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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 ..... ellite 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 Judges while remanding the matter, clearly observed that there is no expression on the inter party merits and all issues would be left open for consideration before the Assessing Authority. The Assessing Authority after notice to the petitioner carried out a fresh assessment which is pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 v. Purvi Communication (P) Ltd., (2005) 3 SCC 711, the High Court of Rajasthan in Sky Media (P) Ltd. v. Asstt. Commissioner, Commercial Taxes, Circle 'A', Jodhpur, 2015 SCC OnLine Raj 3271 and Indusind Media and Communications Limited and another v. Mamlatdar and other, (2011) 15 SCC 294, the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 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 addressed by the Assessing Officer. The MSO supplies set-top boxes to the LCO and collects their revenue share based on the number of set-top boxes and not the number of subscribers. The learned counsel clarifies that if 100 set-top boxes are supplied to the LCO, then the LCO is obliged to and the MSO is entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment, 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 the amendment. But Section 19 only applies to tax on goods or services or both and not to any other tax. Hence, the Act of 1948 as it exists cannot definitely enable the levy after the 101st Amendment and it cannot also justify the levy and collection for the period prior to the amendment since the power to levy and col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponsible 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 made amenable to tax. The rate of tax and the measure also is quite obvious from the provisions and the machinery provision also enables such levy and collection from the MSO, who is in all pervasive control of the cable TV network. In fact, the LCO cannot exist without the MSO but, however, the MSO can survive by itself if it enrolls the subscribers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x 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 with reference to the records. At the outset, we have to say that there is no dispute in so far as the tax, is on the entertainment which a subscriber gets to enjoy from the transmission of programmes through the Cable TV Network. The rates and the measure; the collection permitted from the subscribers, are also not disputed. The contention raised based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 at the place of end subscribers. This puts the relationship between the LCO & the MSO in its proper perspective, and it is crystal clear that the LCO acts on behalf of the MSO from the time when the set-top boxes are installed at the place of the end subscriber and the set-top boxes are activated, for which activation also an invoice - styled as one time - is ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 LCO, as found from Clause 7, is in so far as the maintenance of the quality of service which shall not be subject to any interruption or degradation; which is the obligation of the MSO. 20. The obligations of the MSO, as seen from Clause 8 again make its role all pervasive. By Clause 8.1 the MSO is required to set up and operate the Head-end, Conditional Access System ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 ultimate management and full responsibility in relation to an entertainment. An entertainment includes any exhibition, performance, amusement, game, sport or races to which persons are admitted for payment and also includes programmes relayed to a subscriber by a Cable Operator or by Cable Television Network and programmes relayed by an entertainment provider on payment or otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 very same position as it exists in the enactment we are concerned with, in the State of Bihar, which defines them respectively as 'proprietor' and 'cable operator'. The distinction drawn in so far as the direct and indirect transmission being specified in the charging section under the West Bengal enactment, is taken care of in the Bihar enactment by making the taxing event, the gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable 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 under such definition. 29. It has to be noted that the High Court of Gujarat and High Court of Delhi found differently on a definition which was in pari materia. But the charging Section under the Gujarat statute does not have the word 'prescribed' and the decision of the High Court of Delhi has been stayed by the Hon'ble Supreme Court. We are in the present case concerned with the Act of 1948, withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The respondent is very much directly and closely involved in the act of offering or providing entertainment to subscribers who are on his record. For the fact of offering or providing entertainment to the subscribers and/or viewers, the respondents receive charges, which are realised or collected by their franchisee from the ultimate subscribers. Their franchisee, called as sub-cable operator under the said 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase 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 Panchayat, Municipality, Regional Council or a District Council. In the teeth of the amendment made to Entry 62 and also the complete omissions carried out by the subject amendment, of other taxation entries; while retaining that on entertainment, we cannot but hold that the tax on entertainments or amusements were never intended to be subsumed in or consumed by, the definition of services so as to include it under the common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices 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 amendment, for one year or till such a repeal or amendment is brought by the State Legislature, whichever is earlier. By virtue of the specific provision provided in Section 19 it does not necessarily mean that such levy and collection can be only for one year. If no repeal and amendment is made to the inconsistent State legislations then of course such levy could have been made and collected only till the expiry of one year from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Amendment. This is because the transitional provisions under Section 19 does not make the same applicable to tax on entertainments and confines it to tax on goods or services or on both. We need not dwell into the same since neither is there existing a repeal or saving clause in such an enactment nor even was such an enactment brought in. It could have been done only if there was a foundational empowerment by a transition clause, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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