2005 Supreme(SC) 487

2005(2) Supreme 750
Supreme Court of India
(From Calcutta High Court)
S.N. Variava, Dr. AR. Lakshmanan, S.H. Kapadia, JJ.
State of West Bengal and Ors. —Appellants
versus
Purvi Communication Pvt. Ltd. and Ors. —Respondents
Civil Appeal No. 2508 of 2001
Decided on 16-3-2005
Counsel for the Parties :
For the Appellants : Tara Chandra Sharma, Ms.Neelam Sharma, Tarun Sharma, Rajeev Sharma, Ajay Sharma, Rupesh Kumar, Advocates.
For the Respondents Nos. 1-2: Maninder Singh, Mrs. Pratibha M. Singh, Angad Mirdha, Kirti Man Singh and Saurabh Mishra, Advocates.
For the Applicants in I.A. No.1 : Dr. A.M. Singhvi, Sr. Advocate, K.V. Vishwa­nathan, Ameet Bhandari, Ms. Gauri Rasgotra and Sanjeev Kumar, Advocates.

Important point
Clause (ii) of sub-section (4a) of Section 4A of the West Bengal Entertainment-cum-Amusement Tax Act which sought to impose a tax on Multi System Operators and the cable operators by amending the Act, does not cross the bounds of the Entry No. 62 of List II of the Seventh Schedule of the Constitution and is intra vires.

Headnote:Cable Television Networks (Regulation) Act, 1995—West Bengal Entertainment-cum-Amusement Tax Act, 1982 as amended by the West Bengal Finance Act, 1998—Section 4(4a)(ii)—Imposition of entertainment tax—Writ petition filed by respondents challenging validity of 1998 amendment in the 1992 Act—Respondent 1 carries on business as a Multi System Operator (MSO) and is engaged in receiving and providing TV signals to individual cable operators of various localities—Respondents are receiving communication signals known as TV signals broadcast by various satellite channels and are distributing the same to the sub cable operators with whom respondents have franchise agreement—Individual sub cable operators on basis of monthly subscription provide the said TV signals to individual subscribers of the locality—Aggrieved by imposition of entertainment tax and demand notices issued, respondents challenged vires of 1998 amendment and demand notices before the West Bengal Taxation Tribunal—Tribunal refused to quash the impugned demand—Respondents filed writ petition—High Court declared clause (ii) of sub-section (4a) of Section 4A of the Act ultra vires the Constitution—Whether clause (ii) of sub section (4a) of Section 4A of the Act is beyond the legislative competence of State Legislature—(No)—Performance, film or programmes shown to the viewers through cable television network come within the meaning of entertainments and therefore within the legislative competence of State Legislature under Entry 62 of List II of the Constitution—Respondents as a cable operator have direct and proximate nexus with the entertainments provided by them and, as such, they are the taxable person—Constitution of India—Entry 62, List II, Seventh Schedule.

       Held : A tax under Entry 62 of List II of 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 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 franchise from the ultimate subscribers. Their franchise, called as sub-cable operator under the said 1982 Act having no independent role to offer or provide entertainments to the subscribers inasmuch as franchise have to depend entirely on the respondents communication network and this communication network of the respondents consists of receiving and sending visual images and audio and other information for preparation of the subscribers and/or viewers, without the communication network service of the respondents, no entertainments can be offered or provided to the subscribers and/or viewers. In the tax matters, the State ­Legislature is free to, if it has legislative ­competence, to choose the persons from whom the tax levied on entertainments is to be collected. In other words, what are taxed are the entertainments, which is very much within the ambit of Entry 62 of List II of Seventy Schedule. It is the respondents who as cable operator for the purpose of the said 1982 Act is engaged in the business of providing or offering entertainments which include showing of films, various serials, cricket matches and dramatic performances to the subscribers, and the tax is imposed on the act of offering such entertainments in this way to such subscribers and/or viewers. The entire communication network service is built up and controlled by the respondents. Whatever amount is received or receivable by the respondent in respect of providing such entertainments­ is taxable under sub-Section 4(a) of Section 4A of the said 1982 Act which has a direct and sufficient nexus with the entertainments. The charging section is very clear and unambiguous in as much as there is no vagueness about the incidence of tax and the person who is liable to pay tax. So far as the declaration of liability to pay tax is concerned, the charging section does not suffer from any vagueness. The provision does not lead to any discrimination amongst persons. There is no scope of any discrimination in as much as either an owner, or person who having in possession of electrical, electronic or mechanical device 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 he has also been clearly and unambiguously mentioned in the charging section. The rates of tax has 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 not interfere with the fundamental rights guaranteed under Article 19(1)(g) of the Constitution or is violative of Article 19(1)(g). (Paras 45 to 47)

       It is thus clear that the cable operator- respondent No.1 is the exhibitor in this case and also the provider of the entertainment to the customer. Hence, he alone can be asked to pay the tax on the entertainment that has resulted from this exhibition. This provision, therefore, does not cross the bounds of the entry No. 62 of List II of the Seventh Schedule to the Constitution and is intra vires. Providing a cable link up to the viewers end is the only role of sub-cable operator. It is, therefore, unconceivable that despite put forth the ready entertainment in the form of signal on the cable line, the cable operator cannot be said to be providing the entertainment within the meaning of Entry 62 of List II of the Seventh Schedule of the Constitution. So long as the State Act remains within the ambit of Entry 62 of List II and is not offending the provisions of Article 286 of the Constitution or the laws made thereunder, the State Act validity is beyond question. Thus, respondent No.1 who is engaged in receiving and providing TV signals to individual cable operators is liable to pay tax under clause (ii) of sub-section (4a) of Section 4A of the Act. (Para 49)

       We do not find any reason to consider the sub-cable operator as the only giver. Even though the sub-cable operator may be the giver of the entertainment in as much as he has a direct connection with the viewer, still in cases like the present where he does not select the show, or make the show ready, or does not put the show on and the exhibition is done by the cable operator through mere franchisees it cannot be said that the cable operator is not the giver. It is true that the cable used to get in touch with the TV set of the consumer has been provided by the sub-cable operator, but that fact alone by itself cannot make the sub-cable operator, the only exhibitor or the giver, of the entertainment. In a world of indirect links between individuals made possible by the electronic age, the indirect meeting between the cable operator and the consumer through a technical link has been made possible. Sub-section (4a) of Section 4A of the Act recognizes the reality that entertainment is possible through such contact. Clause (i) of sub-section (4a) speaks of a situation where the cable operator “Exhibits directly”. Clause (ii) speaks of the situation where the cable operator does not exhibit directly, but transmits the signals to the sub-cable operator. Significantly, the clause does not say that the sub-cable operator exhibits, it rather says that the sub-cable operator “provides cable service for exhibition”. It is reasonable to conclude that these provisions imply that the exhibition is being held here also by the cable operator, only the technical link of the cable service has been provided by the sub-cable operator. The cable operator is also the exhibitor in this case; he is the provider of the entertainment to the customer. Hence he can be asked to pay tax on the entertainment that has resulted from this exhibition. The provision, therefore, does not cross the bounds of the Entry No. 62 of List II of the Seventh Schedule of the Constitution and is intra vires. (Paras 50 & 51)