2022 (5) TMI 558 - HC - VAT and Sales Tax

Levy of advertisement tax - MSOs - conduct of business thereby transmitting signals of various channels belonging to different broadcasters to LCOs and includes broadcasting of private and local advertisements - demand of fine and penalty as well - HELD THAT - It is trite that a taxing statute has to be strictly construed. No tax can be levied except in accordance with law. Reading the provisions, it is manifest that the advertisement tax is levied on advertisement at any place of entertainment where the advertisement is exhibited for payment. The MSOs, it appears, only transmit the signals of various TV channels belonging to different broadcasters to LCOs who, in turn, retransmit signals for viewership by their own viewers. If the Petitioners are only transmitting the signals, then, in such an event, they cannot be made liable to pay advertisement tax in terms of the Advertisement Tax Act. The advertisement is not exhibited at its place, as the MSOs only transmit the signals of various channels belonging to different broadcasters to LCOs, unless the Respondents could demonstrate that the MSOs independently received the advertisements. The MSO in the present case only retransmits the programing services received from broadcaster and/or his authorized agency or transmits his own programing services for simultaneous reception either by multiple supplier directly or through one or more LCOs. The MSO is only retransmitting the programing services received from the broadcaster. It is not the case of the Respondent Department that the Petitioner is transmitting his own programming services for simultaneous reception and that he has received the advertisement for consideration so as to be made liable for the advertisement tax. Petitioner is issued with the demand and is penalized purportedly under Section 4 of the Advertisement Tax Act and non compliance of Section 4 of the Entertainment Charges Act (Maharashtra Entertainments Duty Act) - HELD THAT - Section 4 of the Entertainment Charges Act 1923 only states no person other than a person who has to perform some duty in connection with an entertainment or a duty imposed upon him by any law, shall be admitted to any entertainment except with a valid printed ticket or complimentary ticket. In the present case, said question does not arise. The impugned notice cannot be sustained and is quashed and set aside - Petition allowed.

Summary

Issues:
1. Imposition of penalty and fine on petitioners for advertisement tax.
2. Legislative competence to levy tax on advertisement.
3. Compliance with statutory mandates by Multi-System Operators (MSOs).
4. Interpretation of provisions related to advertisement tax and place of entertainment.

Issue 1: Imposition of penalty and fine on petitioners for advertisement tax

The petitioners, who are Multi-System Operators (MSOs), were imposed with penalty and fine for non-payment of advertisement tax for the financial years 2014-2015 and 2015-2016. The petitioners argued that they act as conduits between broadcasters and local cable operators (LCOs) and do not have control over the advertisements aired through their network. They claimed that they do not receive any revenue from advertisements and thus should not be liable to pay the advertisement tax.

Issue 2: Legislative competence to levy tax on advertisement

The petitioners contended that the respondents lack legislative competence to levy tax on advertisements from MSOs as the petitioners do not display or receive any advertisements independently. They argued that the reliance on certain rules and acts by the respondents to impose the tax was misplaced. The petitioners claimed that under the Maharashtra Entertainment Duty Act 1923, there is no provision to recover advertisement tax from them.

Issue 3: Compliance with statutory mandates by Multi-System Operators (MSOs)

The respondents argued that MSOs are required to maintain books of accounts, particulars of advertisements, and advertisement agreements as per the Maharashtra Advertisements Tax Act 1967 and Cable Television Networks Rules 1994. The respondents conducted a survey and issued a notice to the petitioners for non-compliance. The respondents claimed that the petitioners contravened statutory mandates and failed to pay the advertisement tax, resulting in the imposition of fines.

Issue 4: Interpretation of provisions related to advertisement tax and place of entertainment

The court analyzed the definitions and provisions related to advertisement tax, place of entertainment, and the role of MSOs. It was noted that MSOs transmit signals of TV channels to LCOs for viewership and do not independently exhibit advertisements. The court emphasized that tax can only be levied under the authority of law and that the respondents must demonstrate the authority to levy advertisement tax on MSOs. The court found that the petitioners were not liable to pay advertisement tax as they were only retransmitting programming services received from broadcasters and not exhibiting advertisements independently.

In conclusion, the court quashed the impugned notice imposing advertisement tax on the petitioners, stating that the department could take action if the petitioners did not adhere to the provisions of the law in the future. The writ petition was disposed of with no costs awarded.