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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3882 OF 2013
(ARISING OUT OF SLP (CIVIL) NO.27595 OF 2010)
M/s Tata Sky Ltd. … Appellant
Versus
State of M.P. and others … Respondents
WITH
CIVIL APPEAL NO.3888 OF 2013
(ARISING OUT OF SLP (CIVIL) NO.27655 OF 2010)
WITH
CIVIL APPEAL NO.3889 OF 2013
(ARISING OUT OF SLP (CIVIL) NO.30034 OF 2010)
WITH
CIVIL APPEAL NO. 3890 OF 2013
(ARISING OUT OF SLP (CIVIL) NO.32475 OF 2010)
WITH
CIVIL APPEAL NO.3891 OF 2013
(ARISING OUT OF SLP (CIVIL) NO.2528 OF 2011)
AND
CIVIL APPEAL NO. 3892 OF 2013
(ARISING OUT OF SLP (CIVIL) NO.2752 OF 2011)
J U D G M E N T
Aftab Alam, J.
1. Leave granted in all the special leave petitions.
2. All these appeals relate to the demand of entertainment tax raised by the
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Government of Madhya Pradesh under the Madhya Pradesh Entertainment Duty and
Advertisements Tax Act, 1936 (hereinafter referred to as “the 1936 Act”) on DTH
(direct to home) broadcast provided by the appellants to their respective customers on
payment of subscriptions. The appellants in all the appeals challenged the demand by
the State Government by filing writ petitions before the Madhya Pradesh High Court.
The High Court dismissed the writ petitions, upholding the demand by the State
Government by the judgment and order dated August 20, 2010. That judgment was
rendered in a batch of three writ petitions, taking Writ Petition No. 10148 of 2009, filed
on behalf of Tata Sky Limited (appellant in the appeal arising from SLP (C) No.2752 of
2011) as the lead case. The rest of the writ petitions were dismissed following the
judgment dated August 20, 2010.
3. For the sake of convenience, we too have taken the facts from civil appeal arising
out of special leave petition (civil) No.27595 of 2010.
4. The appellant operates under a licence from the Government of India under
section 4 of the Indian Telegraph Act, 1885 and the Indian Telegraphy Act, 1933. It is,
however, the case of the appellant that DTH broadcast is a “service” and it is chargeable
to service tax. As a matter of fact, one of the several grounds on which the demand of
entertainment tax by the State Government on DTH broadcasting is challenged by the
appellant is that DTH broadcasting is one of the notified services under the Finance Act,
1994 and is chargeable to service tax by the Central Government. In that regard, it is
stated on behalf of the appellant, that in 1991 the Government of India appointed a Tax
Reform Committee under the Chairmanship of Dr. Chelliah. The recommendations
made by the Tax Reform Committee were accepted and the service tax was introducedPage 3
in the budget for the year 1994-1995 through the Finance Act, 1994 under the residuary
entry 97 of List 1 of the 7th Schedule of the Constitution of India. Under the Act, service
tax is levied on the notified services provided or to be provided.
5. For the purpose of levy of service tax on broadcasting, the expression
“broadcasting” has been defined specifically under section 65(15) of the Finance Act.
The broadcasting services were brought within the purview of the service tax under
section 65(105)(zk) of the Finance Act, 1994 as amended with effect from July 16,
2011. Later on, DTH service was brought within the purview of the service tax with
effect from June 16, 2006.
6. Under section 67 of the Finance Act, the value of taxable service is the gross
amount charged by the service provider for provision of service.
7. On March 24, 2006, the appellant got a licence from the Government of India
under section 4 of the Indian Telegraph Act, 1885 and the Indian Telegraphy Act, 1933
to establish, maintain and operate DTH platform for a period of 10 years on the terms
and conditions stipulated in the licence agreement. The appellant paid Rs.10 crores as
licence fee and furnished a bank guarantee for the sum of Rs.40 crores that is to remain
valid for the entire duration of the licence. In terms of the licence the appellant is further
required to pay an annual fee equivalent to 10 percent of its gross revenue as reflected in
the audited accounts of the company for every financial year within one month from the
end of the financial year. The appellant is also required to pay, in addition to licence
fee, royalty for spectrum use as prescribed by the Wireless Planning and Coordination
Authority (WPC) under the Department of Telecommunications.
