancillary power.
(4) The entries in the lists being merely topics or fields
of legislation, they must receive a liberal construction
inspired by a broad and generous spirit and not in a
narrow pedantic sense. The words and expressions
employed in drafting the entries must be given the
widest-possible interpretation. This is because, to quote
V. Ramaswami, J., the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere simplex enumeratio of broad categories. A power to legislate as to the principal matter specifically mentioned in the entry shall also include within its expanse the legislations touching incidental and ancillary matters.
(5) Where the legislative competence of the legislature of any State is questioned on the ground that it encroaches upon the legislative competence of Parliament to enact a law, the question one has to ask is whether the legislation relates to any of the entries in List I or III. If it does, no further question need be asked and Parliament's legislative competence must be upheld. Where there are three lists containing a large number of entries, there is bound to be some overlapping among them. In such a situation the doctrine of pith and substance has to be applied to determine as to which entry does a given piece of legislation relate. Once it is so determined, any incidental trenching on the field reserved to the other legislature is of no consequence. The court has to look at the substance of the matter. The doctrine of pith and substance is sometimes expressed in terms of ascertaining the true character of legislation. The name given by the legislature to the legislation is immaterial. Regard must be had to the enactment as a whole, to its main objects and to the scope and effect of its provisions. Incidental and superficial encroachments are to be disregarded.
(6) The doctrine of occupied field applies only when there is a clash between the Union and the State Lists within an area common to both. There the doctrine of pith and substance is to be applied and if the impugned legislation substantially falls within the power expressly conferred upon the legislature which enacted it, an incidental encroaching in the field assigned to another legislature is to be ignored. While reading the three lists, List I has priority over Lists III and II and List III has priority over List II. However, still, the predominance of the Union List would not prevent the 26 State Legislature from dealing with any matter within List II though it may incidentally affect any item in List I."
33. The principle of federal supremacy can be invoked only if there is irreconcilable conflict in Entries in Union and State Lists. If two Entries can be reconciled by harmonious construction or by applying principle of pith and substance, there is no occasion to apply the principle of federal supremacy. Concept of repugnancy under Article 254 relating to List III is different from repugnancy arising due to overlapping in List I and List II in which case principle of pith and substance is applied to determine legislative competence.
34. In Ralla Ram v. Province of East Punjab, AIR 1949 FC 81, the Federal Court made it clear that every effort should be made as far as possible to reconcile the seeming conflict between the provisions of the Provincial legislation and the Federal legislation. Unless the Court forms an opinion that the extent of the alleged invasion by a Provincial Legislature into the field of the Federal Legislature is so great as would justify the view that in pith and substance the impugned tax is a tax within the domain of the Federal Legislature, the levy of tax would not be liable to be struck down.
35. The Entries in List-I and List-II must be so construed as to avoid any conflict. If there is no conflict, an occasion for deriving assistance from the non obstante clause 'subject to' does not arise. If there is conflict, the correct approach is to find an answer to three questions step by step as under:
(1) Is it still possible to effect reconciliation between the two Entries so as to avoid conflict and overlapping? (2) In which entry does the impugned legislation fall by finding out the pith and substance of the legislation? and 27 (3) Having determined the field of legislation wherein the impugned legislation falls by applying the doctrine of pith and substance, can an incidental trenching upon another field of legislation be ignored?
[See Kesoram Industries Ltd. (supra)]
36. In Imagic Creative Pvt. Ltd. Vs. Commissioner of Commercial Taxes, (2008) 2 SCC 614, the Hon'ble Supreme Court held that while interpreting tax statues involving applicability of Article 246 of Constitution of India read with Seventh Schedule thereof, Court should take various theories including 'aspect theory'.
37. 'Aspect Theory' means on the basis of different aspects of particular transaction the same can fall within the legislative competence of two legislature and both would have the power to tax a transaction on its different aspect.
Thus, the same transaction may involve two or more taxable events in different aspects. There may be overlapping, but that does not detract from the distinctiveness of the aspect.
38. In case of manufacturing and sale of a commodity, the taxable event for excise duty is manufacture of goods and the taxable event for sales tax/value added tax is sale of goods. Since the manufacture takes place earlier than the sale of goods, the excise duty is levied first and thereafter sales tax / value added tax is paid on the value including excise duty.
39. The Hon'ble Supreme Court in Inre, Sea Customs Act (1878), S.20(2), AIR 1963 SC 1760 held as under.
"25. This will show that the taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. In this connection sales-tax may be contrasted which is also imposed with reference to 28 goods sold, where the taxable event is the act of sale. Therefore, though both excise duty and sales-tax are levied with reference to goods, the two are very different imposts; in one case the imposition is on the act of manufacture or production while in the other, it is on the act of sale. In neither case therefore can it be said that the excise duty or sales tax is a tax directly on the goods for in that event they will really become the same tax. It would thus appear that duties of excise partake of the nature of indirect taxes as known to standard works on economics and are to be distinguished from direct taxes like taxes on property and income."
40. In the case of Governor General in Council Vs. Province of Madras, reported in AIR (32) 1945 Privy Council 98, it was held as under:-
"..... The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of, his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separated and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale..."
