State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

(b) A proprietor may, however, opt to pay an entertainment duty either under sub-section (1) or he may pay lump-sum entertainment duty under the proceeding clause (a). (2) A draft of the proposed order specifying the rate of entertainments duty referred to in sub- section (1) shall be notified for the information of all persons likely to be affected thereby and it shall take effect only after the Government has considered all objections received within a period of thirty days from the date of such publications, and has notified the same again, with or without modification: Provided that if the Government consider that such an order should be brought into force at once, the final notification may issue without previous publication: Provided further that Government may impose an entertainments duty on complimentary tickets at a different from that imposed on other kinds of payment for admission subject to the maximum specified in sub-section (1). (3) Until such time as the duty referred to in sub-sections (1) and (2) has been finally notified, the entertainments duty shall be levied at the rates in force in this behalf immediately before the commencement of this Act. (3-A) Notwithstanding anything in this section, the amount of duty shall be calculated to the nearest multiple of 5 naye paise by ignoring 2 naye paise or less and counting more than 2 naye paise as 5 naye paise. (4) The final notification specifying the rates of entertainment duty shall be laid before the Legislature at the session immediately following its publication.

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3.A. Entertainment duty is not leviable in case tax is paid under Punjab Act 8 of 1954.- Notwithstanding anything contained in this Act, no entertainment duty shall be leviable on the proprietor who is able to pay entertainment tax under the Punjab Entertainment Tax (Cinematograph Shows) Act, 1954. (3B) Notwithstanding anything contained in sub- sections (l), (1-A), (2) and (3), in the case of entertainment provided with the aid of antenna or cable television to a connection holder, the proprietor of such entertainment shall pay entertainment duty of fifteen thousand rupees per annum at a time. (3C) Notwithstanding anything contained in this section, in the case of entertainment, provided with the aid of dish, relating to direct-to-home television, the proprietor of such entertainment shall pay entertainment duty at the rate of ten per cent of the charges, received by such proprietor from the subscriber. The entertainment duty shall be paid by the proprietor by the 10th day, commencing from the close of the concerned calendar month.”

Rajasthan Entertainments and Advertisements Tax Act, 1957: (h) The relevant provisions of the Rajasthan Entertainments and Advertisements Tax Act, 1957 are as under: “3. Definitions. – In this Act, unless the subject or context otherwise requires,- xxx (4A).- “direct to home broadcasting service” means distribution of multi channel television programmes by using satellite system by providing television signals direct to the premises of subscribers without passing through an intermediary such as cable services.

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

(4AAA.)- “levy of tax on direct to home broadcasting service”- The proprietor of a direct to home broadcasting service shall be liable to pay entertainment tax at such rates, not exceeding twenty percent of the monthly subscription charges per subscriber, as the State Government may from time to time, notify in the Official Gazette, in this behalf and different may be notified for different categories of subscribers (5) “entertainment” includes – (i) any exhibition, (show), performance, amusement, game or sport to which persons are admitted for payment. (ii) providing cable service to a subscriber. (iii) providing direct to home broadcasting service and, (6) “entertainment tax” means the tax levied and charged under section 4, 4AA and 4AAA and the expression 4AA shall be deemed to have been inserted with effect from 26.03.1999 and the expression 4AAA shall be deemed to have been inserted with effect from 25.02.2008 and includes the additional tax payable under section 6A, xxx (8) “proprietor” in relation to an entertainment includes any person responsible for, or for the time being in-charge of the management thereof; xxx (11A) “subscriber” means a person who receives the signals of cable television network at a place indicated by him to the proprietor of the cable television network without further transmitting it to any other person;

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Explanation : In case of hotels each room or premises where facility for receiving signals of cable television network have been attached shall be treated as a subscriber.”

The relevant provisions of the Rajasthan Entertainments and Advertisements Tax Rules, 1957 are as under “Rules 18BBBB.- Permission to be obtained to operate direct to home broadcasting service. (1) the proprietor of a direct to home broadcasting service shall submit to the Commissioner an application within fifteen days from the date on which these rules come into force or at least within fifteen days of his commencing entertainment through direct to home broadcasting service, whichever is later. (2) the proprietor shall submit to the Commissioner a security of an amount fixed by the Commissioner along with any other information which may be so required by the Commissioner. Rules 18BBBBB.- Payment of tax for direct to home broadcasting service. (1) The proprietor of a direct to home broadcasting service liable to pay tax in accordance with section 4AAA of the Act, shall maintain a true and correct record of the number of subscribers, the amount received from each subscriber and the amount of tax. (2) The proprietor of a Direct to Home broadcasting service shall be required to deposit tax payable within seven days of the close of each calendar month. (3) The proprietor of a Direct to Home broadcasting service shall file quarterly return in Form S-7 in duplicate, within fifteen days

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

of the end of each quarter along with proof of deposit of tax payable under the Act.”

Tamil Nadu Entertainments Tax Act, 1939: (i) The relevant provisions of the Tamil Nadu Entertainments Tax Act, 1939 are as under: “3. Definitions: In this Act, unless there is anything repugnant in the subject or context : xxx (3B) “direct to home service” means distribution of multi-channel television programmes by using a satellite system by providing television signals direct to subscribers’ premises without passing through an intermediary such as cable operator; xxx 3(4) “entertainment” means a horse race or cinematograph exhibition to which persons are admitted on payment; or television exhibition for which persons are required to make payment by way of contribution, or subscription, or installation or connection charges or any other charges collected in any manner whatsoever or an amusement or a recreation parlour where a game such as bowling, billiards, snooker or the like is provided or direct to home service or a cricket tournament conducted by the Indian Premier League. xxx 3(9) “proprietor” in relation to any entertainment means a licensee of Cinematograph exhibition under the Tamil Nadu Cinemas (Regulation) Act, 1995 (Tamil Nadu Act No.IX of 1955) or the licensee of an Exhibition of Cinematograph film on Television Screen through Video Cassette Recorder or through Cable Television Network under the Tamil Nadu Exhibition of Films on

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Television Screen through Video Cassette Recorders and cable Television Network (Regulation) Act, 1984 (Tamil Nadu Act No. VII of 1984) or any person providing Television exhibition or any person providing amusement or any person providing recreation parlour or any person providing direct to home service or the Indian Premier League and includes the State Government, any local authority or any person responsible for the management thereof. xxx 3(11) “Television exhibition” means an exhibition with the aid of any type of antenna with a cable network attached to it or a cable television, of a film or moving picture or series of moving pictures, by means of transmission of television signals by wire where subscribers’ television sets at residential or non-residential place are linked by metallic coaxial cable or optic fibre cable to a central system called the head-end. xxx 4-I. Tax on direct to home service.—(1) Notwithstanding anything contained in Sections 4 and 7, there shall be levied and paid to the State Government a tax (hereinafter referred to as the “entertainment tax”) calculated at the rate of thirty per cent of the gross charges excluding the service tax, received by the provider of a direct to home service. (2) The tax levied under sub-section (1) shall be recoverable from the proprietor. (3) The provisions of this Act (other than Sections 4, 7 and 13) and the rules made thereunder shall, so far as may be, apply in relations to the tax payable under sub-section (1). xxx

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

4-E. Tax on television exhibition.- (1) Notwithstanding anything contained in Sections 4 and 7, there shall be levied and paid to the State Government a tax (hereinafter referred to as the entertainment tax) on television exhibition at the following rates namely:-

Within the limits Six thousand of the Municipal rupees per Corporation of Chennai, month. Madurai, Coimbatore, Tiruchirapalli, Tirunelveli, (i) Salem or any other Corporation that may be constituted under any law for the time being in force; Within the limits of the Three Municipalities constituted thousand under the Tamil Nadu rupees per (ii) District Municipalities month Act, 1920 (Tamil Nadu Act No. V of 1920) Within the limits of Town One thousand Panchayats constituted and five under the Tamil Nadu hundred District Municipalities rupees per (iii) Act, 1920 (Tamil Nadu month Act No. V of 1920) or any other area not specified in items (i), (ii), or (iv) Within the limits of One thousand Village Panchayats rupees per constituted under the month. (iv) Tamil Nadu Panchayats Act, 1994 (Tamil Nadu Act No. 21 of 1994).

(2) The tax levied under sub-section (1) shall be recoverable from the proprietor.

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(3) The provisions of this Act other than Sections 4, 4-B, 4-D, 4-F, 4-G, 5-F, 5-G, 6(1), 7 and 13 and the rules made there under shall, so far as may be, apply in relation to the tax payable under sub- section (1).