8. The licence granted by the Central Government is for the whole of India and thePage 4
appellant is not obliged to take any permission or any other licence from any other
authority for making DTH broadcast.
9. In August 2006, the appellant launched its operations all over India, including the
State of Madhya Pradesh. The appellant is having a single broadcasting centre at
Chhattarpur, Delhi. This centre downlinks the signals from satellite and then uplinks
those signals to the designated transponders for their transmission in Ku band. These
signals are received by the dish antenna installed at the subscribers’ premises. The TV
signals transmitted from the broadcasting centre at Chhattarpur, Delhi, are in encrypted
format and those are decrypted/decoded by the set top boxes and the viewing card inside
the set top box supplied by the appellant to its subscribers. The subscribers are required
to pay certain charges for viewing DTH broadcasts by the appellant on their TV sets.
10. The appellant does not use any infrastructure from the State for its DTH
broadcasts.
11. On May 5, 2008, the State Government in exercise of powers conferred under
section 3(1) of the 1936 Act, issued a gazette notification fixing 20 percent
entertainment duty in respect of every payment made for admission to an entertainment
other than cinemas, videos cassette recorders and cable service. As the aforesaid
notification forms the basis of the demand raised by the State Government it is useful to
reproduce it here in full:-
“No. (63) B-5-9-2006-2-V- In exercise of the powers conferred by sub section
(1) of Section 3 of the Madhya Pradesh Entertainment Duty and
Advertisements Tax Act 1936 (No 30 of 1936) the State Government hereby
prescribed the rate of Entertainment Duty at 20 percent in respect of every
payment for admission to an Entertainment other than Cinema, Video Cassette
Recorder and Cable service.
This notification shall come into force with effect from the date of
publication. Page 5
By order and in the name of the Governor of Madhya Pradesh.”
12. Following the notification dated May 5, 2008, a demand notice dated June 10,
2009 was issued by the Excise Commissioner Madhya Pradesh, Gwalior, to the
appellant. The contents of the notice, insofar as relevant for the present, are as under:
“S.No.7-Ent./2009-10/173 Gwalior Date 10.06.2009
To,
Tata Sky,
…
…
Sub: Levy of Entertainment Duty on Direct to Home Entertainment Service
You are providing entertainment in the State of Madhya Pradesh by Direct to
Home (DTH) to registered consumers on monthly payment basis. Whereas:
(1.) Under section 3(1) of the Madhya Pradesh Entertainment Duty and
advertisements Tax Act, 1936 except cinema hall, videos and cable in all
entertainments including entertainment provided through registered
consumers through DTH on monthly subscription basis is
included. In the aforesaid payment by the consumers, entertainment duty
@ 20% is liable to be paid in advance in the treasury of the Government.
…”
13. The appellant was directed to provide the information as asked for in the notice
failing which, the notice declared, an ex parte assessment would be made of the
entertainment tax payable by it.
14. The appellant replied to the notice by its letter of July 22, 2009 stating that under
the provisions of the 1936 Act, there is no specific entry with respect to DTH
broadcasting and in absence of such an entry, the provisions of the Act are not
applicable to DTH broadcasting and, therefore, the notice was illegal and withoutPage 6
jurisdiction. The appellant also referred to a decision of the Uttarakhand High Court in a
case relating to a similar demand raised by the Uttarakhand Government and the order
of this Court in the special leave petition filed by the Uttrakhand Government against
the judgment of the High Court.
15. On August 1, 2009, the State of Madhya Pradesh passed the Madhya Pradesh
Entertainment Duty and Advertisements Tax (Amendment) Act, 2009. By the
Amendment Act, the failure to produce accounts and documents as required by the
Excise Commissioner or any officer authorized by the State Government was made a
penal offence. The Amendment Act, however, did not introduce any provision in the
Parent Act with respect to levy of entertainment duty on DTH broadcasting.
