(Per : HONOURABLE MS. JUSTICE HARSHA DEVANI) 1. The petitioner, a private limited company, carrying on business of exhibiting feature films in the name and style of Payal Cinema, Vasad has called in question the order/communication dated 3rd January, 1992 issued by the Mamlatdar, Anand calling upon the petitioner to pay differential amount of entertainment tax of Rs.36,406.65ps.
2. The facts stated briefly are that the petitioner made an application under section 6(3) of the Gujarat Entertainments Tax Act, 1977 (hereinafter referred to as “the Act”) for payment of tax at the rate specified in sub-section (5) of section 6, commonly known as “consolidated payment of tax”. The Mamlatdar and Entertainment Tax Officer granted permission under section 6(5) of the Act on 19th January, 1989 for the period commencing from 30th December, 1988 at the rate of Rs.2097/- per week. It appears that subsequently, the petitioner with effect from 21st August, 1989 reduced the sitting capacity in the upper class from 410 to 375 seats. Accordingly, the Mamlatdar passed another order dated 30th August, 1989 granting permission under section 6(5) of the Act for the period commencing from 4th September, 1989 at the rate of Rs.1714.95 per week. Subsequently, it appears that on account of increase in the prices of the tickets, by an order dated 3rd September, 1990, permission was granted under section 6(5) of the Act for payment of consolidated tax at the rate of Rs.2640/- per week with effect from 3rd August, 1990. The petitioner, accordingly, made payment of entertainment tax as provided under the said permission granted by the Entertainment Tax Officer. Subsequently, by the impugned order dated 3rd January, 1992, the petitioner was called upon to pay differential amount of entertainment tax to the tune of Rs.36,406.65 ps. for the period 4th September, 1989 to 14th August, 1991 on the ground that as per the departmental clarification dated 5th January, 1989, the petitioner was not entitled to reduction of the rate of consolidated tax or decrease of the sitting capacity of the cinema hall and as such, with effect from 4th September, 1989 whereupon the consolidated tax had been paid on a reduced capacity, the petitioner was liable to pay the differential amount. Subsequently, by a notice dated 14th February, 1992, the petitioner has been called upon to pay the amount of Rs.36,406.65 in terms of the earlier notice failing which the amount would be recovered under the relevant provisions of the Bombay Land Revenue Code. Being aggrieved, the petitioner has filed the present petition challenging the aforesaid order.
3. Mr. Vandan Baxi, learned advocate for the petitioner assailed the impugned order by submitting that the same is in flagrant breach of the principles of natural justice inasmuch as prior to passing the order for recovery of the differential amount, no notices under the relevant provisions of the Act have been issued to the petitioner. Referring to the provisions of section 8 of the Act, which provides for “Returns and assessment” and section 9 of the Act which makes provision for “Assessment of escaped payment for admission and reassessment of payments for admission assessed at lower rate and assessment on failure to pay tax under section 6B”, it was submitted that the present case does not fall under either of the said provisions and as such, the impugned recovery is without any authority of law.
3.1 Next, it was submitted that pursuant to the application made by the petitioner, the Entertainment Tax Officer had passed orders granting permission to the petitioner to pay consolidated tax and specifying the amount payable by the petitioner. The petitioner had, accordingly, paid entertainment tax in terms of the permission granted by the Entertainment Tax Officer. Therefore, unless the said orders granting permission for payment of consolidated tax are revoked or set aside by the competent authority under the Act, the same subsist and as such, merely because the office of the Auditor General has taken objection in relation to the entertainment tax paid by the petitioner, ipso facto, the petitioner cannot be saddled with the liability to pay differential tax. Referring to the conditions imposed by the Entertainment Tax Officer while granting permission under section 6(5) of the Act, it was submitted that no condition had been imposed to the effect that there shall be no subsequent reduction in the sitting capacity. Referring to clause (v) of the conditions imposed while granting such permission, it was submitted that the said condition requires the petitioner to inform the Entertainment Tax Officer as regards any change in the rates of the ticket or in the sitting capacity, at least one week prior thereto. It was contended that if there is a presumption as regards the sitting arrangement, even where the number of seats are not as per the permission, the same would amount to taxing a non-existent income. The petitioner having reduced the sitting capacity was taxed accordingly, and as such, the impugned recovery being without authority of law, is required to be quashed and set aside.
