2015 (10) TMI 2602 - HC - VAT and Sales Tax

Entertainment tax u/s 4 of the Tamil Nadu Entertainment Tax Act, 1939 - the benefit of exemption from the entertainment tax is not being passed on to the viewers and the Theatre owners collect huge sums and appropriate themselves - whether the benefit of exemption is to be passed on to the viewers or not? Held that - the grant of exemption has devolved from mere title to the development of Tamil Language and culture. It also limits use of other languages, violence and obscenities. It is also to be noted that the exemption is granted only to the films and all the conditions are imposed keeping the viewers in mind - The duties of the theatre owners are only to display, whereas it requires certain actions from the film makers to comply with the conditions - The purpose of the exemption, as this court has already pointed out, is mainly to develop and promote Tamil Culture. The object can only mean that by viewing the movies, which comply with the conditions, the viewers would develop further liking towards the Tamil language and Culture. Therefore, it can be safely said that the exemptions are to woo more viewers and therefore, the benefit of an exemption is only for the viewers, who bare the tax burden. An exemption is not a right. It is only a grant. The authority, granting the same, has powers to impose any conditions. Section 8 of the Act has to be read along with Section 4 of the Act and the provisions of the TNCR Act. Unjust enrichment - Held that - the collection and retention of tax against the provisions of law is unjustifiable and would amount to unjust enrichment. As evident from the various cases relied upon by the learned senior counsel for the Petitioner above, once it is found that the tax is collected against the statute, the same is liable to be refunded. Any levy of tax or any amount in the like nature would be amenable to Article 265 of the Constitution of India. Further, the Government issued orders in GO.Ms.No.159, Commercial Taxes and Registration (C1) Department, dated 22.08.2007, restricting the concession not to those old or new Tamil films bearing Tamil titles, but only to those conforming with Tamil culture and dignity, that is the movies not having, violence and adult only scenes were only granted exemptions. The exemption benefit must be passed on to the viewers, as the burden falls on them - the tax burden should not be passed on to the viewers by the theatre owners in cases of exemption from the levy of entertainment tax - petition allowed - decided in favor of petitioner.

Issues Involved:
1. Legality of Circular No.14/2014 regarding entertainment tax collection.
2. Whether the benefit of entertainment tax exemption should be passed on to viewers.
3. Validity of theatre owners collecting tax despite the exemption.
4. Interpretation of relevant sections of the Tamil Nadu Entertainment Tax Act, 1939.
5. Applicability of the doctrine of unjust enrichment.

Detailed Analysis:

1. Legality of Circular No.14/2014:
The petitioner challenged Circular No.14/2014 issued by the 4th Respondent, arguing that it allowed theatre owners to collect entertainment tax despite exemptions granted by the government. The respondents contended that the circular was in line with existing laws and aimed to regulate the minimum and maximum ticket rates, ensuring compliance with licensing conditions.

2. Benefit of Entertainment Tax Exemption:
The core issue was whether the tax exemption granted should benefit the viewers. The petitioner argued that the exemption was intended for viewers, citing Section 7 of the Tamil Nadu Entertainment Tax Act, which states that theatre owners act as agents collecting tax from viewers. The respondents claimed the exemption was meant to promote the Tamil film industry and culture, not directly benefiting viewers.

3. Theatre Owners Collecting Tax Despite Exemption:
The petitioner provided evidence that theatre owners continued to collect Rs. 120 per ticket despite the exemption. The respondents countered that the ticket rates were fixed by licensing authorities and could not be altered by theatre owners. The court examined the practice and found that the tax burden was indeed being passed on to viewers, which was contrary to the intent of the exemption.

4. Interpretation of Relevant Sections:
The court analyzed Sections 4, 7, and 8 of the Tamil Nadu Entertainment Tax Act. Section 4 deals with the levy of tax on admission payments, Section 7 outlines the manner of tax calculation and payment, and Section 8 grants the government power to exempt certain entertainments from tax. The court concluded that the tax should be calculated based on actual admissions, and exemptions granted should benefit the viewers, not the theatre owners.

5. Doctrine of Unjust Enrichment:
The petitioner argued that retaining tax collected despite exemptions constituted unjust enrichment. The court agreed, referencing various judgments that established the principle that any tax collected against statutory provisions must be refunded. The court held that the theatre owners' practice of collecting tax despite exemptions was unjust and ordered refunds.

Conclusion:
The court found that the benefit of entertainment tax exemptions should be passed on to viewers, as the tax burden ultimately falls on them. The impugned circular was not struck down but required clarification to ensure compliance with this principle. The court directed the respondents to issue appropriate orders to prevent theatre owners from passing the tax burden to viewers and to take inventory of tickets sold to verify compliance. The petitioner was awarded a refund of Rs. 107.

Judgment:
- The respondents were instructed to ensure the tax burden is not passed to viewers in cases of exemption.
- The respondents were to verify compliance by theatre owners and initiate proceedings if violations were found.
- The 5th respondent was ordered to refund Rs. 107 to the petitioner.
- The circular was upheld but required clarification to align with the court's findings.

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