Uttar Pradesh Entertainment and Betting Tax Act, 1979: (j) The relevant provisions of Uttar Pradesh Entertainment and Betting Tax Act, 1979 as amended by Uttar Pradesh Entertainment and Betting Tax (Amendment) Ordinance, 2009 are as under: “2. Definitions.- In this Act- (a) ‘admission to an entertainment’ includes admission to any place which the entertainment is held or any place wherefrom entertainment is provided by means of the cable television network of Direct to Home service or any other emerging transmission by whatever name called.” (a-1) ‘amusement park’ mean a place wherein various type of amusements, which includes games or rides or water sports, water park, splash pool etc. but does not include exhibition by means of cinematograph and video, are provided on payment of admission.” xxx (ee) ‘cable operator’ means any person who provides cable service through a cable television network or otherwise controls or is responsible for the management and operation of cable television network and includes the proprietor of a hotel who provides cable service in the hotel through his own cable television network”; xxx (f-1) ‘Direct-to-Home service’ means a system of distribution of multi-channel television

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

programmes in Ku band by using a satellite system, by providing television signals direct to the subscriber’s premises without passing through an intermediary such as cable operator.” (g) ‘entertainment’ includes any exhibition, performance, amusement, game, sport or race (including horse rase) to which persons are admitted for payment and in the case of cinematograph exhibition, includes exhibition of news-real, documentaries, cartoons, advertisement shorts or slides, whether before or during the exhibition of a feature film or separately,; It also includes any activity notified as entertainment by the State Government from time to time.” xxx (i-1) ‘Ku Band’ ordinarily means the 11.7 to 12.7 Gigahertz frequency band which splits into two segments namely Fix Satellite Service having the frequency of the 11.7 to 12.2 Gigahertz and Broadcasting Satellite service having the frequency of 12.2 to 12.7 Gigahertz, or any other band of width as may be approved by the Government of India and from time to time.” xxx (k.1) “Multi System Operator” means a cable operator who receives a programming service from a broadcaster or his authorized agencies and retransmits the same or transmits his own programming service for simultaneous reception either by multiple subscribers directly or through one or more local cable operators, and includes his authorized distribution agencies by whatever name called. (l) ‘payment for admission’ includes-

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(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 or contrivance which enables a person to get a normal or better view of hearing or enjoyment of the entertainment, which without the aid of such instrument or contrivance such person would not get; (iv) any payment, by whatever name called or any purposes whatsoever, connect 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 payment, if any, entertainment or without any such payment for admission. (v) 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.-Any subscription raise or donation collected in connection with an entertainment in any form shall be deemed to be payment for admission; (vi) Any payment made by a person by way of contribution or subscription or installation and connection charges or any other charges collected in any manner whatsoever, by whatever name called, for television exhibition through cable television network or any other such

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

network by whatever name called, attached to television set or any other device at a residential or non-residential place of a connection holder; or (vii) Any payment made by person to the proprietor of a Direct-to-Home service or any other service by whatever name called, by way of contribution or subscription or installation and connection charges or any charges collected in any manner by whatever name called either directly or through any agency established for the purpose for Direct-to-Home service with the aid of set top box or any other device of like nature which connects television set or any other device at a residential or non-residential place of a connection holder directly to the satellite without passing through an intermediary such as cable operator; Explanation-For the purposes of sub-clauses (vi) and (vii) any expenditure incurred by any co-operative society including a co-operative housing society or by the management of any factory, hotel, lodge, bar, permit room, pub or by a person or group of persons for the purchase of any type of antenna or any other apparatus for securing transmission through cable television network, Direct-to-Home service or any other service by whatever name called, for its member or for workers or customers or for himself or themselves, as the case may be shall be deemed to be payment made under the sub-clause; (viii) Where in any entertainment admission has been allowed on a gross payment, such gross payment shall be deemed to be aggregate payment”.

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(l-l) ‘Place of entertainment includes- (i) a house, building, tent, site to be used for purpose of cinema building or other structure and description of transport whatsoever; (ii) any addition to the place of entertainment; (iii) a house building, tent or any other place where the books of account, ticket books or any other relevant records pertaining to the entertainment or pertaining to the management of providing cable service or Direct-to-Home service or Broadband service or any emerging transmission services, by whatever name called, are kept or purported to have been kept;. xxx (m) ‘proprietor’ in relation to any entertainment includes any person- (i) connected with the organisation of the entertainment, or (ii) charged with the work of admission to the entertainment, or (iii) responsible for, or for the time being in- charge of the management thereof, or (iv) any cable operator registered under Section 4 of the Cable Television Network (Regulation) Act, 1995 (Act No. 7 of 1995) or any person responsible for or for time being in charge of management of providing cable connection through cable television network or any other emerging technology; or (v) any company registered under the Company Act, 1956 having license to provide Direct- to-Home service or any other emerging

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

transmission services by whatever name called by the Government of India under Section 4 of the Telegraph Act, 1985 and the Indian Wireless Telegraph Act, 1933 or any agent thereof appointed for the purpose of sale, letting on rent or distribution of equipment related thereto;”. xxx (p-1) television signal receiver’ means any device, by whatever name called, used to receive and/or decode the transmission programme of particular channel and without which no person is able to see a particular channel programme.” (p-2) ‘television signal receiver agency’ means a place of entertainment by whatever name called, where business of selling or letting on hire or distribution or exchange or putting into circulation in any manner whatsoever of television signal receiver.”. xxx (t) Words and expressions used in this Act but not defined, shall have the meaning respectively assigned to them in the Cable Television Networks (Regulation) Act, 1952. (u) Words and expression used in this Act not defined, shall have the same meaning as respectively assigned to them in the Uttar Pradesh Cinema (Regulation) Act, 1955 or the rules made thereunder and the Cable Television Network (Regulation) Act, 1995 and the rules made thereunder.

3. Tax on entertainment. - (1) Subject to the provisions of this Act, there shall be levied and paid on all Aggregate payments required for admission to any entertainment other than an entertainment to which Section 4 or Section

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4-A or Section 4-B applies or a compounded payment is made under the proviso to this sub-section an entertainment tax at such rate not exceeding one hundred and fifty per cent of each such payments as the State Government may form time to time notify in this behalf, and the tax shall be collected by the proprietor from the person making the payment for admission and paid to the Government in the manner prescribed. Provided that a proprietor of a cinema or cable operator in a local area having a population not exceeding one lac. may, in lieu of payment under this sub-section, pay a compounded payment to the State Government on such conditions and in such manner as may be prescribed and at such rate as the State Government may from time to time notify, and different rates of compounded payments may be notified for different categories of local areas. Provided further that in the case of cable service, the proprietor of the cable service control room/ multi system operator shall be liable to pay the tax irrespective of the fact whether he collect it directly from the person making the payment for admission or indirectly through an associate or franchise cable operator or an agent, who in turn collects it from the person making the payment: Provided also that a proprietor of a cinema, in lieu of payment under this sub-section, shall make a lump sum payment to the State Government on such conditions and restrictions and in such manner as may be prescribed and at such rate as the State Government may from time to time notify, and different rates of lump sum payments may be notified for different categories of local areas or cinemas or for different payment for admission.

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

(2) Nothing in sub-section (1) shall preclude the State Government form notifying different rate of entertainment tax for different areas or for different classes of entertainment or for different Aggregate payment required for admission to entertainment. (2-a) It shall be lawful for the State Government to notify lump sum rate of entertainment tax for any entertainment or class of entertainments or for different payment for admission to entertainment or for different area; (3) Where the aggregate payment required for admission to an entertainment together with any other charge leviable under this Act, is not a multiple of one rupee then notwithstanding anything to the contrary contained in sub-section (1) or sub-section (2) or any notification issued thereunder, the tax shall be increase to such extent and be so computed that the aggregate of such aggregate payment and other charges is rounded off to the next higher multiply of one rupee and such increased tax shall also be collected by the proprietor and paid to the State Government in such manner as may be prescribed, (4) If in any entertainment, referred to in sub- section (1), to which admission is generally on payment, any person is admitted free of charge or on a concessional rate, the same amount of tax shall be payable as would have been payable had such person been admitted on full payment. (5) Where the Aggregate payment required for admission to an entertainment, referred to in sub-section (1), is made wholly or partly, by means of a lump sum paid as subscription, contribution, donation or otherwise, the tax shall be paid on the amount of such lump sum and

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on the amount of Aggregate payment required for admission if any made otherwise. (6) Where in hotel or a restaurant, entertainment by way of cabaret or floor show (by whatever name called, by excluding a mere band in attendance or recorded music) is provided alongwith any meal or refreshment with a view to attracting customers, whether or not Aggregate payment required for admission is charged distinctly for such entertainment, Thirty per cent of the amount payable by the customer such meal or refreshment or the amount charge distinctly for such entertainment, whichever is higher, shall be deemed to be the Aggregate payment required for admission to such entertainment and the tax shall be levied and pain accordingly. (7) Where in a hotel, entertainment by way of cable service is provided in rooms or other places, the entertainment so provided in each room or other place shall be deemed to be a separate entertainment and the subscription for admission to each such entertainment shall be deemed to be equal to the amount of subscription charged from a subscriber in the vicinity of the hotel by the cable operator providing cable service in the hotel, and the tax shall be levied and paid on the basis of such subscription: Provided that where the cable operator himself is the proprietor of the hotel, the subscription for admission to each such entertainment shall be deemed to be equal to the amount of subscription charged from a subscriber in the vicinity of the hotel by any other cable operator. Explanation.- (1) For the purposes of this sub- section and clause (ee) of Section 2, ‘hotel’ includes an accommodational unit wherein

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

rooms are provided to the customers on rent, but does not include the units approved under the ‘Paying Guest Scheme’ of the Department of Tourism of the State Government. Explanation - (2) For the purposes of this Act, the expression aggregate payment shall mean a sum paid by a person for admission to the entertainment which shall include entertainment tax and other amount required to be paid under this Act but does not include any fee or other charges which is not a part of entertainment tax under this Act.” The State Legislature of Uttarakhand amended the Uttar Pradesh Entertainment and Betting Tax Act, 1979 (as applicable to the State of Uttarakhand) by Act No.4 of 2009 notified on 16.03.2009 which are as under: “Section 2 – Definitions.– xxx (ff) “Direct-to-Home (DTH) Broadcasting” a service for multi- channel distribution programmes direct to subscriber’s premises without passing through an intermediary such as cable operator by uplinking to a satellite system. Section 2(g) has been amended as under – (g) “Entertainment” includes Direct-to-Home Broadcasting service and any and any exhibition, performance, amusement, game, sport or race (including horse race) to which persons are admitted for payment and in the case of cinematograph exhibition, includes exhibition of news- reel, documentaries, cartoons, advertisement shorts or slides, whether before or during the exhibition of a feature film or separately.”