4. Vehemently opposing the petition, Ms. Maithili Mehta, learned Assistant Government Pleader invited attention to the averments made in the affidavit-in-reply and more particularly the affidavit-in-reply dated 23rd January, 2012 filed by the Mamlatdar and Entertainment Tax Officer. The learned Assistant Government Pleader had principally drawn the attention of the court to the provisions of the Gujarat Entertainments Tax (Amendment) Act, 1989 whereby the expression “gross tax collection” came to be amended, to submit that the same provides that the gross tax collection shall be the amount of tax that would be leviable as on the day immediately before the commencement of the Amendment Act in respect of a cinema existing on that day and on the first day of the commencement of a new cinema in respect of a cinema established after the commencement of the Amendment Act and in case where the sitting capacity of the auditorium of a cinema is increased subsequent to the day referred to in sub- clause (i) or (ii), on the day of such increase. It was, accordingly, urged that the expression “gross tax collection” under section 6 of the Act envisages the computation of consolidated tax on the basis of sitting capacity in a case like the present one on the day immediately before the commencement of the Amendment Act of 1989 and the sitting capacity of the auditorium of the cinema in case the same is subsequently increased. It was submitted that the said provision does not envisage decrease in the sitting capacity and as such, in case there is a decrease in the sitting capacity, the amount of tax leviable shall be on the basis of the sitting arrangement on the day immediately before the commencement of the Amendment Act of 1989. It was submitted that in the present case, on the day of commencement of the Amendment Act, the sitting arrangement of the petitioner was in terms of the permission granted on 19th January, 1989 and as such, the reduction in the consolidated tax granted by the subsequent permission dated 30th August, 1989 on the basis of reduction of sitting capacity was not in consonance with the provisions of section 6 of the Act and as such, the petitioner was liable to pay the differential amount of tax. It was submitted that under the circumstances, the respondents are justified in seeking to recover the differential amount of tax. Attention was also invited to the circular dated 5th January, 1989 issued by the Entertainment Tax Commissioner whereby certain clarifications have been made and more particularly clause (x) thereof whereby it has been stipulated that while computing the amount of consolidated tax payable under section 6(5) of the Act, any decrease in the number of seats shall not be taken into consideration. It was, accordingly, submitted that the action of the respondents in seeking to recover the differential amount of tax is just, proper and legal and does not warrant any interference by this court.
5. The facts are not in dispute. The petitioner had been granted permission for payment of consolidated tax under section 6(5) by an order dated 19th January, 1989. Subsequently, on account of reduction in the sitting capacity, the consolidated tax payable came to be reduced by an order dated 1st September, 1989 whereby the amount of consolidated tax was reduced from Rs.2097/- per week to Rs.1794.95 per week. Later on, the amount was increased in view of the increase in the price of the tickets to Rs.2340/- per week by an order dated 3rd September, 1990. It is an admitted position that the said orders have neither been revoked nor have they been taken in revision and set aside by the competent authority and as such, the said orders/permissions have attained finality. By the impugned order dated 3rd January, 1992, the petitioner has been called upon to pay differential tax of Rs.36,406.65 on the ground that the petitioner was not entitled to reduction in the amount of consolidated tax payable by it on the basis of decrease in the sitting capacity of the cinema. Undisputedly, prior to the order of recovery, no notice has been issued to the petitioner calling upon it to show cause as to why such amount of tax should not be recovered from it.
