Entertainment Tax leviable in Delhi on Multi-System & Local Cable Operators

FULL EXTRACT OF THE JUDGMENT

1. These petitions raise common issues and were, therefore, heard together and are being decided together. Siti Cable Networks Limited v. Government of NCT of Delhi and Another [WP(C) 427/2014] was considered as the lead case.

2. All the petitioners are multi-system operators (MSOs). They are aggrieved by the circular dated 17.12.2012 as also notices similar to the notice dated 08.01.2014 issued to the petitioner in WP(C) 427/2014. Declarations are also sought to the effect that Section 2(o) read with Section 7 of the Delhi Entertainments and Betting Tax Act, 1996 (hereinafter referred to as “the said Act”) be declared as vague and ambiguous and, therefore, resulting in no levy of tax in law. Prayers have also been sought seeking the quashing of Section 8 of the said Act as also Rule 12 of the Delhi Entertainments and Betting Tax Rules, 1997 (hereinafter referred to as ^‗the said Rules‘) to the extent they regulate cable television services provided by the petitioners. A restraining order is also sought against the respondents prohibiting transmission of cable TV signals in the National Capital Territory of Delhi.

3. In sum and substance, the grievance of the MSOs is that by virtue of the circular dated 17.12.2012 they are being foisted with the liability to collect and pay entertainment tax when, according to them, such liability/responsibility is that of the cable operators. It is also the case of the MSOs that the circular dated 17.12.2012 is, in any event, without the authority of law and cannot be sustained in view of the provisions of the said Act and the said Rules. The notice dated 08.01.2014 and other similar notices to the other MSOs are also challenged inasmuch as they are a consequence of the circular dated 17.12.2012.

4. On the other hand, the case of the respondents is that by virtue of the provisions of the said Act and the said Rules, the MSOs, since under the new regime they were required to bill the customers directly, are liable to collect and pay the entertainment tax to the government. It was also submitted that the circular dated 17.12.2012 was not without authority and had been issued under the powers given by Section 46 of the said Act.

5. At this juncture, it would be appropriate to set out the impugned circular dated 17.12.2012 issued by the Entertainment Tax Officer. The same reads as under:-

^“GOVT. OF N.C.T. OF DELHI
OFFICE OF THE COMM ISSIOINER EXCISE, ENTT. & LUXURY TAX
L- BLOCK VIKAS BHAWAN, NEW DELHI

(ENTERTAINMENT TAX BRANCH)

No. F. 13(4)/ETO/12-13/4284

Dated: 17.12.2012

To,

The All MSOs (List enclosed)

National Capital Territory of Delhi

Wire & Wireless India Ltd

Essel House, B-10

Lawrence Road Indl Area,

Delhi-35 (Siti Cable)

Sub. – Payment of due Entt. Tax for operation of cable network.

Sir,

You are aware that the Central Govt. had made it obligatory for every Cable Operator to transmit or re-transmit telecast of any channel in an encrypted form through the Digital Addressable System (DAS) from ₁st November, 2012 in four metros i.e. Delhi, Mumbai Chennai and Kolkata. After implementation of DAS in NCT of Delhi control over the cable television network has been shifted from LCOs to MSOs. Under the new system only the MSOs can encrypt the cable signal and decrypt the same through their set-top boxes. Every MSO has its own set top box and local cable operator has no control over it except seeding it to the subscriber. Through set-top boxes MSOs are in position to know exact number of subscribers/connections at a given point of time. However, in a recent meeting held with the MSOs they have submitted that they are in the process of compiling the entire data base of subscribers by collection of SAF forms from the customers through cable operators.

It would have been ideal for the Depaiment in the changed situation  as elaborated above, the collect tax only through MSOs. However, keeping  in view, the submissions of MSOs. It has been decided that the existing system of collection and deposition of tax through LCOs will continue till 31^st March, 2013. In this period MSOs will make sure that the entire data base of subscribes is ready with them. From the month of April, 2013  onwards the tax will be Collected by the MSOs and deposited with the  Department by the 7^th of May, 2013. However, it is also clarified here that  MSOs & LCOs are jointly and severally responsible for payment of Entertainment Tax and will be liable to be proceeded against in case of default.