Interpretation of Entries of the Lists of the Seventh Schedule of the Constitution:

8. With regard to the distribution of legislative subjects under the three Lists of the Seventh Schedule of the Constitution, it is necessary

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to state that the Devolution Rules drawn under the Government of India Act, 1919 and thereafter the Government of India Act, 1935 are the precursors to the distribution of legislative powers between the Union and the States. Some of the salient aspects concerning the distribution of legislative powers between the Parliament and State Legislature as per the three Lists in the backdrop of constitutional provisions could be alluded to. Article 246 of the Constitution deals with the distribution of legislative powers between the Union and the States. The said Article has to be read along with the three Lists, namely, the Union List, the State List and the Concurrent List. The taxing powers of the Union as well as the States are also demarcated as separate entries in the Union List as well as the State List i.e. List I and List II respectively. The entries in the Lists are fields of legislative powers conferred under Article 246 of the Constitution. In other words, the entries define the areas of legislative competence of the Union and the State Legislature. (vide: State of Karnataka). 8.1 The legislative power to impose a tax or impost can be traced to either List I - Union List or List II - State List. List III - Concurrent List which gives powers to both Union as well as the States to legislate on a subject does not contain any taxation entry. Entry 47 - List III states that fees in respect of any of the matters in that List but not including fees taken in any Court could be levied and collected by an authority of law either by the Union or the State Legislature. Similarly, Entry 66 - List II states that fees in respect of any of the matters in List II but not including fees taken in any Court could be collected by the State Legislature. In a similar vein, Entry 96 - List I gives power to levy fee in respect of subjects enumerated in List I but not including fees taken in any Court. 8.2 On the aspect of interpretation of legislative entries in the three Lists, the principles are apposite as discussed in State of Karnataka: 8.2.1 The power to legislate which is dealt with under Article 246 has to be read in conjunction with the entries in the three Lists discussed above which define the respective areas of legislative competence of the Union and State Legislatures. While interpreting these entries, they should not be viewed in a narrow or myopic manner but by giving

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

the widest scope to their meaning, particularly, when the vires of a provision of a statue is assailed. In such circumstances, a liberal construction must be given to the entry by looking at the substance of the legislation and not its mere form. 8.2.2 However, while interpreting the entries, in the case of an apparent conflict between the entries in the Lists, every attempt must be made by the Court to harmonise or reconcile them. Where there is an apparent overlapping between two entries, the doctrine of pith and substance is applied to find out the true character of the enactment and the entry within which it would fall. The doctrine of pith and substance, in short, means, if an enactment substantially falls within the powers expressly conferred by the Constitution upon the legislature which enacted it, the same cannot be held to be invalid merely because it incidentally encroaches on matters assigned to another legislature. Also, in a situation where there is overlapping, the said doctrine has to be applied to determine to which entry, a piece of legislation could be related to by examining the true character of the enactment or a provision thereof. Due regard must be had to the enactment as a whole and to its scope and objects. It is said that the question of invasion into another legislative territory has to be determined by substance and not by degree. According to the pith and substance doctrine, if a law is in its pith and substance within the competence of the Legislature which has made it, it will not be invalid because it incidentally touches upon the subject lying within the competence of another Legislature. 8.2.3 In case of any conflict between entries in List I and List II, the power of Parliament to legislate under List I will supersede when, on an interpretation, the two powers cannot be reconciled. But if a legislation in pith and substance falls within any of the entries of List II, the State Legislature’s competence cannot be questioned on the ground that the field is covered by Union list or the Concurrent list (vide Prafulla Kumar Mukherjee vs. Bank of Commerce, Khulna, AIR 1947 P.C. 60). It

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was further observed that in distinguishing between the powers of the divided jurisdictions under Lists I, II and III of the Seventh Schedule to the Government of India Act, 1935, it is not possible to make a clean cut between the powers of the various legislatures. They are bound to overlap from time to time, and the rule which has been evolved by the Judicial Committee whereby an impugned statute is examined to ascertain its pith and substance or its true character for the purpose of determining in which particular list the legislation falls, applies to Indian as well as to Dominion legislation. 8.2.4 The Privy Council quoted with approval, the observations of Gwyer, CJ in A.L.S.P.P.L. Subrahmanyan Chettiar vs. Muttuswami Goundan, AIR 1941 FC 47 wherein it was observed that overlapping of subject-matter is not avoided by substituting three lists for two, or even by arranging for a hierarchy of jurisdictions. It was observed that “Subjects must still overlap, and where they do the question must be asked what in pith and substance is the effect of the enactment of which complaint is made, and in what list is its true nature and character to be found. If these questions could not be asked, much beneficent legislation would be stifled at birth, and many of the subjects entrusted to provincial legislation could never effectively be dealt with”. In the said case, it was further observed that the dominant position of the Central Legislature (Parliament) with regard to matters in List I and List III is established. But the rigour of the literal interpretation is relaxed by the use of the words “with respect to” which signify “pith and substance”, and do not forbid a mere incidental encroachment. The learned Chief Justice Gwyer further added as under: “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 adherence to a strictly verbal interpretation would result in a large number of statutes

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

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.” 8.2.5 Where one entry is made “subject to” another entry, all that it means is that out of the scope of the former entry, a field of legislation covered by the latter entry has been reserved to be specially dealt with by the appropriate legislature. Also, when one entry is general and another specific, the latter will exclude the former on a subject of legislation. If, however, they cannot be fairly reconciled, the power enumerated in List II must give way to List I. 8.2.6 But once the legislation is found to be ‘with respect to’ the legislative entry in question, unless there are other constitutional prohibitions, the power would be unfettered. It would also extend to all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in that topic or category of legislation (vide United Provinces vs. Atiqa Begum, AIR 1941 FC 16). 8.2.7 Another important aspect while construing the entries in the respective Lists is that every attempt should be made by the Court to harmonise the contents of the entries so that interpretation of one entry should not render the entire content of another entry nugatory (vide Calcutta Gas Company Ltd. vs. State of West Bengal, AIR 1962 SC 1044). This is especially so when some of the entries in a different List or in the same List may overlap or may appear to be in direct conflict with each other. In such a situation, a duty is cast on the Court to reconcile the entries and bring about a harmonious construction. Thus, an effort must be made to give effect to both entries and thereby arrive at a reconciliation or harmonious construction of the

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same. It is only when such attempt to reconcile fails that the non-obstante clause in Article 246(1) should be applied as a matter of last resort as observed in Re: The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, AIR 1939 FC 1 by Gwyer, C.J. in the following words: “for the clause ought to be regarded as a last resource, a witness to the imperfections of human expression and the fallibility of legal draftsmanship”. 8.2.8 The sequitur to the aforesaid discussion is that if the Legislature passes a law which is beyond its legislative competence, it is a nullity ab-initio. The legislation is rendered null and void for want of jurisdiction or legislative competence vide RMD Chamarbaugwalla vs. Union of India, AIR 1957 SC 628. 8.2.9 On a close perusal of the entries in the three Lists, it is discerned that the Constitution has divided the topics of legislation into the following three broad categories: (i) Entries enabling laws to be made; (ii) Entries enabling taxes to be imposed; and (iii) Entries enabling fees and stamp duties to be collected. 8.2.10 Lists I and II are divided essentially into two groups : one, relating to the power to legislate on specified subjects and the other, relating to the power to tax. Thus, the entries on levy of taxes are specifically mentioned. Therefore, as such, there cannot be a conflict of taxation power of the Union and the State. Thus, in substance the taxing power can be derived only from a specific taxing entry in an appropriate List. Such a power has to be determined by the nature of the tax and not the measure or machinery set up by the statute. In Hoechst Pharmaceuticals, it has been categorically held that taxation is considered as a distinct matter for purposes of legislative competence.

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

8.2.11 It would be relevant to discuss the following two judgments of this Court in detail in order to bring out the pertinent principles of interpretation of taxation entries in List II even when regulation of an activity is provided under an entry in List I. They are: (i) MPV Sundararamier and Union of India vs. H.S. Dhillon, (1971) 2 SCC 779 (“H.S. Dhillon”). 8.2.12 In paragraph 51 of MPV Sundararamier, it was observed as under: “51. In List I Entries 1 to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament. An examination of these two groups of entries shows that while the main subject of legislation figures in the first group, a tax in relation thereto is separately mentioned in the second. Thus, Entry 22 in List I is “Railways”, and Entry 89 is “Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights”. If Entry 22 is to be construed as involving taxes to be imposed, then Entry 89 would be superfluous. Entry 41 mentions “Trade and commerce with foreign countries; import and export across customs frontiers”. If these expressions are to be interpreted as including duties to be levied in respect of that trade and commerce, then Entry 83 which is “Duties of customs including export duties” would be wholly redundant. Entries 43 and 44 relate to incorporation, regulation and winding up of corporations. Entry 85 provides separately for corporation tax. Turning to List II, Entries 1 to 44 form one group mentioning the subjects on which the States could legislate. Entries 45 to 63 in that List form another group, and they deal with taxes. Entry 18, for example, is “Land” and Entry 45 is “Land revenue”. Entry 23 is “Regulation of mines”

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and Entry 50 is “Taxes on mineral rights”. The above analysis—and it is not exhaustive of the entries in the Lists—leads to the inference that taxation is not intended to be comprised in the main subject in which it might on an extended construction be regarded as included, but is treated as a distinct matter for purposes of legislative competence. And this distinction is also manifest in the language of Article 248 clauses (1) and (2) and of Entry 97 in List I of the Constitution. Construing Entry 42 in the light of the above scheme, it is difficult to resist the conclusion that the power of Parliament to legislate on inter-State trade and commerce under Entry 42 does not include a power to impose a tax on sales in the course of such trade and commerce.” On the above analysis, it was categorically inferred in MPV Sundararamier that taxation was not intended to be comprised in the main subject in which it might, on extended construction, be regarded as included but is to be treated as a distinct matter for the purpose of legislative competence. But while saying so, in the said case, reliance was also placed on Article 286 of the Constitution. 8.2.13 It was observed in H.S. Dhillon that Entry 97 - List I conferred the residuary powers on Parliament. Article 248 of the Constitution which speaks of residuary powers of legislation confers exclusive power on Parliament to make any law with reference to any matter not enumerated in the Concurrent List or the State List. But at the same time, it provides that such a residuary power shall include a power of making any law imposing a tax not mentioned in either of those Lists. It is thus clear that if any power to tax is clearly mentioned in List II, the same would not be available to be exercised by Parliament based on the assumption of a residuary power.

