1998 (12) TMI 587 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to levy of entertainment tax for pictures exhibited in video theatres.

Analysis:
The petitioners challenged the entertainment tax imposed for exhibiting pictures in video theatres, declaring the notices as illegal, arbitrary, and unconstitutional. The petitioners, unemployed graduates, leased a theatre to exhibit video films. They purchased necessary equipment and charged admission fees. The authorities started collecting tax without issuing any demand notice, leading to a dispute over the tax amount. The tax was calculated based on the gross collection capacity per show. The petitioners contended that they were not liable to pay entertainment tax under the Act of 1939 as they were governed by the Act of 1993. The central issue was whether the petitioners were liable to pay entertainment tax under the Act of 1939.

The Act of 1939, particularly Section 4, levies tax on the gross collection capacity for entertainments held in specified theatres. The term "gross collection capacity per show" was defined to include all payments for admission if all seats were occupied. Section 4-A imposed additional tax on entertainment shows, including a specific tax on 16mm cinematograph films. The definition of "entertainment" encompassed cinematography exhibitions, which included video films. Therefore, the exhibition of video films constituted entertainment subject to taxation under the Act of 1939.

The petitioners argued that since the Act of 1955 was not applicable to video films, they were not liable to pay tax under the Act of 1939. However, the court rejected this argument, stating that the Rules under the Act of 1955 were adopted for video theatres under the Act of 1993. As a result, the gross collection capacity was determined based on these rules, making the petitioners liable to pay entertainment tax under the Act of 1939.

The court further clarified that the petitioners could not evade tax liability by claiming exemption under the Act of 1993, as the Act of 1939 specifically covered the exhibition of films through video cassette recorders. Despite the shift in regulatory frameworks from the Act of 1955 to the Act of 1993, the liability to pay entertainment tax remained for video film exhibitions under the Act of 1939. Consequently, the court dismissed the writ petitions, emphasizing that the petitioners were obligated to pay the entertainment tax as per the provisions of the Act of 1939.

Additionally, the court directed the Entertainment Tax Officer to consider the petitioners' request to exercise an option under Section 5 of the Act of 1939 without limitations up to the financial year 1998-99. Ultimately, the writ petitions were dismissed, and no costs were awarded.