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2023 (5) TMI 889 - HC - VAT and Sales TaxLiability to pay Entertainment Tax - sharing of Revenue - proprietor has the ultimate control in the transmission of programs, which he receives from a satellite and through the Local Cable Operators (LCO), broadcasts to the subscribers - constitutional issue raised by the petitioner with reference to the 101st Amendment of the Constitution of India - power to levy and collect the tax as per the enactment, after the 101st amendment - HELD THAT - A similar provision defining Proprietor was available in the Delhi enactment. The Division Bench which considered the matter in Siti Cable Networks Limited 2017 (3) TMI 627 - DELHI HIGH COURT also proceeded on the basis that the definition of the word Proprietor covers both the MSO and the LCO. It was held that the expression in the manner prescribed in Section 7, the charging section, which requires the tax to be collected by the proprietor and paid to the Government in the manner prescribed , and the definition of the word prescribed in Section 2(n); makes inevitable a reference to Rule 26, which also refers to the proprietor of a cable television network. It was thus held that where an MSO provides cable service directly to the subscribers, it would fall under the definition of the proprietor and if it is given through an LCO; then LCO would fall under such definition. The LCO as per clause 9.6 is interdicted from, (i) transmitting or retransmitting, interpolating any signals, not transmitted by the MSO, (ii) inserting any commercial or advertisement or information on any signal transmitted by the MSO, (iii) interfering in any way with the signals of the MSO or using any equipment for decoding, receiving, recording or using a counterfeit set-top box, (iv) altering or tampering the Hardware and (v) using any Hardware not supplied by the MSO. There shall also be no connection provided by the LCO to any entity for retransmission of the TV signals (Clause 9.7) and the LCO is also prohibited from recording and retransmitting and from blocking, adding or substituting the TV signals transmitted by the MSO - It was on similar provisions that the Hon ble Supreme Court in paragraph 36 of Purvi Communication (P) Ltd. 2005 (3) TMI 438 - SUPREME COURT found the respondent therein, an MSO, to have a direct and proximate nexus with the entertainments provided by them through the cable TV network and found them to be liable as the taxable person, liable to pay tax on the gross receipts obtained from the viewers; the subscribers. The Act of 1948 in the State of Bihar, by which the State, through its Commercial Tax Officers collect entertainment tax inter alia from the proprietors of cable television networks cannot survive the 101st Amendment, since the field of taxation available to the State under the amended Entry 62 of List II is confined to those levied and collected by the local self-government institutions. The tax for the period prior to the amendment, though levied on the taxable event occurring, cannot also be collected since there is no transition provision available under the 101st Amendment making such collection of entertainment tax permissible for one year or by way of a repeal; by an enactment, consistent with the amendment, with a saving clause for continuance of the levy and collection under the old Act as it was never repealed. The impugned orders are hence set aside, only on the ground of the authorities under the Act of 1948 having been denuded of the power to levy and collect the tax as per the enactment, after the 101st amendment. The State also is denuded of the power to make an enactment in the nature of the Bihar Entertainment Tax Act, 1948 after the 101st Amendment. The repeal and the saving clause provided under the BGST Act does not inure to the benefit of the State since the enactment and the levy made by it cannot be sustained after the 101st amendment - Petition allowed.
Issues Involved:
1. Liability of MSO under the Bihar Entertainment Tax Act, 1948. 2. Jurisdictional facts and application of precedents. 3. Impact of technological advancements on tax liability. 4. Effect of the 101st Constitutional Amendment on the levy and collection of Entertainment Tax. Summary: 1. Liability of MSO under the Bihar Entertainment Tax Act, 1948: The petitioner, a Multi System Operator (MSO), contested the liability to pay Entertainment Tax under the Bihar Entertainment Tax Act, 1948. The court found that the MSO, being the ultimate controller of the transmission of programs through Local Cable Operators (LCOs), is the taxable person under the Act. The MSO supplies set-top boxes to LCOs, who then provide and activate these for subscribers. The court held that the MSO is the "proprietor" as defined in the Act, responsible for the tax, despite the physical connection being given by the LCO. 2. Jurisdictional facts and application of precedents: The petitioner argued that the assessment order was perverse due to non-application of mind and reliance on irrelevant facts. The court examined the statutory provisions and agreements between MSO and LCO, concluding that the relationship is one of principal and agent, not principal to principal. The court also distinguished the Bihar Act from similar provisions in West Bengal, Rajasthan, Gujarat, and Delhi, finding the MSO liable under the Bihar Act. 3. Impact of technological advancements on tax liability: The petitioner contended that advancements in technology, which differentiate the MSO from the LCO in providing connections, were not reflected in the Act. The court observed that despite technological changes, the MSO remains in control of the network and the activation of set-top boxes, making it liable for the tax. The court emphasized that the law must keep pace with technological advancements to ensure clear tax liability. 4. Effect of the 101st Constitutional Amendment on the levy and collection of Entertainment Tax: The petitioner argued that post the 101st Constitutional Amendment, the State was denuded of the power to levy and collect Entertainment Tax. The court agreed, stating that the amendment restricted the power to levy such taxes to local self-government institutions. The court held that the Bihar Entertainment Tax Act, 1948, could not survive post-amendment, as it was inconsistent with the new constitutional provisions. Consequently, the court set aside the impugned orders, invalidating the levy and collection of tax under the Act after the amendment. Conclusion: The court allowed the writ petition, setting aside the impugned order on the grounds that the authorities under the Act of 1948 were denuded of the power to levy and collect the tax post the 101st Constitutional Amendment. The State also lacked the power to enact similar legislation after the amendment.
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