1991 (11) TMI 227 - HC - VAT and Sales Tax

Summary

Issues:
Validity of Ordinance No. 8 of 1988 authorizing levy of show tax on films exhibited on television screen, challenge under articles 14 and 19(1)(g) of the Constitution of India.

Analysis:
The judgment of the High Court of Andhra Pradesh addressed the challenge to the validity of Ordinance No. 8 of 1988, which imposed a show tax on films exhibited on television screens. The petitioners, who were exhibitors of films on video, questioned the constitutionality of the tax under articles 14 and 19(1)(g) of the Indian Constitution. The petitioners held licenses for public exhibition of films on video and were subject to entertainment tax and show tax under the A.P. Entertainments Tax Act, 1939. The focus of the challenge was on the show tax imposed by Ordinance No. 8 of 1988, later replaced by Act No. 23 of 1988.

The show tax rates were revised by the ordinance, significantly increasing the tax burden on exhibitors. The petitioners argued that the new tax rates, especially the flat rate of Rs. 50 per show for films exhibited on television screens, were discriminatory and confiscatory. The court noted the disparity in tax rates between cinema theatres and video parlours, highlighting the arbitrary nature of the tax imposition. The petitioners contended that the tax regime unfairly targeted video parlours, imposing a higher tax burden compared to cinema theatres.

The court analyzed the impact of the tax increase on video parlours, emphasizing the potential confiscatory nature of the tax, especially for smaller establishments with limited seating capacity. The judgment highlighted the need for a reasonable classification in taxation and cautioned against discriminatory practices. The court found that the imposition of a flat rate of Rs. 50 per show on video parlours was arbitrary and unreasonable, violating the fundamental rights of the petitioners.

Citing previous Supreme Court decisions, the High Court emphasized the constitutional limitations on taxing statutes and the need for reasonableness and non-discrimination in taxation laws. The court held that the provision authorizing the levy of Rs. 50 show tax on films exhibited through video cassette recorders was unconstitutional and struck down the relevant clause of the A.P. Entertainments Tax Act, 1939. The writ petitions challenging the tax imposition were allowed, with costs awarded to the petitioners.