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CASE NO.: Appeal (civil)  2508 of 2001

PETITIONER: The State of West Bengal & Ors.

RESPONDENT: Purvi Communication Pvt. Ltd. & Ors.

DATE OF JUDGMENT: 16/03/2005

BENCH: S.N. Variava, Dr. AR. Lakshmanan &  S.H. Kapadia

JUDGMENT: J U D G M E N T

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

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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 Seventh Schedule to the Constitution is also  reproduced hereunder:- "Taxes on luxuries, including taxes on entertainments, amusements,  betting and gambling."

Section 4A reads thus: "4A. Levy and collection of tax for exhibition.- (1) Subject to the  provisions of sub-section (2) and other provisions elsewhere contained in  this Act, there shall be levied on, and collected from, a holder of a video  cassette recorder set or sets or a holder of a video cassette player set or  sets a tax, in addition to the tax referred to in section 4, where such holder  makes any public performance or exhibition of film through a video  cassette recorder set or a video cassette player set against payments made  or to be made by persons admitted to witness such performance or  exhibition at the rates specified below\005\005"

 Some of the relevant definitions are reproduced hereunder for the  proper understanding and adjudication of the case:   "cable operator" means any person who provides cable service  directly to customers or transmits signal to sub-cable operator through a  cable-television network and otherwise controls or is responsible for the  management and operation of a cable television network; "Sub-cable operator" means person, other than any owner or person  who is cable operator referred to in this sub-section, who, on the basis of an  agreement, contract or any other arrangement made between him and such  cable operator, receives signal from such cable operator and provides cable  service for exhibition of performance, film or any programme to the  customers; "Cable Service" means transmission or retransmission of programmes  including broadcast television channel signals or satellite television channel  signals or both through or any other means; "Cable Television Network" means any system consisting of a set  closed transmission paths and associated signals generation, control and  distribution equipment, designed to provide cable service for reception by  multiple customers; "gross receipt", in relation to any month or part thereof, shall mean  the aggregate of amounts received or receivable by owner, or a person for  the time being in possession, of any electrical, electronic or mechanical  device who exhibits any performance, film or any other programme through  cable television network directly to customers or who transmits the signal

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for exhibition of any performance, 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.

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."

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.  Aggrieved by the imposition of entertainment tax and the demand  notices issued, the respondents challenged the vires of 1998 amendment in  the 1992 Act as well as these demand notices before the West Bengal  Taxation Tribunal.  The case was heard by a three-Member Bench.  The  Chairman of the Tribunal was of the opinion that the State Legislature was  not competent to levy the tax on the "entertainer" i.e., the "sub-cable  operator" and/or the "entertainee", namely, the viewer or the customer  having regard to the administrative convenience and other relevant factors.   The Chairman declared that clause (ii) of sub-section (4a) of Section 4A is  ultra vires to the Constitution because the Legislature of the State of West  Bengal is not competent to enact the provisions under Entry 62 of List II of  the Seventh Schedule to the Constitution.   

Another Technical Member and Judicial Member took the opposite  view.  According to them, the cable operator is the exhibitor and that he is  the provider of the entertainment to the customer and hence he can be asked  to pay tax on the entertainment that has resulted from the exhibition.   Accordingly, they refused to quash the impugned demand.  

Being aggrieved by and dis-satisfied with the judgment of the  Tribunal, the respondents preferred a writ petition under Article 226 of            the Constitution of India before the High Court.  The writ petition was  contested by the appellant-State by filing a detailed reply to the writ petition.   The writ petition filed by the respondents was allowed by the High Court by  their judgment dated 04.08.2000 for the reasons recorded in their judgment.   The Bench was of the opinion that clause (ii) of sub-section (4a) of Section  4A of the Act is ultra vires to the Constitution.  Accordingly, the Division  Bench allowed the writ petition filed by the respondents herein.  Aggrieved  by the same, the State of West Bengal has preferred the above civil appeal.

We heard Mr. V.R. Reddy, learned senior counsel for the appellants  and Mr. Dushyant Dave, learned senior counsel for respondent Nos. 1 & 2  and Dr. A.M. Singhvi, learned senior counsel for the Applicants in IA No.1.   I.A. No.1 was allowed to the limited extent that the applicant therein should  have the liberty of addressing the Court in support of the respondents but  without filing any pleadings.   

