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TMI Blog2023 (5) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a Multi System Operator ( MSO for brevity) who is mulcted with the liability to pay Entertainment Tax under the Bihar Entertainment Tax Act, 1948 (for brevity Act of 1948 ), as the proprietor who has the ultimate control in the transmission of programs; which he receives from a satellite and through the Local Cable Operators ( LCO for brevity), broadcasts to the subscribers. Earlier the petitioner was before this Court when an assessment order was passed, based on the number of set-top boxes recorded in the register of the petitioner. This Court by Annexure P-5 judgment in CWJC No. 6413 of 2018 dated 17.04.2019 found that the Assessing Officer has resorted to a short cut method to extract money from the petitioner by resorting to a special mode of recovery without even identifying the subscribers for the purpose of such levy. The assessment orders were quashed and the Assistant Commissioner, Commercial Taxes, Patna North Circle, Patna was directed to redo the assessment for the 4th quarter of the Assessment Year 2015-16 (01.01.2016 to 31.03.2016), the full Assessment Year of 2016-2017 and the 1st quarter of the Assessment Year 2017-18 (01.04.2017 to 30.06.2017). The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer and there is no right of exclusive transmission conferred on the LCO within the area of its operation, as found in the impugned order. The finding that the LCOs have been reduced to repairing agents carrying out the repairs of set-top boxes and networks cannot be countenanced going by the relationship between the MSO and the LCO, as coming out from the agreement. The Assessing Officer even goes to the extent of faulting the petitioner for not having produced the registers of the LCO; which definitely is not their obligation. The Assessing Officer even at this point has not made any inquiry regarding the subscribers and has merely proceeded on the basis of the set-top boxes supplied; which action was deprecated as a short cut to extract money and set aside, in the earlier litigation. The impugned order is vitiated for the error in facts and of law, as is evident from the facts emanating from the decisions relied on by the Assessing Officer; which have no application to the present system of transmission of programs by the MSO, through the LCOs to the ultimate subscriber. The specific charging Sections, dealt with by the Hon ble Supreme Court in The State of W .B. and others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the request was made by the LCO to the MSO for making available signals of TV channels and the agreement was, on a non-exclusive basis. Clause No. 3.2 is referred, to emphasize that the LCO had the right to terminate the agreement which indicates the pervasive control and dominant nature of the LCO; clearly defining the status of the parties to the agreement. Clause no. 14.2 is also read over to rubbish the finding of the Assessing Officer that the LCO is an agent of the MSO, who is wrongly assumed to be the principal. The disclaimer in Clause 16.1 further emphasizes the severability of the contractual relationship with the subscriber. 5. The learned counsel read out the various provisions of the agreement to specifically emphasize the physical aspect of the connection being given to the subscriber, which is carried out by the LCO and the entertainment related to the subscriber being re-transmitted by the LCO, thus, making the LCO the taxable person. Specific reference is made to Annexure-P-6 which is a reply given to the Assessing Officer to the notice, the aspects raised in which, regarding the activation invoice and the sharing of revenue having not been properly address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to continue with the levy as per the Act of 1948. The 101st Amendment also brought in, the Goods and Services Tax regime. The transition provision under Section 19 of the amendment only speaks of the law relating to tax on goods or services or of both, enforced in any State, inconsistent with the provisions of the amendment, being in force, until amended or repealed by a competent legislature or other competent authority, or until expiry of one year from such amendment, whichever is earlier. Entry 62, the field of legislation available to the State, to tax entertainment is no more available in the Schedule to the Constitution under List II, in the form it was available and this denudes the power of the State to levy and collect tax in the manner it was done under the Act of 1948. Entry 62 has been substituted permitting levy and collection by the local bodies thus denuding the State s power to levy and collect taxes as provided in the Bihar Entertainment Tax Act and the Rules, by the Commercial Tax Officer. 8. Section 19 of the 101st Amendment has a transition provision enabling the State to amend or repeal the existing enactments, to make it consistent with the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n liable under the Act. It is pointed out from Govind Saran Ganga Saran v. Commissioner of Sales Tax, 1985 (Suppl.) SCC 205 that there are four components to taxation - the taxable event, the taxable person the rate of tax and the measure or value to which the rate is applied. The taxable person in accordance with the Act is the proprietor responsible for and in charge of the management in relation to any entertainment and in the present case, it is the MSO who has the ultimate control of the entire procedure of transmission of the entertainment programmes. The taxable event though is stated to be the giving of each connection, it refers to the initiation of the subscription, by the MSO, through the LCO, which ensures the display of the entertainment programme in the TV screen of the consumer, which is the place at which the subscriber desires to receive the signals of the cable television network. It is pointed out from Purvi Communication (supra) that the taxable event does not depend upon whether there is any entertainment or that the subscriber uses such facility for entertainment and that both the giver and receiver of the entertainment with equal propriety, can be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any other legal proceedings or recovery of arrears, in respect of any tax to be levied or imposed as if the repealed Acts had not been so repealed under the provisions of the BGST Act. In the above circumstances, the entire period under consideration, dealt with by the impugned order in the writ petition, would be covered by the Bihar Entertainment Tax Act, despite its repeal. 