16. On August 18, 2009, the Excise Commissioner Madhya Pradesh wrote to the
Deputy Commissioner Excise, Flying Squad, Gwalior Division, Gwalior, telling him
that entertainment duty at the rate of 20 percent was payable on subscription amounts
received by the DTH entertainment service provider and directing to ensure the
realization of entertainment duty from DTH entertainment service providers. The
direction of the Excise Commissioner was followed by a number of notices given to the
appellant and on October 1, 2009, the Vice President (Operation) and Area Operation
(Manager) of the appellant company were arrested and later released on bail for noncompliance with the provisions of section 5(E) of the 1936 Act.
17. On October 3, 2009, the appellant filed a writ petition, being Writ Petition
No.10148 of 2009, challenging the demand and collection of entertainment duty at the
rate of 20 percent under section 3(1) of the 1936 Act. The writ petition was eventually
dismissed by the High Court by its judgment and order dated August 20, 2010 and thePage 7
matter is now brought to this Court.
18. Before proceeding further, it needs to be stated that the controversy in all the
appeals relates to the demand and realization of entertainment tax under the 1936 Act,
which means for the period between the commencement of operation by the appellant in
the year 2006 and March 31, 2011, i.e., the day prior to the coming into force of the new
Act, called the Madhya Pradesh Vilasita, Manoranjan, Amod Evam Vigyapan Kar
Adiniyam, 2011. Further, in course of hearing of the appeals Mr. Dave learned counsel
appearing for the State of Madhya Pradesh submitted that he proposed to defend the
demand and realization of the impugned tax only for the period between May 5, 2008,
the date of the notification issued under section 3(1) of the 1936 Act and the coming into
force of the new Act on April 1, 2011. It is, therefore, made clear that this judgment
deals with the question of levy of entertainment tax on DTH broadcast under the 1936
Act for the period between the issuance of the notification (May 5, 2008) and the
coming into force of the new Act (April 1, 2011). The judgment is not concerned with
the legal position arising after the new Act came into force.
19. We now propose to examine whether on the basis of the provisions of the 1936
Act, it is permissible or possible for the State of Madhya Pradesh to levy on what in the
lexicon of broadcasting is called direct-to-home or in short DTH. Here it needs to be
clearly understood that the issue in this case is not whether direct to home broadcast is
“entertainment” in the broader sense. Entry 62 of List 2 of Schedule 7 to the
constitution may indeed be wide enough to include DTH as yet another form of
entertainment but that is not the issue rising for consideration. The issue under
consideration is whether the provisions of the 1936 Act have the necessary expanse andPage 8
flexibility to include DTH as an “entertainment” chargeable to tax and whether the
notification dated May 5, 2008 in any manner extended the scope of chargeability under
the 1936 Act.
20. The preamble to the 1936 Act reads as under:-
“An Act to impose a duty in respect of admission to entertainments and a
tax in respect of certain forms of advertisement exhibited at such
entertainments in Madhya Pradesh.”
21. Section 2 of the 1936 Act contains the definition clauses and clause (a) defines the
expression “admission to an entertainment”:
“2(a) “admission to an entertainment” includes admission to any place in
which the entertainment is held;”
22. Clause (aaaa) was inserted in the Act with effect from May 1, 1999 to define
‘Cable Operator”, “Cable Service”, “Cable Television Network” and “Subscriber”.