Mr. V.R. Reddy, learned senior counsel for the appellant, after  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 is 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

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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 01.04.1998.  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 performance, film or any other programme telecast to a sub- cable operator.  It was submitted that respondent No.1 is a multi-system  operator who receives TV signals and transmits such signals to his sub-cable  operators through his cable television network, is a cable operator within the  meaning assigned by the explanation of sub-section (4a) of Section 4A of  the Act.  After transmission of such signal by respondent No.1 to their sub- cable operator they, in turn, provide cable service for exhibition of such  performance, film or programme to individual customers and entertain them. It was further submitted that respondent No.1 admittedly controls and  is responsible for the management and operation of the cable television  network.  

Our attention was also invited to certain terms and conditions of the  franchise agreement entered into between the cable operator and sub-cable  operator.  According to Mr. V.R.Reddy, learned senior counsel, the services  rendered by respondent No.1 is not restricted only to receiving signals but  also extends to sending certain visual images and audio and other  information by means of telecommunication network for presentation to  members of public and in the present case respondent No.1 sends visual  images and audio signals for presentation to the individual subscribers  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 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 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 respondent No. 1 in relation to any month or part thereof.  It  was further submitted that sub-cable operators, as franchise, cannot render  any service to any subscriber or various independent of or contrary to, any  terms and conditions laid down in the agreement.  A franchisee is merely an  executor within the meaning given by respondent No. 1 in the agreement.   The films, programmes performance can be telecast to the viewers only  when the respondents receive signals and sends image and audio signals to  their sub-cable operator for immediate 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.  

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, which reaches television as  the entertainment itself, is the very signal i.e. the ready entertainment, which  has been transmitted by the cable operator.  Thus providing the cable link up  to the viewer’s end is the only role sub-cable operator has to play.  It is,

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therefore, inconceivable that despite putting 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 of India.   

It was submitted that sub-cable operators are not independent of, or  can act contrary to, any terms and conditions laid down in the agreement.  A  franchisee is merely an executor within the meaning given by respondent  Nos. 1 and 2 themselves in the agreement.  It was further submitted that no  viewers could be entertained by the sub-cable operators alone.   

Elaborating further, Mr. V.R. Reddy submitted that it is the cable  operator not the sub-cable operator, who decides the programme that should  be included to the bunch of programmes.  Out of the large number of  programmes available from satellite, the cable operator chooses those  programmes that he will put on his cable network.  Cable Operator decides  the bunch of programmes that viewers, the householder, connected to him  will be able to see.  The sub-cable operator cannot change the composition  of these bunches; he can neither take out any channels nor add a new one.   Secondly, it is the cable-operator, and not the sub-cable operator, who makes  signals received from satellite ready whenever necessary, for reception by  the TV set of the consumer.  Many of the more popular channels transform  the signals in such a way that the signal cannot be transformed into legible  image and sound unless the signals are just made to pass through a decoder.   For getting for a suitable decoder, the cable operator has to approach the  agency controlling the channel for negotiating the charge to be paid for the  decoder, for getting it after payment and completing other formalities.  In  other words, the bunch of programmes has not only to be assembled, it has  to be made ready for reception by the ultimate consumer.  Thirdly, the cable  operator puts the bunch of channels on his "Cable TV Network" which has  been defined in clause (d) of the Explanation under sub-section (4a) of  Section 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.

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.  According to Mr. Dushyant Dave there is a significant and  qualitative difference between the functions performed by respondent No.1  cable-operator and the activities of the local sub-cable operators who are the  franchisee of the respondent company.  He would further submit that it is  particularly important to note that due to recent technological developments,  the MSOs like the respondent-company are not only providing the input to  the localised cable operators in their business of providing cable TV  connections and transmission of programme through cables, but the MSOs  are also concerned with the value added services like internet, telephony,  and transmission of data.  The respondent-company by the use of the state of  art bi-directional network of 550 MHZ bandwidth is able to receive and  transmit signals telecast on about 40 to 50 channels as at present.   

