The Supreme Court on Thursday held that broadcasters are liable to pay both service tax and entertainment tax on the broadcasting activity for the purpose of entertainment of the subscriber as both Parliament and the state legislatures have the legislative competence to levy the taxes.
The two taxes are different aspects of the same activity which enable two different legislatures to impose tax under distinct taxation entries in two different Lists, the apex court said.
A bench of Justices B.V. Nagarathna and N.K. Singh said that in the instant case, the Parliament under the Finance Act, 1994 and its amendments is not imposing a tax on entertainment. Such a tax is being imposed by the state legislatures as entertainment is a luxury within the meaning of Entry 62 - List II, it said.
“In the same way, the Finance Act along with its amendments seeks to impose a tax on the service rendered by the broadcasting agency which is imposed under Entry 97 List – I. In the same vein, under Entry 62 List – II, the state governments are not imposing any service tax on the assesses,” the top court said.
It further stated that there is no overlapping in fact or in law, inasmuch as different aspects of the same activity are being taxed under two different legislations by two different legislatures. “This is because the activity of broadcasting is a service and liable to service tax imposed by the Parliament (Entry 97 – List I of the Seventh Schedule of the Constitution) and the activity of entertainment is a subject falling under Entry 62 - List II and therefore, the assessees herein are liable to pay entertainment tax as well. Hence, the State Legislatures as well as the Parliament, both have the legislative competence to levy entertainment tax as well as service tax respectively on the activity carried out by the assessees herein,” the judgment stated.
According to it, no entertainment can be presented to the viewers unless the broadcaster transmits the signals for instantaneous presentation of any performance, film or any programme on their television. “Thus, there are two aspects in this activity; the first is the act of transmission of signals of the content to the subscribers. The second aspect here concerns not only the content of the signals, but the effect of the decryption of the signals by the Set-Top Boxes and the viewing cards inside these boxes provided by the assessees to the subscribers, which is providing and receiving of entertainment through the television. Without the apparatus provided for by the assessees to decrypt the signals, the subscriber would not be able to watch the content that is transmitted, the content being for the purpose of entertainment,” Justice Nagarathna, writing for the bench, said in her 321-page judgment.
The television entertainment provided by them through broadcasting, is a luxury within the meaning of Entry 62 - List II. The assessees who are engaged in the activity of providing entertainment are liable to pay service tax on the activity of broadcasting under the provisions of the Finance Act, 1994 read with relevant amendments and are also liable to pay entertainment tax in terms of Entry 62 - List II as being a specie of luxuries, the court added.
The apex court was hearing a batch of cases from different high courts (lead case being Kerala vs Asianet Satellite Communications) in which entertainment tax was charged from broadcasters by various states. The broadcasters claimed that they were not liable to pay entertainment tax (or luxury tax) under the respective state enactments. They submitted that since they were engaged in broadcasting of signals through television channels to subscribers, hence, were possibly liable to pay only service tax to the Central government.
It set aside the Kerala High Court’s 2012 judgment that had held that exemption given to cable operators from luxury tax while making DTH operators to pay the same is a case of discriminatory levy of luxury tax merely because of technological differences in the system of delivery of entertainment in both the services.
The top court said that the 2012 judgment, which declared the levy and collection of luxury tax on cable television operators with connections of 7,500 or more as unconstitutional for being discriminatory was "incorrect".
The two taxes are different aspects of the same activity which enable two different legislatures to impose tax under distinct taxation entries in two different Lists, the apex court said.
A bench of Justices B.V. Nagarathna and N.K. Singh said that in the instant case, the Parliament under the Finance Act, 1994 and its amendments is not imposing a tax on entertainment. Such a tax is being imposed by the state legislatures as entertainment is a luxury within the meaning of Entry 62 - List II, it said.
“In the same way, the Finance Act along with its amendments seeks to impose a tax on the service rendered by the broadcasting agency which is imposed under Entry 97 List – I. In the same vein, under Entry 62 List – II, the state governments are not imposing any service tax on the assesses,” the top court said.
It further stated that there is no overlapping in fact or in law, inasmuch as different aspects of the same activity are being taxed under two different legislations by two different legislatures. “This is because the activity of broadcasting is a service and liable to service tax imposed by the Parliament (Entry 97 – List I of the Seventh Schedule of the Constitution) and the activity of entertainment is a subject falling under Entry 62 - List II and therefore, the assessees herein are liable to pay entertainment tax as well. Hence, the State Legislatures as well as the Parliament, both have the legislative competence to levy entertainment tax as well as service tax respectively on the activity carried out by the assessees herein,” the judgment stated.
According to it, no entertainment can be presented to the viewers unless the broadcaster transmits the signals for instantaneous presentation of any performance, film or any programme on their television. “Thus, there are two aspects in this activity; the first is the act of transmission of signals of the content to the subscribers. The second aspect here concerns not only the content of the signals, but the effect of the decryption of the signals by the Set-Top Boxes and the viewing cards inside these boxes provided by the assessees to the subscribers, which is providing and receiving of entertainment through the television. Without the apparatus provided for by the assessees to decrypt the signals, the subscriber would not be able to watch the content that is transmitted, the content being for the purpose of entertainment,” Justice Nagarathna, writing for the bench, said in her 321-page judgment.
The television entertainment provided by them through broadcasting, is a luxury within the meaning of Entry 62 - List II. The assessees who are engaged in the activity of providing entertainment are liable to pay service tax on the activity of broadcasting under the provisions of the Finance Act, 1994 read with relevant amendments and are also liable to pay entertainment tax in terms of Entry 62 - List II as being a specie of luxuries, the court added.
The apex court was hearing a batch of cases from different high courts (lead case being Kerala vs Asianet Satellite Communications) in which entertainment tax was charged from broadcasters by various states. The broadcasters claimed that they were not liable to pay entertainment tax (or luxury tax) under the respective state enactments. They submitted that since they were engaged in broadcasting of signals through television channels to subscribers, hence, were possibly liable to pay only service tax to the Central government.
It set aside the Kerala High Court’s 2012 judgment that had held that exemption given to cable operators from luxury tax while making DTH operators to pay the same is a case of discriminatory levy of luxury tax merely because of technological differences in the system of delivery of entertainment in both the services.
The top court said that the 2012 judgment, which declared the levy and collection of luxury tax on cable television operators with connections of 7,500 or more as unconstitutional for being discriminatory was "incorrect".
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