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IN THE HIGH COURT OF DELHI
Badar Durrez Ahmed and V.K. Jain, JJ.
Bharti Telemedia Ltd.
Vs.
Government of Nct of Delhi and Anr.
W.P. (C) 2194/2010
[Alongwith W.P. (C) 1312, 2718 and 4621/2010]
Decided On: 05.09.2011
DIRECT-TO-HOME (DTH) SERVICE - ENTERTAINMENT TAX - CONSTITUTIONAL VALIDITY - Petitioners challenged the Delhi Entertainments and Betting Tax Act, 1996 (the said Act) to the extent it imposes a tax on entertainment through 'direct-to-home (DTH) service'. Petitioners contended that DTH service is a broadcasting service falling within the meaning of taxable service under Section 65(105)(zk) of the Finance Act, 1994 and is amenable to service tax 10.33% on the gross amount paid by a subscriber for providing the DTH broadcasting service. The service tax is imposed by the Finance Act, 1994 in exercise of Parliament's exclusive power to levy a tax on services under Article 246(1) read with Entry 92C of List I of the VI Ith Schedule to the Constitution of India. It was also contended on behalf of the Petitioners that Parliament alone has the exclusive power to tax DTH services and that the States do not have any power to tax the said service by any name called. It is argued that the State legislature cannot, in the guise of imposing a tax on entertainments, in exercise of its powers under Entry 62 of List II of the VI Ith Schedule to the Constitution, impose a tax on the DTH service. Consequently, it was submitted that the said Act, to the extent it attempts at encompassing DTH services within the ambit of entertainment tax, is unconstitutional. On the other hand, the learned Additional Solicitor General of India appearing on behalf of the Government of National Capital Territory of Delhi based his arguments on the "aspect theory". He submitted that the same transaction or activity may have more than one aspect and these aspects may fall within entries of different lists. Thus, while one aspect may be taxed under an entry in List I another aspect may be taxed under an entry in List II. Therefore, both Parliament and the State legislatures would be competent to make laws for taxing the aspect relevant to them without impinging on each other's domains. According to Mr Tripathi, DTH service had two aspects - (1) a service aspect; and (2) an entertainment aspect. The former is taxed under the Finance Act, 1994 read with entry 92C of List I and the latter is subjected to tax as an entertainment under the said Act read with entry 62 of List II. He further submitted that there a two separate and distinct taxable events in respect of the two aspects. It was therefore contended by him that the said Act, by including DTH service within the ambit of entertainment, had not transgressed the Constitution. Court held that the tax in question is neither on a person nor on a thing but on the activity of entertainment. This is the true nature and character of the tax and is, therefore, within the legislative field of Entry 62 of List II of the VI Ith Schedule to the Constitution.
Fact of the Case:
Petitioners challenged the Delhi Entertainments and Betting Tax Act, 1996 (the said Act) to the extent it imposes a tax on entertainment through 'direct-to-home (DTH) service'. Petitioners contended that DTH service is a broadcasting service falling within the meaning of taxable service under Section 65(105)(zk) of the Finance Act, 1994 and is amenable to service tax 10.33% on the gross amount paid by a subscriber for providing the DTH broadcasting service. The service tax is imposed by the Finance Act, 1994 in exercise of Parliament's exclusive power to levy a tax on services under Article 246(1) read with Entry 92C of List I of the VI Ith Schedule to the Constitution of India. It was also contended on behalf of the Petitioners that Parliament alone has the exclusive power to tax DTH services and that the States do not have any power to tax the said service by any name called. It is argued that the State legislature cannot, in the guise of imposing a tax on entertainments, in exercise of its powers under Entry 62 of List II of the VI Ith Schedule to the Constitution, impose a tax on the DTH service. Consequently, it was submitted that the said Act, to the extent it attempts at encompassing DTH services within the ambit of entertainment tax, is unconstitutional.
Finding of the Court:
The Court held that the tax in question is neither on a person nor on a thing but on the activity of entertainment. This is the true nature and character of the tax and is, therefore, within the legislative field of Entry 62 of List II of the VI Ith Schedule to the Constitution.
Issues: Whether the Delhi Entertainments and Betting Tax Act, 1996 (the said Act) is constitutionally valid to the extent it imposes a tax on entertainment through 'direct-to-home (DTH) service'.