According to Mr. Dushyant Dave, under sub-section (4a) of Section  4A of the said Act of 1982, the tax is payable by a person provided the  following conditions are fulfilled:

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a)      He is an owner or a person for the time being in possession of  any electrical, electronic or mechanical device; b)      He is a cable operator as defined in Explanation (a) of the sub- section; c)      He receives through such device the signal telecast and  thereafter exhibits the same through cable television network  directly to customers or transmits the same to a sub-cable  operator who in turn provides cable service for exhibition to the  customers; d)      The said owners or the person does the same against payment  received or receivable.  

It was further argued that the activities carried on by the respondents  do not in any view of the matter constitute amusement or entertainment.  At  best the respondents may be providing one of the inputs for the ultimate  creation of an output, which may be said to be entertainment.  The State  Legislature by an artificial definition has treated the respondents as "Cable  Operators".  While in fact and also in law, as per the Cable Television  Networks (Regulation) Act, 1995, the respondents are not "Cable  Operators".  Those who are actually "Cable Operators" within the meaning  of the said Act of 1995 have been artificially excluded from the said  category and termed as "Sub-cable Operators" only for the purpose of  enlarging the scope of the said impost.  It is those sub-cable operators as  they 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 insofar 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 is required to pay the tax is clearly established, the levy cannot be held  to be constitutionally valid.  

It was submitted that for the purpose of levy of entertainment tax it is  the person who directly and ultimately provides the entertainment by  exhibition to the viewers, is liable to pay the entertainment tax.  In the case  of exhibition of a movie in the cinema hall, it is the proprietor of the hall,  who is taxed, as he obviously is the person who provides the entertainment  by charging the necessary monetary compensation.  All other persons who  had participated in the production and distribution of the movie are not liable  to pay entertainment tax.  Similarly, the Cable operator in a locality who is  actually providing the entertainment to this subscribers may be liable to pay  tax but those who function at an intermediary stage, cannot be held liable to  pay the said tax.  Explaining further, Mr. Dave submitted that the impugned legislation  is broad sweep seeks to convert everyone into a cable operator so much so  that the respondents as well as persons with whom the respondent Company  has franchise agreements would be cable operators.  Again, those who are  cable operators within the meaning of the said Central Act of 1995 and are  in franchise agreement with the respondent Company would be sub-cable  operator as also cable operators, at one and the same time.   

It was further submitted that the impugned legislation has made an  irrational classification by putting the respondent Company and its  franchisees holders who are called cable operators under the said Central Act  of 1995 in one class even though they are differently circumstanced.  This

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amounts to treating unequals as equals which is a fact of hostile  discrimination.   

The said provision of the charging section suffers from the vice of  unreasonable classification insofar as it seeks to impose the tax on the  person who provides entertainment to the viewers directly as also on those  who merely sends the signal received by them to the other operators who in  their turn transmits the signals to the consumers.  Even though the said two  functions are distinct and different in nature, they are placed in the same  category by impugned legislation.    That the levy of the said amusement tax suffers from illegality in as  much as it fails to specify the exact nature of receipt which will be 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.

The legislative provision is bad in law because of vagueness,  ambiguous and uncertainty.  This leave 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.  

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.

Dr. A.M. Singhvi, learned senior counsel appearing on behalf of the  intervenor made the following submissions:- A)      Assuming without conceding that Multi System Operators (MSOs)  are also Cable Operators (COs), the impugned levy is  unconstitutional because it travels beyond the very concept and scope  of the word "Entertainment" under Entry 62 List II. B)      Any State levy on entertainment and/or amusement, to be valid, must  necessarily fall within Entry 62 List II, which gives exclusive state  competence, in so far as taxation on these subjects is concerned. C)      The taxable event is thus the act or activity of entertainment.  This  taxable event must have a direct and proximate connection with the  assessee on which it falls and must itself constitute entertainment.   The activity in question must be examined and unless it qualifies as  entertainment itself, the taxable event of entertainment cannot arise.   In the present case, so far as the MSO (assuming without conceding  that MSOs are also COs) are concerned, they do not do the activity of  entertainment in any manner themselves.  They are engaged merely  in the receipt and transmission of telecommunication signals and do  not themselves conduct shows, exhibitions or entertainment of any  kind. D)      If the activity in question by itself is not the taxable event (here  entertainment), the impugned levy cannot constitute it to be so and  deem it to be so. E)      Unless the assessee is itself doing the entertainment, to tax the  assessee would amount to unconstitutional enlargement of the  concept of entertainment.   (i) It would be beyond legislative competence under Entry 62 List II.   (ii) There would be no logical and legal line of demarcation if the  activity in question (here entertainment) could be enlarged by a process  of backward integration.  There would be no logical basis then to not  treat distributors, producers, broadcasters and even the writer, author and  creator of the film, show or serial in question as being an entertainer and