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

8.2.14 In fact, the judgment in H.S. Dhillon was by a majority of 4 : 3 to the effect that the power to legislate in respect of a matter does not carry with it a power to impose a tax under our constitutional scheme. Thus, there is nothing like an implied power to tax. The source of power to legislate on a subject which does not specifically speak of taxation cannot be so interpretated by expanding its width as to include therein the power to tax, by implication or by necessary inference. Reliance was also placed on Cooley on Taxation to the following effect: “There is no such thing as taxation by implication. The burden is always upon the taxing authority to point to the act of assembly which authorises the imposition of the tax claimed.” 8.2.15 Thus, the power to tax is not an incidental power. Although legislative power includes incidental and subsidiary power under a particular entry dealing with a particular subject, the power to impose a tax is not such a power which could be implied under our Constitution. Therefore, it was held that the power to legislate in respect of inter-State trade and commerce (Entry 42 -List I) did not carry with it the power to tax the sale of goods which are subject of inter-State trade and commerce, before the insertion of Entry 92-A - List I and such power belonged to the States under Entry 54 - List II subject to Article 286 of the Constitution. (See: Builders’ Association of India vs. Union of India, (1989) 2 SCC 645) 8.2.16 Delving further on the distinction between the power to regulate and control and the power to tax, it has been observed by this Court that there is a significant distinction between the two primary purposes of legislation. The primary purpose of taxation is to collect revenue. Power to tax may be exercised for regulating an industry, commerce or any other activity. The purpose of levying such tax is the exercise of sovereign power for effectuating regulation although incidentally, the

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levy may contribute to the revenue. Taking a leaf from Cooley on his work on taxation, it was observed that the distinction between a demand of money under the police power and one made under the power to tax, is not so much one of form as of substance. 8.2.17 In view of the detailed discussion made above, we find that the dictum of this Court in MPV Sundararamier analysing the entries in Lists I and II dealing with various subjects of legislation and entries concerning taxation being separate and distinct must be borne in mind while interpreting the impugned provisions of the State Acts. That is the constitutional scheme. In this regard, we reiterate what has been observed in Hoechst Pharmaceuticals, to the effect that taxation is considered to be a distinct matter for purposes of legislative competence and the power to tax cannot be deduced from the general legislative entry as an ancillary power. Also, a power to legislate as to the principal matter specifically mentioned in the entry shall also include within its expanse legislation touching only upon incidental and ancillary matters. But the power to levy tax cannot be considered to be an incidental and ancillary matter while interpreting an entry in the Lists concerning legislative competence of Parliament or legislature of any State to enact laws on the subjects mentioned in the entry. 8.2.18 As a sequitur, it is observed that Entry 97 - List I which is the residuary entry relatable to Article 248 of the Constitution cannot be invoked or pressed into service when a specific entry empowering Parliament or the Legislature of a State to pass laws regarding the taxation on any subject is specifically enumerated either in List I or List II. 8.2.19 It would also be useful to mention that since the legislative competence to pass a law relating to taxation being specific and distinct in List I or List II, such an entry is not found in List III. In other words, both Parliament as well as the Legislature of a State cannot have the

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

competence to levy tax on a particular subject and hence, there is no specific entry regarding taxation in List III or the Concurrent List. In fact, Entry 47 - List III refers only to power to impose “fees in respect of any of the matters in the List but not including fees taken in any court”. The distinction between the power to levy fees and the power to levy a tax is well known and it would not be necessary to go into that aspect of the matter in the present cases except to highlight that there is no entry for taxation in the Concurrent List. Therefore, while interpreting a taxation entry in List I or List II, all efforts must be made to interpret them in such a way as to give content and meaning to the same having regard to the constitutional scheme under which the distribution of legislative powers have been envisaged in the Seventh Schedule and bearing in mind and the object and intent behind them.

State of Karnataka vs. State of Meghalaya: 8.3 The controversy in the aforesaid case was regarding the interpretation to be given to the expression ‘betting and gambling’ in Entries 34 and 62 - List II of the Seventh Schedule to the Constitution of India. Further, whether “lotteries organised by the Government of India or the Government of a State”, which is a subject in Entry 40 - List I also encompasses the power to levy tax on the said lotteries? Consequently, whether under Entry 62 - List II the State Legislature is denuded of the power to levy tax on the said subject? In other words, whether the subject covered in Entry 40 - List I restricts the scope and ambit of Entries 34 and 62 - List II? If the answer is in the affirmative, whether the State Legislatures have no legislative competence to levy tax on lotteries organised by the Government of India or the Government of a State. Consequently, the question in these cases was, whether, the Legislatures of the States of Karnataka and Kerala had the legislative competence to enact the Karnataka Act, 2004 and the Kerala Act, 2005 respectively. 8.3.1 After examining the entries in List I and List II, it was observed that the expression “betting and gambling” finds a mention in Entry 34 – List II and taxes on, inter alia,

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betting and gambling are leviable having regard to Entry 62 – List II. Thus, the activity of betting and gambling and taxes on betting and gambling are subjects falling within List II i.e. they are State subjects. If conduct of lotteries is held to come within the scope of the expression ‘betting and gambling’ then the regulation and control of the said activity as well as the taxation on lotteries are squarely within the contours of the legislative powers of the State. However, only lotteries organised by the Government of India or the Government of a State, even though, they come within the scope of the expression ‘betting and gambling’ have been carved out of Entry 34 - List II dealing with betting and gambling inasmuch as Entry 40 - List I (Union List) deals with lotteries organised by the Government of India or the Government of a State. This implies that conduct of lotteries by the Government of India or the Government of a State, even though, is betting and gambling within the meaning of Entry 34 and Entry 62 - List II, nevertheless, those entries are denuded inasmuch as the State Legislature has no legislative powers to pass any law on the subject lotteries organised by the Government of India or the Government of a State. If such is the simplistic interpretation to be given, the matter would rest. However, that is not so. This Court observed that: “158.2 The expression “betting and gambling” is also found in Entry 34 of List II. We have discussed at length above the content of the said expression and as to what it encompasses. The activity of “betting and gambling” includes, inter alia, lotteries. Lotteries can be conducted by the Government of India or the Government of States or authorised by a State or be conducted by private entities in a State. Thus, a lottery conducted by any of the above entities, Government or private is an activity falling within the nomenclature of “betting and gambling” which is the subject in Entry 34 List II. But what has been carved out of Entry

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

34 of List II is only lotteries conducted by the Government of India or the Government of any State. Therefore, all other types of lotteries continue to remain within the scope and ambit of “betting and gambling” as an activity in Entry 34 of List II.” 8.3.2 In the above backdrop, Entry 40 – List I and Entries 34 and 62 - List II were considered to assess whether there is any apparent conflict or overlapping between the same. It was observed that with regard to lotteries organized by the Government of India or Government of a State are concerned, they continue to remain within the scope and ambit of Entry 62 - List II dealing with, inter alia, betting and gambling in so far levy of tax is concerned. But in order to have uniformity of laws throughout the country governing such lotteries, the framers of the Constitution had intentionally included the said activity referred to above in Entry 40 – List I. Consequently, Parliament has legislative competence to pass laws on lotteries organized by the Government of India or the Government of any State, uniformly throughout the country, as the conduct of such lotteries by the sovereign State is a source of revenue. Therefore, in order to enhance the faith of the people in the organization and conduct of such lotteries throughout the territories of India by the Government of India or the Government of any State, the said regulation by Parliament is enabled by placing the subject in Entry 40 – List I. Consequently, the Lotteries (Regulation) Act, 1998 had been passed by Parliament which is regulatory in nature. But the question, whether, while interpreting Entry 40 - List I alongside Entries 34 and 62 - List II, the power to tax lotteries organized by Government of India or the Government of a State was also taken away from Entry 62 - List II and was to be read within the ambit of Entry 40 - List I was considered. It was held that the power to tax remains in Entry 62 – List II with the State Legislature for which in paragraph 158 of the said judgment, twelve reasons were assigned. It was ultimately held that Entry 62 - List II is a specific taxation entry on

p. 2352

luxuries, including taxes on entertainments, amusements, betting and gambling. Since lotteries conducted by any entity or organization was nothing but betting and gambling, the State Legislatures would have the power to tax lotteries under Entry 62 - List II as lotteries would come within the nomenclature of betting and gambling irrespective of who conducts them. 8.4 Therefore, before approaching Entry 97 - List I which is a residuary entry in the Union List (List I), it would be necessary to first interpret the relevant taxation entry in the State List and it is only in the absence of there being legislative competence in the relevant taxation entry in the State List could such a power be traced to Entry 97 - List I in the residuary list provided such a power is not also traceable to any entry in the Union List. This is because in List I itself the entries concerning taxation are separate and distinct. Such entries are from Entries 82 to 92-B and Entry 96 - List I deals with fees in respect of any of the matters in the List but not including fees taken in any court. Therefore, the power to tax can be read under Entry 97- List I which is only a residuary entry, if the same is not enumerated separately in List I or in List II in which latter case it would come within the legislative competence of the State Legislature. 8.5 From the aforesaid discussion, we would have to deduce and give a finding whether the activity conducted by the assessees herein falls within the nomenclature of entertainments under Entry 62 – List II thereby recognizing legislative competence with the State legislature to impose a tax on the assessees herein.

