Patna High Court Decides Power to Collect Entertainment Tax No Longer Belongs to State After Constitutional Amendment

In a significant ruling, the Patna High Court has declared that the state government no longer possesses the authority to collect entertainment tax following the implementation of the 101st Amendment. The court’s bench, led by Chief Justice K. Vinod Chandran and Justice Madhuresh Prasad, carefully examined the 101st Constitution Amendment Act and concluded that the power to levy and collect entertainment tax has now been exclusively bestowed upon local self-government institutions, thereby excluding the state government.

The case revolves around a Multi System Operator (MSO) who operates within the boundaries of the Bihar Entertainment Tax Act of 1948, and thus bears the responsibility of paying entertainment tax. As the proprietor, the MSO exercises ultimate control over the transmission of programs received via satellite, which are subsequently disseminated to subscribers through Local Cable Operators (LCOs).

Earlier, the petitioner approached the High Court when an assessment order was issued based solely on the number of set-top boxes registered by the petitioner. The Court swiftly recognized that the Assessing Officer had adopted an expedited method to extract funds from the petitioner, resorting to a specialized recovery procedure without even identifying the individual subscribers for accurate taxation purposes.

Consequently, the assessment orders were invalidated, and the Assistant Commissioner of Commercial Taxes, Patna North Circle, Patna, was directed to conduct a fresh assessment. The court made it clear that the matter had not been thoroughly adjudicated in terms of the interparty merits, leaving all issues open for consideration before the Assessing Authority.

During the proceedings, the petitioner raised a crucial argument concerning the state’s diminished power to levy and collect taxes subsequent to the implementation of the 101st Amendment to the Constitution. This constitutional amendment brought about the substitution of Entry 62 of List II in the Seventh Schedule of the Indian Constitution, which now vests the authority to levy and collect entertainment tax solely with Panchayats and other local bodies. Consequently, as per the 1948 Act, the state government no longer possesses the power to continue imposing such taxes after the implementation of the 101st Constitutional Amendment, which also introduced the Goods and Services Tax (GST) regime.

The court’s ruling emphasized that the repeal and saving clause provided under the BGST Act did not bestow any benefits upon the state, as the enactment and levy made by the state government were deemed unsustainable after the 101st Amendment took effect.

The case, titled “M/s DEN Networks Limited Versus The State of Bihar,” bearing case number Civil Writ Jurisdiction Case No.24647 of 2019, concluded on May 18, 2023.


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