TMI Blog2005 (3) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... liable can by no means take it out of the purview of entry 62. - Civil Appeal No. 2508 of 2001 - - - Dated:- 16-3-2005 - VARIAVA S.N., LAKSHMANAN AR. AND KAPADIA S.H. JJ. Dr. A.M. Singhvi, Senior Advocate (K.V. Vishwanathan, Ameet Bhandari, Ms. Gauri Rasgotra and Sanjeev Kumar, Advocates, with him), for the intervener. Tara Chand Sharma, Ms. Neelan Sharma, Taurn Sharma, Rajeev Sharma, Ajay Sharma and Rupesh Kumar, Advocates, for the appellants. Manindar Singh, Mrs. Pratibha M. Singh, Angad Mirdha, Kirti Man Singh and Saurabh Misra, Advocates, for respondents Nos. 1 and 2. -------------------------------------------------- The judgment of the Court was delivered by Dr. AR. LAKSHMANAN, J.- The State of West Bengal Department of Finance, Calcutta and two others are the appellants in this appeal. Leave was granted by this Court on March 30, 2001 and pending disposal of the appeal, stay of operation of the judgment and order under challenge was passed. 2.. The above appeal is directed against the final judgment and order dated August 4, 2000 passed by the High Court at Calcutta in W.P.T.T. No. 338 of 2000 whereby the High Court allowed the writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m-Amusement Tax Act, 1982. The said Act was amended by omitting sub-section (4) of section 4A and inserted a new sub-section (4a) reading as under: "(4a) Where any owner, or any person for the time being in possession, of any electrical, electronic or mechanical device, is a cable operator and receives through such device the signal of any performance, film or any other programme telecast, and thereafter such owner or person, against payment received or receivable,- (i) exhibits such performance, film or programme through cable television network directly to customers, or (ii) transmits such signal to a sub-cable operator, who in turn provides cable service for exhibition of such performance, film or programme to the customers, such owner or person shall be liable to pay tax from the month in which he exhibits such performance, film or programme or transmits such signal to a sub-cable operator on the basis of his monthly gross receipt at such rate, not exceeding twenty-five per centum of the monthly gross receipt, as may be specified by the State Government by notification published in the Official Gazette." 6.. Entry 62 of List II of the Seventh Schedule to the Constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformance, film or any other programme telecast to a sub-cable operator. 2(d) 'Subscriber' means a person who receives the signals of cable television network at a place indicated by him to the cable operator, without further transmitting it to any other person." 9.. In addition to the incorporation of sub-section (4a) in section 4A, the said Amending Act of 1998 also inserted sub-section (4b) which reads as under: (4b) The prescribed authority shall, after making such enquiry as he may think necessary and after giving the owner or the person, referred to in sub-section (4a) of section 4A, a reasonable opportunity of being heard, fix the date on and from which such owner or person shall become liable to pay tax under the said sub-section." 10.. According to the respondents that the so-called sub-cable operators who are in reality the cable operators are willing to get themselves registered and to pay the tax. According to them, it is the said local operators who have direct contractual nexus with the consumers/viewers/households are taxed for the purpose of entertainment tax and it is only in West Bengal that such a situation has been created. 11.. Aggrieved by the imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inviting our attention to the relevant sections and of the definitions, judgments and annexures, submitted that the High Court has erred in declaring clause (ii) of sub-section (4a) of section 4A of the Act ultra vires. According to him, clause (i) of sub-section (4a) of the Act falls within the legislative competence of the State Legislature and is not ultra vires to the Constitution. Respondent No. 1 who is engaged in receiving and providing TV signals to individual sub-cable operators is liable to pay tax under clause (ii) of sub-section (4a) of section 4A of the Act which has come into force on August 1, 1998. The said sub-section (4a) has been substituted by an amendment made by the West Bengal Finance Act, 1998. According to the provisions of the said clause (ii) of sub-section (4a), any owner or person having in possession, of any electrical, electronic or mechanical device who receive through such device the signal of any performance, film or any other programme telecast and thereafter transmits such signals to a sub-cable operator against payment received and receivable by him is liable to pay tax on his monthly gross receipt for transmitting such signals of any perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mediate presentation to such viewers. Therefore, whatever entertainments are derived by the members of public or viewers in houses, flats, being the subscribers, against payment is possible only because of their receiving signals and transmission of image and audio signals by the respondent and, as such, the source of entertainments is respondent No. 1 and the entire network is controlled and regulated by him. 18.. Mr. V.R. Reddy submitted that the High Court has failed to appreciate that the taxable event need not necessarily be the actual utilisation or the actual consumption of the luxury or entertainment and that a luxury or entertainment which can reasonably be said to be amenable to a potential consumption does provide the nexus. It was further urged that the High Court ought to have seen that the very signal transmitted through cable operator's cable instantly reaches the sub-cable operator and also the viewer's television threshold. Thus the ready entertainment in the form of audio visual signal, which is transmitted by the cable operator, reaches instantly in fact from them to the threshold of the television of the viewer. Therefore, the signal of the sub-cable operator, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A of the Act to mean any system "designed to provide cable services for reception by multiple consumer". Once this movement is done, the show is on. It is not at all like a roll of cinematic film lying in a can in the go-down of a distributor waiting for an exhibitor to take to his cinema hall and put it in show when the