Case: M/S Tata Sky Ltd Vs. State Of M.P.

legislature considered it necessary to amend the 1936 Act and to insert section 3-A and section 3-B respectively with effect from May 1, 1999 and April 1, 2001. In this regard, it is also very important to note that both in the case of shows by video cassette recorder or video cassette and player, cable T.V. operations, the collection machinery is in-built and provided within the respective provisions of section 3-A and section 3-B. and in those two cases the collection of duty does not take place under section 4 of the 1936 Act. 36. On behalf of the State the imposition of levy on DTH was sought to be justified on the basis of sub-clause(4) of clause (d) of section 2 which reads as under: (iv) any payment made by a person by way of contribution or subscription or installation and connection charges or any other charges, by whatever name called, for providing access to any entertainment, whether for a specified period or on a continuous basis; 37. In our view, the submission is untenable for more reasons than one. First, section 2(d)(iv) is only the measure of tax and it does not create the charge which is created by section 3. The question of going to the measure of the tax would arise only if it is found that the charge of tax is attracted. Under section 3 read with section 2(d) and section 2(a), the charge or levy of tax is attracted only if an entertainment takes place in a specified place or locations and persons are admitted to the place on payment of a charge to the proprietor providing the entertainment. In the present case, as DTH operation is not a place-related entertainment, it is not covered by the charging section 3 read with section 2(a) and 2(b) of the 1936 Act. Consequently, the question of going to section 2(d)(iv) does not arise. Moreover, even if section 2(d)(iv) is to be read as an extension of section 3 and, thus, as a part of the charge, it does not make any difference at all because section 2(d)(iv) refers to entertainment which takes us back to section 2(b) and finally to section 2(a). 38. We have held that DTH is not covered by the provisions of section 3 read with section 2(a), 2(b) and 2(d) of the 1936 Act. The issue gets further settled on reference being made to the mechanism of collection of the charge as provided under section 4 of the 1936 Act. Section 4(1) mandates that no person shall be admitted to any entertainment other than entertainment by V.C.R. except with a ticket stamped with an impressed, embossed, engraved or adhesive stamp issued by the State Government of nominal value equal to the duty payable under section 3; sub-section (2) of section 4 provides for different modes specified thereunder for payment of the amount of duty due on the entertainment. Neither the provision of section 4(1) nor any of the modes provided under section 4(2) can be made applicable for collection of duty on DTH operation. Further, it is noted above that section 8 provides rule making powers. In exercise of the powers under that provision the Madhya Pradesh Entertainment Duty and Advertisement Tax Rules 1942 were framed. A perusal of the Rules makes it absolutely clear that the collection mechanism under the 1936 Act is based on revenue stamps stuck to the tickets issued by the proprietor for entry to the specified place where entertainment is held. 39. The machinery for collection of duty provided under the 1936 Act has no application to DTH. It is well settled that if the collection machinery provided under the Act is such that it cannot be applied to an event, it follows that the event is beyond the charge created by the taxing statute. See: Commissioner of Income Tax v. B.C. Srinivasa Setty, (1981) 2 SCC 460 , Commissioner of Income-Tax Ernakulam, Kerala v. Official Liquidator, Palai Central Bank Ltd.. (1985) 1 SCC 45 (pages 50-51), PNB Finance Limited v. Commissioner of Income Tax I, New Delhi (2008) 13 SCC 94 ( paragraphs 21 and 24 pages 100 to 101). 40. In light of the discussions made above, we are clearly of the view that the 1936 Act cannot be extended to cover DTH operations being carried out by the appellants. 41. Coming now to the notification dated May 5, 2008, it is elementary that a notification issued in exercise of powers under the Act cannot amend the Act. Moreover, the notification merely prescribes the rate of entertainment duty at 20 percent in respect of every payment for admission to an entertainment other than cinema, video cassette recorder and cable service. The notification cannot enlarge either the charging section or amend the provision of collection under section 4 of the Act read with the 1942 Rules. It is, therefore, clear that the notification in no way improves the case of the State. If no duty could be levied on DTH operation under the 1936 Act prior to the issuance of the notification dated May 5, 2008 as fairly stated by Mr. Dave, we fail to see how duty can be levied under the 1936 Act after the issuance of the notification. 