Introduction:

The Kerala High Court, in the case of The Kerala Film Exhibitors Federation v. State of Kerala (WA NO. 2300 OF 2015, 2025 LiveLaw (Ker) 115), addressed the constitutional validity of Section 3C of the Kerala Local Authorities Entertainments Tax Act, 1961. The case was heard by a Division Bench comprising Chief Justice Nitin Jamdar and Justice S. Manu. The petitioner, represented by K. Ramakumar and S.M. Prasanth, challenged the imposition of cess on cinema tickets, arguing that it was unconstitutional. The respondent, represented by Advocate General K. Gopalakrishna Kurup and K.R. Deepa, defended the levy, asserting that it was within the legislative competence of the state government.

Arguments of Both Sides:

The petitioner contended that the cess imposed under Section 3C was unconstitutional as it was unrelated to entertainment and cinema, and the state lacked legislative competence to enact such a provision. They argued that Entry 62 of List II of Schedule VII to the Constitution only permitted taxation, not cess. Additionally, they claimed that the collected cess was directed towards the Kerala Cultural Activists’ Welfare Fund, which had no direct nexus with entertainment, making the levy arbitrary. The respondent countered that cess, in essence, can function as an additional tax or fee, as established by precedent. They argued that the impugned levy was indeed related to entertainment, given that it was imposed on cinema tickets, and therefore fell within the purview of Entry 62 of List II. The state further emphasised that the collected amount contributed to the welfare of individuals in the cultural and entertainment sectors, benefiting cinema patrons indirectly.

Court’s Judgment:

The Kerala High Court upheld the constitutional validity of the cess, dismissing the appeal. The bench observed that cess is a permissible levy under Entry 62 of List II as an increment to the existing entertainment tax. They stated that the imposition of cess was on cinema viewers rather than theatre owners and was intrinsically linked to entertainment. The court clarified that the cess was legally justified since it was imposed on an activity explicitly covered under the entertainment tax framework. The collected revenue, directed towards the Kerala Cultural Activists’ Welfare Fund, was deemed an appropriate and justifiable allocation. Consequently, the court ruled that the state government had the legislative competence to impose such a levy, and Section 3C of the Kerala Local Authorities Entertainments Tax Act, 1961, was upheld as constitutional valid.