The Telangana High Court stayed the impugned order imposing Entertainment Tax on Master System Cable Operator.

The petitioner claims to be one of the largest Master System Cable Operators (MSO) and it provides Digital Cable Services comprising Digital Channels, Movies, etc., with the State-of-Art distribution set-ups. It provides very cost-effective technologically advanced set-top boxes which enable the subscribers to have access to other Value Added Services provided by it which include Video-on-Demand, Gaming, E-Commerce, etc., and the entire system is routed through local cable operators who reach the end-consumers.

The State of Telangana had adopted the Andhra Pradesh Entertainment Tax Act, 1939, and cable service was brought under the purview of the State Act by insertion of Section 15-A in the said statute and the petitioner is paying tax at the rate of 5% per connection under the said Act.

The respondent authority issued a show-cause notice proposing to levy entertainment tax on the petitioner for the tax period 2011-12, 2012-13, and 2013-14 amounting to Rs.3,24,51,090/- on three entities, viz. Digi Cable Network (I) Pvt. Ltd; Digi Route Network Ltd.; Lifestyle Networks Pvt. Ltd.

Thereafter, the second respondent, Commercial Tax Officer issued a Revision Show-cause notice to the petitioner in the exercise of powers vested in him under Section 9-A of the Act proposing to revise the assessment order passed by the respondent on the ground that the order passed by the respondent was prejudicial to the State Revenue as per the Vigilance and Enforcement report and the material evidence available on record showed that a number of connections given by M/s. Sun 18 Distribution Services Pvt. Ltd. to the assessees which was admitted by the said party.

The Stay application was heard by the third respondent, and it was dismissed by it through the impugned order passed in Appeal.

The division bench consisting of Justice Ramachandra Rao and Justice Amarnath Goud opined that the impugned Stay rejection order passed by the third respondent deserves to be set aside on the ground of non- consideration of contentions of the petitioner by the 3rd respondent and that the matter ought to be remitted to 3rd respondent for fresh consideration.

“The Stay application filed by the petitioner in the Appeal filed by it before the 3rd respondent is restored to the file of the 3rd respondent; and the 3rd respondent shall pass a reasoned order after considering the contentions raised by the petitioner in the Stay application / Grounds of Appeal in accordance with law, and communicate it to the petitioner,” the bench said.

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