6. A perusal of the provisions of section 8 of the Act which deals with returns and assessment shows that under the said section, the proprietor is required to furnish returns relating to payments for admission and complimentary tickets issued by him in the manner prescribed. Sub-section (2) of section 8 lays down that if the prescribed officer is satisfied that the return furnished under sub-section (1) is correct and complete, he shall assess the tax due from the proprietor for the period concerned on the basis of such return. Sub-section (3) thereof provides that if no return is furnished by the proprietor under sub-section (1) before the date prescribed or if the return furnished by him appears to the prescribed officer to be incorrect or incomplete, the prescribed officer shall, after making such inquiry as he considers necessary, assess to the best of his judgment the tax due from the proprietor. Thus, the provisions of section 8 of the Act can be invoked where either no return has been filed or where a return has been filed and the prescribed officer is of the opinion that the return furnished is incorrect or incomplete, whereupon he can proceed to assess to the best of his judgment the tax due from the proprietor. In the facts of the present case, it is not the case of the respondents that the petitioner had not filed a return or that the details furnished by him in the return were incorrect or incomplete. It appears to be the case of the respondents that the petitioner could not have made payment of consolidated tax based on reduction of the sitting capacity of the auditorium. It may also be noted that the proviso to section 8 postulates that before taking any action under sub-section (3) of section 8, the proprietor shall be given a reasonable opportunity of providing that no return was due from him or of proving the correctness and completeness of any return furnished by him. Thus, even if it is assumed that the action which is sought to be taken by the respondents is under sub- section (3) of section 8, in the first place, the prescribed officer would be required to give the petitioner a reasonable opportunity of proving the correctness and completeness of any return furnished by him and after making due inquiry is required to make an assessment in terms of sub-section (3) of section 8. In the present case, evidently, no assessment order has been passed as contemplated under sub-section (3) of section 8 of the Act and straightaway an order of recovery of differential amount had been made.
7. As noted earlier, section 9 of the Act makes provision for assessment of escaped payments for admission and reassessment of payments for admission assessed at lower rate and assessment on failure to pay tax under section 6B. For the purpose of invoking section 9, if for any reason any payment for admission to any entertainment or any complimentary ticket has escaped assessment to tax or the proprietor has failed to pay tax payable under section 6B, the prescribed officer is empowered to make assessment to the best of his judgment. Section 6B of the Act relates to tax on exhibition of entertainment by means of any type of antenna or cable television, which would not be applicable in the facts of the present case. As a natural corollary section 9 of the Act would not be attracted. The learned advocate for the petitioner is, therefore, justified in contending that neither would the provisions of section 8 nor section 9 of the Act be attracted in the facts of the present case.
8. It cannot be gainsaid that a condition precedent for the purpose of recovering any tax under a taxing statute, is the existence of an assessment order under the relevant provisions of the Act. In the facts of the present case, as noted hereinabove, no assessment order has been passed assessing the liability of the petitioner for payment of entertainment tax under section 6 of the Act. Apart from the fact that as discussed earlier, neither the provisions for assessment under section 8 nor section 9 of the Act are attracted in the facts of the present case, even otherwise no assessment has been framed under either of the said provisions. Thus, it is abundantly clear that by virtue of the impugned notice/order dated 3rd January, 1992, entertainment tax is sought to be recovered from the petitioner without making any assessment order, solely on the basis of an audit objection, which has no statutory basis and as such is without authority of law, rendering the same unsustainable.
9. In the light of the fact that the court has held that the recovery of differential amount of entertainment tax is itself without authority of law, it is not necessary to enter into the larger question as to whether it is permissible for a cinema to avail of reduction in the amount of consolidated tax on the basis of reduction of the sitting arrangement of the auditorium of the cinema. The said question is left open to be decided in an appropriate case.
10. For the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned order dated 3rd January, 1992 passed by the Mamlatdar, Anand (Annexure 'A' to the petition) as well as the notice dated 14th February, 1992 (Annexure 'F' to the petition) are hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs.
( Akil Kureshi, J. ) ( Harsha Devani, J. ) hki