“Licencees are bound under the provisions of the Entertainments Tax Act to remit cess collected under Section 3C till the preceding month to seek renewal of the licence.”
Court’s Decision:
The Kerala High Court dismissed a batch of writ petitions filed by theatre owners challenging the insistence by local authorities to produce ‘No Dues Certificates’ issued by the Kerala Cultural Activists’ Welfare Fund Board as a condition for licence renewal under the Kerala Cinemas (Regulation) Act, 1958.
The Court held:
- The statutory framework under Section 3C of the Kerala Local Authorities Entertainments Tax Act, 1961 read with Section 6(4) mandates payment of cess as a precondition for licence renewal.
- Licensing authorities are justified, and indeed bound, to insist on the No Dues Certificate to ensure compliance.
- All writ petitions seeking licence renewal without the No Dues Certificate were dismissed.
Facts:
Multiple theatre proprietors and the Kerala Film Exhibitors Federation filed writ petitions challenging:
- The demand for submission of No Dues Certificates issued by the Kerala Cultural Activists’ Welfare Fund Board as a precondition for renewal of licences under the Kerala Cinemas (Regulation) Act, 1958.
- Notices issued by local authorities demanding remittance of cess under Section 3C of the Kerala Local Authorities Entertainments Tax Act, 1961, claiming these lacked legal basis under the Cinemas Regulation Act and its Rules.
The State argued that the cess collected from viewers under Section 3C is mandatory and that the licensing authorities were legally bound to ensure its collection before renewing theatre licences.
Issues:
- Whether the Kerala Cinemas (Regulation) Act, 1958 permits licensing authorities to demand No Dues Certificates from the Welfare Fund Board for licence renewal.
- Whether Section 3C of the Kerala Local Authorities Entertainments Tax Act, 1961 read with Section 6(4) authorises such a requirement overriding the Cinemas Regulation Act.
- Whether notices demanding payment of cess under Section 3C are legally sustainable.
Petitioners’ Arguments:
The petitioners argued:
- The Kerala Cinemas (Regulation) Act, 1958 and its Rules do not require a No Dues Certificate from the Welfare Fund Board as a condition for licence renewal.
- Demanding such certificates was illegal, arbitrary, and without jurisdiction.
- The licensing authorities were exceeding their powers by linking licence renewal to the payment of the cess under Section 3C.
- They sought directions for renewal of licences without the insistence on No Dues Certificates.
Respondents’ Arguments:
The State and the Kerala Cultural Activists’ Welfare Fund Board contended:
- Section 3C of the Kerala Local Authorities Entertainments Tax Act, 1961, specifically mandates the levy and collection of cess for the welfare fund from cinema tickets.
- Section 6(4) explicitly states that no licence for conducting a cinema shall be renewed unless the entertainment tax (and by extension, the cess) has been paid up to the preceding month, overriding the Cinemas Regulation Act.
- The statutory provisions create an obligation on the local authorities to ensure collection of the cess prior to renewal, and hence, insisting on a No Dues Certificate is legally justified.
- The Division Bench of the Kerala High Court upheld the validity of Section 3C in Kerala Film Exhibitors Federation v. State of Kerala [2025 SCC OnLine Kerala 915].
Analysis of the Law:
The Court examined:
- Section 3C of the Kerala Local Authorities Entertainments Tax Act, 1961, which mandates cess collection for the welfare of cultural activists.
- Section 6(4), inserted via the 2013 amendment, contains a non-obstante clause overriding the Cinemas Regulation Act, mandating cess payment as a precondition for licence renewal.
- Section 3C(6), which clarifies that the word “tax” in Section 6(4) includes “cess,” bringing the welfare cess under the same compliance mechanism as entertainment tax.
- Kerala Film Exhibitors Federation v. State of Kerala [2025 SCC OnLine Kerala 915], which upheld the constitutionality of Section 3C, making payment of cess mandatory.
- The legislative intent to ensure compliance with the welfare cess payment while renewing licences was clear.
Precedent Analysis:
The Court relied on:
- Kerala Film Exhibitors Federation v. State of Kerala [2025 SCC OnLine Kerala 915], where a Division Bench upheld Section 3C’s validity.
- Judgment dated 10 April 2025 in W.P.(C) No. 14313/2016, where the Single Judge directed local authorities to collect cess under Section 3C and remit it to the Welfare Fund Board.
These precedents clarified:
1. The legality and enforceability of cess collection under Section 3C.
2. The authority of local bodies to require payment of dues as a condition for licence renewal under the overriding provisions of Section 6(4).
Court’s Reasoning:
The Court reasoned:
- The statutory mandate under Section 3C and Section 6(4) explicitly requires payment of cess before licence renewal.
- The non-obstante clause in Section 6(4) ensures it overrides the provisions of the Kerala Cinemas (Regulation) Act, 1958.
- The licensing authorities’ insistence on a No Dues Certificate is in line with statutory compliance and protects them from personal liability for non-collection or delayed remittance of the cess.
- The argument that there was no provision in the Cinemas Regulation Act requiring such certification was irrelevant due to the overriding statutory provision.
Conclusion:
The Kerala High Court dismissed all the writ petitions, upholding:
1. The requirement of No Dues Certificates from the Kerala Cultural Activists’ Welfare Fund Board for theatre licence renewals.
2. The validity of notices demanding payment of cess under Section 3C.
It concluded:
“Licencees are bound under the provisions of the Entertainments Tax Act to remit cess collected under Section 3C till the preceding month to seek renewal of the licence.”
Implications:
- Theatre owners in Kerala must clear all cess dues under Section 3C and produce No Dues Certificates before seeking licence renewals.
- Clarifies the overriding effect of the Entertainments Tax Act over the Cinemas Regulation Act in matters of cess compliance.
- Reinforces the legislative commitment to welfare measures for cultural activists funded through the cess on cinema tickets.
- Avoids legal challenges on the same grounds in future by upholding the statutory interpretation consistently with the legislative scheme.
Brief Note on Cases Referred:
- Kerala Film Exhibitors Federation v. State of Kerala [2025 SCC OnLine Kerala 915]: Upheld the constitutional validity of Section 3C, confirming the legality of cess collection by local authorities for the welfare fund.
- Judgment dated 10 April 2025 in W.P.(C) No. 14313/2016: Directed local bodies to collect and remit cess under Section 3C in a timely manner to the Kerala Cultural Activists’ Welfare Fund Board.
These judgments reinforced the statutory obligations of theatre owners and local authorities regarding cess payment and licence renewal procedures in Kerala.
FAQs:
1️. Can theatre owners in Kerala get licence renewals without producing No Dues Certificates from the Welfare Fund Board?
No, the Kerala High Court has held that it is mandatory to produce No Dues Certificates showing cess payment under Section 3C before renewal.
2️. Does the Kerala Cinemas Regulation Act override the Entertainments Tax Act regarding licence renewal requirements?
No, the Entertainments Tax Act with Section 6(4) has an overriding effect, requiring cess payment prior to licence renewal, even if the Cinemas Regulation Act is silent.
3️. What happens if the cess under Section 3C is not paid by theatre owners?
Theatres will not be able to renew their licences, and local authorities can enforce recovery with penalties, while officials can be personally liable for delayed remittance.