Full Judgment Text
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CASE NO.:
Appeal (civil) 709 of 2004
PETITIONER:
Aashirwad Films
RESPONDENT:
Union of India & Ors
DATE OF JUDGMENT: 18/05/2007
BENCH:
S.B. Sinha & Markandey Katju
JUDGMENT:
J U D G M E N T
S.B. SINHA, J :
1. Constitutionality of a notification issued by the Government of the
Andhra Pradesh levying different rates of entertainment tax is in question in
this Writ Petition filed by the petitioner herein under Article 32 of the
Constitution of India. The petitioner herein carries on its business as a
distributor of motion film at Hyderabad. The field of his activity is said to
be distribution of Hindi films in the State of Andhra Pradesh.
2. The State of Andhra Pradesh made an Act known as "Andhra Pradesh
Entertainment Tax Act, 1939". The said Act was enacted in terms of Entry
No. 62 of List II of the VII Schedule of the Constitution of India which reads
as under :-
"62. Taxes on luxuries including tax on entertainment,
amusement and betting and gambling."
3. It is not in dispute that the rate of tax in respect of Telugu film was
fixed at 10% and that of non-Telugu film has been fixed at 24%.
4. Representations were made to the Government of Andhra Pradesh to
withdraw the said purported discriminatory tax by the Andhra Pradesh State
Film Television and Theatre Development Corporation Ltd. in terms of its
letter dated 9th/11th December, 2002 addressed to the Secretary to the
Government, GA (I&PR) Department, Secretariat, Hyderabad as also other
bodies and parliamentarians, which was not acceded to. The decision of the
State was communicated to the petitioner by the Principal Secretary to the
Government in terms of its letter dated 19.9.2003 stating;
"I invite attention to the reference cited and inform that
Government have carefully examined your representation
for grant of Tax relief to the Hindi Films on par with Telugu
Films and consider that there is no need to extend such
concession.
Accordingly the representation first cited is hereby
rejected."
5. We may notice that the number of Hindi Films certified by the Censor
Board is highest in India. Films made in Telugu, however, appears to be
next in number as would appear from the following comparative chart:-
COMPARATIVE CHART SHOWING NUMBER
OF INDIAN FILMS (LANGUAGE-WISE)
CERTIFIED IN INDIA IN 2001, 2002 & 2003
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_________________________________________________
No. Language 2003 2002 2001
1. Hindi 222 218 230
2. Telugu 155 167 206
3. Tamil 151 178 196
4. Kannada 109 113 93
5. Malayalam 64 101 135
6. Bengali 49 47 48
7. Marathi 25 20 18
8. Assamese 17 17 13
9. Gujarati 14 15 12
10. Chhattisgarhi 4 12 14
11. English 23 12 8
12. Oriya 13 10 6
\005\005.
6. Mr. Anil Kumar Tandale, learned counsel appearing on behalf of the
Writ Petitioner inter-alia would submit that the impugned levy is not
justified inasmuch as;
1. It contravenes Article 351 of the Constitution of India.
2. It is discriminatory in nature and thus ultra-vires Article 14 thereof.
7. Mr. R. Sundaravaradhan, learned senior counsel appearing on behalf
of the respondent on the other hand would submit that
(i) Article 351 of the Constitution of India has no application in the
instant case.
(ii) The State enjoys a greater latitude in imposing different types of
taxes on different classes of the people.
(iii) In any event, as the Writ Petition does not contain any ground on
the basis whereof, the plea of discrimination could be raised, the
same should not be entertained by this Court.
8. We are not impressed with the submission of Mr. Anil Kumar
Tandale, learned counsel that in a case of this nature, Article 351 of the
Constitution of India would have any role to play. Assuming that there was
a violation thereof, the same would not come within the purview of Part III
of the Constitution of India and thus its application under Article 32 in
relation thereto is not maintainable.
9. The State undoubtedly enjoys a greater latitude in the matter of a
taxing statute. It may impose a tax on a class of people, whereas it may not
do so in respect of the other class.
10. A taxing statute, however, as is well known, is not beyond the pale of
challenge under Article 14 of the Constitution of India.