41. The Hon'ble Supreme Court in the case of Federation of Hotel & Restaurant Association of India v. Union of India, [1989[ 3 SCC 634, held as under:
"26. .....Wherever legislative powers are distributed between the Union and the States, situations may arise where the two legislative fields might apparently overlap. It is the duty of the courts, however difficult it may be, to ascertain to what degree and to what extent, the authority to deal with matters falling within these classes of subjects exists in each legislature and to define, in the particular case before them, the limits of the respective powers. It could not have been the intention that a conflict should exist; and, in order to prevent such a result the two provisions must be read together, and the language of one interpreted, and, where necessary modified by that of the other.29
27. The Judicial Committee in Prafulla Kumar Mukherjee v. Bank of Commerce7 referred to with approval the following observations of Sir Maurice Gwyer, C.J., in Subrahmanyan Chettiar case4:
"It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind observance to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the legislature enacting them may appear to have legislated in a forbidden sphere. Hence the rule which has been evolved by the Judicial Committee, whereby the impugned statute is examined to ascertain its 'pith and substance', or its 'true nature and character', for the purpose of determining whether it is legislation with respect to matters in this list or in that."
28. This necessitates as an "essential of federal Government the role of an impartial body, independent of general and regional Governments", to decide upon the meaning of division of powers. The court is this body.
29. The position in the present case assumes a slightly different complexion. It is not any part of the petitioners' case that "expenditure tax" is one of the taxes within the States' power or that it is a forbidden field for the Union Parliament. On the contrary, it is not disputed that a law imposing "expenditure tax" is well within the legislative competence of Union Parliament under Article 248 read with Entry 97 of List I. But the specific contention is that the particular impost under the impugned law, having regard to its nature and incidents, is really not an "expenditure tax"
at all as it does not accord with the economists' notion of such a tax. That is one limb of the argument. The other is that the law is, in pith and substance, really one imposing a tax on luxuries or on the price paid for the sale of goods. The crucial questions, therefore, are whether the economists' concept of such a tax qualifies and conditions the legislative power and, more importantly, whether "expenditure" laid out on what may be assumed to be "luxuries" or on the purchase of goods admits of being isolated and identified as a distinct aspect susceptible of recognition as a distinct field of tax legislation.30
30. In Lefroy's Canada's Federal System the learned Author referring to the "aspects of legislation" under Sections 91 and 92 of the Canadian Constitution i.e. British North America Act, 1867 observes that "one of the most interesting and important principles which have been evolved by judicial decisions in connection with the distribution of legislative power is that subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power". Learned Author says:
"... that by 'aspect' must be understood the aspect or point of view of the legislator in legislating the object, purpose, and scope of the legislation that the word is used subjectively of the legislator, rather than objectively of the matter legislated upon."
In Union Colliery Co. of British Columbia v. Bryden8 Lord Haldane said:
"It is remarkable the way this Board has reconciled the provisions of Section 91 and Section 92, by recognising that the subjects which fall within Section 91 in one aspect, may, under another aspect, fall under Section 92."
31. Indeed, the law "with respect to" a subject might incidentally "affect" another subject in some way; but that is not the same thing as the law being on the latter subject. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detract from the distinctiveness of the aspects. Lord Simonds in Governor General-in-Council v. Province of Madras9 in the context of concepts of Duties of Excise and Tax on Sale of Goods said:
"... The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of, his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separated and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale...."31
32. Referring to the "aspect" doctrine Laskin's Canadian Constitutional Law states:
"The 'aspect' doctrine bears some resemblance to those just noted but, unlike them, deals not with what the 'matter' is but with what it 'comes within'.... (p. 115) ... it applies where some of the constitutive elements about whose combination the statute is concerned (that is, they are its 'matter'), are a kind most often met with in connection with one class of subjects and others are of a kind mostly dealt with in connection with another. As in the case of a pocket gadget compactly assembling knife blade, screwdriver, fishscaler, nailfile, etc., a description of it must mention everything but in characterising it the particular use proposed to be made of it determines what it is. (p. 116) "... I pause to comment on certain correlations of operative incompatibility and the 'aspect' doctrine. Both grapple with the issues arising from the composite nature of a statute, one as regards the preclusory impact of federal law on provincial measures bearing on constituents of federally regulated conduct, the other to identify what parts of the whole making up a 'matter' bring it within a class of subjects...." (p. 117)
38. Indeed, as an instance of different aspects of the same matter, being the topic of legislation under different legislative powers, reference may be made to the annual letting value of a property in the occupation of a person for his own residence being, in one aspect, the measure for levy of property tax under State law and in another aspect constitute the notional or presumed income for the purpose of income tax."
