Allahabad High Court
Sunil Kumar Sharma And 4 Others vs State Of U.P. And 3 Others on 26 August, 2019
Author: Saumitra Dayal Singh
Bench: Saumitra Dayal Singh
HIGH COURT OF JUDICATURE AT ALLAHABAD Court No. - 59 Case :- WRIT TAX No. - 600 of 2015 Petitioner :- Sunil Kumar Sharma And 4 Others Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Pramod K. Sinha Counsel for Respondent :- C.S.C.,S.C. Hon'ble Saumitra Dayal Singh,J.
1. Heard Sri Pramod K. Sinha, learned counsel for the petitioners and Sri A.C. Tripathi, learned Standing Counsel for the State.
2. The present petition has been filed against the order dated 09.07.2015 passed by the appellate authority, by which the appeal filed by the petitioners against the order dated 05.06.2010 passed by the District Magistrate, Rampur, assessing them to entertainment tax at Rs. 6,61,049/-, has been rejected.
3. Learned counsel for the petitioners submits that, undisputedly, the petitioners had operated the Control Room, Space Cable Network, Rampur (hereinafter referred to as the MSO), under the Cable Television Networks (Regulation) Act, 1995. That Control Room functioned similar to a MSO as came to be defined later, under section 2(k-1) of the Uttar Pradesh Entertainments and Betting Tax Act, 1979 (hereinafter referred to as the Act). They never supplied directly, digital signal to any individual consumer. The petitioners only supplied digital signal to four individual cable operators namely, Vinod Chaudhary; Bajjan @ Bhaiya; Naim Khan and; Tahir Miyan (hereinafter collectively referred to as the four cable operators), upto March, 2005. It appears that initially assessments to tax were made against the four cable operators, for different amounts being Rs.2,21,698/-, Rs.1,19,696/-, Rs.1,47,293/- and Rs.1,72,362/-. Thus total demand Rs.6,61,049/- was created against them. The said demand remained unrecovered. The same was then tried to be recovered from the present petitioners by issuance of a recovery certificate dated 18.05.2006 under Section 34 of the Act. At that stage, the petitioners approached the State Government who by order dated 06/11.06.2006 set aside the same on the ground, such order could not be issued by the Entertainment Tax Officer but by the District Magistrate under section 3 of the Act read with Rule 63 of the 1981 Rules. On 29.06.2006, the District Magistrate, Rampur reiterated the demand of Rs.6,61,049/- against the petitioners. It became subject matter of challenge in an appeal. It was dismissed by order dated 24.01.2007. That order became subject matter of challenge in two writ petitions before Lucknow Bench of this Court in Writ Petition Nos.737 (M/S) of 2007 and 864 (M/S) of 2007 filed by Jagjeet Singh Mata & Sunil Sharma & Others, respectively. Those writ petitions came to be decided by order dated 28.10.2009 wherein this Court observed as under:-
"By considering the totality of the facts and circumstances of the case, it appears that the District Magistrate has passed the order and demanded the entertainment tax under U.P. Entertainment and Betting Tax Rules 1979 by stating that there were five partners in the business but the fact remains that one of the partner Sri Vinod Chawla was a regular employee of another company M/s. Jolly T. V. He categorically denied his involvement in the business in question. The District Magistrate has not examined the other partners or the partnership deed, if any. In the absence of partnership, the District Magistrate has not examined whether these persons were the members of "Association of Persons" or not. Thus, the fact mentioned by the District Magistrate are ambiguous. No attempt was made for the verification of the number of operators. Merely an estimation was made without providing the opportunity to the petitioner.
In the circumstances mentioned above, I set aside the impugned order passed by the Special Secretary, Government of U.P. as well as the order passed by the District Magistrate and restored the matter back to the District Magistrate to decide the issue denovo as per the law but by providing reasonable opportunity to the petitioner.
With this direction, both the writ petitions are finally disposed of."