11. In M/s. Chhotabhai v. Union of India [AIR 1962 SC 1006], it was
stated :
"(37) But it does not follow that every other Article of Part
III is inapplicable to tax laws. Leaving aside Art. 31(2)
that the provisions of a tax law within legislative
competence could be impugned as offending Art. 14 is
exemplified by such decisions of this Court as Suraj Mal
Mohta & Co. v. A.V. Visvanatha Sastri, (1955) 1 SCR 448
: (AIR 1954 SC 545), and Shree Meenakshi Mills Ltd.,
Maduari v. A.V. Visvanatha Sastri, (1955) 1 SCR 787 : (
(S) AIR 1955 SC 13). In Moopil Nair v. State of Kerala,
AIR 1961 SC 552 the Kerala Land Tax Act was struck
down as unconstitutional as violating the freedom
guaranteed by Art. 14. It also goes without saying that if
the imposition of the tax was discriminatory as contrary to
Art. 15, the levy would be invalid."
12. A taxing statute, however, enjoys a greater latitude. An inference in
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regard to contravention of Article 14 would, however, ordinarily be drawn if
it seeks to impose on the same class of persons or occupations similarly
situated or an instance of taxation which leads to inequality. The taxing
event under the Andhra Pradesh State Entertainment Tax Act is on the
entertainment of a person. Rate of Entertainment tax is determined on the
basis of the amount collected from the visitor of a cinema theatre in terms of
the entry fee charged from a viewer by the owner thereof.
13. It is not the case of the respondent that the imposition of different
rates of entertainment tax is justified on any ground other than language.
Entertainment of a person may not wholly depend upon the language of the
film he sees. A film may be produced in one language and may be dubbed
in another. Even within a State, people belonging to different regions may
speak different languages, although the State language may be one.
14. It has been accepted without dispute that taxation laws must also pass
the test of Article 14 of the Constitution of India. It has been laid down in a
large number of decision of this Court that a taxation statute for the reasons
of functional expediency and even otherwise, can pick and choose to tax
some. Importantly there is a rider operating on this wide power to tax and
even discriminate in taxation: that the classification thus chosen must be
reasonable. The extent of reasonability of any taxation statute lies in its
efficiency to achieve the object sought to be achieved by the statute. Thus,
the classification must bear a nexus with the object sought to be achieved
[See Moopil Nair v. State of Kerala AIR 1961 SC 552, East India Tobacco
Co. v. State of Andhra Pradesh AIR 1962 SC 1733, V. Venugopala Ravi
Varma Rajah v. Union of India and Anr. AIR 1969 SC 1094, Assistant
Director of Inspection Investigation v. Kum. A.B. Shanthi AIR 2002 SC
2188, The Associated Cement Companies Ltd. v. Government of Andhra
Pradesh and Anr. AIR2006SC928]
15. Objectives in a statute may have a wide range. But the entire matter
should also be considered from a social angle. In any case, it cannot be the
object of any statute to be socially divisive in which event it may fall foul of
broad constitutional scheme enshrined under Articles 19, 21 as also the
Preamble of the Constitution of India.
16. In that behalf, it is important to read the object of a taxation statute on
the touchstone of social values as mentioned in the Constitution. An adverse
conclusion can be drawn if a particular statute goes against such values. It is
on thing to say that the taxation statute does not further social good, but
quite another when it disturbs the social fabric. The court may take adverse
note in respect to statutes falling in the latter category. We herein note two
cases where an attempt has been made to raise this discussion to the pedestal
of Directive Principles. In Sri Srinivasa Theatre and Ors. v. Government of
Tamil Nadu and Ors. [(1992) 2 SCC 643], this Court held:
"Article 14 of the Constitution enjoins upon the
State not to deny to any person ’Equality before
law’ or ’the equal protection of laws’ within the
territory of India. The two expressions do not
mean the same thing even if there may be much in
common\005
Equality before law is a dynamic concept having
many facets. One facet - the most commonly
acknowledged - is that there shall be no privileged
person or class and that none shall be above law. A
facet which is of immediate relevance herein is the
obligation upon the State to bring about, through
the machinery of law, a more equal society
envisaged by the preamble and Part IV of our
Constitution. For, equality before law can be
predicated meaningfully only in an equal
society i.e., in a society contemplated by Article
38 of the Constitution, which reads:
38. State to secure a social order for the
promotion of welfare of the people. (l) The
State shall strive to promote the welfare of
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the people by securing and protecting as
effectively as it may a social, economic and
political, shall inform all the institutions of
the national life.
