2007 (7) TMI 580 - HC - VAT and Sales Tax

Validity of the provisions contained in the Tamil Nadu Entertainments Tax (Third Amendment) Act (15 of 2003) challenged - Held that - The burden of taxation is ultimately passed on to the moviegoers and the producers or distributors or exhibitors are merely collecting agents. From the point of view of a moviegoer, it makes no difference to him, whether a film good, bad or indifferent, is made originally in Tamil or such a film made in any other language is subsequently dubbed in Tamil. It is very difficult to fathom as to why a moviegoer, who is very interested in watching a film should be subjected to pay higher rate of entertainment tax merely because the film which he wants to view was originally produced in some other language and was subsequently dubbed in Tamil. From the view point of such a person, obviously the provisions of the (Third Amendment) Act are discriminatory. Thus unable to uphold the validity of the provisions contained in the amending Act 15 of 2003. Accordingly, all the writ petitions are allowed

Issues Involved:
1. Validity of the Tamil Nadu Entertainments Tax (Third Amendment) Act (15 of 2003).
2. Discrimination and arbitrariness in the imposition of higher entertainment tax on dubbed films.
3. Violation of Articles 14 and 19 of the Constitution of India.
4. Impact on freedom of expression and business.

Issue-wise Detailed Analysis:

1. Validity of the Tamil Nadu Entertainments Tax (Third Amendment) Act (15 of 2003):
The petitioners challenged the provisions of the Tamil Nadu Entertainments Tax (Third Amendment) Act, 2003, which imposed a higher rate of entertainment tax on dubbed films. The Act defined "dubbed film" as any film originally produced in a language other than Tamil and subsequently dubbed in Tamil. Section 4H of the Act mandated a 50% entertainment tax on dubbed films, compared to lower rates for original Tamil films.

2. Discrimination and arbitrariness in the imposition of higher entertainment tax on dubbed films:
The petitioners argued that the higher tax rate on dubbed films was discriminatory, arbitrary, and lacked rationale, violating Articles 14 and 19 of the Constitution. They contended that there was no justification for different tax rates based solely on whether a film was dubbed or originally produced in Tamil. The State countered that the amendment aimed to protect Tamil film producers from competition with dubbed films, which had lower production costs.

3. Violation of Articles 14 and 19 of the Constitution of India:
The court referenced the Supreme Court's decision in Aashirwad Films v. Union of India, which held that a taxing statute must not impose unequal burdens on similarly situated persons. The court noted that the imposition of different tax rates based solely on language was discriminatory and violated Article 14. The court found no reasonable nexus between the classification of films and the object of protecting Tamil film producers.

4. Impact on freedom of expression and business:
The court observed that the higher tax rate on dubbed films affected the freedom of expression and the right to carry on business. The court stated that the burden of entertainment tax ultimately fell on the moviegoer, not the producer. There was no justification for requiring a higher tax from viewers of dubbed films compared to original Tamil films. The court emphasized that such a policy could not be justified as a reasonable restriction in the interest of the general public.

Conclusion:
The court concluded that the provisions of the Tamil Nadu Entertainments Tax (Third Amendment) Act, 2003, were discriminatory and violated Articles 14 and 19 of the Constitution. The court held that there was no reasonable basis for the higher tax rate on dubbed films and that the provisions lacked a rational nexus with the object of protecting Tamil film producers. Consequently, the court allowed the writ petitions and declared the provisions invalid.

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