# ST ATE OF WEST BENGAL AND ORS v. PURVI COMMUNICATION PVT. LTD. AND ORS

- **Citation:** [2005] 2 S.C.R. 954
- **Court:** Supreme Court of India
- **Decided:** 2005
- **Case number:** Civil Appeal No. 2508 of2001
- **Bench:** S.N. Varia Va, Dr. Ar. Lakshmanan, S.H. Kapadia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/st-ate-of-west-bengal-and-ors-v-purvi-communication-pvt-ltd-and-ors-20538
- **Pages:** 29

## Headnote

West Bengal Entertainment-cum-Amusement Tax Act, 1982 with
C amendments; Section 4(A)(4a)(ii)/Cable Television Networks (Regulations) Act,
1955/Constitution of India, 1950, Article 286; Entry 62 of List-fl of Seventh
Schedule:
Transmission of T. V. Signals by Multi System Cable Operator to subD cable Operators against a price-Levy of entertainment tax-Constitutionality
of-Dismissed by Taxation Tribunal-Allowed by High Court holding that
Section 4(A)(4a)(ii) of 1982 Act is ultra vires the Constitution-On appeal,
Held : Cable Operator transmits signals to sub-cable operators under a
franchise agreement-No entertainment to viewers/subscribers could be
provided unless signals are transmitted by the Cable Operator-Thus, not
E only sub-cable operators but also the Cable Operator have direct and proximate
nexus with the entertainments presented to the viewers-Hence, levy of
entertainment tax on cable operator/sub-cable Operators is within the
competence of the State Legislature under Ent1y 62 of List fl of the Seventh
Schedule of the Constitution-Since charging Section 4(A)(4a)(ii) is very clear
F and unambiguous, levying of the tax not violative of fimdamental rights as
guaranteed under Article 19(/)(g) of the Constitution-Bengal Amusement
Act, 1922-West Bengal Entertainment and Luxuries (Hotel and Restaurant)
Act, 1972.
Cable Television Networks (Regulatio11) Act vis-a-vis 1982 ActG Taxation-Overlapping of-Held: No overlapping since power of regulation
under the Central enactment is separate and distinctive from the power of
taxation by the State Legislature under Entry 62 of List-11 of the ConstitutionThough both the Statutes apply to levy of on amusement/entertainment tax but
areas of application of the two Acts are d{fferent.
H
954
--
STATE v. PURVICOMMUNICATION PVT. LTD.
955
Words and Phrases :
'Cable Operator', 'Sub-cable Operator', 'Cable Service', 'Cable
Television Network', 'subscriber' and 'gross receipt '-Meaning of
The questions which arose for determination in this appeal were as
A
to whether Clause (ii) of sub-section (4a) of Section 4A of the West Bengal B
Entertainment-cum-Amusement Tax, 1982 (as amended by the West
Bengal Finance Act, 1998) is beyond the legislative competence of the St'ate
Legislature and as to whether respondent No. 1-Muiti-system Operator
and respondent No. 2-Sub Cable operator would come within the purview
of Clause (ii) of sub-section (4a) of Section 4A of the Act as they are the
persons who exhibit such performance through cable Television Network C
through the sub-Cable Operators.
Allowing the appeals, the Court
HELD : I. Respondent No. 1 engaged in receiving and providing
TV signals to individual cable operators is liable to pay the entertainment D
tax under sub-section (4a) of Section 4A of the West Bengal Entertainmehtcum-Amusement Tax Act, 1982. (973-B)
2.1. 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 E
enactment does not 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 61 of List II of Seventh Schedule
to the Constitution. The power of regulation or control under the centtal
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 F
taxation cannot be cut down or fettered by the general power or reguiati(m
as exercised by the Parliament in enacting the 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. (973-E-F-G)
G
· 2.2. The Bengal Amusement Act, 1922 and the West Bengal
Entertainment and Luxurious (Hostel and Restaurants) Act, 1972 are two
statutes

## Text

_Characters 0–39,987 of 71,564. This is a partial read: ask again with offset=39987 for what follows._

A
ST ATE OF WEST BENGAL AND ORS.
v.
PURVI COMMUNICATION PVT. LTD. AND ORS.
B
MARCH I 6, 2005
[S.N. VARIA VA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.]