42. In All India Federation of Tax Practitioners v. Union of India, (2007) 7 SCC 527, the Hon'ble Supreme Court observed here under:
"34. As stated above, Entry 60, List II refers to taxes on professions, etc. It is the tax on the individual person/firm or company. It is the tax on the status. A chartered accountant or a cost accountant obtains a licence or a privilege from the competent body to practise. On that privilege as such the State is competent to levy a tax under Entry 60. However, as 32 stated above, Entry 60 is not a general entry. It cannot be read to include every activity undertaken by a chartered accountant/cost accountant/architect for consideration. Service tax is a tax on each activity undertaken by a chartered accountant/cost accountant or an architect. The cost accountant/chartered accountant/architect charges his client for advice or for auditing of accounts. Similarly, a cost accountant charges his client for advice as well as doing the work of costing. For each transaction or contract, the chartered accountant/cost accountant renders profession based services. The activity undertaken by the chartered accountant or the cost accountant or an architect has two aspects. From the point of view of the chartered accountant/cost accountant it is an activity undertaken by him based on his performance and skill. But from the point of view of his client, the chartered accountant/cost accountant is his service provider. It is a tax on "services". The activity undertaken by the chartered accountant or cost accountant is similar to saleable or marketable commodities produced by the assessee and cleared by the assessee for home consumption under the Central Excise Act.
xx xx xx
43. As stated above, every entry in the Lists has to be given a schematic interpretation. As stated above, constitutional law is about concepts and principles. Some of these principles have evolved out of judicial decisions. The said test is also applicable to taxation laws. That is the reason why the entries in the Lists have been divided into two groups, one dealing with general subjects and other dealing with taxation. The entries dealing with taxation are distinct entries vis-à- vis the general entries. It is for this reason that the doctrine of pith and substance has an important role to play while deciding the scope of each of the entries in the three Lists in the Seventh Schedule to the Constitution. This doctrine of pith and substance flows from the words in Article 246(1), quoted above, namely, "with respect to any of the matters enumerated in List I". 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.
3344. Competence to legislate flows from Articles 245, 246 and the other articles in Part XI. A legislation like the Finance Act can be supported on the basis of a number of entries. In the present case, we are concerned with the constitutional status of the levy, namely, service tax. The nomenclature of a levy is not conclusive for deciding its true character and nature. 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. The powers of Parliament and the State Legislatures are subject to constitutional limitations. Tax laws are governed by Part XII and Part XIII. Article 265 takes in Article 245 when it says that the tax shall be levied by the authority of law. To repeat, various entries in the Seventh Schedule show that the power to levy tax is treated as a distinct matter for the purpose of legislative competence. This is the underlying principle to differentiate between the two groups of entries, namely, general entries and taxing entries. We are of the view 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 92-C/97 of List I operate in different spheres."
43. The Hon'ble Supreme Court in the case of Imagic Creative (P) Ltd. (supra) , has held hereunder"
"31. The court, while interpreting a statute, must bear in mind that the legislature was supposed to know law and the legislation enacted is a reasonable one. The court must also bear in mind that where the application of a parliamentary and a legislative Act comes up for consideration; endeavours shall be made to see that provisions of both the Acts are made applicable."
44. In view of the discussions made in the preceding paragraphs, the amendment brought by The Orissa Entertainment Tax (Amendment) Act, 2010 and The Orissa Entertainment Tax (Amendment) Rules, 2010 authorizing to levy tax on entertainment through Direct-to-Home (DTH) Broadcasting falls under Entry 62 of List II of Seventh Schedule. This is completely different from the levy of tax on broadcasting service which falls under Entry 92C, List I of Schedule VII. By application of aspect theory levy 34 of tax on entertainment through DTH broadcasting service as well as levy of service tax on broadcasting service is constitutionally valid and perfectly justified. Entry 62 of List II and Entry 92 C of List I operate in two different spheres. Tax on entertainment cannot be held to be encroachment upon List I pertaining to tax on service. Levy of tax on broadcasting service which falls under Entry 92C of List I does not exclude levy of entertainment covered by Entry 62 of List II. Entertainment is not same as taxable service covered by Article 246(1) read with Entry 92C/97 of List-I of Seventh Schedule. The Amendment Act so far it defines "Entertainment" as entertainment through Direct-to-Home broadcasting service and consequently imposes entertainment tax is not taxable service. The activity sought to be taxed under the Entertainment Tax Act, 2006 as amended by E.T. Amendment Act, 2010 read with E.T. Amendment Rules, 2010 is within the legislative competency of Orissa State Legislature. There is no transgression or encroachment upon the field of Union Legislation. Levy of entertainment tax on entertainment through DTH is not ultra vires the power of State Legislature provided under Entry 62 of List II.
45. The decision of the Punjab & Haryana High Court in Tata Sky Limited v. State of Punjab and another, (2011) 37 VST 1 (P&H), wherein it is held that levy of entertainment duty falls under Entry 62 of List II and not hit by Entry 92C of List I and that such levy is not ultra vires the powers of State Legislature is squarely applicable to the present case.
46. For the reasons indicated supra, the various decisions of the Hon'ble Supreme Court relied upon by the petitioner are of no help to it in the fact situation.
3547. In the result, the writ petition is dismissed.
No order as to costs.
..................................
B.N.Mahapatra, J.
V. Gopala Gowda, C.J. I agree.
...................................
Chief Justice
Orissa High Court, Cuttack
Dated 24th April, 2012/ss/skj/ssd