(2) The State shall, in particular, strive to
minimise the inequalities in income, and
endeavour to eliminate inequalities, in
status, facilities and opportunities, not only
amongst individuals but also amongst
groups of people residing in different areas
or engaged in different vocations.
The instrument of taxation is not merely a
means to raise revenue in India; it is, and
ought to be, a means to reduce inequalities.
You don’t tax a poor man. You tax the rich
and the richer one gets, proportionately
greater burden he has to bear. Indeed, a few
years ago, the Income-tax Act taxed 94p out of
every rupee earned by an individual over and
above Rupees one lakh. The Estate Duty Act, no
doubt since repealed, Wealth-tax Act and Gift-
tax Act are all measures in the same direction. It
is for this reason that while applying the doctrine
of classification - developed mainly with
reference to and under the concept of "equal
protection of laws" Parliament - is allowed more
freedom of choice in the matter of taxation vis-a-
vis other laws...In the matter of taxation it is,
thus, not a question of power but one of
constraints of policy - the interests of economy,
of trade, profession and industry, the justness of
the burden, its ’acceptability’ and other similar
considerations. We do not mean to say that
taxation laws are immune from attack based upon
Article 14. It is only that Parliament and
legislatures are accorded a greater freedom and
latitude in choosing the persons upon whom and
the situations and stages at which it can levy tax.
We are not unaware that this greater latitude has
been recognised in USA and UK even without
resorting to the concepts of ’equality before law’
or "the equal protection of laws" - as something
that is inherent in the very power of taxation and
it has been accepted in this country as well. In the
context of our Constitution, however, there is an
added obligation upon the State to employ the
power of taxation - nay, all its powers - to
achieve the goal adumbrated in Article 38."
(Emphasis supplied)
17. In Elel Hotels and Investments Limited and Others v. Union of India
[(1989) 3 SCC 698], Justice Venkatachaliah observed:
"\005It is now well settled that a very wide latitude
is available to the legislature in the matter of
classification of objects, persons and things for
purposes of taxation. It must need to be so, having
regard to the complexities involved in the
formulation of a taxation policy. Taxation is not
now a mere source of raising money to defray
expenses of government. It is a recognised fiscal
tool to achieve fiscal and social objectives. The
differentia of classification presupposes and
proceeds on the premise that it distinguishes and
keeps apart as a distinct class hotels with higher
economic status reflected in one of the indicia of
such economic superiority\005"
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(Emphasis supplied)
18. The fact of the matter remains that it is difficult to laud the objective
of the taxation statute in the instant matter which differentiates on the basis
of language alone. This is definitely derisive of social attributes of the polity
and Article 14 in its basic form i.e. equality before law. If any classification
seeks to take refuge of exception under reasonable differentia category
under Article 14, it must stay clear of the broad constitutional mandate as
mentioned hereinbefore. In the instant matter, the classification solely on the
basis of language, fails in its initiative to be called reasonable. The
classification thus is arbitrary and as such violative of Article 14 of the
Constitution of India.
19. In Venkateshwara Theatre v. State of Andhra Pradesh and Others
[(1993) 3 SCC 677] this court observed:
"Since in the present case we are dealing with a
taxation measure it is necessary to point out that in
the field of taxation the decisions of this Court
have permitted the legislature to exercise an
extremely wide discretion in classifying items for
tax purposes, so long as it refrains from clear and
hostile discrimination against particular persons or
classes."
20. It is also required to be realized that imposition of reasonable tax is a
facet of good governance.
21. Another aspect of the matter cannot also be lost sight of. Taxing
statute like penal statues should receive strict construction. It cannot be
arbitrary. [See Bidhannagar (Salt Lake) Welfare Asson. V. Central
Valuation Board & Ors., Civil Appeal No. 6345 of 2000 decided this date]
22. It may be true that the Court ordinarily is not concerned with the rate
of tax unless the same is wholly arbitrary or confiscatory. However, it is well
settled that generally speaking a tax imposed must be reasonable. We may
only notice that a Constitution Bench of this Court in Jindal Stainless Ltd. v.