“2(aaaa) “Cable Operator”, “Cable Service”, “Cable Television Network”
and “Subscriber” shall have the same meaning as assigned to them in the
Cable Television Network (Regulation) Act, 1995 (No.7 of 1995)”
23. Clause (b) defines “entertainment”:
“2(b) “Entertainment” includes any exhibition, performance, amusement,
game or sport to which persons are admitted for payment;”
24. Clause (c) defines “entertainment duty”:
“2(c) “entertainments duty” means a duty levied under section 3;”
25. Clause (d) defines the expression “Payment for admission” as under:
“2(d) “Payment for admission” includes –
(i) any payment for seats or other accommodation in any form in a
place of entertainment;
(ii) any payment for a programme or synopsis of an entertainment;
(iii) any payment made for the loan or use of any instrument orPage 9
contrivance which enables a person to get a normal or better
view or hearing or enjoyment of the entertainment, which
without the aid of such instrument or contrivance such person
would not get;
(iv) any payment made by a person by way of contribution or
subscription or installation and connection charges or any
other charges, by whatever name called, for providing
access to any entertainment, whether for a specified period
or on a continuous basis;
(v) any payment, by whatever name called for any purpose
whatever, connected with an entertainment, which a person is,
required to make in any form as a condition of attending, or
continuing to attend the entertainment, either in addition to the
payment, if any, for admission to the entertainment or without
any such payment for admission;
(vi) any payment, made by a person, who having been admitted to
one part of a place of entertainment is subsequently admitted to
another part thereof, for admission to which a payment
involving tax or more tax is required;
Explanation - I. – Any subscription raised or donation collected in
connection with an entertainment in any form shall be deemed to be payment
for admission;
[Explanation - II. – Where entertainment is provided as part of any service by
any person, whether forming an integral part of such service or otherwise the
charges received by such person for providing the service shall be deemed to
include charges for providing entertainment or access to entertainment also];
26. Clause (f) defines “proprietor”:
“2(f) “proprietor” in relation to any entertainment, includes any person
responsible for or for the time being in-charge of the management thereof;”
27. “Video Cassette Recorder” and “Video Cassette Player” are defined in clauses
(g) and (h) of section 2.
28. The charging provision is contained in Section 3 of the 1936 Act which, insofar as
relevant for the present, is extracted hereunder:
“Entertainment Duty payable by proprietor of an entertainment - (1) Every
proprietor of an entertainment other than proprietor of an entertainment by
Video Cassette Recorder (hereinafter referred to as V.C.R.) or Video Cassette
Player (hereinafter referred to as V.C.P.) or a Cable Operator, shall in respectPage 10
of every payment for admission to the entertainment pay to the State
Government a duty at the rate as prescribed by the State Government not
exceeding seventy five per centum thereof:
Provided …
Provided further …
Provided also ….
Explanation …
(2) xxx
(3) Where the payment for admission to an entertainment is made by
means of a lump sum paid as a subscription or contribution to any person, or
for a season ticket or for the right of admission to a series of entertainments or
to any entertainment during a certain period of time, or for any privilege,
right, facility or thing combined with the right of admission without further
payment or at a reduced charge, the entertainments duty shall be paid on the
amount of such lump sum:
Provided that where the State Government is of opinion that the payment of a
lump sum represents payment for other privileges, rights, or purposes besides
the admission to an entertainment, or covers admission to the entertainment
during any period for which the duty has not been in operation, the duty shall
be charged on such an amount as appears to the State Government to represent
the right of admission to entertainment in respect of which the entertainment
duty is payable.”
(4) xxx
(i) xxx
(ii) xxx”
29. Section 3-A deals with entertainment duty payable by proprietor of V.C.R. or
V.C.P. and this provision was inserted in the Act with effect from May 1, 1999.
30. Section 3-B was inserted in the 1936 Act with effect from April 1, 2001. Subsection (1) of section 3-B deals with entertainment duty payable by cable operator and it
makes a cable operator, providing access to entertainments through cable service to
subscribers of such service, not being owner or occupants of rooms of hotel or lodging
house, liable to pay duty at the rate of twenty rupees per month per subscriber in urban
and cantonment areas. Sub-section (2) of section 3-B makes every proprietor of hotel or
lodging house, providing access to entertainments in the rooms of a hotel or lodgingPage 11
house through the cable service of his own or obtained through any cable operator liable
to pay a consolidated amount of duty per month determined on the basis of number of
rooms.
31. Section 3-C deals with levy of Advertisement Tax.
32. The machinery for effectuating the charge created by section 3 is provided under
section 4 of the 1936 Act which, insofar as relevant for the present, is quoted below:
“4. Method of levy – (1) Save as otherwise provided by this Act, no
person shall be admitted to any entertainment other than entertainment by
V.C.R., except with a ticket stamped with an impressed, embossed,
engraved or adhesive stamp, (not before used) issued by the State
Government, of nominal value equal to the duty payable under section 3.
