2017 (4) TMI 3 - HC - Indian Laws

Liability of petitioner to pay entertainment tax in respect of 49012 STBs operated through its cable service control room - Held that - By virtue of second proviso to section 3(1) of the Act of 1979, the liability to pay entertainment tax in respect of admission to entertainment offered through a multi system operator would be upon the proprietor of the cable service control room/multi system operator and it is immaterial whether he collects it directly from subscriber or indirectly through an associate or franchisee cable operator or an agent, who collects it from the person making the payment. In the absence of factual foundation laid, showing the particulars of the cable operator or that such cable operator was not an associate/franchise or agent, the liability to pay tax cannot be resisted by the petitioner under the Act. The Act of 1979 has been enacted by the state legislature invoking its authority under Entry 62 of list 2, and the IInd proviso to Section 3(I), which makes the proprietor of multi system operator liable to pay tax, is within the legislative competence of State and is otherwise not questioned. No provision could be shown in the West Bengal Act or the Delhi Act, similar to the one contained in the second proviso to Section 3(1) of the Act of 1979. It clearly holds the proprietor of multi system operator liable to pay entertainment tax, as has already been discussed above. As such, the challenge laid to the impugned orders on the ground that the petitioner is not liable to pay tax, in the facts of the present case, fails. So far as the second aspect of dispute raised i.e. role of subscription received by the petitioner, find that the petitioner has clearly disputed it before the assessing authority and also in appeal. Petitioner s consistent case was that it had received subscription at the rate of ₹ 100 and not ₹ 150 as claimed by the department. The appellate authority has noticed this contention, but has not dealt with it. Learned Standing Counsel has not able to show any consideration on this aspect of the matter in the appellate order. In such circumstances, on this limited aspect the matter is liable to be remitted back to the appellate authority for a fresh consideration of cause. In view of the discussions aforesaid, the writ petition succeeds and is allowed in part. The liability of petitioner to pay entertainment tax in respect of 49012 STBs operated through its cable service control room is upheld. However, the matter with regard to determination of rate of subscription is remitted back to the appellate authority for consideration of petitioner s objection in that regard.

Summary

Issues Involved:

1. Liability of Multi System Operator (MSO) to pay entertainment tax.
2. Rate of subscription charges for determining entertainment tax.

Issue-Wise Detailed Analysis:

1. Liability of Multi System Operator (MSO) to Pay Entertainment Tax:

The petitioner, a private limited company functioning as a Multi System Operator (MSO), challenged the orders passed by the District Magistrate/Assessing Authority and the Divisional Commissioner under the U.P. Entertainments and Betting Tax Act, 1979, which held the petitioner liable for entertainment tax. The petitioner argued that it should not be liable for the tax on connections provided by local cable operators (LCOs) and that the statutory scheme under the Act had been overlooked.

The Court examined the statutory provisions, particularly the definitions under Section 2 and the tax imposition under Section 3 of the Act. It was noted that the second proviso to Section 3 clearly makes the MSO liable to pay the tax, irrespective of whether it collects the tax directly from the subscriber or indirectly through an associate or franchise cable operator or an agent. The Court emphasized that the petitioner failed to provide details of the LCOs who offered admission to entertainment, thus justifying the authorities' decision to hold the petitioner liable for the tax.

The Court distinguished the case from a Delhi High Court judgment in Siti Cable Networks Limited, noting that the statutory scheme in Uttar Pradesh is distinct, with the second proviso to Section 3 explicitly making the MSO liable. The Court also referred to the Supreme Court's judgment in State of West Bengal vs. Purvi Communication (P) Ltd., which upheld the liability of the MSO under similar circumstances.

2. Rate of Subscription Charges for Determining Entertainment Tax:

The petitioner contended that the subscription charges were ?100 per subscriber, contrary to the department's claim of ?150 per subscriber. The appellate authority did not address this contention. The Court found that the petitioner's consistent claim regarding the subscription rate was not considered by the appellate authority.

Conclusion:

The Court upheld the liability of the petitioner to pay entertainment tax for 49,012 Set Top Boxes (STBs) operated through its cable service control room. However, the matter regarding the determination of the rate of subscription was remitted back to the appellate authority for fresh consideration. The writ petition was allowed in part, affirming the tax liability but requiring a re-evaluation of the subscription charges.