Ratio Decidendi: The Court applied the aspect theory to hold that the DTH service had two aspects - (1) a service aspect; and (2) an entertainment aspect. The former is taxed under the Finance Act, 1994 read with entry 92C of List I and the latter is subjected to tax as an entertainment under the said Act read with entry 62 of List II. The Court held that there are two separate and distinct taxable events in respect of the two aspects. Therefore, the said Act, by including DTH service within the ambit of entertainment, had not transgressed the Constitution.
Final Decision: The Court dismissed the petitions and held that the State Legislature had (and has) the legislative competence to levy an entertainment tax on all payments for admission to an entertainment through a direct-to-home (DTH) as contemplated in Section 7 and other provisions of the said Act.
Badar Durrez Ahmed, J.
1. These petitions raise common issues and are, therefore, being decided together. Briefly put, the challenge is to the Delhi Entertainments and Betting Tax Act, 1996 (hereinafter referred to as 'the said Act') to the extent it imposes a tax on entertainment through 'direct-to-home (DTH) service'.
Rival Contentions
2. Mr Ganesh, senior advocate, appearing for Bharti Telemedia Ltd. and Mr Aman Lekhi, senior advocate, appearing for Tata Sky Ltd. and Bharat Business Channel Ltd, contented on behalf of the Petitioners that the DTH service is a broadcasting service falling within the meaning of taxable service under Section 65(105)(zk) of the Finance Act, 1994 and is amenable to service tax 10.33% on the gross amount paid by a subscriber for providing the DTH broadcasting service. The service tax is imposed by the Finance Act, 1994 in exercise of Parliament's exclusive power to levy a tax on services under Article 246(1) read with Entry 92C of List I of the VI Ith Schedule to the Constitution of India. It was also contended on behalf of the Petitioners that Parliament alone has the exclusive power to tax DTH services and that the States do not have any power to tax the said service by any name called. It is argued that the State legislature cannot, in the guise of imposing a tax on entertainments, in exercise of its powers under Entry 62 of List II of the VI Ith Schedule to the Constitution, impose a tax on the DTH service. Consequently, it was submitted that the said Act, to the extent it attempts at encompassing DTH services within the ambit of entertainment tax, is unconstitutional. It is further argued on behalf of the Petitioners that the taxable event for the levy of service tax is exactly the same as the taxable event for the levy of entertainment tax, which is, the provision of DTH service by transmitting DTH signals. And, therefore, there is a clear trespass into Parliament's exclusive domain. Mr Varun Sarin, appearing for Dish TV India Ltd, adopted the arguments of Mr Ganesh and Mr Lekhi.
3. On the other hand, Mr Parag Tripathi, the learned Additional Solicitor General of India, appearing on behalf of the Government of National Capital Territory of Delhi based his arguments on the "aspect theory". He submitted that the same transaction or activity may have more than one aspect and these aspects may fall within entries of different lists. Thus, while one aspect may be taxed under an entry in List I another aspect may be taxed under an entry in List II. Therefore, both Parliament and the State legislatures would be competent to make laws for taxing the aspect relevant to them without impinging on each other's domains. According to Mr Tripathi, DTH service had two aspects - (1) a service aspect; and (2) an entertainment aspect. The former is taxed under the Finance Act, 1994 read with entry 92C of List I and the latter is subjected to tax as an entertainment under the said Act read with entry 62 of List II. He further submitted that there a two separate and distinct taxable events in respect of the two aspects. It was therefore contended by him that the said Act, by including DTH service within the ambit of entertainment, had not transgressed the Constitution.
4. In rejoinder, Mr Ganesh submitted that the "aspect theory" can only be invoked and applied in order to justify the levy of two taxes on one transaction if the transaction gives rise to two distinct and different taxable events, such as manufacture and sale of goods or holding a licence to practice and rendering professional services and so on. He maintained that in the present case the event for the service tax regime is the provision of the broadcasting service and in the entertainment tax regime contemplated under the said Act also the taxing event is the provision of DTH broadcasting service. Thus, according to him, the taxable event being the same, the aspect theory would have no application and, without that, the impost of entertainmen
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