(1A) Omitted.
(2) The State Government may, on the application of a proprietor of any
entertainment other than entertainment by V.C.R. in respect of which
entertainments duty is payable under section 3, allow such proprietor to pay
by one of the modes specified hereunder as it may think fit, in such manner
and subject to such conditions as may be prescribed, the amount of the duty
due, namely:-
(a) by a consolidated payment of such percentage as determined by the
State Government of the gross sum received by the proprietor on
account of payments for admission to the entertainment and on account
of the duty to be fixed by the State Government;
(b)in accordance with returns of the payments for admission to the
entertainment and on account of the duty;
(c) in accordance with the results recorded by any mechanical contrivance
which automatically registers the number of persons admitted;
(d)xxx
(e) xxx
(f) xxx
(3) xxx
(4) xxx”
33. Section 4-B imposes restriction on admission without payment or at concession
rates and provides as under:
“4-B Restriction on admission without payment or at
concession rates. – No proprietor shall admit any person to an entertainment
other than entertainment by V.C.R. without payment for admission thereto orPage 12
at concession rates unless the entertainments duty payable in respect thereof
or on the full value of the ticket for the class to which such person is
admitted has been paid.
Provided that nothing in this section shall apply in respect of
admission at concessional rates –
(i) to such class of persons; and
(ii) to such entertainment or class of entertainments;
As the State Government may, by notification, specify.”
34. Section 4-C gives the power to impose penalty and section 5 deals with penalties.
5-A deals with composition of offences and section 5-B deals with suspension or
revocation of licence for entertainment. Section 8 provides the rule making powers.
Section 9 gives the power of entry and inspection and section 9-A makes production and
inspection of accounts and documents obligatory. Section 10 deals with recovery of
arrears of entertainment duty. Section 10 provides protection to persons acting in good
faith and bars any suit or prosecution or other proceedings against officers and servant
of the Government. Section 11 deals with delegation of powers and section 12 bars
imposition of entertainment duty by any local authority.
35. On a careful examination of the 1936 Act as a whole, and more particularly on a
conjoint reading of clauses (a) [“Admission to an entertainment”], (b) [“Entertainment”]
and (d) [“Payment of admission”] along with section 3 creating the charge and section 4
providing the collection machinery, we find ourselves in agreement with the submission
made on behalf of the appellants that the provisions of 1936 Act are applicable only to
place-related entertainment. In other words, the provisions of the 1936 Act cover an
entertainment which takes place in a specified physical location to which persons are
admitted on payment of some charge as defined under clause (d) of section 2 of the 1936
Act. The legislative history and the amendments introduced in the 1936 Act also showPage 13
that it was how the scheme of the 1936 Act was viewed by the State itself. It was earlier
found that the provisions of the 1936 Act were inadequate to bring shows by video
cassette recorder or video cassette and player cable T.V. operations within the taxing net
and hence, the legislature considered it necessary to amend the 1936 Act and to insert
section 3-A and section 3-B respectively with effect from May 1, 1999 and April 1,
2001. In this regard, it is also very important to note that both in the case of shows by
video cassette recorder or video cassette and player, cable T.V. operations, the collection
machinery is in-built and provided within the respective provisions of section 3-A and
section 3-B. and in those two cases the collection of duty does not take place under
section 4 of the 1936 Act.
36. On behalf of the State the imposition of levy on DTH was sought to be justified
on the basis of sub-clause(4) of clause (d) of section 2 which reads as under:
“(iv) any payment made by a person by way of contribution or subscription
or installation and connection charges or any other charges, by whatever name
called, for providing access to any entertainment, whether for a specified
period or on a continuous basis;”
37. In our view, the submission is untenable for more reasons than one. First, section
2(d)(iv) is only the measure of tax and it does not create the charge which is created by
section 3. The question of going to the measure of the tax would arise only if it is found
that the charge of tax is attracted. Under section 3 read with section 2(d) and section
2(a), the charge or levy of tax is attracted only if an entertainment takes place in a
specified place or locations and persons are admitted to the place on payment of a
charge to the proprietor providing the entertainment. In the present case, as DTH
operation is not a place-related entertainment, it is not covered by the charging section 3Page 14
read with section 2(a) and 2(b) of the 1936 Act. Consequently, the question of going to
section 2(d)(iv) does not arise. Moreover, even if section 2(d)(iv) is to be read as an
extension of section 3 and, thus, as a part of the charge, it does not make any difference
at all because section 2(d)(iv) refers to “entertainment” which takes us back to section
2(b) and finally to section 2(a).