West Bengal Entertainment-cum-Amusement Tax Act, 1982 with
C amendments; Section 4(A)(4a)(ii)/Cable Television Networks (Regulations) Act,
1955/Constitution of India, 1950, Article 286; Entry 62 of List-fl of Seventh
Schedule:
Transmission of T. V. Signals by Multi System Cable Operator to subD cable Operators against a price-Levy of entertainment tax-Constitutionality
of-Dismissed by Taxation Tribunal-Allowed by High Court holding that
Section 4(A)(4a)(ii) of 1982 Act is ultra vires the Constitution-On appeal,
Held : Cable Operator transmits signals to sub-cable operators under a
franchise agreement-No entertainment to viewers/subscribers could be
provided unless signals are transmitted by the Cable Operator-Thus, not
E only sub-cable operators but also the Cable Operator have direct and proximate
nexus with the entertainments presented to the viewers-Hence, levy of
entertainment tax on cable operator/sub-cable Operators is within the
competence of the State Legislature under Ent1y 62 of List fl of the Seventh
Schedule of the Constitution-Since charging Section 4(A)(4a)(ii) is very clear
F and unambiguous, levying of the tax not violative of fimdamental rights as
guaranteed under Article 19(/)(g) of the Constitution-Bengal Amusement
Act, 1922-West Bengal Entertainment and Luxuries (Hotel and Restaurant)
Act, 1972.
Cable Television Networks (Regulatio11) Act vis-a-vis 1982 ActG Taxation-Overlapping of-Held: No overlapping since power of regulation
under the Central enactment is separate and distinctive from the power of
taxation by the State Legislature under Entry 62 of List-11 of the ConstitutionThough both the Statutes apply to levy of on amusement/entertainment tax but
areas of application of the two Acts are d{fferent.
H
954
--
STATE v. PURVICOMMUNICATION PVT. LTD.
955
Words and Phrases :
'Cable Operator', 'Sub-cable Operator', 'Cable Service', 'Cable
Television Network', 'subscriber' and 'gross receipt '-Meaning of
The questions which arose for determination in this appeal were as
A
to whether Clause (ii) of sub-section (4a) of Section 4A of the West Bengal B
Entertainment-cum-Amusement Tax, 1982 (as amended by the West
Bengal Finance Act, 1998) is beyond the legislative competence of the St'ate
Legislature and as to whether respondent No. 1-Muiti-system Operator
and respondent No. 2-Sub Cable operator would come within the purview
of Clause (ii) of sub-section (4a) of Section 4A of the Act as they are the
persons who exhibit such performance through cable Television Network C
through the sub-Cable Operators.
Allowing the appeals, the Court
HELD : I. Respondent No. 1 engaged in receiving and providing
TV signals to individual cable operators is liable to pay the entertainment D
tax under sub-section (4a) of Section 4A of the West Bengal Entertainmehtcum-Amusement Tax Act, 1982. (973-B)
2.1. 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 E
enactment does not 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 61 of List II of Seventh Schedule
to the Constitution. The power of regulation or control under the centtal
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 F
taxation cannot be cut down or fettered by the general power or reguiati(m
as exercised by the Parliament in enacting the 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. (973-E-F-G)
G
· 2.2. 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 to levy of tax on amusements, entertainments and luxuries H
956
SUPREME COURT REPORTS
(2005] 2 S.C.R.
A in the.ir respective area but the area of application of the 1982 Act is
different from the provisions of 1922 Act and the 1972 Act.
[973-G-H; 974-A[
2.3. The purpose of sub-Section 4(a) of Section 4A of the I 982 Act is
to levy and collection of tax from any person who provide cable service
B 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
C 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. [974-B-C-D-E]
D
2.4. No e.ntertainment 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
E promised or paid in terms of agreements entered by and between them
as per terms of the franchise agreement. (974-G-H; 975-A)
3.1. 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
F 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". [976-C-D)
G
3.2. 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
H such entertainments. The tax may be imposed not only on the person
-
STATE v. PURVI COMMUNICATION PVT. LTD.
957
spending on entertainment but also on the act of a person entertaining, A
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. 1976-F-G; 977-A-BI
3.3. The respondents' act is, no doubt, an act of offering
entertainment to the subscribers and/or viewers. Tile respondent is very · B
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- C
cable operator under the 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. It is the
respondents who as cable operator is engaged in the business of providing
or offering entertainments and the tax is imposed on the act of offering
such entertainments in this way to such subscribers and/or viewers. The p
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 1982 Act which has a direct and sufficient nexus
with the entertainments. (977-C-D; F-G-H)
4.1. 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,
E
F
and as such owner or person exhibits such performance, film or any other G
programme through his cable television network directly to customers he
is liable to pay tax. [978-A-B-q
4.2. 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 H
958
SUPREME COURT REPORTS
[2005] 2 S.C.R.
