Service tax on Entry to Amusement Parks held Constitutionally Valid – Revisiting Aspect Theory

Hon’ble High Court of Kerala vide WP(C).No.18328 of 2015 (M) in the case of M/S. KANJIRAPPILLY AMUSEMENT PARK AND HOTELS PVT. LTD. V UOI has delivered its judgement on the question as to 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 [any reference to Lists I, II or III is to the Lists under the Seventh Schedule of the Constitution].

It was argued that state has already enacted an act enacted under Entry 62 of List II which deals with “taxes on luxuries, including taxes on entertainments, amusements, betting and gambling” wherein specific entry levies entertainment tax on amusement park. This, being covered exclusively under state list, it cannot be brought under service tax which is levied under list III. It was also argued that , 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.

On behalf of the government, it was argued that the levy was valid basis aspect theory. In other words, Overlapping regime arising out with distinguished powers cannot make a levy invalid. Even if there is an amount of overlapping when the power is exercised by two legislatures, if the overlapping is in law and is only an incidental trenching upon one, by the other, then it was held to be a valid levy.

It was observed by court that while what can provide entertainment to a person is a subjective concept, but when a facility is created to offer such entertainment, an element of service is introduced. Hon’ble Court departs nature of levy from measure of levy and observed that service tax on admission is only a measure of levy. The real nature of levy is on count of entertainment offered In a facility for a consideration by one person to another. It was further observed that 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. With these observations, Hon’ble Court has upheld the levy of Service tax on admission and access to entertainment event and amusement facilities.

It is important to note that while upholding the levy, the judgement has relied upon aspect theory and has beautifully carved out the difference between nature of levy and measure of levy. However, it is also to be noted that the judgement views the two levies from two different perspectives – while it observes entertainment tax from the perspective of entertainment being enjoyed by a person, on the other hand, it also finds in existence the services of a man offering such amusement to the other person. While appreciating this argument, one must also understand that this dual aspect is an inherent part of every service. Service is received by a person to fulfil one of his desire and a service is only possible when the provider offers something which fulfils another person’s desire. For eg a student is enlightened On being taught, while a teacher offers services of teaching to a student. One can view this as two aspects or one can also view this as an act and result. Every service provided will surely have a result, or in other words, no result is possible without a service. Only (as court has observed in its judgement) services by mother nature or to oneself are not taxable since they lack consideration as also the other defined person is missing. Else all acts are service. While we can not deny such strong argument in support of multiple levies, however, It feels that It is time that we need to reinvent the wheel of aspect theory as somewhere while understanding the technical arguments, we are visited by the same question time and again – whether while drafting the constitution, our leaders had wanted such dual or even multiple taxation on their subjects. Somewhere, everyone of us might seek as answer as no. Taxation is a matter of gathering funds for running government to meet needs of al of its subjects, but never at the cost of subjects paying such multiple taxes coupled with multiple compliance. The discussion becomes more complicated in a country like ours where one can find variety and disparity. Disparity more in terms of classes. While the idea always remains to tax the upper segment to share resources with masses but somewhere in the present emerging consumption economy, such tax also acts as a infliction on weaker sections when they ever indulge in such consumptions. Also, costlier sources of entertainment also devoid masses from facilities of fun and joy which is in any case required for a healthy society. The depth of discussion forces me to conclude the topic with these final words – it should be requested from governments that multiple levies should be upheld with aspect theory with a small rider that those aspects must lead to fulfilment of multiple purpose, else it is better to have one tax at higher rate rather than two taxes cumulating to a higher rate but dredging India towards a complex tax regime and a nightmare for a taxpayer.

Print Friendly, PDF & Email

Leave a Reply

Your email address will not be published. Required fields are marked *