By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Whether entertainment duty can be levied on the services of Direct to Home (DTH) Broadcasting on the basis of a notification? Held, No.
Facts: The appellant provided services of DTH broadcasting under the Indian Telegraph Act, 1885 and the Indian Telegraphy Act, 1933 and discharged service tax thereon. In exercise of their powers, the State Government issued a notification dated 05-05-2008 fixing 20 percent entertainment duty in respect of every payment made for admission to an entertainment other than cinemas, videos cassette recorders and cable service and thus proceeded to demand entertainment duty from the appellant. The appellant filed a writ petition before the Hon. Madhya Pradesh High Court which dismissed the petition and upheld the said levy and demand thereof. The appellant therefore filed a petition before the Hon. Supreme Court against the said levy.
Held: The Hon. Supreme Court held in favour of the appellant in view of the following observations:
The provisions of the Act were applicable only to place-related entertainment. In other words, the Act covered an entertainment which takes place in a specified physical location to which persons are admitted on payment of some charge. The legislative history and the amendments introduced by the state in the said Act further substantiated the above fact.
The activity of DTH Broadcasting was not covered by the provisions of section 3 read with section 2(a), 2(b) and 2(d) read with section 4 of the said Act and thus, the provisions of the Act cannot be extended to cover DTH operations carried out by the appellant. Further, it was elementary that a notification issued in exercise of powers under the Act should not amend the Act. Moreover, the notification merely prescribed the rate of entertainment duty at 20 percent in respect of every payment for admission to an entertainment other than cinema, video cassette recorder and cable service. The notification could not enlarge either the charging section or amend the provision of collection under section 4 of the Act read with the Rules. It was, therefore, clear that the notification in no way improved the case of the State. Lastly, if no duty could be levied on DTH operation under the Act prior to the issuance of the notification, then duty cannot also be levied under the said Act after the issuance of the notification.
