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Judgment
(1) In all these writ petitions the levy of entertainment tax under Section 4-C of the Karnataka Entertainment Tax Act, 1958 (''the Act'' for short) is under challenge. The petitioners question the validity of the aforesaid Section 4-C on several grounds such as lack of legislative competence, violation of fundamental rights under Article 19(1)(g), discriminatory nature of levy, levy being unreasonable and want of Presidential assent under Article 304(b) of the Constitution.
The petitioners provide the facility of transmitting the various programmes through cables, after receiving the signals containing the entertainment through dish antenna. The cables are connected to the televisions (T.Vs.) of the viewers. In some instances there will be a single channel conveying the entertainment or the programmes by operating cassettes at some fixed place. In the former case tax is levied at the rate of Rs. 20/- per connection per month, while in the latter case tax is Rs. 15/- per connection per month. The petitioners assert that they are only rendering information services and that they are not rendering any entertainment. The Act was enacted originally in the year 1958. The definition of entertainment under Section 2(e) was confined to a horse race or cinematograph show to which persons are admitted for payment. Subsequently the term ''cinematograph show'' was expanded to include video show in the year 1985. Obviously with the development of what is popularly called cable T.Vs. the legislature thought it fit to amend the Act in the year 1993 as per Karnataka Act No. 11 of 1993. The term ''entertainment'' was widened by substituting a new definition as follows:
"(e) ''Entertainment'' means a horse race or cinematograph show including video shows to which persons are admitted on payment: or exhibition of films, or moving pictures or series of pictures which are viewed and heard on the television receiving set, with the aid of any type of antenna with a cable net work attached to it or cable television for which persons are required to make payment by way of contribution or subscription or installation and connection charge or any other charges collected in any manner whatsoever."
Section 4-C was inserted to rope in the cable T.Vs., etc., which read as follows:
"4-C. Special provision in respect of certain entertainments.-Notwithstanding anything contained in Sections 3, 3-A, 4, 4-A or 4-B and subject to such rules as may be prescribed, there shall be levied and paid entertainments tax at the following rates in the case of entertainment provided with the aid of antenna or cable television to a connection holder on payment of any contribution or subscription or installation and connection charges or any other charges collected in any manner whatsoever namely:
(i) Providing entertainment through antenna and cable television or antennae. Twenty Rupees per month per connection
(ii) Providing entertainment through cable television exclusively. Fifteen Rupees per month per connection:"
Provided that no tax shall be payable under this section, if the period of connection provided to a connection holder in any month is less than fifteen days." Following these amendments the rule-making authority framed under Rule 41-F which reads as follows:
"41-F. (1) Every person liable to pay tax under Section 4-C shall, seven days prior to the date of which he commences to provide entertainment through antennae or cable television or both make an application in Form VI-G for permit, furnishing details as to the number of connections given and amount of tax payable to the Entertainment Tax Officer of the area concerned:
Provided that in the case of a person who is already providing entertainment through antennae or cable television or both, prior to the date of commencement of Section 4-C, shall make an application within seven days from the commencement of the said section and continue to provide such entertainment till a permit is issued in that behalf.
(2) On receipt of the application under sub-rule (1), the Entertainment Tax Officer of the area shall fix the amount and the nature of the security to be furnished by the applicant and the time within which such security should be furnished. On furnishing such security, the Entertainment Tax Officer shall grant a permit to the applicant in Form-H.
(3) The holder of the permit shall maintain a register showing number of connections provided, the names and addresses of the connection holders and the amounts collected as contribution or subscription of installation and connection charges or any other charges collected in any manner whatsoever."
The basic question is whether the subject-matter of the levy is "entertainment" at all. The petitioners contend that they do not render any entertainment. They are receiving the signals through the appropriate apparatus such as dish antenna and thereafter the material is transmitted through the cables and the viewers are able to view the programmes conveyed to them by this process of transmission. According to the petitioners they are only providing services by providing a facility to transmit the so-called entertainment to the door steps of the viewers and such a facility or service cannot be taxed under Entry 62 of List II of the VII Schedule to the Constitution. Entry 62 refers to taxes on luxuries, including taxes on entertainment, amusements, betting and gambling. The petitioners contend that tax can be levied only on the person who imparts the entertainment or performs the entertainment.
This contention assumes that under Entry 62 tax can be levied only on the person who renders the entertainment. It is now quite well established that the legislative entry shall have to be liberally interpreted giving the terms used therein the widest possible meaning and that the legislature is competent to select anyone aspect of the subject-matter covered by the relevant term, for levying a tax in respect of the said subject-matter. If, what is brought to the viewer is entertainment, though the entertainment is created elsewhere, the question naturally has to be examined as to whether this bringing the entertainment by any facility to enable the viewer to avail of the entertainment could be the subject-matter of taxation under Entry 62. The cable or any other apparatus provided by the petitioners are nothing but the means through which the entertainments are conveyed. Just like a cinema theatre is a place where one can go and view the exhibition of cinema and avail of the entertainment, the transmission of the entertainment carried out by the petitioners also is a mode of conveying the entertainment to the viewers. The facility provided by the petitioners, assuming that this facility is only a service, is still a source of entertainment for the viewer. The legislature may select this aspect of the entertainment to create a charge for the purpose of levying a tax under Entry 62 of List II.
It was then contended that the materials transmitted are not mere entertainment but materials having educative value and that question of mere entertainment is not involved at all in these transmissions and displays. This contention shall have to be referred only to be rejected without much discussion. It is quite well known that these cable operators provide the facility of viewing several programmes through different channels and it is for the viewer to select the programme which appeals to his taste or requirement. This apart the concept of entertainment cannot be confined to the ordinary idea of viewing a dance or a drama or a cinema, etc. Whatever refreshes the mind or satisfies the curiosity of a person or which is considered as giving pleasure could be considered as an entertainment. In M/s. Geetha Enterprises and Others v State of U.P. and Others, AIR 1983 SC 1096, it was contended that exhibiting a video show is not an entertainment because what was exhibited was mainly, of sports, games, etc. The petitioners before the Supreme Court also contended that no admission fee was charged and the person who wants to select the programme shall have to operate the video machine at the rate of 50 paise per show lasting upto 30 seconds and others may view the programme without any payment; hence it was contended that the entertainment tax could not be levied. The Supreme Court rejected this contention. The Supreme Court referred to the various meanings given to the term ''entertainment'' by several dictionaries and thereafter observed at page 1100:
"A perusal of the various shades, aspects, forms and implications of the word ''entertainment'' as defined in the aforesaid books clearly leads to an irresistible inference that the word ''entertainment'' has been used in a very wide sense so as to include within its ambit, entertainment of any kind including one which may be purely educative."
The Supreme Court also indicated that, from whatever, pleasure is derived will be an entertainment, regardless of the fact that any skill is required or not in viewing or participating in the particular event.
It is contended that the legislature is not competent to expand the meaning of the term ''entertainment'' and the term entertainment connotes a place where it is rendered and charging of admission fee for the viewer to avail of the entertainment.
Only because traditionally, before the development of science and technology, people had to visit some other place to seek entertainment, it does not mean the term ''entertainment'' should have a limited meaning as conveying an activity at a particular place to which others are admitted. As Supreme Court has pointed out, from whatever one could derive pleasure or get educated could be considered as an entertainment and the place at which the entertainment is received is entirely irrelevant for the purpose of levy of tax under Entry 62. It was then contended that the subject-matter is covered by Entry 31 of List I of VII Schedule and therefore the subject-matter could be legislated upon only by the Parliament.
Entry 31 of List I refers to posts and telegraphs, telephone, wireless, broadcasting and other like forms of communication. Entry 31 does not provide for the levy of tax in respect of the subject referred in Entry 31. One of the aspects of the subject covered by Entry 31 will be the conveying of the entertainment either by wireless, broadcasting or any other kind of communication. This transmission of entertainment could be the subject-matter of tax under Entry 62 of List II. There is absolutely no overlapping between the two entries. The subject-matter for the levy of taxation under Constitution is specifically provided for and the subject of entertainment and luxuries are clearly left to the competence of the State Legislature for the purpose of taxation as per Entry 62 of List II.
The learned counsel for the petitioners relied on a decision of the Rajasthan High Court in Shiv Cable TV System v The State of Rajasthan and Others, AIR 1993 Raj. 197. The cable operators questioned the competence of the authorities under the Indian Telegraph Act and the Indian Wireless Telegraphy Act who interfered with the petitioners'' business. The authorities were insisting that cable operators were transmitting T.V. programmes unauthorisedly. The High Court held that dish antenna as well as the cable network installed by the petitioners require licences under the aforesaid two Acts and the transmission of pre-recorded cassettes through cable network also require licences. This was relied upon to contend that the subject-matter was covered by Entry 31 of List I of VII Schedule to the Constitution. As already noted by me the subject-matter of Entry 31 is quite different from the subject-matter of taxation under Entry 62 of List II. The licensing authority may insist upon the licences to be obtained under the two Central enactments but at the same time the operators under the licences can be subjected to taxation by the State Legislature if the subject-matter also falls within the legislative competence of the State under Entry 62. The levy of entertainment tax was also challenged in the said case before the Rajasthan High Court. This challenge was upheld by pointing out that tax is payable on all payments for admission to entertainment only and that the petitioners were merely receiving the T.V. programmes directly from dish antenna transmitting the same to the viewers at their residences, therefore the petitioners were not admitting the T.V. viewers for their entertainment nor are they charging anything for the entertainments. This observation of the Rajasthan High Court certainly is based on the charging provisions of the relevant legislation. This observation has nothing to do with the scope of Entry 62 of the said List. It is for the legislature to involve a taxable event to effectuate the charging provision. The legislature may levy the tax at the stage of the admission if the entertainment is provided at a particular place or the legislature may provide for the levy of tax at a point when the entertainment is availed of by the viewer as in the instant case.
It was then contended that no assent of the President was obtained before the levy was imposed and therefore the levy contravenes Article 304(b) of the Constitution. The petitioners contended that a sum of Rs. 20/- in respect of each connection per month is exhorbitant and in many rural areas the petitioners were collecting only Rs. 50/- per connection and out of this Rs. 50/-, forty per cent is taken away by way of tax. The levy shall have to be considered as confiscatory or at any rate the levy is an unreasonable restriction on the right of the petitioners to trade. The same argument was extended to attack the levy under Article 19(1)(g) of the Constitution.
The Act nowhere restricts the right of the petitioners to collect the tax from the viewers, i.e., from the persons who avails of the benefit of the connection. Just as a cinema-goer is burdened with the price for admission along with the entertainment tax there is no reason as to why a person who avails of this connection should not be burdened with the levy under the Act. It is convenient for the State Legislature to levy and collect the tax through the petitioners who provide the connections. The tax is not carved out of the service charges collected by the petitioners. This apart the question whether the levy of tax is unreasonable and it amounts to an unreasonable restriction under Articles 19(1)(g) and 304(b) of the Constitution cannot be answered in favour of the person who challenges the levy only because there is a levy. The imposition of tax is a sovereign function and the need to levy taxes and collect the same for the welfare activities of the State and other functions are quite well recognised. It is only in rarest of rare cases levy of tax has been struck down by the courts as confiscatory or arbitrary either under Article 19(1)(g) or Article 304(b) of the Constitution, vide Atiabari Tea Company Ltd. v The State of Assam and Others, AIR 1961 SC 232 and Firm A.T.B. Mehtab Majid and Co. v State of Madras and Another, 14 STC 355. In Federation of Hotel and Restaurant Association of India and Others v Union of India and Others, 74 STC 102, the Supreme Court pointed out at page 131 thus:
"A taxing statute is not, per se, a restriction of the freedom under Article 19(1)(g). The policy of a tax, in its effectuation, might, of course, bring in some hardship in some individual cases. But that is inevitable, so long as law represents a process of abstraction from the generality of cases and reflects the highest common factor. Every cause, it is said, has its martyrs. Then again, the mere excessiveness of a tax or even the circumstance that its imposition might tend towards the diminution of the earnings or profits of the persons of incidence does not, per se, and without more, constitute violation of the rights under Article 19(1)(g)."
Again in Express Hotels Private Ltd. v State of Gujarat and Another, 74 STC 157, at page 174 the Supreme Court considered the rights under Articles 301 and 304 and in that connection the following observations were made at page 175:
"Taxes can and do sometimes, having regard to their effect and impact on the free-flow of trade, constitute restrictions on the freedom under Article 301. But the restriction must stem from the provisions of the law imposing the tax which could be said to have a direct and immediate effect of restricting the free-flow of ''trade, commerce and intercourse''. It is not all taxes that have this effect.
Freedom under Article 301 is, by all reckoning, a great freedom, one of the utmost significance to economic unity of the nation. Underlying the need for and the recognition of the freedom of inter-State trade, commerce and intercourse, one is tempted to refer to the lofty sentiments of justice Cardozo in Charles H. Baldwin v GAF Seeling, (1934)294 US 511, that ''it was framed upon the theory that peoples of several States must sink or swim together and that in the long-run the prosperity and salvation are in union and not in division'' and that ''the ultimate principle is that one State, in dealing with another, may not place itself in a position of economic isolation''.
But, in the present case, it has not been pointed out how a tax on ''luxuries'' enjoyed by a person in a hotel is either discriminatory or has the direct and immediate effect of impeding the freedom of intercourse. In Grannall v Matrickville Margarine Pty. Ltd, (1955)93 CLR 55, a New South Wales statute which prohibited the manufacture of margarine without a licence which, if granted, would contain a condition limiting the quantity to be manufactured was assailed on the ground of its violation of Section 92 of the Australian Constitution. Repelling the challenge, it was held:
''It is, of course, obvious that without goods, there can be no inter-State or any other trade in goods. In that sense manufacture or production within, or importation into, the Commonwealth is an essential preliminary condition to trade and commerce between the States in merchandise. But that does not make manufacture, production or importation, trade and commerce among the States. It is no reason for extending the freedom which Section 92 confers upon trade and commerce among the States to something which precedes it and is outside the freedom conferred."
In the instant case before me also it is not shown as to how the tax has a direct and immediate effect on the free flow of trade, commerce and intercourse nor how the tax is unduly burdensome or confiscatory.
H. Anraj v Government of Tamil Nadu and Shri Dipak Dhar and Others v The State of West Bengal and Another, 61 STC 165, was referred by one of the learned counsel for the petitioners to contend that the principle of the said decision would govern the present cases also. In the said decision a notification issued by the State Government was struck down because of its discriminatory character resulting in an impediment to the free flow of trade, commerce and intercourse. The ratio is not at all applicable to the present situation.
It was then contended that there was a discrimination between the petitioners and those who do not avail of cable T.V. and who avail of the entertainment through Doordarshan. It was also contended that some of the programmes of Doordarshan are also conveyed through these cables and levy of tax on the viewers who avail of this benefit actually offends the very purpose for which the Doordarshan is constituted.
It is open to the legislature always to pick up the subject-matter for levy of tax. Nature of entertainment provided by the cable operators are vastly different and varying. As one of the learned counsel for the petitioners contended the purpose of Doordarshan is quite different, and it is not confined to mere entertainment. The dominant purpose of the Doordarshan is to bring out news and display programme of educative and cultural values. Such a restriction is not found in the entertainment provided through these cables.
Proviso to Section 4-C was attacked as unworkable. The proviso is quite clear. If the benefit of the connection is taken for a period of 15 days or more during a month only then tax is levied. The connection need not be for a continuous period of 15 days but it may spread over during the various days of a month. I fail to understand as to how this proviso, which looks to be beneficial to the tax-payer, could be held as arbitrary. In case the petitioners are able to show that a particular subscriber has not availed of the benefit and the connection was taken away for a period exceeding 15 days such petitioner may seek refund of the tax paid. Even for any reason if there is any mistake in payment of tax the power is inherent in the assessing authority to order refund and this power should be read as part of his power to levy and collect the tax under the Act.
The learned counsel for the petitioners also attacked the entire machinery and levy of collection of tax as not satisfactory and therefore arbitrary.
It is true there are no provisions enabling best judgment assessment or to make assessment when there has been escapement. If such provisions are not found the petitioners should thank the State for the omission. They cannot make a grievance of this lacuna in the law which is to their benefit. The primary question is whether the State Legislature is competent to levy the tax and whether the levy can be properly effectuated by the machinery to collect the same. These are satisfied in the instant cases in view of Section 4-C and Rule 41-F.
No other question survives for consideration.
Writ petitions are accordingly dismissed. Rule discharged.
In all these cases petitioners are permitted to file their objections or respond to the demand notices before the assessing authority within 4 weeks from today.