The Hon’ble HC, Madras in the matter of Balaji Theatre v. the Chief Secretary and Others [W.P. No. 33077 & W.M.P. No. 38348 of 2018 dated November 20, 2019] dismissed the petition challenging the collection of entertainment tax from cinema theater by Respondent Municipality and held that collection of entertainment tax was within their power, competence and with authority of law. Further, introduction of the Puducherry Goods and Services Act, 2017 (“PGST, Act 2017”) had not taken away the power of Respondent Municipality to collect entertainment tax.
Facts:
Balaji Theatre (“the Petitioner”) is a Cinema Theatre, run by a Partnership Firm. The Petitioner and the other licensees of Cinema theaters were directed to remit the entertainment tax every week to the Municipality (“the Respondent”). Consequently, the Petitioner seeks for a direction to the Respondent to refund the entertainment tax paid from 01.07.2017 to till date.
Petitioner’s contentions:
PGST Act, 2017 came into force with effect from 01.07.2017 and Section 173(2) of the PGST Act, 2017 annulled the collection of the tax by the Respondents. In view of Section 173(2) of the PGST Act, 2017 Section 118(1) (b) (ii) of the Puducherry Municipalities Act, 1973 (“Puducherry Municipalities Act”), stands annulled and thus, the Respondent has no authority to collect the entertainment tax. If Section 118(1)(b)(ii) of the Puducherry Municipalities Act is annulled, no other law empowers collection of entertainment tax by the Respondent.
Respondent’s contentions:
The Respondents alleged that Section 161 of the Puducherry Municipalities Act, specifically deals with the powers of the Municipalities to collect the entertainment tax and this provision is not challenged therefore, the Petitioner is not entitled to maintain the present writ petition, against the consequential demand. Under Section 173(1) of PGST Act, 2017, sub-section (iii) of Section 118(1)(a) of the Puducherry Municipalities Act, alone was omitted and the other taxes referred to under Section 118 of the Puducherry Municipalities Act, are retained, out of which, the entertainment tax is one. The Petitioner is not entitled to take shelter under Section 173(2) of the PGST Act, 2017.
Issue:
Whether the writ petition is maintainable, based on the prayers sought for in this writ petition?
Whether the collection of entertainment tax made by the Respondent from the Petitioner is without authority of law and should be refunded?
Held:
The Hon’ble HC, Madras in W.P. No. 33077 & W.M.P. No. 38348 of 2018 dated November 20, 2019 held as under:
- It is not in dispute that the Puducherry Municipalities Act, is an enactment, which is still in force and thus, the authorities competent under the above enactment are bound and entitled to act in accordance with the relevant provisions made thereunder. Section 118(1)(b)(ii) of the Puducherry Municipalities Act, empowers the Respondents to impose a tax on entertainment.
- Noted that the power is conferred on the Respondent under Section 118 of the Puducherry Municipalities Act to collect various taxes has not been totally taken away or subsumed under the PGST Act, 2017.
- Even after introduction of the PGST Act, 2017, in view of the specific provision made under Section 173(1) therein, what was omitted from the purview of the Respondent is only a tax on advertisements other than advertisements published in the newspapers and not in respect of other taxes such as property tax, professional tax, duty on certain transfer of immovable property in the form of additional stamp duty and the “Tax on Entertainment”. Therefore, it is very clear that the powers of the Respondent to collect the tax on entertainment, is retained, even after introduction of the PGST Act, 2017.
- However, in view of Section 173(2) of the PGST Act, 2017, power to collect entertainment tax by the Respondent stands annulled but the Court opined that general provision made under Section 173(2) of the PGST Act, 2017 cannot override or include a specific provision made under Section 173(1) of the PGST Act, 2017.
- Further, the challenge made against the consequential proceedings without challenging the original/main proceedings or relevant provision of law, is not maintainable. Therefore, on this ground also, the Court found that the present challenge is not maintainable.
- Furthermore, in view of the fact that the Petitioner has already collected the entertainment tax from the Cinema viewers and thus, it is impossible to return the same to such viewers in the event of order for refund.
Relevant Provisions:
Section 173 of the PGST Act, 2017
“173. Save as otherwise provided in this Act, on and from the date of commencement of this Act,-
(1) In the Puducherry Municipalities Act, 1973,-
(a) In section 118, in sub-section (1), in clause (a), sub-clause (iii) shall be omitted;
(b) Sections 152, 153, 154, 155, 156 and 157 shall be omitted; and
(c) schedule-VII appended to the Act shall be omitted.
(2) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the provisions, under any State law, authorizing levy and collection of taxes or cess or surcharge by the Government or a Municipality or a Commune Panchayat or any other authority shall stand annulled or rescinded or modified in as much as and to the extent such taxes are the subject matter of Entry 52, Entry 54, Entry 55 and Entry 62 of the State List of the Seventh Schedule of the Constitution, as amended by the Constitution (One Hundredth and First Amendment) Act, 2016.”
Section 118(1) of the Puducherry Municipalities Act:
“118. Taxes to be imposed.-
(1) (a) Subject to any general or special order which the Government may make in this behalf, every municipal council shall impose, for the purposes of this Act, the following taxes, namely: –
(i) A property tax;
(ii) A profession tax;
(iii)…………………. (Omitted)
(b) Every municipal council shall, with the sanction of and subject to such rules as may be prescribed by the Government, impose.-
(i) A duty on certain transfers of immovable property in the form of additional stamp duty in accordance with the provisions of section 158;
(ii) A tax on entertainments.”
Section 161 of the Puducherry Municipalities Act:
“161. Tax on payment for admission to entertainment. – The entertainments tax shall be levied on each payment for admission to any entertainment at rates the maxima and minima whereof are specified in Schedule V:
Provided that in the case of cinematograph exhibition, the tax shall be calculated at the rates specified on each payment for admission after excluding from such payment the amount of the tax.”