2008 (9) TMI 913 - HC - VAT and Sales Tax

Tax on payments for admission to entertainments - constitutional validity of the provisions of sections 3(1)(b) 3A 3C and section 4 of the Act questioned as discriminatory in the matter of levy of tax between a class of films produced in Kannada Kodava Konkani Tulu or Banjara languages on the one hand and films produced in the rest of the languages on the other hand Held that - The provisions of section 4 which constitute a proviso in the nature of levy of a lower rate of tax in the case of Kannada Kodava Konkani Tulu or Banjara films i.e. the following portion of section 4 of the Act is declared as unconstitutional - Provided that in the case of a cinematograph show of Kannada Kodava Konkani or Tulu film in addition to tax leviable under sections 3 and 3A the tax payable under this sub-section shall be at the following rates namely - Exceeds fifteen rupees but does not exceed twenty rupees - Thirty-eight rupees OR Exceeds twenty rupees - Forty-eight rupees And Provided also that in respect of cinema theatres paying tax in the manner specified in section 4A the tax payable under this sub-section in respect of cinematograph show of a Kannada Kodava Konkani or Tulu film shall be at the following rates namely Total payment for admission of a person to the highest class of seat or accommodation Does not exceed eight rupees - Rate of tax per show will be Thirteen rupees if Exceeds eight rupees but does not exceed fifteen rupees - Twenty-five rupees if Exceeds fifteen rupees - Thirty-eight rupees The petitioners cannot even complain of act of discrimination in the present situation particularly in respect of section 3C of the Act providing for an exemption or concession as the exemption provision in no way affects the petitioners who are all exhibitors of movies and who are free to choose to exhibit movies of the language of their choice. Exhibiting a movie in a language which enjoys a tax concession or tax exemption can if at all be to the advantage and benefit of the exhibitors and it can in no way said to be disadvantageous or even to bring about an act of discrimination against the petitioners in any manner. It is for this reason no fault with the provisions of section 3C providing for special provisions in the nature of concession or exemption in the matter of exhibition of cinematograph shows of films in Kannada Kodava Konkani Tulu or Banjara languages. The challenge to the provisions of section 3C on the ground of unconstitutionality therefore fails and the argument is rejected.

Summary

Issues Involved:
1. Validity of Sections 3(1)(b), 3A, 3C, and Section 4 of the Karnataka Entertainments Tax Act, 1958.
2. Allegation of discrimination based on language in the levy of entertainment tax.
3. Impact on fundamental rights under Articles 14, 19(1)(a), and 19(1)(g) of the Constitution of India.
4. Request for refund of entertainment tax and additional tax paid.

Issue-wise Detailed Analysis:

1. Validity of Sections 3(1)(b), 3A, 3C, and Section 4 of the Karnataka Entertainments Tax Act, 1958:
The petitioners challenged the constitutional validity of Sections 3(1)(b), 3A, 3C, and Section 4 of the Karnataka Entertainments Tax Act, 1958, arguing that these provisions were discriminatory as they imposed different rates of tax based on the language of the films. The petitioners claimed this differentiation violated Article 14 of the Constitution, which guarantees equality before the law.

2. Allegation of Discrimination Based on Language in the Levy of Entertainment Tax:
The petitioners contended that the provisions discriminated between films based on language, favoring Kannada, Kodava, Konkani, Tulu, or Banjara language films with lower or nil tax rates while imposing higher taxes on films in other languages. This, they argued, amounted to unconstitutional discrimination. The court examined whether the differential tax rates based on language were justified and whether they constituted an act of discrimination.

3. Impact on Fundamental Rights Under Articles 14, 19(1)(a), and 19(1)(g) of the Constitution of India:
The petitioners argued that the impugned provisions violated their fundamental rights to freedom of speech and expression under Article 19(1)(a) and the right to carry on any profession or business under Article 19(1)(g) of the Constitution. They claimed that the differential tax rates based on language restricted their ability to exhibit films of their choice and created an unfair competitive disadvantage.

4. Request for Refund of Entertainment Tax and Additional Tax Paid:
The petitioners sought a declaration that no tax could be collected under Section 3A of the Act, as there was no corresponding liability on Kannada, Kodava, Konkani, Tulu, or Banjara language films. They also requested a refund of the entertainment tax and additional tax paid under Sections 3 and 3A of the Act.

Court's Analysis:

On Discrimination:
The court referred to the Supreme Court's decision in Aashirwad Films v. Union of India, where it was held that classification based solely on language for tax purposes was arbitrary and discriminatory. The court found that the Karnataka Entertainments Tax Act's provisions, which imposed different tax rates based on the language of the films, violated Article 14 of the Constitution. The court held that the distinction based on language alone was not a reasonable classification and failed to meet the test of equality before the law.

On Fundamental Rights:
The court rejected the argument that the impugned provisions violated Articles 19(1)(a) and 19(1)(g) of the Constitution. It stated that the differential tax rates did not place an embargo on the exhibition of films in other languages and did not reach the level of confiscation that would violate Article 19(1)(g). Therefore, the provisions did not infringe on the petitioners' fundamental rights under Articles 19(1)(a) and 19(1)(g).

On Refund of Taxes:
The court found that the petitioners' request for a refund of entertainment tax and additional tax paid did not arise for consideration in light of the court's decision on the validity of the impugned provisions.

Conclusion:
The court declared the provisos in Section 4 of the Karnataka Entertainments Tax Act, which provided for lower tax rates for Kannada, Kodava, Konkani, Tulu, or Banjara language films, as unconstitutional and void. However, the court upheld the validity of Section 3C, stating that it was an exemption provision and did not constitute an act of discrimination against the petitioners. The writ petitions were allowed to the extent indicated, and the prayer for a refund was rejected.