TaxTMI 
TaxTMI 
2017 (3) TMI 627
X X X X Extracts X X X X
X X X X Extracts X X X X
....366/2015, W.P.(C) 3927/2015 & CM No. 7012/2015, W.P.(C) 1285/2016 & CM No. 5649/2016 JUDGMENT BADAR DURREZ AHMED, J 1. These petitions raise common issues and were, therefore, heard together and are being decided together. Siti Cable Networks Limited v. Government of NCT of Delhi and Another [WP(C) 427/2014] was considered as the lead case. 2. All the petitioners are multi-system operators (MSOs). They are aggrieved by the circular dated 17.12.2012 as also notices similar to the notice dated 08.01.2014 issued to the petitioner in WP(C) 427/2014. Declarations are also sought to the effect that Section 2(o) read with Section 7 of the Delhi Entertainments and Betting Tax Act, 1996 (hereinafter referred to as 'the said Act') be declared as vague and ambiguous and, therefore, resulting in no levy of tax in law. Prayers have also been sought seeking the quashing of Section 8 of the said Act as also Rule 12 of the Delhi Entertainments and Betting Tax Rules, 1997 (hereinafter referred to as 'the said Rules') to the extent they regulate cable television services provided by the petitioners. A restraining order is also sought against the respondents prohibiting transmission of cable TV s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xact number of subscribers/connections at a given point of time. However, in a recent meeting held with the MSOs they have submitted that they are in the process of compiling the entire data base of subscribers by collection of SAF forms from the customers through cable operators. It would have been ideal for the Department in the changed situation as elaborated above, the collect tax only through MSOs. However, keeping in view, the submissions of MSOs. It has been decided that the existing system of collection and deposition of tax through LCOs will continue till 31st March, 2013. In this period MSOs will make sure that the entire data base of subscribes is ready with them. From the month of April, 2013 onwards the tax will be Collected by the MSOs and deposited with the Department by the 7th of May, 2013. However, it is also clarified here that MSOs & LCOs are jointly and severally responsible for payment of Entertainment Tax and will be liable to be proceeded against in case of default. Sd/- 17/12/2012 (S.N. SAH) Entt. Tax Officer Copy to All ETIs for strict compliance Sd/- 17/12/2012 (S.N. SAH) Entt. Tax Officer." (underlining added) 6. It is also necessary to set....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sonable steps for breaching the provisions of the said Act and Rules. Please take notice that in the event of your failure without sufficient reason to comply with this notice necessary action as deemed fit shall initiated under the provisions of the Delhi Entertainment and Betting Tax Act, 1996 without any further notice. Sd/- Entertainment Tax Officer M/s SITI Cable Network Ltd. Essel House, B-10, Lawrence Road Industrial Area, Delhi-110035." 7. On behalf of the petitioners, it was submitted that Section 7 was the charging section in the said Act. The said provision clearly stipulated that the entertainment tax was to be collected by the 'proprietor' and paid to the government in the prescribed manner. Referring to the decision of a Division Bench of this Court in Bharti Tele Media v. Government of NCT of Delhi: (2011) 44 VST 262, it was submitted that the levy under the said Act is on entertainment and it is paid in respect of all payments for admission to entertainment. It is to be collected by the proprietor and paid to the government in the manner prescribed. The tax is neither on the person nor on a thing but on the activity of entertainment and the proprietor ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re-transmission through cables. 10. It was explained by the learned counsel for the petitioners that MSOs enter into agreements with broadcasters, such as Zee TV, Sony and Star etc. They provide integrated Receiver Decoder Boxes (IRD Boxes) to MSOs to receive their signals in encrypted form. These boxes are installed in the 'Digital Head Ends' and maintained by the MSOs. MSOs maintain distribution centres at different locations which are connected with the Digital Head Ends. At the distribution centres, optical signals are converted to radio frequency. At the distribution centres, MSOs can do the following two things:- (a) Directly provide cable service to the subscribers (without the involvement of LCOs). In such a situation, the MSOs lay their own cables from the distribution centre to the subscribers' locations. The cables are owned and maintained by the MSOs and in such a case, there is no involvement of any LCO. Subscription charges for providing the cable services directly to the subscribers are paid by the subscribers to the MSOs and the MSOs are solely responsible for maintenance and upkeep of such cables through which the cable service is provided directly to the subscri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any of its powers under this Act, except those under sections 3, 6, 7 and 45 to any person or authority subordinate to it." It was, therefore, submitted that the power to fix the liability on a person for collection and payment of tax cannot be delegated. In any event, the circular dated 17.12.2012 had been issued by the Entertainment Tax Officer and under the provisions