exhibitor feels like it. What has gone on the TV network is in the process of being exhibited and cannot be postponed in time. 21.. Per contra, Mr. Dushyant Dave, learned Senior Counsel for the respondent, submitted that the respondent is engaged in receiving and providing TV signals to individual sub-cable operators of various localities and such cable operators on their part transmit the signals to their respective subscribers, who are the actual consumers who get the benefit of the amusement or entertainment from those signals. According to him, in technological terms, it may be stated that respondent No. 1 actually acts as the nodal, technical and scientific receptionist and supplier of signals and that the signals provided to the sub-cable operators are utilised by the said sub-cable operators for providing information and entertainment to their customers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey are called by the said definition that may be providing the entertainment to the ultimate consumers but surely the respondents are not doing so. That the impugned legislation in so far as the same seeks to impose a tax on MSOs like the respondents by treating them as "cable operators" is ultra vires the Constitution being in excess of the legislative competence of the State Legislature under entry 62 of List II of the Seventh Schedule. That the power to enact a law in respect of entertainment or amusement must, in order to be intra vires, be one relating to entertainment as understood in common parlance. A law made under entry 62 of List II of the Seventh Schedule should have a direct and sufficient nexus with the factum of entertainment. In other words, there must exist a close and direct connection between the person who provides the entertainment to the person who is thus entertained and pays for such entertainment. An activity, which is remotely connected with such entertainment, cannot come within the ambit of the said legislative entry. It was submitted that until and unless such a direct and proximate nexus between the transaction sought to be taxed and the person who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termed as gross receipts. A major component of the receipts of signals providers like the respondent-company is absorbed in reimbursing the charges directly payable to pay channels, software providers, intellectual properties right holders and hence do not constitute receipts of the respondent-company. In the absence of any definition of "gross receipt" the incidence of tax is rendered unreasonable, indeterminate and ultra vires. 29.. The legislative provision is bad in law because of vague- ness, ambiguous and uncertainty. This leaves enough scope for the authorities under the Act to be arbitrary since they can pick and choose any persons or event or action at their whims and fancies for the purpose of levying tax in the guise of "luxury" or "entertainment" or "amusement". In the instant case the same has led to discrimination amongst persons similarly placed. 30.. That the imposition of the tax on the gross receipts and/ or gross income of the respondent-company which has no direct and proximate relationship with the provision of entertainments make the impost ultra vires the Constitution as the State Legislature has no power to impose a tax on income. 31.. Dr. A.M. Singhvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mately with the taxable transaction. (G) It must be remembered that the MSO has no privity or direct dealing with the subscriber. There is no contractual, statutory or other common law relationship between the MSO and the subscriber. The MSO cannot sue and is not suable by the subscriber. The MSO has no connection with the subject of entertainment, i.e., (subscriber) but is yet made subject to tax. The MSO does not know the identity and whereabouts of the subscriber. (H) The dominant position and intention of the MSO is to act as a conduit for receipt and transmission of telecommunication and broadcasting signals. The dominant object is that of a conduit and the MSO performs the role of a telecommunicator and not an entertainer. He receives signals on the one hand from the broadcaster and transmits and passes them, on the other hand, to the cable operator and/or the sub-cable operator who then gives it to the subscriber. There is neither intent to entertain nor the taxable fact of entertainment. Both animus and factum are thus missing. (I) Indeed, in view of the MSOs role as a conduit, the impugned levy would de facto amount to a tax upon expenditure in the hands of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable operator/sub-cable operator/subscribers. It would be impossible to recover or pass the burden of the tax at least for the past period on to any subscriber or operator. 32.. In this background of facts and circumstances of the case and of the arguments of the respective counsel, the following questions of law arise for consideration by this Court: 1.. Whether clause (ii) of sub-section (4a) of section 4A of the West Bengal Entertainment-cum-Amusement Tax Act, 1982 (as amended by the West Bengal Finance Act, 1998) is beyond the legislative competence of the State Legislature. 2.. Whether respondent Nos. 1 and 2 would come within the purview of clause (ii) of sub-section (4a) of section 4A of the West Bengal Entertainment-cum-Amusement Tax Act, 1982 (as amended by the West Bengal Finance Act, 1998) as they are the persons who exhibit such performance through cable Television Network through the sub-cable operator. 33.. We have very carefully considered the rival submissions made by learned counsel appearing on either side. Even though the arguments advanced by Mr. Dushyant Dave and Dr. A.M. Singhvi, the Intervenor appear to be very attractive at the first blush, yet on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tel and Restaurants) Act, 1972 are two statutes which have been enacted under the same Legislature field, i.e., entry 62 of List II of the Seventh Schedule to the Constitution of India, and the two statutes apply admittedly to levy of tax on amusements, entertainments and luxuries in their respective area but the area of application of the said 1982 Act is different as would be evident from the provisions of 1922 Act and the 1972 Act as aforesaid. The said 1982 Act was, for the first time, enacted by the State Legislature in 1982 and its area of application was initially confined to levy and collection of tax from the holders of television set or sets under section 4 of that