42. We have held that the 1936 Act does not cover DTH operations on an interpretation of the provisions of 1936 Act itself. We, therefore, see no need to refer to the cases relied upon by the appellants relating to demand of duty on DTH operations under the Uttar Pradesh Entertainments and Betting Tax Act, 1979 and under the Bihar Entertainment Tax Act. 43. Further, as we have held that the 1936 Act does not cover the DTH operations we need not go to the other submissions made on behalf of the appellants inter alia regarding the legislative competence of the statute legislature to impose tax on DTH operation as it was a notified service chargeable to service tax under the Finance Act, 1994. 44.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]In our view, the submission is untenable for more reasons than one. First, section 2(d)(iv) is only the measure of tax and it does not create the charge which is created by section 3. The question of going to the measure of the tax would arise only if it is found that the charge of tax is attracted. Under section 3 read with section 2(d) and section 2(a), the charge or levy of tax is attracted only if an entertainment takes place in a specified place or locations and persons are admitted to the place on payment of a charge to the proprietor providing the entertainment. In the present case, as DTH operation is not a place-related entertainment, it is not covered by the charging section 3 read with section 2(a) and 2(b) of the 1936 Act. Consequently, the question of going to section 2(d)(iv) does not arise. Moreover, even if section 2(d)(iv) is to be read as an extension of section 3 and, thus, as a part of the charge, it does not make any difference at all because section 2(d)(iv) refers to entertainment which takes us back to section 2(b) and finally to section 2(a)38. We have held that DTH is not covered by the provisions of section 3 read with section 2(a), 2(b) and 2(d) of the 1936 Act. The issue gets further settled on reference being made to the mechanism of collection of the charge as provided under section 4 of the 1936 Act. Section 4(1) mandates that no person shall be admitted to any entertainment other than entertainment by V.C.R. except with a ticket stamped with an impressed, embossed, engraved or adhesive stamp issued by the State Government of nominal value equal to the duty payable under section 3; sub-section (2) of section 4 provides for different modes specified thereunder for payment of the amount of duty due on the entertainment. Neither the provision of section 4(1) nor any of the modes provided under section 4(2) can be made applicable for collection of duty on DTH operation. Further, it is noted above that section 8 provides rule making powers. In exercise of the powers under that provision the Madhya Pradesh Entertainment Duty and Advertisement Tax Rules 1942 were framed. A perusal of the Rules makes it absolutely clear that the collection mechanism under the 1936 Act is based on revenue stamps stuck to the tickets issued by the proprietor for entry to the specified place where entertainment is heldwe are clearly of the view that the 1936 Act cannot be extended to cover DTH operations being carried out by the appellants41. Coming now to the notification dated May 5, 2008, it is elementary that a notification issued in exercise of powers under the Act cannot amend the Act. Moreover, the notification merely prescribes the rate of entertainment duty at 20 percent in respect of every payment for admission to an entertainment other than cinema, video cassette recorder and cable service. The notification cannot enlarge either the charging section or amend the provision of collection under section 4 of the Act read with the 1942 Rules. It is, therefore, clear that the notification in no way improves the case of the State. If no duty could be levied on DTH operation under the 1936 Act prior to the issuance of the notification dated May 5, 2008 as fairly stated by Mr. Dave, we fail to see how duty can be levied under the 1936 Act after the issuance of the notification42. We have held that the 1936 Act does not cover DTH operations on an interpretation of the provisions of 1936 Act itself. We, therefore, see no need to refer to the cases relied upon by the appellants relating to demand of duty on DTH operations under the Uttar Pradesh Entertainments and Betting Tax Act, 1979 and under the Bihar Entertainment Tax Act43. Further, as we have held that the 1936 Act does not cover the DTH operations we need not go to the other submissions made on behalf of the appellants inter alia regarding the legislative competence of the statute legislature to impose tax on DTH operation as it was a notified service chargeable to service tax under the Finance Act, 1994.