of the said Act and the said Rules, no power has been conferred upon the Entertainment Tax Officer to create any joint and several liability of MSOs and LCOs. 14. It was submitted that there are certain essential components of a tax and they have to be unambiguous and clear. The three components which were referred to were as under:- (i) Subject of the tax; (ii) The person who is liable to pay the tax ; and (iii) The rate at which the tax is to be paid. It was submitted that if there is any ambiguity with regard to any of these three components in a tax statute, it would be fatal to the levy of tax. Reference was made to the Supreme Court decisions in Govind Saran Ganga Saran v. Commissioner of Sales Tax: 1985 (Suppl) SCC 205 and Mathuram Agarwal v. State of Madhya Pradesh: (1999) 8 SCC 667. It was submitted....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore, the MSOs were not liable for collection and payment of tax. It was also submitted that the impugned circular dated 17.12.2012 attempts at shifting the statutory responsibility of collecting and depositing entertainment tax from LCOs to MSOs and the reason for this has been given as administrative ease. It was submitted that the statutory duty to collect and pay tax cannot be shifted from one entity to another and that, too, through a mere circular which did not have any authority in law. Such shifting of liability could only be done through legislative amendment which has not occurred in the present case. 17. It was submitted on behalf of the petitioners that for all these reasons, the circular dated 17.12.2012 was liable to be quashed as being without any authority of law and, in any event, being ultra vires the said Act and Rules. It was also submitted that the notices dated 08.01.2014 and other similar notices to the petitioners on the foundation of the circular dated 17.12.2012 were, therefore, bad and were ought to be quashed. 18. On the other hand, the learned counsel for the respondents submitted that there was a clear-cut rationale for collecting entertainment tax fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nment Tax Registration Number of the multi-system operator. It was submitted that the MSOs were governed by TRAI Regulations. From the above, it was evident, according to the respondents, that the MSOs were to be responsible for, inter alia, the collection of entertainment tax. 21. It was also submitted that by virtue of several Supreme Court decisions as also decisions of the High Courts, it has been held that under the new DAS regime, MSOs are to be regarded as 'proprietors' and are liable to collect and pay entertainment tax under the respective State Entertainment Tax Acts. Reliance was placed on the following decisions:- (i) IndusInd Media and Communications Limited v. Mamlatdar and Others: (2011) 15 SCC 294; (ii) The State of West Bengal and Others v. Purvi Communication Private Limited: (2005) 3 SCC 711; (iii) Digi Cable v. State of M.P: AIR 2013 M.P 36; and (iv) Sky Media (P) Limited v. Assistant Commissioner, Commercial Taxes Rajasthan, decided by a Single Judge of High Court of Rajasthan, Jodhpur Bench in S.B. Sales Tax Revision Nos. 229/2012 and other connected matters on 16.02.2015. 22. It was submitted that the charging section, that is, Section 7 of the said Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....set of closed transmission paths and associated signal generation/control and distribution equipment, designed to provide cable service for reception by multiple subscribers;" xxxx xxxx xxxx xxxx "(ka) "multi-system operator (MSO)" means any person including an individual, group of persons, public or body corporate, firm or any other organization or body, who or which is engaged in the business of receiving television signals and value added services from a broadcaster or his authorized agencies and distributing the same or transmitting his own programming service including production and transmission of programmes and packages, directly to the multiple subscribers or through one or more cable operators and includes its authorized distribution agencies by whatever name called;" xxxx xxxx xxxx xxxx (n) "prescribed" means prescribed by rules made under this Act; (o) "proprietor" in relation to any entertainment includes any person- (i) connected with the organization of the entertainment, or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Government may, from time to time, notify and different rates of compounded payment may be notified for the different categories of hotels. (4) The proprietor of a video cinema shall be liable to pay entertainment tax at a rate to be notified by the Government from time to time in this behalf. (5) The tax payable under this section shall be paid, collected or realised in such manner as may be prescribed." xxxx xxxx xxxx xxxx "45. Power to make rules (1) The Government may make rules for carrying out the purposes of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide, for- (a) collection of tax and payment thereof in the government account by the proprietor;" xxxx xxxx xxxx xxxx" Rule 26 of the said Rules: "26. Payment of tax for cable service (1) The proprietor of a cable television network liable to pay tax in accordance with sub-section (1) of section 7 of the Act shall file monthly returns in Form "10" in duplicate showing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansporter or the person entertained - it is on the entertainment. The subscriber may be the person on whom the incidence of the tax falls and the measure of the tax may be based on the subscription money but, as we have already seen, the incidence of a tax or the measure of a tax ought not to be confused with the subject matter of the tax. 41. The charging section itself makes it clear that the levy is on entertainment and it is paid on all payments for admission to an entertainment. There are three very important words used in section 7(1) of the said Act and they are - "levied" (or levy), "paid" and "collected". These words are used in distinct and different senses and must not be confused with each other. The tax is "levied" on "entertainment", it is "paid" on all "payments for admission to an entertainment" and it is "collected" by "the proprietor" and "paid" to the Government in the manner prescribed. It is clear from this scheme that the tax is neither on provider of the DTH service nor on the DTH service nor on the person entertained. Though the incidence of the tax may fall on the ultimate subscriber and the tax may have to be collected by the DTH service provider and paid....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... expression 'in the manner prescribed' and particularly the word 'prescribed', as defined in Section 2(n) of the said Act, means prescribed by Rules made under the said Act. This takes us to Rule 26 of the said Rules. The said Rule 26 clearly refers to 'the proprietor of a cable television network'. Thus, the liability to collect the tax and pay it to the Government is not on all proprietors as defined under Section 2(o) of the said Act but only on proprietors of cable television networks. At this juncture itself, we would like to point out that the Notification dated 01.04.1998 is also in respect of "proprietors of cable television networks providing cable service in the National Capital Territory of Delhi". Therefore, not only Rule 26 but also the Notification under Section 7(1) dated 01.04.1998 bears reference to proprietors of cable television networks. 28. A 'cable television network', in turn, is defined in Section 2(h) of the said Act to mean any system consisting of a set of closed transmission paths etc. designed to provide cable service for reception by multiple subscribers. Here again, two expressions are used which require further elaboration. They are - 'cable servi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oprietor'. LCO 'B' has its own set of subscribers B1, B2 and B3 and so on and that network is also a cable television network in which LCO 'B' is to be regarded as the 'proprietor'. 31. It is, therefore, clear that where the MSOs directly provide cable services to their subscribers without intervening LCOs, that would constitute a separate cable television network of which the MSOs would certainly be the proprietors for the purposes of Rule 26 and, in turn, Section 7 of the said Act. However, in respect of the cable television networks of the LCOs, the MSO would not be a proprietor thereof but, each of the LCOs would be proprietors of their cable television networks which have their individual subscribers as the end points of transmission. In such cases, each of the LCOs would be proprietors of their individual cable television network for the purposes of Rule 26 and Section 7 of the said Act. 32. This is the plain and simple meaning which can be ascribed to the word 'proprietor' as appearing in Section 7(1) of the said Act. 33. In Govind Saran Ganga Saran (supra), the Supreme Court referred to the components of tax and indicated that none of the components must be vague otherwi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Fortunately for us, the Legislative intent is clear as indicated above. It is only the circular dated 17.12.2012 which has brought in the ambiguity. 35. Such ambiguity is impermissible in law particularly in the field of taxation. We do not understand as to how the Entertainment Tax Officer held the MSOs and LCOs jointly and severally responsible for payment of entertainment tax. It appears that because of the change over to the new system, the Entertainment Tax Officer was finding it difficult administratively to regulate the collection of taxes and it is perhaps for this reason that in the circular dated 17.12.2012, it is mentioned that 'it would be ideal for the Department in the changed situation" to collect tax only through MSOs. The argument of the respondents that the changed system was brought about by the regulations and the directions of TRAI and, therefore, MSOs were liable to collect and pay entertainment tax, is an argument which is stated to be rejected. The said Act is a complete code in itself and it is the said act which is to provide for chargeability as well as for the collection and payment of the tax. If there was any change necessitated because of the switch ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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." 38. It will be seen that the expression 'cable operator' has been referred to in the said provision. 'Cable operator' was, under the West Bengal act, defined to mean any person who provides cable service 'directly to customers or transmits signals to a sub-cable operator through a cable television network and otherwise controls or is responsible for the management and operation o....