13. The levy and collection prior to the 101st Amendment cannot at all be disputed and the BGST Act having been enacted, repealing the Act of 1948 and providing for the liability under the Act to be continued, even after the repeal; which also came into force on 01.07.2017, the entire period upto 30.06.2016 which is the period under consideration would be covered by the aforesaid provisions. In any event, it is also argued that the levy and collection for the period prior to 101st Amendment cannot at all be disputed or challenged. The repeal and saving in the BGST Act at least would save the levy and collection of the tax prior to the 101st Amendment, is the alternative plea taken. 14. We have given our anxious consideration to the arguments raised on both sides and have minutely examined the same wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the subscribers; which we cannot accept, as arising from the terms of the agreement. Clause 11 of the agreement indicates that the billing for subscriber shall be in the name of the LCO; but that is only for receipt of the subscription, which has to be shared as per Clause 12.1, which shall be paid by the LCO on the MSO raising an invoice. Clause 12.1 relating to the revenue settlement between the LCO the MSO lays down the ratio of sharing of the collections made from the subscribers, dependent on the various categories indicated in sub-clauses (a) and (b); respectively 50:50 60:40. This is quite contrary to the argument raised and the revenue sharing of the subscription fees collected by the LCO is further clarified by the communication Annexure P-6, issued to the Joint Commissioner of State Taxes on the remand made by this Court, at the earlier point of time. Exhibit P-6 provides the list of LCOs with their respective subscribers at Annexure-1. Annexure-2 to Exhibit P-6 are the copies of activation invoices raised by the MSO on the LCO, which is the One time Activation Charges recovered on invoices raised at the time of providing set-top boxes to the LCO, who installs it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out is Clause 3.2 which indicates that the LCO has the right to terminate the Agreement, which is only in the event of the MSO discontinuing the business of re-transmission of signals of TV channels in the Territory; which is a foregone conclusion and is a mere statement of the obvious. The agreement would necessarily fail, if the MSO discontinues his business in the territory assigned to the LCO. More relevant is Clause 3.1 where either party has a right to terminate their agreement, with 21 days advance notice if there is material breach of the agreement, not rectified within 15 days; bankruptcy, insolvency or appointment of receiver having been visited on either of the parties and if either of the parties indulge in piracy or acts in contravention of the regulatory statutes. Clause 5.1 indicates that the MSO would make available TV signals to the LCO on a non-exclusive basis to re-transmit the same to the subscribers in the territory; which permits the MSO to have any number of LCOs within a specified territory. Such right has also been given to the LCO who obtains the right of retransmission of TV signals made available by the MSO, on a non-exclusive basis. The right of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection is given to the subscriber by the LCO, on behalf of the MSO. The set-top boxes are supplied by the MSO to the subscriber through the LCO. This is very evident from the fact that there is also an activation charge, one-time, received from the LCO and even a set-top box change has to be requested for by the subscriber to the LCO through an application form. The mere supply or change of set-top boxes does not ensure the continued transmission of programmes since every set-top box has to be activated which physical act of activation, done by the LCO is only on behalf of the MSO, on one-time charges paid to the MSO. The activation of a set-top box is exclusively in the domain of the MSO, who does it through the LCO. There is no difficulty in so far as the taxable event as arising from the Act of 1948, which is the act of giving connection, which takes within its ambit activation; both of which being on behalf of the MSO and the LCO acting as a mere intermediary or go-between. 22. Now, we go to the taxable person, which the petitioner asserts, is the LCO and not the MSO. Again, we look at the provisions of the Act which defines Proprietor as the person who is in the ultimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the incidental control and responsibility of management of the network, on the field, to the subscribers. There can be no doubt raised as to the petitioner who is the MSO, is the Proprietor, as defined in the statute, who is the taxable person as per the Act of 1948. 