JUDGMENT

Dr. AR. Lakshmanan, J.

The State of West Bengal \026 Department of Finance, Calcutta and two others are the appellants in this appeal. Leave was granted by this Court on 30.03.2001 and pending disposal of the appeal, stay of operation of the judgment and order under challenge was passed.

The above appeal is directed against the final judgment and order dated 04.08.2000 passed by the High Court at Calcutta in W.P.T.T. No. 338 of 2000 whereby the High Court allowed the writ petition filed by respondent Nos. 1 and 2 and declared 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 ultra vires to the Constitution.

Respondent No.1 carries on business as a Multi System Operator (hereinafter referred to as ’MSO’) and is engaged in receiving and providing TV signals to individual cable operators of various localities. The respondents are receiving communication signals known as TV signals broadcast by various satellite channels and are distributing the same to the sub-cable operators. The process involved in the business consists of establishment of state of the art control rooms and spreading the cable network. The said network signals are being given to various sub-cable operators with whom the respondents have franchise agreement. According to the respondents, there is a significant and qualitative difference between the functions performed by them and the activities of sub-cable operators who are franchisee of the respondent-company. According to the respondents, the object of the MSO is to capture signals from various satellites and to put all of them in proper format/frequencies so that all those signals can travel together in cables without encroaching upon and interfering with other signals for the reception and distribution by the so- called sub-cable operators. The signals are transmitted through the satellites by the various broadcasters from their earth uplinking stations at various parts of the world.

Respondent No.1 entered into Franchise Agreement with the individual cable operators of various localities and on the basis of the said agreement, respondent No.1 transmits the said TV signals to the said individual sub-cable operators against a price. The individual sub-cable operators on the basis of the monthly subscription provide the said TV signals to the individual subscribers of the locality.

The Parliament of India enacted the Cable Television Networks (Regulation) Act, 1995 which was given effect from 29.09.1994. The said Act seeks to regulate the operation of cable television network in the country and matters connected therewith and incidental thereto. The West Bengal Legislature sought to impose a tax on the MSOs and the cable operators by amending the West Bengal Entertainment-cum-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.

Entry 62 of List II of Sev