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M/s PVR Ltd., Mridul Properties (P) Ltd., Fun Cinemas Versus The State of Assam, The Commissioner of Taxes, Assam, The Deputy Commissioner of Taxes, Zone A (Appeals) , The Superintendent of Taxes

2016 (9) TMI 310 - GAUHATI HIGH COURT

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 un .....

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en 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 .....

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xation JUDGMENT [ Hrishikesh Roy, J. ] Heard Dr. A. Saraf, learned Senior Counsel appearing for the petitioners in all the cases. Also heard Mr. D. Saikia, the learned Addl. Advocate General representing the respondents. 2. The petitioners operate multiplex/mini cinema halls and the issue here is their liability towards entertainment tax for the relevant period, under the Assam Amusement and Betting Tax Act, 1939 (hereinafter referred to as the Assam Act ). The concerned entities, hereinafter re .....

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/2014, WP(C) No.4480/2014 and WP(C) No.4479/2014 and they claim that they have not collected the tax, whereas the 2nd group of M/s. Mridul Properties (P) Ltd., in the other five cases, have admittedly recovered the entertainment tax, from the movie-goers. 3. The cases have common facts and hence for the sake of convenience, the narratives in this order are extracted from the WP(C) No.4477/2014, filed by the M/s. PVR Ltd. BACKGROUND FACTS 4. Through the notice dated 12.9.2012 (Annexure-IV), the S .....

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13.12.2012 (Annexure-X), where it was alleged that tax is being illegally collected from the movie-goers, in spite of the exemption notification dated 29.3.2008 (Annexure-I), issued under Sub-Section (2) of Section 8 of the Assam Act. According to the notice, the claim of not charging entertainment tax made by the exhibitor is not believable, as the tickets issued for certain films, reflects the charging of tax. Hence, tax was proposed to be assessed under Section 5-A(2) of the Assam Act. 6. In .....

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ion Bench on 6.5.2013, by relegating the party to the statutory forum. Thereafter the appellate authority after considering the rival submission through the impugned order dated 28.7.2014 (Annexure-XXI), opined that when the tax is collected, the same should be deposited in the Govt. exchequer or else, it will amount to unjust enrichment. It was also concluded that objective of exemption by the Government was to provide relief to the movie-goers and it is impermissible for the exhibitor to retai .....

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d on the entry tickets but denied their corresponding obligation to deposit the collected sum on account of the exemption notification. Confronted with similar assessment and demand like the first group, the aggrieved exhibitors filed Revision Petition(s) against the assessment order passed by the Superintendent of Taxes. But since those were rejected by the common order dated 20.5.2014 (Annexure-XXII), the first group having realized the futility of revision, have decided to challenge the order .....

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courage business activities and since they are exempted from the tax liability, there can be no assessment for the exhibitors to tax, under Section 5-A of the Assam Act. 10. The petitioners refer to the fact that the exemption notice was issued under Sub-Section (2) of Section 8 of the Assam Act and therefore it is contended that there is no absolvement from charging tax but what is exempted is the liability from payment of entertainment tax and therefore it is argued that demand for tax from th .....

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shtra scenario, the beneficiary was exempted from payment liability towards the State exchequer. Therefore Dr. Saraf argues that it is not a case of unjust enrichment, since the charging of tax was not exempted by the Notification dated 29.3.2008 (Annexure-I). Hence the Assam situation is nothing but a business incentive for five years, for the new entrepreneurs in the field and retention of the collected sum is not unjust enrichment since this was permitted by the Govt. 12. The petitioners cont .....

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then the amount collected by the second group can never be assessed as tax and then the recovery through assessment, is contended to be impermissible. 14. The substantial contention of the petitioners is that if the exhibitor is exempted from liability to payment of entertainment tax, retention can t be construed as unjust enrichment since it is nothing but an incentive for investment in the fresh field of multiplex and mini cinema halls, in Assam. SUBMISSION OF RESPONDENTS 15. On the other han .....