38. We have held that DTH is not covered by the provisions of section 3 read with
section 2(a), 2(b) and 2(d) of the 1936 Act. The issue gets further settled on reference
being made to the mechanism of collection of the charge as provided under section 4 of
the 1936 Act. Section 4(1) mandates that no person shall be admitted to any
entertainment other than entertainment by V.C.R. except with a ticket stamped with an
impressed, embossed, engraved or adhesive stamp issued by the State Government of
nominal value equal to the duty payable under section 3; sub-section (2) of section 4
provides for different modes specified thereunder for payment of the amount of duty due
on the entertainment. Neither the provision of section 4(1) nor any of the modes
provided under section 4(2) can be made applicable for collection of duty on DTH
operation. Further, it is noted above that section 8 provides rule making powers. In
exercise of the powers under that provision the Madhya Pradesh Entertainment Duty and
Advertisement Tax Rules 1942 were framed. A perusal of the Rules makes it absolutely
clear that the collection mechanism under the 1936 Act is based on revenue stamps
stuck to the tickets issued by the proprietor for entry to the specified place where
entertainment is held.
39. The machinery for collection of duty provided under the 1936 Act has no
application to DTH. It is well settled that if the collection machinery provided under the
Page 15
Act is such that it cannot be applied to an event, it follows that the event is beyond the
charge created by the taxing statute. See: Commissioner of Income Tax v. B.C.
Srinivasa Setty, (1981) 2 SCC 460, Commissioner of Income-Tax Ernakulam, Kerala v.
Official Liquidator, Palai Central Bank Ltd.. (1985) 1 SCC 45 (pages 50-51), PNB
Finance Limited v. Commissioner of Income Tax I, New Delhi (2008) 13 SCC 94
(paragraphs 21 and 24 pages 100 to 101).
40. In light of the discussions made above, we are clearly of the view that the 1936
Act cannot be extended to cover DTH operations being carried out by the appellants.
41. Coming now to the notification dated May 5, 2008,
it is elementary that a
notification issued in exercise of powers under the Act cannot amend the Act.
Moreover,
the notification merely prescribes the rate of entertainment duty at 20 percent in respect
of every payment for admission to an entertainment other than cinema, video cassette
recorder and cable service.
The notification cannot enlarge either the charging section or
amend the provision of collection under section 4 of the Act read with the 1942 Rules.
It is, therefore, clear that the notification in no way improves the case of the State.
If no
duty could be levied on DTH operation under the 1936 Act prior to the issuance of the notification dated May 5, 2008 as fairly stated by Mr. Dave, we fail to see how duty can be levied under the 1936 Act after the issuance of the notification.
42. We have held that the 1936 Act does not cover DTH operations on an
interpretation of the provisions of 1936 Act itself. We, therefore, see no need to refer to
the cases relied upon by the appellants relating to demand of duty on DTH operations
under the Uttar Pradesh Entertainments and Betting Tax Act, 1979 and under the Bihar
Entertainment Tax Act. Page 16
43. Further, as we have held that the 1936 Act does not cover the DTH operations we
need not go to the other submissions made on behalf of the appellants inter alia
regarding the legislative competence of the statute legislature to impose tax on DTH
operation as it was a notified service chargeable to service tax under the Finance Act,
1994.
44. In the result, the appeals are allowed but with no order as to costs.
.…..………………………..J.
(Aftab Alam)
.…..………………………..J.
(R.M. Lodha)
New Delhi;
April 16, 2013