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hence exigible to entertainment tax.  Such enlargement would be clearly  ultra vires and beyond the legislative competence. F)      A close, direct and proximate connection must necessarily exist  between the transaction in question and the person made liable for the  tax in question.  Such nexus must be fair and reasonable.  The  impugned tax cannot involve those not connected directly or  intimately 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  assessee.  Admittedly, the aggregate of all collection by MSOs from  cable operator or sub cable operators is passed back to the  broadcaster and what is retained in the hands of MSO is only a  service charge.  The impugned levy is a tax on the gross receipt of the  assessee/MSO.  It is not a tax on the aforesaid service charge only.   Since the overwhelming proportion is given back by the MSO to the  broadcaster, such a tax constitutes a tax on expenditure of the MSO  and is therefore perverse, unreasonable and unconstitutional. J)      In view of the foregoing, a tax on mere receiving and/or transmitting  of signals will not fall under Entry 62 List II at all and would be the  subject of exclusive parliamentary competence under Entry 31 read  with Entry 97 of List I.   K)      Without prejudice, in the alternative, in any event the respondent  assesses are MSOs and not cable operators and do not fall under the  impugned Act of 1982.  To fall within sub-Section (4a) of Section 4A  of the 1982 Act, the assessee must separately and independently be "a  cable operator".  A MSO is not a cable operator and in particular, do  not "exhibit" programmes "direct to customers" as per Section   4A(4a)(i) and does not "transmit such signals to a sub cable operator"  under Section 4A(4a)(ii).  The impugned Act of 1982 will cover only  a cable operator who is also an MSO and not an MSO simplicitor.  To  that extent, the impugned provision is severable and should be  declared and held to apply only to an entity(any entity (MSO or  others) who is also a cable operator). L)      Given the nature of activity of MSOs summarized above, it is clear  that MSOs have not recovered any of the impugned tax amounts  either from subscribers or from cable operators/sub cable operators.   Levy and recovery upon MSO would be unreasonable since they  have no means of recovery from subscriber/cable operator/sub cable  operator. M)      Without prejudice, in the alternative, the impugned levy and/or  recovery should be prospective, if at all from after the judgment of  the apex Court in the event that the judgment allows the appeal of  the State of West Bengal.  After the levy in 1998, tax was paid for  sometime after which payment was stopped by the assessee and  legal challenges were mounted.  In different cases from mid 2000  onwards up to date from different dates, there has been no payment  of the tax in question and no recovery from 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

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subscriber or operator.     

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, 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?   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 deeper examination, it  doesn’t appear to be correct and sustainable.   

In the instant case, respondent No.1 is engaged in receiving and  providing TV signals to individual cable operators is liable to pay tax under  sub-section (4a) of Section 4A of the Act.  The expression "cable operator"  has been defined by explanation to sub-section (4a) of Section 4A as  aforesaid for the purpose of the sub-section only.  Similarly, the meaning of  sub-cable operator is given in the said explanation.  There is no dispute that  the respondent No.1 being a cable operator within the meaning assigned by  the explanation to sub-section (4a) of Section 4A receives TV signals and  transmits such signals to their sub-cable operator through their multi-system  operator which is, in other words, a cable television network.  There is also  no dispute that after transmission of such signals by respondent No.1 to their  sub-cable operators they, in turn, provide cable service for exhibition of such  performance, film or programme to individual customers.  The respondents  have, in fact, admitted this position.  The respondents are carrying on  business as Multi System Operator (MSO) being engaged in receiving and  providing TV signals only to the individual cable operators of various  localities.   