Meaning and Scope of the expression “Luxuries, Entertainments and Amusements” and Legislative Competence of State Legislatures to impose Entertainment Tax:

Luxuries: 8.6 The expression “entertainments and amusements” finds a place both in Entries 33 as well as 62 – List II. The former is a regulatory entry while the latter is a taxation entry. Entry 33 – List II, on the one hand, speaks of theatres and dramatic performances, while on the other hand, it deals with sports, entertainments

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

and amusements. Cinemas are also covered within Entry 33 – List II subject to Entry 60 – List I which deals with sanctioning of cinematograph films for exhibition. The taxation entry (Entry 62 – List II) essentially grants or reserves legislative competence to the State Legislature to impose taxes on “luxuries” which expression includes entertainments, amusements, betting and gambling. Thus, the aforesaid four expressions have been brought under the umbrella of the word “luxuries” so as to enable a State Legislature to tax these activities. Therefore, it is necessary to understand the meaning and content of the expression “luxuries, entertainments and amusements”. 8.7 In Express Hotels, this Court observed that luxury connotes extravagance or indulgence as distinguished from the needs and necessities of life. Taxes on luxuries is not limited to things tangible and corporeal but the entry encompasses all the manifestations and emanations which comprehend the elements of extravagance and indulgence that differentiates luxury from necessity. There can be elements of extravagance or indulgence in the quality of service as well as activities. 8.8 It was observed that luxuries covered both corporeal and incorporeal services and thus refers to goods and services as noted above. Further, there are two aspects of luxury, the first being objects and services which are intrinsically capable of fostering a sense of luxury and second, the recipient of such articles or services who consumes them experiences such gratification. Since “luxuries” can be both goods and services, what is relevant is the common denominator of the luxury element/potential of goods and services. Reference could be made to Oxford English Dictionary, (Second Edition, Volume IX), wherein it is stated that luxury could among other things be defined as – (i) abundance, sumptuous enjoyment; (ii) the habitual use of, or indulgence in, what is choice or costly; (iii) refined and intense enjoyment; means of luxurious enjoyment;

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(iv) in a particularised sense: something which conduces to enjoyment or comfort in addition to what are accounted as the necessaries. Hence, in recent use, something which is desirable but not indispensable; and (v) as an attribute such as luxury coach, cruise duty, edition, flat, liner, shop, tax, trade. 8.9 In short, the connotation of the word luxury is something which conduces enjoyment over and above the necessities of life to which one takes with a view to enjoy, amuse or entertain oneself. 8.10 In the same vein, in A.B. Abdul Kadir vs. State of Kerala, (1976) 3 SCC 219 (“A.B. Abdul Kadir”), it was observed that the connotation of the word “luxury” is something which conduces enjoyment over and above the necessities of life. It denotes something which is superfluous and not indispensable and to which one takes with a view to enjoy, amuse or entertain oneself. An expenditure on something which is in excess of what is required for economic and personal well-being would be expenditure on luxury although the expenditure is of a nature which is incurred by a large number of people, including those not economically well off. 8.11 Further, in Godfrey Phillips, it was observed that the expression “luxury” must be understood in a sense analogous to that of the less general words such as entertainments, amusements, gambling and betting which are clubbed with it. This is by way of the application of the principle of interpretation known as noscitur a sociis. Thus, luxuries is also capable of meaning an activity and has primarily and traditionally been defined as such. It is only derivatively and recently used to connote an article of luxury. If luxuries is understood as meaning something which is purely for enjoyment and beyond the necessities of life, then, entertainments, amusements, betting and gambling would come within its scope and ambit. Further, these are all activities. 8.12 In Western India Theatres, this Court observed that the ordinary meaning has to be given to the word “luxury”. This means that it would refer to goods and services which foster “luxury”, a sense of abundance, enjoyment and gratification.

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

Further taxes on luxuries, entertainments or amusements cannot have a restricted meaning so as to confine the operation of the law only to taxes on persons receiving the luxuries, entertainments or amusements. The entry contemplates luxury, entertainments and amusements as objects on which the tax is to be imposed, if so there can be no reason to differentiate between the giver and the receiver of the luxuries, entertainments and amusements and both may, with equal propriety be made amenable to the tax. Thus luxury tax can be imposed on those who provided it also. It was further observed that the concept of luxuries in the legislative entry takes within it everything that can fairly and reasonably be said to comprehended in it. The actual measure of the levy is a matter of legislative policy and convenience so long as the legislation has a reasonable nexus with the concept of luxuries in the broad and general sense in which the expressions in legislative list are comprehended, the legislative competent extends to all matters “with respect to” that field of topic of legislation. It was further observed that the taxable event need not necessarily be the actual utilization or the actual consumption, as the case may be, of the luxury. Once the legislative competence and the nexus between the taxing power and the subject of taxation is established, the other incidence are matter of fiscal policy behind the taxing law. The measure of the tax is not the same thing as and must be kept distinguished from the subject of the tax. 8.13 In Federation of Hotel & Restaurant Association of India, the concept of luxuries in Entry 62 – List II was also considered and in the said case, the aspect theory was also applied.

Entertainments and Amusements: 8.14 According to P. Ramanatha Aiyar’s Advanced Law Lexicon, 6th Edition, Volume II, the word ‘entertainment’ includes any exhibition, performance, game, sport and any other form of amusement to which persons are ordinarily admitted on payment. It also means “work in connection with, or for the purposes of, any cinema, exhibition or entertainment”. The

p. 2356

expression ‘entertainment’ includes hospitality of any kind and also expenditure on business gift with the aim of advertising to the general public. It is an activity that provides amusement and would include public performances including games and sports, exhibition, amusement to which persons are admitted for payments. 8.15 Readers Digest’s Family Word Finder defines the word “entertainment” to mean amusement, diversion, distraction, recreation, fun, play, good time, pass time, novelty, pleasure, enjoyment and satisfaction. Entertainment denotes that which serves for amusement and ‘amusement’ is defined as a pleasurable occupation of the sense or that which furnishes it as sports or music. 8.16 Webster’s Third New International Dictionary has defined ‘entertainment’ as an act of diverting, amusing or causing someone’s time to pass agreeably. 8.17 According to Concise Oxford English Dictionary, 11th Edition (Revised) as cited in Bangalore Turf Club Ltd. vs. Regional Director, ESI Corporation, (2014) 9 SCC 657 (paragraph 43.1), “entertainment” means ‘the action of providing or being provided with amusement or enjoyment. An event or performance designed to entertain’. 8.18 In State of Karnataka vs. Drive-in Enterprises, (2001) 4 SCC 60, it was observed that the word “entertainment” is wide enough to comprehend in it, the luxury or comfort with which a person entertains himself. It includes viewing a cinema film inside a driving theatre along with a car/motor vehicle. 8.19 In Purvi Communication, the expression “entertainments” under Entry 62 – List II was held to include performance, film or programmes shown to the viewers through the cable television network. 8.20 Thus, the expression “entertainments” is a word of general import and in common parlance, it includes cinema shows, dramatic performances, etc. The expression ‘entertainments’ used in Entry 62 - List II does not draw a distinction between one who derives amusement and one who caters to it. It covers both categories.

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

8.21 This Court has interpreted the expression “entertainments” in a broad and wide manner and not restricted to entertainment in a public place. With the advancement of technology, there can be entertainment provided within the private space or the household also by means of television or other electronic gadgets as well as in a motor vehicle. The growth of technology is such that there is now entertainment available even on a mobile phone (cell phone or even on a smart watch). Thus, the expression “entertainments” cannot be interpreted in a narrow, pedantic or in a myopic way. With the advancement in technology, there can be several modes in which the activity of entertainment can be provided or received. However, what is essential is the object of providing or receiving signals etc. which must be for the purpose of entertainment.

