Balaji Theatre VS Chief Secretary

The petitioner in this case is contesting a directive issued by the 5th respondent, dated July 15, 2017, which instructed them and other cinema theater licensees to remit entertainment tax weekly to the 5th respondent, which is a municipality. Consequently, the petitioner is seeking a court direction for the 5th respondent to refund the entertainment tax paid from July 1, 2017, up to the present date.

The petitioner, a cinema theater operated by a partnership firm, contends that until the issuance of the aforementioned directive, they were remitting the entertainment tax on a monthly basis. This change to a weekly remittance system is perceived by the petitioner as unjust and burdensome. They argue that this sudden alteration disrupts their financial planning and operational management, as they now have to manage tax payments on a more frequent basis.

Furthermore, the petitioner asserts that this directive lacks legal basis and violates their rights as licensees. They argue that there is no provision in the relevant statutes or regulations that empowers the 5th respondent to mandate weekly tax payments. Additionally, they highlight that such a change requires prior notice and consultation, which they claim was not provided.

Moreover, the petitioner raises concerns about the practicality and feasibility of the weekly tax remittance requirement. They argue that it imposes an unnecessary administrative burden on both the cinema theaters and the municipality. They contend that the municipality’s resources may not be equipped to handle the increased frequency of tax collection and processing.

The petitioner also emphasizes the financial implications of this directive. They claim that the increased frequency of tax payments adds to their operational costs and affects their profitability. This, they argue, unfairly impacts not only their business but also the overall cinema industry within the municipality.

In light of these arguments, the petitioner seeks relief from the court in the form of a direction to the 5th respondent to rescind the weekly tax remittance requirement and to refund the entertainment tax paid from July 1, 2017, onwards. They urge the court to uphold their rights as licensees and to ensure that any tax policies imposed by the municipality are fair, reasonable, and legally justified.

The petitioner is contesting a directive issued by the 5th respondent, dated July 15, 2017, which instructed the petitioner, along with other cinema theater licensees, to remit entertainment tax weekly to the 5th respondent, namely, the Municipality. The petitioner seeks redress in the form of a direction for the 5th respondent to reimburse the entertainment tax paid from July 1, 2017, onwards.

Here’s a breakdown of the petitioner’s argument:

1. Background: The petitioner operates a cinema theater under a partnership firm. Prior to the implementation of the Goods and Services Tax (GST), the Government of Puducherry collected entertainment tax from theater owners. In 1995, through Government Order G.O.Ms.157 dated October 20, 1995, a 10% exemption for maintenance was granted, with the remaining 90% subject to taxation. However, with the advent of GST, the 6th respondent issued a notice on May 29, 2017, declaring that admission to cinema halls constituted a supply of service, necessitating registration under the GST Act. Consequently, the petitioner obtained registration under the GST Act with registration No. 34AAAFB3557FIZU. Pursuant to the May 29, 2017 notice, the petitioner pays GST at rates of 18% for tickets below Rs.100 and 28% for tickets above Rs.100. Notably, the GST calculation excludes the 10% maintenance charges permitted for theater owners. Under GST, 50% of the tax is remitted to the Central Government and 50% to the State Government, aligning with the overarching goal of GST to establish a unified tax regime.

2. Contradiction: However, in contradiction to the principles of GST and the aforementioned notice, the 5th respondent, via a letter dated July 15, 2017, instructed the petitioner and other theater owners to remit an additional entertainment tax of 25% to the Municipality, in addition to the GST already being paid. Consequently, the petitioner finds itself burdened with a cumulative tax rate of 53% (28% GST + 25% entertainment tax), deviating from the intended objective of GST to streamline taxation and create a uniform market across the nation.

In summary, the petitioner argues that the directive from the 5th respondent imposes an unjustified additional tax burden, contrary to the principles of GST and the objectives of creating a unified tax system. Therefore, the petitioner seeks relief in the form of a refund of the entertainment tax paid and a directive to cease the imposition of additional taxes by the Municipality.

The petitioner is contesting an order issued by the 5th respondent on July 15, 2017, which mandated cinema theater licensees, including the petitioner, to pay entertainment tax weekly to the municipality. The petitioner seeks a refund of the entertainment tax paid from July 1, 2017, onwards.

According to the petitioner, prior to the implementation of Goods and Services Tax (GST), the Government of Puducherry collected entertainment tax from theater owners. In 1995, the government exempted 10% for maintenance and allowed payment of the remaining 90% as entertainment tax. However, after the introduction of GST, the 6th respondent notified that admission to cinema halls constituted a service, requiring registration under the GST Act. Accordingly, the petitioner registered under the GST Act.

The petitioner claims to be remitting GST at rates of 18% for tickets below Rs.100 and 28% for tickets above Rs.100, excluding the permitted 10% maintenance charges. Half of the GST amount is paid to the Central Government and the other half to the State Government. However, the 5th respondent’s directive instructed theater owners to pay an additional 25% entertainment tax to the municipality on top of GST, totaling a tax burden of 53%. Despite pleas from industry associations to cancel the entertainment tax in light of GST implementation, the 5th respondent did not reconsider.

The petitioner argues that collecting entertainment tax alongside GST constitutes double taxation, violating the Constitution of India. The 6th respondent allegedly collected an excess of Rs.10,44,508.28, and the 5th respondent collected Rs.96,19,068/- in the period from July 1, 2017, to October 31, 2018. The petitioner seeks refunds of these overpaid amounts.

In response, the 5th respondent contends that their directive is lawful under Sections 118 and 161 of the Puducherry Municipalities Act, 1973. They assert that compliance with these laws is mandatory and that no entity has the legal right to challenge their enforcement. Therefore, the 5th respondent argues that their communication does not infringe upon the rights of the petitioner or other cinema business operators.

In summary, the petitioner seeks a refund of entertainment taxes paid post-GST implementation, alleging double taxation and constitutional violation, while the 5th respondent defends their directive as lawful under existing municipal legislation.

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