A whom the legal liability to pay tax falls 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 ilo uncertainty or vagueness of the legislative scheme.
B Thetax levied by sub-section (4a) of Section 4A of the 1982 Act does not
interfere wtth or violative of the fundamental rights guaranteed under
Article 19(l)(g) of the Constitution. (978-C-D-E)
5.1. 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,
C 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
D exhibitor or the giver, of the entertainment. (979-G-H; 980-A)
5.2. Clause (i) of sub-section (4a) of Section 4(A) of the Act speaks
of a situation where the cable operator "exhibits directly". Clause (ii)
speaks of the situation where the cable operator does not exhibit directly,
E 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. (980-B-C-D)
F
5.3. Both the cable operator and the sub cable operator play equally
significant role in providing the means of entertainment. 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
G transmission of the signals. (981-E-F)
Express Hotels Private Ltd. v. State of Gujarat and Anr., (1989) 3 SCC
677, followed.
The Western India Theatres Ltd. v. The Cantonment Board, Poona,
H Cantonment, (1959) Supp. 2 SCR 63, held inapplicable.
-
ST ATE v. PURVI COMMUNICATION PVT.LTD. [LAKSHMANAN . .I.] 959
5.4. Respondent No. I-cable operator is the exhibitor and also the A'
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. The 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. 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 B
or the laws made thereunder, the State Act validity is beyond question.
Thus, respondent No. I is liable to pay tax under clause (ii) of sub-section
(4a) of Section 4A of the 1982 Act. (978~A-B-C)
5.5. The impugned legislation cannot by any stretch of imagination C
be said to be one in pith and substance relating to Broadcasting. If, levy
of tax upon the sub cable operators treating them 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 of List II of
the Constitution. (981-G)
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2508 of2001.
From the Judgment and Order dated 4.8.2000 of the Calcutta High
Court in W.P.T.T. No. 338 of 2000.
D
Tara Chandra sharma, Ms. Neelam Sharma, Tarun Sharma, Rajeev E
Sharma, Ajay Sharma, Rupesh Kumar for the Appellants.
Maninder Singh, Mrs. Pratibha M. Singh, Angad Mirdha, Kirti ·Man
Singh and Saurabh Mishra for the Respondents Nos. 1-2.
Dr. A.M. Singhvi, K.V. Vishwanath&n, Ameet Bhandari, Ms. Gauri F '
Rasgotra and Sanjeev Kumar for the Applicants in I.A. No. I.
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 G
was granted by this Court on 30.03.200 I 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 H
960
SUPREME COURT REPORTS
[2005] 2 S.C.R.
A Nos. land 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, I 998) is ultra vires to the Constitution.
Respondent No. I carries on business as a Multi System Operator
(hereinafter referred to as 'MSO') and is engaged in receiving and providing
B 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
C 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
D that all those signals can travel together in cables without encroaching upon
and interfering with other signals· for the reception and distribution by the socalled 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.
E
Respondent No. I entered into Franchise Agreement with the individual
cable operators of various localities and on the basis of the said agreement,
respondent No. I transmits the said TV signals to the said individual subcable operators against. a price. The individual sub-cable operators on the
basis of the monthly subscription provide the said TV signals to the individual
p subscribers of the locality.
The Parliament of India enacted the Cable Television Netw<;>rks
(Regulation) Act, I 995 which was given effect from 29.09. I 994. 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
G Legislature sought to impose a tax on the MSOs and the cable operators by
amending the West Bengal Entertainment-cum-Amusement Tax Act, I 982.
The said Act was amended by omitting sub-section (4) of Section 4A and
inserted a new sub-section ( 4a) reading as under : -
H
"(4a) Where any owner, or any person.for the time being in possession,
of any el~ctrical, electronic or mechanical device, is a cable operator.
-
l·
STATE v. PURVI COMMUNICATION PVT.LTD. [LAKSHMANAN . .I.] 961
and receives through such device the signal of any performance, film A
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 tum providys
cable service for exhibition of such performance, film or programme
to the customers,
B
such owner or person shall be liable to pay tax from the month in
which he exhibits such performance, film or programme or transmi~s C
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 D ·
reproduced hereunder : -
"Taxes on luxuries, including taxes on entertainments, amusements,
betting and gambling."