Amusement: 8.22 The expression “amusement” in Entry 62 – List II would mean diversion, pass time or enjoyment or a pleasurable occupation of the senses or that which furnished it vide M.J. Sivani vs. State of Karnataka, AIR 1995 SC 1770. 8.23 Entry 62 - List II is a specific taxation entry on luxuries, including taxes on entertainments, amusements, betting and gambling. The expression “entertainments and amusements” would have to be read ejusdem generis. The tax is thus on the activity of “entertainments and amusements” as it is on the activity of betting and gambling. Hence under Entry 62 - List II, the specific power to tax an activity which is “entertainments and amusements” is reserved with the State Legislature and cannot be read within the scope and ambit of Entry 31 - List I which is inherently restricted in its scope to include “broadcasting and other like forms of communication” (Entry 31 – List I). We say so for the following reasons: 8.23.1 First, when a specific entry regarding taxation is provided in List II empowering the State Legislature to levy tax on a subject, namely, “entertainments and amusements” amongst other similar activities, the same cannot be read by implication in an entry of List I, namely, Entry 31 - List I which is a

p. 2358

regulatory entry. This is because a taxation entry is separate and distinct from an entry dealing on a particular subject. This principle has been adequately explained by this Court in several judgments such as MPV Sundararamier and was followed in Hoechst Pharmaceuticals as discussed above. 8.23.2 Second, a taxation entry or legislative power to levy a tax on “entertainments and amusements” in the instant case, cannot be split between Parliament and the State Legislature when the said power is expressly enumerated in Entry 62 - List II. This is the constitutional scheme under the three Lists. This is also evident on a perusal of the entries of List III (Concurrent List) which empowers both the Union as well as State Legislature to enact laws on subjects mentioned therein and the power to levy a tax is conspicuous by its absence. 8.23.3 Third, the object and purpose of Entry 62 - List II is to tax the activity of “entertainments and amusements”. 8.23.4 Fourth, theatres and dramatic performances, cinemas, sports, entertainments and amusements are subjects enumerated in Entry 33 - List II and are State subjects, therefore, regulation of such activities within a State is complemented by the power of the State legislature to also tax the said activity under Entry 62 – List II. This is because what is being taxed is an entertainment and amusement activity which is squarely covered under Entry 62 - List II. Therefore, the State legislature has the competence to tax the activities enumerated in Entry 33 - List II. 8.23.5 Fifth, the contention of the assessees that the subject being placed in Entry 31 - List I would also empower only Parliament to impose a tax on the same by way of implication under the said entry itself is not a correct interpretation of the entries in the Lists. 8.23.6 Sixth, Entry 97 - List I can be invoked only when any matter is not enumerated in List II or List III including

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

any tax not mentioned in the said Lists. There is no specific entry for levy of tax on entertainments and amusements in List I. It is only in Entry 62 - List II. Thus, Entry 62 - List II gives legislative competence to a State Legislature to levy a tax on, inter alia, “entertainments and amusements”. This would also include a tax on organisation and conduct of entertainments and amusements within the State when permission has been given by a State Government to conduct such an activity of entertainments and amusements in whatever form it may be. Thus, Entries 33 and 62 of List – II which, inter alia, deal with “entertainments and amusements” have to be interpreted identically and the expressions given an identical meaning. 8.23.7 Seventh, when the State Government has the legislative competence to levy a tax on, inter alia, entertainments and amusements (as a specific taxation entry is provided to levy tax on the said activity under Entry 62 - List II), the said entry must be interpreted comprehensively and not in a restricted or narrow manner by excluding from the purview of the said entry, taxation on entertainments and amusements conducted through television by the medium of broadcasting. 8.23.8 Eighth, such a power to levy taxes on entertainments and amusements cannot be read into Entry 31 - List I by implication or into Entry 97 - List I as a residuary power. Such interpretation, if endorsed, would do violence to the manner of interpretation of entries in the Lists and prove to be contrary to the Articles of the Constitution and judgments of this Court cited above. 8.23.9 Ninth, if the State Government permits any species of entertainments or amusements activity within the State in terms of Entry 33 - List II, then the State also has legislative competence to tax such an activity as per Entry 62 - List II.

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8.23.10 Tenth, Entry 31 - List I is meant only for the purpose of regulation. The said entry cannot be expanded to cover the power to levy taxes on entertainments and amusements by Parliament when such a power is envisaged in Entry 62 - List II. Parliament, therefore, cannot tax an entertainment or amusement activity, on the strength of Entry 31 - List I. It may however regulate the said activity to the extent permissible under Entry 31 – List I. Any impost strictly for the purpose of regulation of broadcasting is permissible so long as it is not a tax on entertainment or amusement which is only within the ambit of only Entry 62 - List II. 8.23.11 Eleventh, any entertainment or amusement activity conducted by a private entity in a State or authorised by a State Government can be regulated only by the State Legislature. This is because Entry 33 - List II which deals with, inter alia, entertainments and amusements, also includes television entertainment. The regulation could be of Cable Television operators in the State. 8.24 The definition of broadcasting in Section 65(13) of the Finance Act, 1994 as amended in 2001 is as per the meaning assigned to it in clause (c) of Section 2 of the Prasar Bharti Act, 1990. The said Act is made pursuant to Entry 31 – List I which deals with posts and telegraphs; telephones, wireless, broadcasting and other like forms of communications. The quintessence of Entry 31 – List I is communication which could be through various modes as referred to above. However, Entry 62 – List II deals with taxes on luxuries which is a totally distinct entry as opposed to communication which is the subject-matter of Entry 31 – List I and within the nomenclature of the expression “luxury”, is included inter alia entertainments and amusements. 8.24.1 Therefore, on a plain reading of the said entries, it is very apparent that broadcasting is a form of communication and entertainment is a species of luxuries under Entry 62 – List II. There is no doubt that there are various modes of entertainments. Geeta Enterprises is a case which is restricted to certain

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

modes of entertainments but with the advancement of technology, we have noted that entertainment could be through television and other digital devices including cell phone or smart phone. The expression “entertainments” in whatever mode it may be, come within the nomenclature or genre of luxuries which totally distinct from the expression “communication”. It may be that the activity of entertainment is achieved through communication and in that sense could be through the mode of broadcasting and in that sense, broadcasting and communication is for the purpose of the entertainment. Hence, in our view, the State Legislature were fully justified in imposing entertainment tax under Entry 62 – List II. That broad casting through T.V. cable network and cable operators is for carrying out the activity of entertainment and in pith and substance falls within the scope and ambit of Entry 62 – List II. However, the means adopted is through broadcasting which is a means of communication under Entry 31 – List I and therefore incidentally touches upon the subject under Entry 31 – List I. 8.24.2 Insofar as the argument that broadcasting falls only within the scope and ambit of Entry 31 – List I is concerned, it has to be viewed only as a form of communication and for the purpose of imposition of service tax, broadcasting is given meaning which is attributed to clause (c) of Section 2 of the Prasar Bharti Act, 1990 which as already noted as a regulatory entry. A regulatory entry cannot be a basis for imposition of a tax as this Court way back in MPV Sundararamier expressed. That a taxation entry is exclusive and de hors a regulatory entry and cannot be read by way of an implication into a regulatory entry. That apart, in H.S. Dhillon, this Court has specifically stated that if a tax falls within the scope and ambit of an entry in a particular list then the same cannot be read into the residuary list, namely, Entry 97 – List I. In the circumstances, we find that the borrowing of the

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definition “broadcasting” from the Prasar Bharti Act, 1990 for the purpose of imposition of service tax on a broadcaster and thereby including a person who is in the entertainment industry to also liable to pay service tax, is not a levy in the nature of entertainment tax. Thus, a levy of service tax on a broadcaster is not a levy on an activity which is in the realm of entertainment. Conversely, a levy of entertainment tax by a State under Enter 62 – List II is not a levy on the activity/service of broadcasting but on the activity of providing and receiving entertainment. 8.25 In conclusion we hold that the tax sought to be imposed by the State Legislatures by way of the impugned Acts, is traceable to the power conferred on the State Legislatures under Entry 62 - List II. The said entry contemplates imposition of taxes, inter alia, on the entire genus of “entertainments and amusements”. The pith and substance of the provisions of the State Act referred to above are in the realm of taxation of providers/receivers of entertainment/amusement as luxuries within the said Entry through the medium of television which involves broadcasting service which is regulated under Entry 31 – List I as a form of communication in accordance with Prasar Bharti Act, 1990.

Parameters of Taxation: 8.26 A legislative enactment which provides for the imposition of a tax must specify the following parameters of taxation: (i) The taxable event which forms the basis of levy, also referred to as “subject” of a tax; (ii) The measure of the tax; (iii) The rate(s) of taxation; and (iv) The incidence of the tax. 8.27 The said parameters are each distinct and must not be conflated with the others. The components of tax, as stated above have been characterised in Govind Saran Ganga Saran. In the said case, it was also laid down that a legislative scheme which