State of Haryana & Ors. [JT 2006 (4) SC 611] stated :
"38. Tax is levied as a part of common burden. The basis
of a tax is the ability or the capacity of the taxpayer to pay.
The principle behind the levy of a tax is the principle of
ability or capacity. In the case of a tax, there is no
identification of a specific benefit and even if such
identification is there, it is not capable of direct
measurement. In the case of a tax, a particular advantage,
if it exists at all, is incidental to the States’ action. It is
assessed on certain elements of business, such as,
manufacture, purchase, sale, consumption, use, capital etc.
but its payment is not a condition precedent. It is not a
term or condition of a licence. A fee is generally a term of
a licence. A tax is a payment where the special benefit, if
any, is converted into common burden."
23. In Hardev Motor Transport v. State of M.P. & Ors. [JT 2006 (9) SC
454], this Court stated;
"29. Section 3 of the 1991 Act is the charging section. It
provides that the tax shall be levied on every motor vehicle
used or kept for use in the State at the rates specified in the
First Schedule. The levy of tax, therefore, is on the motor
vehicles. Its rate may vary keeping in view its use or the
nature thereof\005"
24. This Court in this case is not concerned with the application of test of
reasonableness while considering the constitutionality of a statute. The test
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of reasonableness, however, would vary from statute to statute and the
nature of the right sought to be infringed or the purpose for imposition of the
restriction. It is also not a case where a Section of the people have been
picked up and they form the constituted class by itself. It is furthermore not
a case where the State has picked up and chosen districts, objects, methods
in the matter of imposition of tax. However, although a legislative body has
a wide discretion, and taking statute may not be held invalid unless the
classification is clearly unreasonable and arbitrary but it is also trite that
class legislation is that which makes an improper discrimination by
conferring particular privileges. "Class legislation is that which makes an
improper discrimination by conferring particular privileges upon a class of
persons, arbitrarily selected from a large number of persons, all of whom
stand in the same relation to the privilege granted and between whom and
the persons not so favoured no reasonable distinction or substantial
difference can be found justifying the inclusion of one and the exclusion of
the other from such privilege. A classification must not be arbitrary,
artificial or evasive and there must be a reasonable, natural and substantial
distinction in the nature of the class or classes upon which the law operates."
(See Weaver’s Constitutional Law, Page 397)
25. The purported classification only on the basis of language without
anything more and in particular having regard to the difference in the rate of
tax, in our opinion is ex-facie arbitrary. The burden was, therefore, on the
State to show that the imposition was justified. Different rates of
entertainment tax had not been levied having regard to the nature of theatre,
the area where they were situated or extent of occupancy etc. It has not
been explained as to whether cinema theatres exhibiting Telugu films suffer
from any disadvantage which others had not been. It has not been shown
as to why the same theatre where films in different languages are exhibited
would be a class apart, only because at different times exhibit films
produced in different languages. Moreover, how telugu films have been
treated as a separate class have not been stated. Although the legislature
enjoys a greater freedom and latitude in chosing person upon whom and
suggest upon which it can levy tax, it is trite that taxing legislations are not
immune from attack based on Article 14. It is also not the case of the
respondent State that in imposing different rate of tax, they intend to achieve
an avowed object envisaged under Part IV of the Constitution of India.
26. We, furthermore, may take judicial notice of the fact and keeping in
view that this case was tagged with other matters where it had been brought
to our notice that some States have been making hostile discriminations at
the instance of the distributors of the films produced in local languages.
State of Andhra Pradesh imposed the said tax on the said basis which is per
se discriminatory in nature.
27. We are, therefore, of the opinion that the impugned levy cannot be
sustained being discriminatory in nature. It is struck down accordingly.
Petitioner would, thus, be bound to pay tax at the rate at which entertainment
tax has been levied in respect of Telugu films. The Writ Petition is allowed
with costs. Counsel’s fees assessed at Rs. 50,000/-.