25. Now, we look at the question raised of wrong application of the various decisions based on the provisions in similar enactments of the States of West Bengal, Rajasthan, Gujarat and the National Capital Territory of Delhi and the applicability of the precedents which considered the respective provisions. Purvi Communication (P) Ltd. (supra) dealt with the West Bengal enactment which defines the Taxable Person as any person for the time being in possession, of any electrical, electronic or mechanical device who is a cable operator and receives through such device the signals and telecasts them for payment received or receivable so as to exhibit such programmes directly or indirectly through cable television networks. There is a definition of Cable Operator and Sub Cable Operator in the said enactment and the decision, found the MSO to be the Cable Operator and the LCO to be the Sub Cable Operator, which is the ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of providing, of maintaining or operating cable connection from any type of antenna or cable television; This includes both the MSO and the Cable Operator and it was found in Indusind Media and Communication Limited (supra) following Purvi Communication (P) Ltd. (supra) that the MSO also can be made liable under the said enactment. 28. In fact, a similar provision defining Proprietor was available in the Delhi enactment. The Division Bench which considered the matter in Siti Cable Networks Limited (supra) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the viewers; the subscribers. 31. We also extract para 38 of Purvi Communication (P) Ltd. (supra) : 38. A tax under Entry 62 of List II of the Seventh Schedule to the Constitution may be imposed not only on the person spending on entertainment but also on the act of a person entertaining, or the subject of entertainment. It is well settled by this Court that such tax may be levied on the person offering or providing entertainment or the person enjoying it. The respondents are admittedly engaged in the business of receiving broadcast signals and then instantaneously sending or transmitting such visual or audio-visual signals by coaxial cable, to subscribers' homes through their various franchisees. It has been made possible for the individual subscribers to choose the desired channels on their individual TV sets because of cable television technology of the respondents and of sending the visual or audio-visual signals to sub-cable operators, and instantly retransmitting such signals to individual subscribers for entertaining them through their franchisees. The respondents' act is, no doubt, an act of offering entertainment to the subscribers and/or viewers. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as has the 101st Amendment omitted completely; Entry 52, the taxes on entry of goods into a local area for consumption, use or sale therein and Entry 55, the taxes on advertisements. Or even the taxes on luxuries, betting and gambling as was earlier available under Entry 62 of List II. When the Goods and Services Tax regime came into force by the 101st Amendment, Entry 54 which earlier included tax on the sale or purchase of goods other than newspapers was amended to retain only taxes on specified goods like petroleum products and alcoholic liquor for human consumption. 33. The tax under Entry 62 was retained, albeit in a newform, that too only of entertainments and amusements, among other taxes which were included under Entry 62 of List II prior to the 101st Amendment; as also confined to those levied and collected by self-government institutions. Entry 62 prior to the subject amendment read as Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling (sic). The Union Parliament consciously deleted the taxes on luxuries, betting and gambling and retained only taxes on entertainments and amusements to the extent levied and collected by a Panchaya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax levied under the Bihar Act of 1948 was a levy and collection made by the State through its Commercial Tax Officers, validly legislated under Entry 62 of List II as it existed prior to 101st Amendment. It cannot be sustained after the 101st Amendment as the amendment to Entry 62 required the levy and collection to be by a local self-government institution and not the State Government. 36. Taxes other than on goods or services or on both, cannot survive after the Constitutional amendment since the same was not saved by the transition provision under Section 19 of the amendment. The tax on goods which earlier was under the general sales tax regime and then under the Value Added Tax regime can continue by virtue of the repeal and amendment, brought in by virtue of Sections 173 and 174 of the State Goods and Services Tax Act; within one year of the 101st amendment. The transitional provision under Section 19 specifically provides for continuance of the inconsistent provisions of any law on any tax on goods or services or on both; with reference to the Constitution as it exists after the 101st Amendment, which were consistent with the Constitution as it existed prior to such amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solidated fund of the State. While retaining the tax on entertainments in the 101st Amendment it was specifically indicated that taxes on entertainments amusements can be sustained; i.e. under Articles 245, 246 265 of the Constitution of India, only to the extent levied and collected by a Local Self Government Institution i.e. a Panchayat, Municipality, Regional Council or a District Council. Hence, the tax as it was levied on entertainments under the Bihar Entertainment Tax Act, 1948 cannot survive after the 101st Amendment since it is not levied and collected by a local self-government institution. 38. That the State could now bring out an enactment-taxing entertainments, also levying tax on Cable TV Networks, by permitting such levy and collection to be made by the local self-government institutions, cannot at all be disputed. However, it is a moot question as to whether a repeal and saving clause as in the Bihar Goods and Services Tax Act, in such a new enactment brought under Entry 62 as it exists now in the Constitution, can provide for a repeal and saving as available under Sections 173 and 174 of the BGST Act, to sustain the levy and collection after the 101st Amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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