4. Upon that remand, a fresh order was passed against the petitioners on 05.06.2010 by the District Magistrate, Rampur after giving adequate opportunity of hearing, as directed by order dated 28.10.2009. Perusal of that order reveals, objections were raised that a MSO cannot be subjected to entertainment tax and also that the liability of entertainment tax fixed on the cable operators cannot be transferred to the MSO. Other objections were also raised before the District Magistrate, however, those were found to have been adjudicated at the earlier stages of this litigation. Since those issues are not being pressed in the present petition, reference to the same is also not required in this order.
5. The District Magistrate negated the objections raised by the petitioner and found, since the petitioners had operated the MSO, therefore their liability to entertainment tax was co-extensive with that of the four cable operators against whom demand had been first raised but could not be recovered. They were equally liable for payment of tax under Section 3 of the Act. Also, reliance was placed on the amendments made by Act no. 25 of 2009 by which MSO came to be defined and made liable to tax under the Act.
6. Against the order dated 05.06.2010, the petitioners filed an appeal before the State Government which later came to be transferred to the Commissioner and has eventually been decided after a remand, by order dated 09.07.2015. Perusal of that order again reveals, the objections were raised by the petitioners, that by running a MSO they did not become liable to tax as a cable operator. Also, the amendment made by Act no. 25 of 2009 was prospective. The present liability being of prior period, the petitioners who operated the MSO could not be made liable for the same. The cable service was claimed to have been provided by the four cable operators. It however could not be disputed that at the relevant time, the petitioners were the only MSO at Rampur and they had supplied the signal to the four cable operators. Thereafter granting the benefit of the amount that had been deposited against the total demand of Rs.6,61,049/-, the balance amount has been directed to be deposited by the petitioners.
7. Learned counsel for the petitioners submits, under the Act and Rules framed therein, there is no provision whereby a liability determined against the four cable operators could be transferred to the petitioners who were providing service of the nature comparable to be provided as a MSO. In fact, the petitioners had not supplied and not provided entertainment to any consumer and not charged any amount towards entertainment from any consumer and therefore, they could not be made liable to any amount of tax. The liability was clearly of the four cable operators who had been already assessed to tax. A MSO was first made liable under Section 3 of Act by Act No. 25 of 2009 w.e.f. From 16.6.2009. Second, merely because no recovery could be made therefrom those persons, the petitioners could not made liable for the same. Thus, it has been submitted, since the Act requires a thing to be done in a particular way, it should be only done in that way or not at all. Third, the four cable operators against whom primary liability had been determined had furnished security to the entertainment tax authorities. Therefore, the demand should have been recovered from that security and only in the event of any outstanding demand remaining, the same may be pressed against the petitioners.
8. Opposing the present petition, learned Standing Counsel would submit insofar as the Act is concerned, even before the amendment made to the law by Act no. 25 of in 2009, under section 3 of the Act, liability of tax was fixed under Section 3 of the Act on the proprietor to collect tax from the person making payment for admission and to pay the same to the Government. Insofar as the present petitioners are concerned, they clearly fall within the definition of "proprietor" as it existed at the relevant time, under Section 2(m) of the Act. They were the persons directly connected with the organisation of the entertainment as proprietors of "cable television network" as defined under section 2(eee) of the Act, providing "cable service" as defined under section 2(ee) of the Act. Therefore, principally, there was no jurisdictional error in proceeding against the petitioners. Insofar as it has been contended that the demand has been transferred on to the petitioners, learned Standing Counsel would submit that such is not the case. While initially a recovery certificate may have been issued against the petitioners to recover a demand created against the four cable operators, however, upon the challenge made by the petitioners being sustained in Writ Petition Nos.737 (M/S) of 2007 and 864 (M/S) of 2007, the entire matter was remitted to the District Magistrate to pass a fresh order of assessment against the petitioners. As a fact, the District Magistrate did pass such fresh order on 05.06.2010, which has been affirmed by order dated 09.07.2015, passed in appeal. Therefore, the provision of Act are claimed to have been fully complied with. As to the third argument with respect to security deposited by the four cable operators, it has been submitted in the recovery proceedings that were pursued against those persons it had come on record that they assessed and therefore, the proceedings against the petitioners were initiated.