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

seeks to impose a tax, ought to define each of the aforestated components with certainty and precision. The observations of Pathak, C.J. in the aforesaid case can be extracted as under : (SCC pp. 209-10, para 6) “6. The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity.” 8.28 This Court, in State of Karnataka, applied the aforesaid parameters of taxation in the context of the State enactments for collection of tax on conduct of lotteries that is encompassing the activity of betting and gambling. Paragraphs 111.1 – 111.4 are apposite to the present case and they read as under: “111.1. In the context of the tax sought to be imposed by the impugned Acts, the basis of levy is the conduct of lotteries within the State of Karnataka or Kerala. In other words, the subject of taxation is the conduct of lottery schemes, by the Government of India or the Government of other States, within the State of Kerala or Karnataka. While it has rightly been stated by the learned counsel appearing on behalf of the respondents that the conduct of lotteries involves a host of events such as formulation and notification of scheme of lotteries, printing, transportation and sale of lottery tickets, etc. all these events constituting the conduct of the lotteries are ultimately for the participation of

p. 2364

persons, within the State of Karnataka or Kerala. Therefore, the subject of tax is the conduct of lottery schemes, within the State of Karnataka or Kerala, which is enabled by the propensity of persons to participate in the lottery schemes. 111.2. The measure of taxation in the instant case is the “draw”. The impugned legislations contemplate two kinds of draws, namely, bumper draw and draw other than a bumper draw. 111.3. The rate of tax, is a dependent variable and is to be determined based on the measure. In the instant case, the rate of tax under the Karnataka Act, 2005 is Rupees one lakh and fifty thousand in respect of a bumper draw and Rupees one lakh in respect of any other draw. Similarly, in the Kerala Act, 2005, the rate of tax is Rupees ten lakhs in respect of a bumper draw and Rupees two lakhs and fifty thousand in respect of any other draw. 111.4. The incidence of the tax is on the promoters of the lotteries i.e. on the Government of India or a the Government of a State or a Union Territory or any country organising, conducting or promoting a lottery, within the State of Karnataka or Kerala, or any person or entity appointed by the said Government or country in this behalf. The impugned Acts require registration of promoters and all provisions requiring filing of the returns of draws and payment of tax, are to operate in relation to promoters. Therefore, the incidence of the tax, falls on the promoters of the lotteries.” 8.29 The above analogy be applied in the context of the legislative enactments of the States under consideration and the following table would bring out the aforesaid parameters of taxation in the context of the activity of providing and receiving entertainment:

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

Taxable Event S. Measure Rate of Incidence States or subject of No. of Tax Tax of Tax taxation Assam Section Section 3C Amusements Section 3C read 1 read with Section 3C and Betting Tax 3C with S.2(4) Act, 1939 S.3C(4) Delhi Entertainments Section 2 Section 7 Section 7 Section 7 and Betting Tax 7 Act, 1996 Gujarat Section Section Section 3 Entertainments Section 6E(1) 6E(1) 6E(1) 6E(1) Tax Act, 1977 Jharkhand Section 3 Section Proviso to 4 Entertainment Section 3 & Section 3 Section 3 Tax Act, 2012 4 Orissa Section 5 Entertainment Section 7 Section 7 Section 7 7 Tax Act, 2006 Punjab Section Section 6 Entertainment Section 3C Section 3C 3C 3C Duty Act, 1955 Rajasthan Section 4AAA Entertainments Notification read with Section Section 7 and S.O.443 dt. Section 5 and 4AAA 4AAA Advertisements 25.02.2008 6 Tax Act, 1957 Uttar Pradesh Entertainment and Betting Tax Section Section 3 Act, 1979 as Section 3 read 3 read 8 Section 3 read with amended by with S.2(a) with S. 2(v) U.P. Ordinance S.2(l)(vii) No. 4 of 2009 w.e.f. 16.06.2009 Uttar Pradesh Entertainment and Betting Tax Section Act, 1979, as Section 3 Section Section 3 read 3 read 9 amended by read with read with with S. 2(g) with S. Uttarakhand S. 2(g) S. 2(g) 2(g) (Amendment) Act, 2009 dt. 16.03.2009

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8.30 The parameters of taxation when juxtaposed with the relevant provisions of the State Acts under consideration, it is evident that the parameters of taxation can be clearly discerned from the aforesaid provision of the State Acts all relatable to the subject “entertainment” on which the tax is levied coming within scope and ambit of Entry 62 – List II.

Relevant case law:

Suresh:

9. The judgment of this Court in Suresh is relevant to the issues herein and deserves deliberation. Suresh arose from an appeal against the judgment of the High Court of Judicature at Madras in Tamil Nadu Cable TV Organisers Association vs. Government of Tamil Nadu, W.P. No.10013/1994 dt. 30.11.1994 (“Tamil Nadu Cable TV Organisers Association”). In the aforesaid case, the constitutional validity of sub-sections (2A), (2-B), (11) of section 3 and section 4-E of the Tamil Nadu Entertainments Tax Act, 1939 as amended by Act 37 of 1994 (“1994 Act”) with the relevant Rules in G.O.P. No.265 dt. 18.08.1994 was under challenge. The purpose of the 1994 Act was to levy entertainment tax on exhibition of films or moving pictures or series of pictures through cable television. “Cable television” was defined in clause (2-B) of section 3 as follows: ““cable television” means a system organised for television exhibition by using a video cassette or disc or both, recorder or player of similar such apparatus on which pre-recorded video cassettes or discs or both are played or replayed and the films or moving pictures or series of pictures which are viewed and heard on the television receiving set at a residential or non-residential place of a connection holder.” “Television exhibition” was defined in clause (11) of section 3 as follows: ““television exhibition” means an exhibition with the aid of any type of antenna with a cable

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

network attached to it or cable television, of a film, or moving picture or series of moving pictures, by means of transmission of television signals by wire where subscribers’ television sets at residential or non-residential place are linked by metallic coaxial cable or optic fibre cable to a central system called the head-end.” Section 4E is the charging section which was introduced for the first time as follows: “(1) Notwithstanding anything contained in sections 4 and 7, there shall be levied and paid to the State Government a tax (hereinafter referred to as the entertainments tax) calculated at forty per cent of the amount collected by way of contribution or subscription or installation or connection charges or any other charges collected in any manner whatsoever for television exhibition. (2) The tax levied under sub-section (1) shall be recoverable from the proprietor. (3) The provisions of this Act (other than Sections 4, 4B, 4D, 5, 5A, 5B, 5C, 5D, 5E, 5F, 5G, 6(1), 7 and 13) and the rules made thereunder shall, so far as may be, apply in relation to the tax payable under sub-section (1).” 9.1 It is relevant here to list the major issues of the writ petitioners therein. They are as follows: I. The State Legislature has no competence to pass the impugned Act inasmuch as the subject falls entirely within List I of Schedule VII to the Constitution. II. The Union of India has passed a legislation viz., Cable Television Network (Regulation) Ordinance 9 of 1994 and also framed the Cable Television Rules of 1994. Thus, by the doctrine of “occupied field”, the State Legislature has no power to pass the impugned Act. III. The impugned Act violates the provisions of Article 19(1) (a) of the Constitution of India, as it operates as an unreasonable restriction on the freedom of speech and expression of the citizens of this country.

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IV. The tax levied by the Amendment Act is not a ‘tax on entertainment’ even as defined by the Act. It is a colourable legislation and is a fraud on the legislative powers for the following reasons: a. Installation Charges and connection charges paid by the viewer cannot form part of the charges for entertainment. b. In effect, it is a tax on trade, profession or calling, falling within the scope of Entry 60 - List II read with Article 276 of the Constitution of India. c. The transmission through the Cable Television Network is not only of films or moving pictures but also of several educative programmes. In effect, it is partly a tax on education. The entertainment part of the transmission will be less than 10% of the total transmission. As there is no provision for apportionment of the tax on entertainment and on other non-entertainment programmes, the entire levy is illegal and invalid. d. There is no nexus between the object of the legislation and the provision contained in the Act, and therefore, it is unconstitutional. V. The provisions of the Act violates Article 14 of the Constitution of India for the following reasons: a. It does not impose a tax on Door darshan and those who own a disc antenna including posh hotels and other organisations. b. The Act treats unequals as equals inasmuch as the levy is the same with reference to rural operators as well as urban operators. VI. Essentially, the tax levied by the impugned Act is one on private enjoyment by the people in their respective houses and not on public entertainment. VII. The provisions of the Act are unreasonable due to the following reasons.

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

a. The rate of tax is unduly exorbitant and wholly unreasonable so as to practically annihilate the business of the Cable TV Operators. b. The provision for security deposit of Rs. 10,000 under Rule 21C is an unreasonable restriction on the business. c. The provision for inspection of the place from where such television exhibition is provided, under Section 11 of the Act is unwarranted and an unreasonable restriction on the business. 9.2 As regards Issue I questioning the legislative competence, petitioners therein argued that the subject matter was governed by Entry 31 and Entry 60 - List I or alternatively, it would fall under the residuary Entry 97 - List I as it was a matter not enumerated in List II or List III of the Seventh Schedule. It was also argued that the Act defined “entertainment” to mean “a horse-race or cinematograph exhibition to which persons are admitted on payment” and this definition had been holding the field since 1939 and therefore the expression ‘entertainment’ was a nomen juris for “a horse-race or cinematograph exhibition”. 9.3 However, the High Court opined that modern statutes have to be interpreted under new facts and situations and that old meaning cannot be given to the expression used therein by relying on the maxim contemporanea expositio est optima et fortissima in lege (contemporaneous exposition is the best and strongest in law). It then opined that the Indian Constitution has always been held to be an organic instrument and the expressions used in the Constitution cannot be restricted to the facts and circumstances which prevailed at the time of the passing of the Constitution. By relying on cases such as Geeta Enterprises and Express Hotels, the High Court held that the meaning of the word ‘entertainments’ used in Entry 62 - List II is not confined to the definition of the said word as found in the Madras Entertainments Tax Act, 1939 and that the impugned Act falls within Entry 62 - List II. 9.4 With regard to Issue II dealing with repugnancy and occupied field, the Court rejected the argument of petitioners that the impugned Act is repugnant to the provisions of the Central