The Cable Television Networks (Regulation) Act, 1995, a central  legislation has been enacted to regulate the operation of cable television  networks in the country and for matters connected therewith.  This  enactment does not, in our opinion, fetter the legislative power or  competence of the State to levy tax on luxuries including taxes on  entertainments, amusements, betting and gambling falling under Entry 62 of  List II of Seventh Schedule to the Constitution.  The power of regulation or  control under the said central enactment is separate and distinct from the  power of taxation by the State legislature under Entry 62 of List II being a  specific power, the power of taxation cannot be cut down or fettered by the  general power or regulation as exercised by the Parliament in enacting the  said 1995 Act.  Under the Legislative field exclusively reserved for the State  Legislature, the levy of tax by more than one statute on different taxable  objects and taxable persons is not prohibited by the Constitution of India.   The Bengal Amusement Act, 1922 and the West Bengal Entertainment and  Luxurious (Hostel and Restaurants) Act, 1972 are two statutes which have  been enacted under the same legislature field i.e. Entry 62 of List II of  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 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

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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 4(a) 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  management and operation of a cable television network and such person  has been defined as "Cable Operator" being a taxable person exclusively for  the purpose of levy and collection of entertainment tax only when a cable  operator so defined receives through any electrical, electronic and mechanic  device the signal of any performance, film or any other programme telecast  and provides cable service directly to consumers or transmits signals to a  sub-cable operator through a cable television network and otherwise controls  or is responsible for the management and operation of a cable television  network.  The person who has been defined as cable operator exclusively for  the purpose of levy and collection of entertainments tax has a direct and  proximate nexus with the amusements and entertainments to the viewers at  every home or place inasmuch as he is the person directly connected with  presentation of entertainments to the subscribers.  A person is also a "cable  operators" for the purpose of sub-Section 4(a) of Section 4A of the said 1982  Act when he receive the signal of any performance, film, or any other  programme telecast and transmits such signal to a sub-cable operator  through cable television network or otherwise control or is responsible for  the management and operation of cable television network against payment  received or receivable by him.  Therefore, a cable operator is the source of  entertainment to the individual subscribers because, it is he who receives the  signal of performance, film, and any programme which transmitted or given  to a large number sub-cable operator (although they call them as cable  operator).  The viewers enjoy, or are entertained by such performance, film,  or programme because of receiving and transmitting video or audiovisual  signals through coaxial cable or any other device by the respondents.  No  entertainment can be presented to the viewers unless a cable operator  transmits the video and audio signals to a sub-cable operator for  instantaneous presentation of any performance, film or any programme on  their T.V. screen.  The sub-cable operators are mere franchisees who  receives signals for transmission to the viewers only on payment of price  promised or paid in terms of agreements entered by and between them.     This is clear from the below set out terms of the Franchise Agreement:  

GRANT         The NETWORK hereby grants to the FRANCHISEE 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.  

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The FRANCHISEE would submit complete information and  not withhold the name of subscribers or declare less number of  subscribers to the NETWORK. (d)     The FRANCHISEE is authorised to receive and immediately  re-transmit and/or communicate the signals of the NETWORK.   Recording and then retransmission of the signals by the  FRANCHISEE is not allowed.  However for any such  intentions the FRANCHISEE will have to take written  permission from the NETWORK. (j)     The FRANCHISEE shall not transmit or restraint any signals to  his subscribers which are not transmitted by the NETWORK  without the prior written consent of the NETWORK. (m)     The FRANCHISEE shall be liable to pay all applicable taxes,  charges etc. levied or imposed by the Government or which  may be imposed in future by the Govt. or any other statutory or  regulatory body of the region.

Therefore, the respondents as a cable operator have direct and  proximate nexus with the entertainments provided by them through their  cable television network and, as such, they are the taxable person in respect  of their gross receipts in relation to any month for providing entertainments  to the individual viewers.  Therefore, the respondents have a direct and  proximate nexus with the entertainments presented to the viewers inasmuch  as in terms of the respondent’s agreement vide clause 4(d) "Recording and  then retransmission of the signals by the franchisee is not allowed".  That  apart, the name of every subscriber having connection with the respondent’s  network must be on their records and the franchisee must furnish  information of business honestly and completely to the respondents pursuant  to clause 4(c) of the said agreement.  In the event, any charge received from  a subscriber is not paid to the respondent, the franchisee shall pay a sum  equivalent to three times of the amount that the franchisee has saved by not  paying the requisite amount to the respondents in respect of such subscriber.

 In our view, the respondents as a cable operator, for the purpose of  levy and collection of tax under sub-section (4a) of Section 4A of the Act  have direct and close nexus with the entertainments made available to the  viewer through their cable television network.  The performance, film or  programmes shown to the viewers through the cable television network  come within the meaning of entertainments and therefore within the  legislative competence of the State Legislature under Entry 62 of List II of  Seventh Schedule to the Constitution of India to make law for the levy and  collection of tax on such entertainments.  

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

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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).   

We also see no substance in the submission that the impugned  legislation impinges on the field occupied by the central legislation.  The  aforesaid central legislation has been enacted to regulate the operation of  cable television network in the country and matters connected therewith or  incidental thereto whereas the State Legislation is for levy of entertainment  tax on entertainment within the legislative field exclusively assigned to the  State Legislature under Entry 62 of List II of Seventh Schedule of the  Constitution.  Thus the objects sought to be achieved by two different Acts  enacted under two different legislative fields exclusively assigned to the  respective Legislatures are entirely distinct and separate.  The Cable  Television Networks (Regulation) Act, 1995 of the Union Legislature does  not denude the State Legislature for levying entertainment tax on  entertainment.  

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

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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.  From the definition of  "Communication network" given in the agreement between the cable  operator and sub-cable operator (termed as Franchise in the agreement), will  be clear that the 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.   

Who will be considered the giver of the entertainment \026 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 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.  

It must finally be mentioned that learned counsel for the respondents  placed reliance upon the case of The Western India Theatres Ltd. vs. The  Cantonment Board, Poona, Cantonment reported in [1959] Supp. (2) SCR  63.   In this context, it is important to refer to the case of Express Hotels

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Private Ltd. vs. State of Gujarat and Another reported in (1989) 3 SCC 677  in which the Constitution Bench had dealt elaborately with Western India  Theatres Ltd. case (supra).  In the said case, 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 &  amusements and both may with equal propriety be made amenable to tax."  

       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  in support of the contention that unless there is actual utilization of luxury no  tax can be levied on the mere existence of the provisions made, for the  prospective or the potential utilization of the luxury (para 24)

       The counsel in the above case further relied on decision of High Court  of Bombay in Ramesh Waman Toke’s case wherein the context of levy on  entertainment it was observed that the levy can be only on entertainment  which is actually held and not on entertainment which is theoretically  capable of being sold.  

       The Constitution Bench did not accept the counsel’s understanding of  the ratio in Western India Theatres case and did not also approve the  reasoning of the High Court at Bombay. (See page 692, para 24, 25).

       Therefore, there is no substance in the contention that taxable event is  entertainment and there can be no tax if there is no entertainment.  As held  by Constitution Bench existence of means of providing entertainment would  be sufficient to support a law imposing tax thereon and that means of  providing entertainment provides the nexus between the taxing power and  the subject of tax.  

If we are looking at the means of providing entertainment, both the  cable operator and the sub cable operator play equally significant role in  providing such means of entertainment, namely, transmission of signals  received from the satellites in one sense the cable operator plays a more  pivotal role than the sub cable operator since the signals are received by him  through his devices and transmitted while a sub cable operator makes  provision for continued instantaneous transmission of the signals.           The arguments advanced by learned senior counsel for the  respondents with reference to Entry 31 of List I is misplaced since the  impugned legislation cannot by any stretch of imagination be said to be one  in pith and substance relating to Broadcasting.  If, levy of tax upon the sub  cable operator treating him as provider of entertainment admittedly falls  under Entry 62 making cable operator liable can by no means take it out of  the purview of Entry 62.          Accordingly, we find merit and substance in the arguments advanced  by learned senior counsel for the appellant assisted by Mr. Tara Chand  Sharma.  We find no substance in the contention of the respondents counsel.   The judgment and order dated 04.08.2000 in W.P.T.T. No. 338 of 2000  passed by the High Court at Calcutta stands set aside and the Civil Appeal is  allowed without any order as to costs.