9. Having heard learned counsel for the parties and having perused the record, in the first place, in view of the definition of the term "proprietor" provided under Section 2(m) of the Act, it is clear that any person who may be connected with the organization of the entertainment would be a 'proprietor', in law.
10. Submission has been advanced by learned counsel for the petitioners that the liability of tax arose on at the hands of the four cable operators and not the Multi System Operator (MSO). In the present case, according to the petitioner, the petitioner nos. 1,2, 3 and 5 had established the MSO and had appointed petitioner no.4 as the Manager to manage the said MSO. Signals were being received by the said MSO and were being distributed to the four cable operators etc. individually in various localities. It has been further contended that the tax liability that arose on such activity, had been discharged by those persons. In such circumstances, the MSO could not be held liable for any defaulted amount on a part of a single or other cable operator.
11. However, it is on record that the entire liability of entertainment tax was in fact incurred by the said four cable operators. It is also not disputed that the MSO alone had provided the signals to the four cable operators and no other person was involved in that activity. As to the liability being shifted to the MSO, specific findings have been recorded by both the District Magistrate as also by the appellate authority that there was collusion between the four cable operators and the M.S.O.
12. While the observations made by the Civil Court rejecting the injunction application may not be binding, inasmuch as that suit itself was not maintainable, however, perusal of the order passed by the District Magistrate would reveal that the findings are not based on the orders of the Civil Court.
13. In any case, upon the matter being raised in appeal, the appeal authority took into account to the fact that despite default committed by the four cable operators, the MSO continued the supply and sell signals to those persons despite intimation given to the MSO to stop such activity on account of the default by the four cable operators. It has further been observed by the appellate authority that there was no other MSO in the district Rampur. Therefore the signal had been obtained by the four cable operators from the petitioners only, as is also apparent from the submissions advanced by leaned counsel for the petitioners that petitioner nos 1,2,3 and 5 had established the MSO while simultaneously engaging (individually) in the activity of cable service within their own areas. The fact that the request for disconnection may have been made outside the period for which the demand has been raised, is also not decisive in view of the fact that the relationship between the parties and the manner in which they conducted the business would be common to earlier period also, in absence of any special fact being pleaded by the petitioners in that regard.
14. Once it got established that the petitioners and the four cable operators were in collusion, the actual date of the communication looses its significance. The present petitioners who are otherwise found included in the definition of the 'proprietor' as defined under Section 2-m of the Act, therefore, continue to be liable to pay tax on entertainment under Section 3 of the Act with respect to the activity noted above.
15. Thus, as noted above, the findings recorded by the authorities appear to be based on material and evidence existing on record. The petitioners are persons liable to discharge the entertainment tax liability against the four cable operators as well.
16. Even otherwise in the present case, that issue does not require any detailed or further consideration as the petitioners had challenged the earlier proceedings before this Court whereupon, the demand raised against them was set aside and the matter remitted to the District Magistrate to pass a fresh order after affording proper opportunity of hearing to the petitioners. Therefore, the petitioners cannot now take up a new plea that they were not the 'proprietor' of the entertainment.
17. As to the other objection, clearly, at this stage, it does appear that whatever security may have been available to the revenue authorities would have been adjusted before the declaration was made that the four persons namely Vinod Chaudhary, Bajjan @ Bhaiya, Naim Khan and Tahir Miyan do not have any assets from which recovery may be made. In any case, if such security is available, the same may be first realized and any outstanding, that would remain, may be recovered from the petitioners in accordance with law.
18. The fact that the petitioners were initially not subjected to assessment along with the four cable operators, may have been defective, but that defect stood cured by the petitioners having filed the earlier writ petitions where the demand being pressed against them was set aside and the was matter remitted to the District Magistrate to pass a fresh assessment order. That argument does not survive for any further consideration.
19. Accordingly, the present writ petition lacks merit and is dismissed.
Order Date :- 26.8.2019 Abhilash/Shubham/Prakhar