Section 4A reads thus :
"4A. Levy and collection of tar: 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
E
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, p
where such holder makes any public performance or exhibition of
film through a video cassette recorder set or a video cassette playe~
set against payments made or to be made by persons admitted to
witness such performance or exhibition at the rates specified
below ........ "
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
G
to customers or transmits signal to sub-cable operator through a cable-television
network and otherwise controls or is responsible for the management and! H
962
SUPREME COURT REPORTS
[2005] .2 S.C.R.
. A 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
B 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;
C
"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;
D
"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 for
exhibition of any performance, film or any other programme telecast to a
E sub-cable operator."
2(d) "Subscriber" means a person who receives the signals of c:able
television network at a place indicated by him to the cable operator,
without further transmitting it to any other person.
p
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
G
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 ~ecome liable to pay tax under the said suh-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
H and to pay the tax. According to them, it is the said local operators who have
ST ATE v. PURVI COMMUNICATION PVT.LTD. [LAKSHMANAN. J.] 963
direct contractual nexus with the consumers/viewers/households are taxed for A
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. B
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, C
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 D
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, E
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 de.tailed 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 F
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 G
and Mr. Dushyant Dave, learned senior counsel for respondent Nos. 1 and 2
and Dr. A.M. Singhvi, learned senior counsel for the Applicants in IA No.
1. I.A. No. l 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.
H
964
SUPREME COURT REPORTS
[2005] 2 S.C.R.
A
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
B of the State Legislature and is not ultra vires to the Constitution. Respondent
No. I 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 0 l .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)
C 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
D 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 mear. ing assigned by the explanation of sub-section ( 4a) of Section
4A of the Act. After transmission of such signal by respondent No. I to their
. E sub-cable operator they, in turn, provide cable service for exhibition of such
performance, film or programme to individual customers and entertain them.
F
It was further submitted that respondent No. I 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. I is not restricted only to receiving signals but
also extends to sending certain visual images and audio and other information
G by means of telecommunication network for presentation to members of
public and in the present case respondent No. I 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
H access to the signals provided by respondent No. l. Therefore, it cannot be
-
STATE v. PURVI COMMUNICATION PVT. LTD. [LAKSHMANAN . .I.] 965
disputed that the price or prices received or receivable by respondent No. 1 A
is the amount received or receivable by him for transmitting the signal for
exhibition of any perfonnance, 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 subcable operators, as franchise, cannot render any service to any subscriber or .$
various independent of or contrary to, any tenns 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 perfonnance
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 C
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.
D
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 E
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 fonn 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, F
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, 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 G
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 H
966
SUPREME COURT REPORTS
(2005] 2 S.C.R.
A Nos. l 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
operntor not the sub-cable operator, who decides the programme that should
be included to the bunch of programmes. Out of the large number of
B programmes available from satellite, the cable operator chooses those
programmes that he will put on his cable network. Cable Oper~tor 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.
C 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
D 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
E 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
F of being exhibited and cannot be postponed in time.
Per contra, Mr. Dushyant Dave, learned senio( 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 cableoperators on their part transmit 'the signals to their respective subscribers,
G who are the actual consumers who get the benefit of the amusement or
entertainment from those signals. According to him, in technological tenns,
\_
it may be stated that respondent No. I 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
H providing information and entertainment to their customers. According to
t
STATE v. PURVI COMMUNICATION PVT.LTD. [LAKSHMANAN. J.] 967
Mr. Dushyant Dave there is a significant and qualitative difference between A,
the functions perfonned by respondent No. I 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 respondentcompany 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 :
c'
(a) He is an owner or a person for the time being in possession of D
any electrical, electronic or mechanical device;
(b) He is a cable operator as defined in Explanation (a) of the subsection;
(c) He receives through such device the signal telecast and thereafter
exhibits the same through cable television network directly to E
customers or transmits the same to a sub-cable operator who in
tum provides cable service for exhibition to the customers;
(d) The said owners or the person does the same agai11st payment
received or receivable.
It was further argued that the activities carried on by the respondents F
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 G
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 H
968
SUPREME COURT REPORTS
(2005] 2 S.C.R.
A 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
B 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 orie 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
C 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.
D
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
o: a movie in the cinema hall, it is the proprietor of the hall, who is taxed,
E 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.
F
Explaining further, Mr. .Dave submitted th_at 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
G 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
H one class even though they are differently circumstanced. This amounts to
STATE v. PURVI COMMUNICATION PVT. LTD. [LAKSHMANAN, J.] 969
treating unequals as equals which is a fact of hostile discrimination.
A
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
tum transmits the signals to the consumers. Even though the said two functions B
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 C
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
D
·'luxury' or 'entertainment' or 'amusement'. In the instant case.the same has E
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 relatiomdp
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.