(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1) As these petitions arise out of a common background, they have been heard together and would be disposed of by this common judgment.
2) Facts being very similar in both the cases, we may record the facts emerging in Special Civil Application No.2568 of 2004.
2.1) The petitioners are engaged in the business of exhibiting films in a cinema hall. They are subjected to entertainment tax under the Gujarat Entertainment Tax Act, 1977. On 6th December 1997, the Deputy Commissioner of Luxury Tax, Gandhinagar, visited the site of the cinema hall of the petitioners for inspection and inquiry. On the basis of the documents collected and the statement recorded during the course of such inspection, the respondent No.3, that is, the Deputy Commissioner of Entertainment Tax, issued a show-cause notice on 18th March 1998 calling upon the petitioners why a sum of Rs.30,862/- be not recovered as per the Gujarat Entertainment Tax Act and a penalty one and a half times that much should not be levied.
In the show-cause notice, it was alleged that during the course of inspection, following irregularities were noticed:
i) That the tickets (details of which were annexed with the notice) which were purchased from the petitioners were not reflected in Form No.17 as required. Thus, the petitioners had issued duplicate tickets with a view to avoid payment of entertainment tax.
ii) That on the tickets, no date was marked. Even after the booking was closed, no entry was made about closing of the bookings.
3) On the basis of such allegations, proposal for collection of tax and penalty came to be made in the show-cause notice.
4) Ultimately, the respondent No.3 passed an order on 22nd June 1998 directing recovery of tax of Rs.30,862/- and penalty at the rate of 150% thereof, which comes to Rs.46,293/-.
5) The petitioners preferred an appeal against such order of the respondent No.3. The Appellate Authority by his order dated 26th February 1999, remanded the proceedings on the ground that certain documents were not supplied to the petitioners. For some strange reason, the respondent No.3, instead of proceeding further afresh, issued a fresh show-cause notice on 29th June 1999 on the same set of allegations. Along with the show-cause notice, certain documents, which the petitioners wanted, were supplied. However, it is the case of the petitioners that the statements of persons from whom the disputed unaccounted tickets were recovered, were not supplied. Be that as it may, the respondent No.3 passed fresh order on 5th June 2000 once again ordering recovery of tax and penalty. Thereupon, the petitioners preferred an appeal before the Appellate Authority. The Appellate Authority dismissed the appeal by an order dated 30th September 2002. