Challenging the Allahabad high court order that upheld the validity of the amended UP Entertainment and Betting Tax Act, 1979 Act by which DTH services were brought within the entertainment tax net, a bench headed by Justice Aftab Alam issued notice to the UP government on the DTH operators plea against the state government demand seeking recovery of entertainment tax.
According to the appeal, the demand and levy of entertainment tax at the rate of 30% of the gross amount for the period prior to September 5, 2009, when the notification was issued under the Amended Act, was wholly discriminatory and illegal was violative of Article 14 and 19(1) (g) of the Constitution of India.
Entertainment tax can only be levied by the state legislature under Entry 62 of List II on entertainment in public places and not otherwise, it said, adding that the Act provided for tax on entertainment provided in a public place and not DTH broadcasting services which are provided at the residence of a subscriber.
Stating that the state government had no power to impose such tax, Tata Sky said that there are no two separate and distinct taking events in provision of DTH broadcasting service and therefore, once the transaction has been constitutionally characterised as service, it is only Parliament which has the power to impose service tax and state cannot by labelling this service as entertainment impose entertainment tax on the said transaction of providing the DTH broadcasting service.
The petition stated that the imposition of entertainment tax on a service provider is misplaced as Tata Sky is paying service tax under the Central Act and the Finance Act 1994.
Similar levy demanded by Uttarakhand and Bihar have been quashed by the respective high courts, it added.
The Allahabad HC had dismissed a bunch of petitions filed by direct-to-home services providers challenging the Uttar Pradesh government's decision to levy such on sale of equipment as well as on recharge coupons.