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e tax on behalf of the state. But when the tax is exempted under Section 8 of the Assam Act, the movie-goers are to be absolved and if any such tax is collected, the retention thereof in the hand of the exhibitors, will certainly be unjust enrichment. 17. The learned counsel for the Revenue submits that the benefit envisaged under Section 8 is for the movie-goers and the exhibitors are not the targeted beneficiary. In support Mr. Saikia refers to the manner of granting exemption, under the Assam .....

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at the entry gate, so that the movie-goers are made aware that tax is not being collected for the show in question. From these provisions of the Rules, it is argued by Mr. Saikia that the benefit of exemption is not envisaged for the exhibitors but for the movie-goers. 18. The learned Addl. Advocate General refers to Section 72 of the Indian Contract Act, 1872 to argue that the exhibitors have the legal obligation to refund the mistakenly collected tax. 19. The respondents argue that by virtue .....

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d to the state exchequer, as otherwise the retention by the exhibitor will amount to unjust enrichment. 20. The respondents rely upon the State of Karnataka vs. Drive-in Enterprises reported in (2001) 4 SCC 60, to contend that the levy is on the person who is entertained and therefore exemption should benefit of the person who is entertained. It is thus argued that the retention of the illegally collected entertainment tax in the hand of the exhibitor would be legally impermissible. 21. Referrin .....

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reported in MANU/TN/8821/2007, to contend that the exhibitors are only collecting agent of the tax on behalf of the state. Therefore when the tax is borne by the movie-goers and if the collection is held to be unauthorised, the retention/refund can be only to the person from whom the tax is realized but not to the exhibitors, who acts as agent on behalf of the state. 23. Mr. Saikia refers to the Govt. Notification dated 30.3.2007, to contend that whenever tax is exempted under some incentive po .....

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them, despite due opportunities. Therefore it is argued that the authorities had rightly made assessment on the basis of best judgment, as provided under Section 5-A(2) of the Assam Act. DISCUSSION AND CONCLUSION 25. The submission made by the rival Counsel have received our earnest consideration. 26. We find that the charging section of the Assam Act refers to charge, levy and payment of entertainment tax and the taxable event is on admission to entertainment. Under sub-section (6) of Section .....

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t assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay . 27. But what we notice from the Assam Act is that while the charge and the levy is on the exhibitors, the taxable event is on admission to entertainment. Hence the submission of the Revenue that tax here is on the person entertained appears to be illogical as this is not found in the charging Section 3 of the Assam Act. In the enactment w .....

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he assessing authority levied entertainment tax only on the ground that the petitioners in spite of the exemption having been granted, charged and collected entertainment tax and appropriated the same to itself. But even if the notification dated 29.03.2008 is construed to be exemption from charge and levy of entertainment tax, then also, in case any unauthorized collection was made, the assessing authority has no power and/or jurisdiction to levy the entertainment tax during the period of exemp .....

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sale turnover for which exemption was claimed and as such, the said amount was refundable under Section 8(B) of the Jammu & Kashmir General Sales Tax Act, 1962. The Court while leaving the question of applicability of Section 8(B) in that case open, held that whether any element of sale tax had merged in the fixation of the sale price and that amounts to collection of sales tax, would have to be decided in a separate proceeding that may have to be initiated under Section 8(B) of the said Ac .....

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consequences as provided in Section 65A of the Assam General Sales Tax Act, 1993 which related to forfeiture of the unauthorized collection of tax and/or Section 10 of the Central Sales Tax Act, 1956, as case may be, would follow. It was thus held that the impugned action of making a general assessment of all the transactions in exercise of powers under Section 17(4) and 9(2) of the 1956 Act and raise a demand for tax, without examining each and every transaction to determine whether any tax wa .....

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tural and common sense meaning, the levy is upon admittance to entertainment. Such construction does not clash in any manner even if we read the Assam Act as a whole and no incongruity or absurdity is discernible, if ordinary meaning is attributed to the expression used in the charging section. Therefore merely because entertainment tax is borne ultimately by the cine-goers will not permit us to import the words person entertained, when such words are missing in the enactment. 32. In fact if we .....

