2016 (9) TMI 310 - HC - Indian Laws

Demand of entertainment tax from the exhibitors - assessment to tax under the Assam Act - Held that - The tax recovered by the exhibitors, as admitted by the 2nd group of litigants, in our view is not collected illegally and therefore we declare that they have no obligation under Section 172 of the Contract Act, to refund any entertainment tax for the exempted period. As earlier noted the charge and levy of tax was never exempted and therefore the cine-goers were not provided any relief under the exemption notification. On the other hand, the exhibitor was freed of their obligation from the liability to the entertainment tax, through the notification issued under Section 8(2) of the Assam Act. Therefore we have no hesitation to hold that incentive was intended for the investors on cineplexes and consequently for the relevant period, the exhibitors can t be forced to discharge their obligation under Section 3(6) of the Assam Act. Since in the present case, entertainment tax has been levied only on the ground that in spite of the exemption having been granted by the notification dated 29.03.2008, petitioners allegedly collected entertainment tax, the impugned orders of assessment are declared to be illegal, without jurisdiction and therefore the same are set aside and quashed. Following the above discussion and our conclusion in favour of the exhibitors on all the issues as delineated above, we declare that the demand of entertainment tax from the exhibitors for the period specified in the notification dated 29.3.2008 (Annexure-I) is illegal and therefore the assessment to tax under the Assam Act for the petitioners are quashed. The cases are allowed with this declaration.

Issues Involved:
1. Liability towards entertainment tax under the Assam Amusement and Betting Tax Act, 1939.
2. Validity of the exemption notification dated 29.3.2008.
3. Legality of tax collection by the exhibitors.
4. Assessment and demand of entertainment tax by the authorities.
5. Interpretation of the charging section and exemption provisions under the Assam Act.
6. Concept of unjust enrichment in the context of tax collection.

Issue-wise Detailed Analysis:

1. Liability towards entertainment tax under the Assam Amusement and Betting Tax Act, 1939:
The petitioners, operating multiplex/mini cinema halls, sought exemption from entertainment tax liability based on a government notification dated 29.3.2008 issued under Sub-Section (2) of Section 8 of the Assam Act. The notification exempted new multiplexes from the liability to pay entertainment tax for five years.

2. Validity of the exemption notification dated 29.3.2008:
The exemption notification was intended to incentivize the establishment of multiplexes in Assam by exempting them from the liability to pay entertainment tax. The court concluded that the notification was valid and aimed at encouraging business activities in the state.

3. Legality of tax collection by the exhibitors:
The first group of petitioners (M/s. PVR Ltd.) claimed they did not collect the tax, while the second group (M/s. Mridul Properties (P) Ltd.) admitted to collecting the tax but argued that they were not obligated to deposit it due to the exemption notification. The court found that the exemption was from the liability to pay the tax and not from charging it, thus the collection was not illegal.

4. Assessment and demand of entertainment tax by the authorities:
The authorities issued show cause notices and assessed the tax on the basis of total turnover, adding interest to the assessed amount. The court held that the assessing authority had no power to levy the entertainment tax during the exemption period, and any unauthorized collection should be scrutinized in a separate proceeding.

5. Interpretation of the charging section and exemption provisions under the Assam Act:
The court analyzed the charging section (Section 3) and found that the tax liability was on the exhibitors, not the cine-goers. The exemption under Section 8(2) was from the liability to pay the tax, not from charging it. The court emphasized that the legislative intent was to benefit the exhibitors, not the movie-goers.

6. Concept of unjust enrichment in the context of tax collection:
The court distinguished the present case from the Swanstone Multiplex Cinema Private Ltd. case, noting that the Assam notification exempted the liability to pay the tax, not the charging of it. Therefore, the collection and retention of the tax by the exhibitors did not amount to unjust enrichment. The court held that the exhibitors had no obligation to refund the collected tax under Section 72 of the Indian Contract Act, 1872.

Conclusion:
The court concluded that the exemption notification was intended to benefit the exhibitors by exempting them from the liability to pay entertainment tax. The tax collection by the exhibitors during the exemption period was not illegal, and the demand for tax by the authorities was without jurisdiction. The court quashed the assessment orders and declared the demand of entertainment tax from the exhibitors for the specified period as illegal. The cases were allowed with no cost.

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