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Ordinance 9 of 1994 since it had found that the subject-matter fell within Entry 62 - List II. 9.5 On the contention regarding violation of Article 19(1)(a) of the Constitution, the Court also rejected the argument that the taxation curtails the freedom of expression of the various national and international television operators by holding that the Cable TV Operators are not prevented from expressing their views on any particular matter. 9.6 As regards Issue IV(a), petitioners contended that the charges for installation or connection are only for the purpose of laying own connecting wires and cables which will not be a recurring expenditure and they cannot be termed as charges paid for the enjoyment of entertainment. The High Court rejected this contention, noting that whatever amount was paid by the viewer to the Cable TV Operator for installation or connection or for transmission of different programmes, all that was intended as payment for enjoying the entertainment. It also decided Issue IV(b) in favour of the State noting that the incidence of tax was on entertainment as such and not on any individual. As regards Issue IV(c), the Court rejected the contention of the petitioners that the tax was mostly on non-entertainment programmes which were of high educational value, and since it was not possible to apportion the tax between entertainment programmes and non-entertainment programmes, the entire levy had to be struck down as unconstitutional. It held that if the pith and substance of the Act brought an enactment within the scope of a particular legislative entry, it could neither be dissected into different parts nor could it be held that the major part of it fell outside the scope of the entry. It rejected the contention of the petitioner as regards Issue IV(d) at the very outset. 9.7 Issue V dealt with Article 14 and the Court reiterated the principles of law relating to classification in a fiscal enactment that the legislature has wide latitude in such matters. It noted that the classification was based on intelligible differentia having nexus with the object of the enactment and that there was no hostile discrimination whatsoever against Cable TV operators. As regards the urban/rural classification, the Court noted that merely because the operators in rural areas may not get as

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

many customers as the operators get in urban areas, it cannot be a ground to provide differential rates, as the incidence of tax was on entertainment and it was the same whether the viewer was in a village or a town or a city. 9.8 Issue VI invoked a right to privacy argument. According to the petitioners, due to the imposition of tax, the charges for getting such connections became out of reach for ordinary people and hence were deprived of watching programmes on the television in the privacy of their respective abodes. The Court dismissed this contention as far-fetched. It also noted that the tax was imposed only on the proprietor, and the law does not mandate that the same be passed on to consumers. 9.9 With regard to Issue VII, the Court reiterated the well-settled principle that it has no concern with the wisdom of the legislature in prescribing the rate of tax. It opined that when there was no prohibition in the Act against the proprietor passing on the tax liability to the customers, there was nothing wrong in the taxing enactment to prescribe the furnishing of security for the proper payment of tax. It also held as regards provisions for inspection that the Legislature was always entitled to make provisions to enable the proper enforcement of the levy. Holding so, it dismissed all the petitions. 9.10 The Supreme Court in Suresh upheld this decision of the Madras High Court. It felt unnecessary to deal with all its conclusions except the submissions relating to i) freedom of speech and expression; ii) colourable legislation; and iii) the rate of tax. It noted that the activity of the appellants therein was a combination of two rights i.e. business and speech – sub-clause (g) and (a) of clause (1) of Article 19 and that there was no reason why the business part of it could not be taxed. It also noted that the State had duly explained its reasons for imposing tax at the rate of 40% and that since the appellants also carried on business, it was their duty to share the burden of the State by paying taxes like any other business.

Vasant Madhav Patwardhan: 9.11 A similar matter had come up before the Bombay High Court in Vasant Madhav Patwardhan vs. State of Maharashtra,

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2000 SCC OnLine Bom 244 wherein operators of Cable Television filed a writ under Article 226 of the Constitution challenging the constitutional validity of an amendment to the Bombay Entertainments Duty Act, 1923. The said Act imposed a tax on the entertainment provided by the Cable TV network. 9.12 The Bombay HC discussed Tamil Nadu Cable TV Organisers Association and Suresh in detail. It noted that the judgments above substantially covered the scope and controversy raised before it and that the substance of the legislations both in Maharashtra and Tamil Nadu were markedly similar. It noted that the Constitution is an organic document and that the vision of the founding fathers cannot, by a process of artificial construction, be frozen at the scientific knowledge and technology which was available at the point of time when the Constitution was drafted. Consequently, it upheld the competence of the State to levy the tax. An appeal against this judgment before the Supreme Court in Civil Appeal No. 7167 of 2000 was dismissed on the ground that the “point involved in this appeal is squarely covered by the judgment of this Court in Suresh”.

Geeta Enterprises vs. Purvi Communication:

10. During the course of the arguments, learned senior counsel Sri KK Venugopal submitted that the three Judge Bench judgment of this Court in Purvi Communication is per incuriam as it did not follow the reasoning of the coordinate Bench judgment in Geeta Enterprises and therefore, the correctness of Purvi Communication must be examined by a larger Bench of five judges. 10.1 While the three judge bench in Geeta Enterprises held that the levy of entertainment tax necessitates that the entertainment in question have a public colour, the coordinate bench deciding Purvi Communication did not take note of the same and erred in holding that state legislatures are competent to impose entertainment tax under Entry 62 – List II on the services rendered by Cable TV Operators. In that regard, Sri Venugopal placed reliance on the judgment of the Constitution Bench of this Court in State of M.P. vs. Abha Sethi, (1999) 4 SCC 32 wherein Geeta Enterprises was cited with approval and its correctness affirmed.

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

10.2 Learned senior counsel further argued that the 1979 Act was amended in 2009 to introduce entertainment tax on DTH services. Our attention was drawn to the charging section of the 1979 Act i.e. Section 3, which, according to Sri Venugopal, predicates the levy of entertainment tax upon “admission to an entertainment”. It was argued that watching television within the boundaries of one’s home cannot be considered “admission to an entertainment”. Therefore, it was contended that the charging section does not apply to the activity of the assessees herein. Placing reliance on Bharat Sanchar Nigam Limited, it was further argued that the dominant nature of the activity of the assessees is that of broadcasting and this Court must be circumspect in holding otherwise. 10.3 The crux of the submission was that in Geeta Enterprises, the word ‘entertainment’, as used in section 2(3) of the Uttar Pradesh Entertainment and Betting Tax Act, 1937 impugned therein, was interpreted to require a ‘public colour’. He submitted that such an interpretation was in line with the meaning of the word ‘entertainments’ in Entry 62 - List II, which has historically required a ‘public colour’. The relevant paragraphs in Geeta Enterprises are as follows (p.818): “Thus, on a consideration of the legal connotation of the word entertainment as defined in various books, and other circumstances of the case as also on a true interpretation of the word as defined in s. 2 (3) of the Act, it follows that the show must pass the following tests to fall within the ambit of the aforesaid section :

1. that the show, performance, game or sport, etc. must contain a public colour in that the show should be open to public in a hall, theatre or any other place where members of the public are invited or attend the show.

2. …” (emphasis supplied)

10.4 Sri Venugopal, learned senior counsel submitted that Purvi Communication ignored this requirement of ‘public colour’ and

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proceeded to hold that the performance, film or programme shown to the viewers through the cable television network came within the meaning of ‘entertainments’ under Entry 62 - List II to make law for the levy and collection of tax on such entertainments. 10.5 Sri Shisodia, learned senior counsel, on the other hand submitted that, as regards the question of whether cable TV operators may be taxed under the impugned Act when it is the subscribers who spend on entertainment, the judgment of this Court in Purvi Communication squarely covers it. Therein, this Court held that, “37. In our view, the respondents as a cable operator, for the purpose of levy and collection of tax under Sub-section (4a) of Section 4A of the Act have direct and close nexus with the entertainments made available to the viewer through their cable television network. The performance, film or programmes shown to the viewers through the cable television network come within the meaning of entertainments and therefore within the legislative competence of the State Legislature under Entry 62 of List II of Seventh Schedule to the Constitution of India to make law for the levy and collection of tax on such entertainments.

38. A tax under Entry 62 of List II of Seventh Schedule to the Constitution of India may be imposed not only on the person spending on entertainment but also on the act of a person entertaining, or the subject of entertainment. It is well settled by this Court that such tax may be levied on the person offering or providing entertainment or the person enjoying it. xxx

39. In the tax matters, the State Legislature is free to, if it has legislative competence, to choose the persons from whom the tax levied on entertainments is to be collected. In other words, what are taxed

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State of Kerala & Another v. Asianet Satellite Communications Ltd. & Others

are the entertainments, which is very much within the ambit of Entry 62 of List II of Seventy Schedule.” (emphasis supplied)

10.6 We are of the view that Purvi Communication is not per incuriam and need not be referred to a larger Bench. To substantiate our reasons, let us revisit Geeta Enterprises and Purvi Communication in light of Entry 62 - List II. 10.7 In Geeta Enterprises, the petitioner therein permitted persons to enter the premises without any charge to view a show on the video which consisted mainly of sports, games etc. played on the screen of the video. Electronic machines were imported from Japan and the mechanism for playing the machine was so designed that a coin of fifty paise was to be inserted into a strong box built within the machine, the keys of which was with the manufacturer. After the show was over, a representative of the manufacturing company would come, open the box collect the money and pay the share of the hire-petitioner therein out of the collected sale proceeds. The charge of inserting the coin was released only from those who wanted to operate the video machine at the rate of fifty paise for a show lasting up to thirty seconds. 10.8 In Geeta Enterprises, the applicability of entertainment tax on the video game installed by the petitioner therein was under question. The modus operandi was that a machine with a video screen was installed in the parlour of the petitioner. There was no admission fee for people to enter the parlour, but a coin of 50 naya paise was to be inserted into a strong box built within the machine to play the video game. The question was, whether this modus operandi would fall within the interpretation of the word “Entertainment” as used in section 2(3) of the Uttar Pradesh Entertainment and Betting Tax Act, 1937 (hereinafter referred to as ‘the 1937 Act). Section 2(3) of the 1937 Act provided that: “entertainment” includes any exhibitional, performance, amusement, game or short to which persons are admitted for payment.”