Act. Thereafter, under section 4A of that Act, inserted by the West Bengal Taxation Laws (Second Amendment) Act, 1983, the area of its application was extended to levy and collection of tax from the holders of video cassette recorder. The purpose of sub-section (4a) of section 4A of the Act is to levy and collection of tax from any person who provide cable service directly to consumers or transmits to a sub-cable operator through a cable television network and otherwise controls or is responsible for the manage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the FRANCHISEE accepts the right to receive signals through a Feeder Line for further instant transmission/communication in the TERRITORY on the terms and conditions set out in this agreement. PRICE The price payable by the FRANCHISEE for access to the signals provided by the NETWORK shall be as follows: (a) Rs. 25 per subscriber per month to be paid before the 7th day of the month. (b) The FRANCHISEE will keep an interest-free deposit of Rs. 50 per subscriber with the NETWORK. (c) The price mentioned in (a) above is liable to change depending upon the market conditions and by mutual understanding between the parties of the area. TERMS AND CONDITIONS (a) The NETWORK shall not provide any connections direct to home in the territory where the FRANCHISEE is operating. (b) The FRANCHISEE would provide a list of subscribers within seven days of signing this agreement with full name, address and other information of relevance as required by the NETWORK. Subsequently any change in the subscriber list would be communicated to the NETWORK within seven days. The FRANCHISEE would submit complete information and not withhold the name of subscribers or declare less numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution of India to make law for the levy and collection of tax on such entertainments. 38.. A tax under entry 62 of List II of the Seventh Schedule to the Constitution of India 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 admittedly engaged in the business of receiving broadcast signals and the instantaneously sending or transmitting such visual or audio visual signals by coaxial cable, to subscribers' homes through their various franchise. It has been made possible for the individual subscribers to choose the desired channels on their individual T.V. sets because of cable television technology of the respondents and of sending the visual or audio visual signals to sub-cable operators, and instantly re-transmitting such signals to individual subscribers for entertaining them through their franchise. The respondents' act is, no doubt, an act of offering entertainment to the subscribers and/or viewers. The respondent is very m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receive signals and instantly transmits such signals of visual image and audio to a sub-cable operator for presentation of any performance, film or any other programme to the subscriber and/or viewers against payment, and as such owner or person exhibits such performance, film or any other programme through his cable television network directly to customers he is liable to pay tax. Except that owner or person of the class referred to in sub-section (4a) of section 4A of the said 1982 Act, no other person can be held liable to pay such tax. There is clear indication of the character of tax from the incidence of such tax or taxable event which takes place on the happening of the event of offering entertainments to the subscribers. The person on whom the legal liability to pay tax falls has also been clearly and unambiguously mentioned in the charging section. The rates of tax have been sought to be specified by the notification. The measure of tax is the "gross receipt" on the basis of which the person is saddled with the liability to pay tax. There is no uncertainty or vagueness of the legislative scheme. The tax levied by sub-section (4a) of section 4A of the said 1982 Act does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service rendered by respondent No.1 is not restricted only to receiving signals but also extends to sending visual images and audio and other information by means of telecommunication network for presentation to members of public. In the present case, respondent No.1 sends visual images and audio signals for presentation to the individual subscribers at various homes through their feeder line, i.e., coaxial cable or any other device used for transmitting audio and visual signals in terms of clause 2 of the said agreement. The franchisee has access to the signals provided by respondent No.1. Therefore, it cannot be disputed that the price or prices received or receivable by the respondent No. 1 is the amount received or receivable by him for transmitting the signal for exhibition of any performance, film or any other programme telecast and the aggregate of such prices or amounts is the gross receipt of the respondent No.1 in relation to any month or part thereof. 43.. Who will be considered the giver of the entertainment the cable operator or the sub-cable operator. We do not find any reason to consider the sub-cable operator as the only giver. Even though the sub-cable operator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, with reference to entry 50 in Schedule VII of the Government of India Act, 1935, which is identical to entry 62, contention was raised that levy with respect to luxuries, entertainments or amusements can be made on person's receiving such luxuries or entertainment and that there can be no levy of tax on those who are givers or providers of such luxuries, entertainments, etc. While rejecting such a contention that it is only the receivers who can be taxed and not the giver, the learned Judges observed that there can be no reason to "differentiate between the giver and the receiver of entertainments and amusements and both may with equal propriety be made amenable to tax. " 47.. The said observation that both giver and receiver be made amenable to the tax was sought to be relied on in the Western India Theatres Ltd. case See [1959] Supp. 2 SCR 63. in support of the contention that unless there is actual utilisation of luxury no tax can be levied on the mere existence of the provisions made, for the prospective or the potential utilisation of the luxury (para 24) 48.. The counsel in the above case further relied on decision of High Court of Bombay in Ramesh Waman Toke's case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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