Sd/-

17/12/2012 (S.N. SAH)

Entt. Tax Officer

Copy to

All ETIs for strict compliance

Sd/-

17/12/2012 (S.N. SAH)

Entt. Tax Officer.^‖

(underlining added)

6. It is also necessary to set out the notice dated 08.01.2014, which was received by the petitioner in WP(C) 427/2014 (similar notices have been received by the other petitioners). The said notice is as under:-

^“OFFICE OF THE COMMISSIONER EXCISE, ENTT. & LUXURY TAX
GOVT. OF N.C.T. OF DELHI
L-BLOCK, VIKAS BHAWAN, NEW DELHI
(ENTERTAINMENT TAX BRANCH

No. F. 5720

Dated: 8.1 .2014

NOTICE

Vide order No. F.13(4)/ETO/12-13/4284, Dated 17/12/2012 all the MSOs were directed to collect entertainment tax for cable television as per provisions of the Delhi Entertainments and Betting Tax Act, 1996 (hereinafter the Act) and deposit the same in the Department for the month of April, 2013 onwards (copy enclosed).

As per the Rule 26 of Delhi Entertainments and Betting Tax Rules, 1997 the proprietor of a cable television network is liable to pay tax in accordance with sub-section (1) of Section 7 of the Act shall file monthly returns in Form 10

Further, as per record available in this office M/s Siti Cable has installed 5,63,616 STBs as on 05.06.2013 whereas M/s Siti Cable has partly deposited tax for the period June 2013 to December 2013. Thus, M/s Siti Cable has neither filed returns nor deposited entire due tax as per provisions of Act. Thus M/s Siti Cable has breached the provisions of the aforesaid Act & Rules.

As per section 39(1) of the Act, the amount of any tax, penalty or other amount due under any provision this Act shall, without prejudice to any other mode of recovery available to the Government under any law for the time being in force, be recoverable as arrears of land revenue.

Further, as per section 8(3) of the Act television signals through cables of M/s Siti Cable, can be prohibited in the National Capital Territory of Delhi by taking all reasonable steps for breaching the provisions of the said Act and Rules.

Now, therefore, M/s SITI Cable is hereby directed to file returns in Form-10 and deposit due Entertainment Tax along with up to date interest payable as per prescribed rate under the said Act, within 07 calendar days from the date of issue of this notice and appear before the undersigned on 16.01.2014 at 11.30 AM in Room No. 203, L-Block, Vikas Bhawan, New Delhi, along with all the relevant documents/ record to show cause as to why television signals through cables of M/s SITI Cable, should not be prohibited in the National Capital Territory of Delhi by taking all reasonable steps for breaching the provisions of the said Act and Rules.

Please take notice that in the event of your failure without sufficient reason to comply with this notice necessary action as deemed fit shall initiated under the provisions of the Delhi Entertainment and Betting Tax Act, 1996 without any further notice.

Sd/-

Entertainment Tax Officer

M/s SITI Cable Network Ltd.

Essel House, B-10,

Lawrence Road Industrial Area, Delhi-1 10035.^‖

7. On behalf of the petitioners, it was submitted that Section 7 was the charging section in the said Act. The said provision clearly stipulated that the entertainment tax was to be collected by the ^‗proprietor‘ and paid to the government in the prescribed manner. Referring to the decision of a Division Bench of this Court in Bharti Tele Media v. Government of NCT of Delhi: (2011) 44 VST 262, it was submitted that the levy under the said Act is on entertainment and it is paid in respect of all payments for admission to entertainment. It is to be collected by the proprietor and paid to the government in the manner prescribed. The tax is neither on the person nor on a thing but on the activity of entertainment and the proprietor is only a collector of entertainment tax on behalf of the

8. Referring to the other provisions of the said Act and, in particular, Section 2(o), which gave the definition of ‘proprietor‘, it was submitted that such definition was wide enough to include a broadcaster, a multi-system operator (MSO) and the (local) cable operator (LCO). It was submitted that though the definition of proprietor could include all such persons/entities, the liability to collect and pay the tax could be only on one person and that person had to be clearly defined. It was submitted, by referring to the various provisions of the said Act, that that person was the one who provided the service by the transmission by cables. It was, therefore, contended that it is only the service provider who provided the service to subscribers who would be liable to collect the tax and pay the same to the Government.

9. A reference was also made to the notification dated 01.04.1998 which was issued by the Government of NCT of Delhi in exercise of the powers conferred under Section 7(1) of the said Act. The said notification reads as under:-

^“F 12(5)/97-Fin./(G)(i)/65, Delhi, the 1st April, 1998