By TIOL News Service

ERNAKULAM, MAY 02, 2016: THE question before the High Court was - Whether the removal of "admission and access to entertainment event and amusement facilities" [sub-clause (j) of Section 66D of the Finance Act, 1994] from the Negative List of "Services" by an Amendment of 2012 and the consequent imposition of service tax on such activity would result in the Union Parliament trenching upon the exclusive field assigned to the State, under Entry 62 List II of the Seventh Schedule of the Constitution of India.

The Petitioners contended that that resort to the residuary entry can be had only when it is found that the object of tax is not available in any of the other entries in List II and List III. The petitioners are all Corporate bodies carrying on amusement parks, which come within the ambit of amusement and entertainment as contained in Entry 62 of List II. The local bodies are also taxing the petitioners on the basis of a valid enactment brought under Entry 62 by the State. Hence, there can be no service element in the amusement enjoyed by the persons who get admitted to the facilities with the sole intention of amusement and entertainment. There can be no service element found, since what the petitioners offer is amusement and entertainment and what the recipients get is also amusement and entertainment, which clearly is covered by the field delineated under Entry 62.

The High Court however, dismissed the Petitions by holding that:

+ The fact that admission to entertainment events and access to amusement facilities are included in the negative list itself is a pointer that the same partakes a service and the Parliament initially exempted it from the levy. The exclusion of such activity from the negative list empowers the Union Parliament to tax the said services. The issue to be decided is whether the activity can only be taxed by the State for reason of the entire activity being subsumed in the definition of 'amusement' leaving nothing else to be taxed by the Union.

+ The Supreme Court has time and again, after the Finance Act, 1994 came into force, upheld the tax levied on "services" as being available to the Union Parliament under the residuary clause. In such circumstances, it cannot at all be said that the field is entirely covered by Entry 62 List II. Amusements are covered by Entry 62 List II and the aspect of "service" involved, when the facilities for amusement is offered for a price cannot be ignored. The Union Parliament's power to levy such tax by an appropriate enactment cannot also be effaced merely for the reason that amusements are covered under Entry 62. The enactment made by the State legislature cannot decide the power of the Union Parliament.

+ The petitioners, maintaining an amusement park, are obliged to pay entertainment tax to the State, whether or not there are entrants to the park. The Union Parliament has provided for a tax on admission to the parks, making it clear that the levy is only when the service is availed of. The "service" provided is the object of taxation and it is imposed on the admission fee which is a permissible measure of tax and the incidence is at the time when a person pays the admission fee to enter the park. There is no conflict between the two entries, which are fields of legislation. The two aspects taxed by the respective legislatures are the 'service' and the 'amusement'. The tax, imposed by the Union Parliament, in pith and substance, is also one on the service offered by the petitioners. This Court does not find any trenching of the Union Parliament on the power conferred on the State, in fact or in law, since the respective legislatures tax two different aspects. The incidental overlapping, if at all, is only to be ignored; going by the precedents of the Hon'ble Supreme Court.

(See 2016-TIOL-856-HC-KERALA-ST)