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eventually borne by the purchaser. Can it then be said that charge and levy of sales tax is on the person who buys the product. The logical answer for both example is that charge and levy will continue to be on manufacturer (for central excise) and on seller (for sales tax) and in neither situation, the person who eventually pay the excise duty or sales tax, can be a factor, for roping in the purchaser, for constructing the charging section. They key words is admission in Section 3 of Assam Act .....

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reported in (2001) 4 SCC 60 will not apply in these cases in the context of the Assam Act. 33. The scheme of the Assam Act is that notwithstanding the collection of tax from the cine-goers, the liability to pay the tax remains with the exhibitors. To understand the implication thereof, we may again benefit by referring to the levy of sales tax where the charge is on the dealer. Similarly for central excise duty, the charge is on the manufacturer. But in both process, while the taxable event is .....

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ntry 62 of List-II of the 7th Schedule empowers the State Legislature to levy tax, inter alia, on entertainment. Under the Assam Act, the taxable event is on admission to entertainment as is specified in the charging section 3. When the taxable event relates to entertainment, the levy and charge is not necessarily on the person entertained, who nevertheless have to bear the entertainment tax. On proper construction of the charging section which doesn t declare that the levy on the person enterta .....

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the State under the Assam Act, is on the exhibitors. So when the liability from payment of tax is exempted, the benefit in our understanding, should go to the entity which is made liable to pay the tax. Merely because the tax is ultimately borne by the cine-goers, exemption is not intended for them particularly when, the notification targets those exhibitors, who commenced commercial operation between 1.4.2007 to 1.2.2008. 36. The different sections of the Assam Act must be harmoniously constru .....

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be correct to conclude that the exemption is for the cine-goers. What is significantly different in sub-sections (1) and (2) of Section 8 is that each one operates on a different field. The sub-section (1) speaks of not charging tax on certain exigencies whereas sub-section (2) speaks of exemption from liability to pay the entertainment tax. When such distinction is made by the law makers in Section 8 itself, the formats and certificates specified under the Assam Rules has to be understood in th .....

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ith Rule 20 and Form V, it becomes clear that the Rules are not applicable for exemption granted under Section 8(2) of the Assam Act. In this connection, the contention of the petitioner gets fortified by the circular No.CTA-41/84/9 dated 06.02.1987 issued by the Commissioner of Taxes, Assam. The govt. circular says that the exemption is to be applied under Section 8(1) of the Act. The Rule 20 clarifies the issue further when it provides that the application for exemption has to be made not less .....

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are intended to support the Act and can t abrogate the Act. Therefore the argument raised to the contrary by the counsel for the revenue, is rejected. 39. Unambiguous intention is essential in fiscal statute. It is not stated anywhere in the Assam Act that the exemption benefit was intended for the cine-goers. Therefore when nothing as such is mentioned, it will be erroneous to import words to construe the exemption notification, as a benefit for the cine-goers. It can t also be overlooked that .....

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nd they are exempted from the liability to payment of entertainment tax. Therefore it is natural to infer from the words used that, exemption is intended for the exhibitors. According to our perception, contrary conclusion will be illogical when the literal Rules of interpretation is to be applied. 40. The concept of cineplex is new in Assam and the state has obviously tried to encourage establishment of cineplexes through incentives by way of exemption from the liability to pay entertainment ta .....

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tate s Industrial Policy. The context in which tax incentive was granted by the Govt. notification dated 30.3.2007 are clearly distinguishable from the present situation. In our perception, elaborate mechanism is unnecessary here since the exhibitors are simply made free of their obligation to pay to the State, the collected tax. Therefore the argument on this issue do not aid the respondents. 42. The Madras High Court in P. Sankara Narayanan (supra) while examining a challenge to levy of higher .....

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ion, in the present matters. 43. Now we have to analyse whether the decision in Swanstone Multiplex (Supra) can be applied here to deny the benefit of the exemption notification to the exhibitors on the principle of unjust enrichment. As earlier noted, the charging of tax is not exempted but liability from payment of tax is exempted, under the Notification dated 29.3.2008 issued under sub-section (2) of Section 8. But on the other hand, the charging of tax exempted, when a notification is issued .....

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