2009 (1) TMI 835 - HC - VAT and Sales Tax

Entertainment tax for screening Kannada film Krishna , a Kannada film - Whether petitioner liable to pay the tax? - Held that - the impugned order passed by the second respondent dated January 30, 2008 is purely on the basis of the communication dated December 20, 2007 sent by the information Department, suspending 100 per cent exemption from the entertainment tax to the movie Krishna and directed the subordinate officers to collect the tax. Meanwhile, the third respondent has requested the second respondent not to collect the taxes for the time being till the criminal case filed against the producer is decided. The same has been communicated to the second respondent and his subordinate officers, viz., respondents 3 and 4. The fourth respondent instead of awaiting the decision to be taken by the competent authority, without taking prior permission from respondents 1 and 2, has proceeded and passed the impugned assessment orders and the consequential demand notice without affording opportunity to the petitioner. Therefore, the said order passed and the demand notice issued are liable to vitiate for non-compliance with the principles of natural justice. Thus assessment order and the demand notice are set aside and the matter is remanded to respondents 2 and 4 to take appropriate decision in accordance with law.

Summary

Issues:
Challenge to communication and assessment order regarding entertainment tax exemption for a Kannada film "Krishna."

Analysis:
The petitioner sought to quash the communication dated January 30, 2008, the final assessment order dated February 29, 2008, and the demand notice dated July 11, 2008 concerning entertainment tax exemption for the film "Krishna." The petitioner argued that they should not be liable to pay entertainment tax from the date of certification for 100% tax exemption until the communication of the order of cancellation or withdrawal of the exemption certificate. The third respondent initially granted 100% exemption on October 5, 2007, but later suspended it based on a complaint. Subsequently, the second respondent directed to collect the tax for the film, which was screened during the exemption period. The fourth respondent passed the assessment order and demand notice without waiting for the decision on the complaint against the producer, leading to the petitioner's grievance and the writ petition.

The High Court observed that the impugned order of January 30, 2008, was based on the communication suspending the tax exemption for the film "Krishna." Despite a request not to collect taxes until the criminal case was decided, the assessment order and demand notice were issued without affording the petitioner an opportunity to be heard. The Court held that the orders were in violation of the principles of natural justice. Therefore, without delving into the case's merits, the Court set aside the communication, assessment order, and demand notice, remanding the matter to the relevant respondents to make a decision in compliance with the law.

In conclusion, the Court disposed of the writ petition by setting aside the impugned communication, assessment order, and demand notice. The matter was remitted back to the concerned respondents to reconsider and make an appropriate decision after receiving communication orders from the competent authority, emphasizing the need to proceed in accordance with the law.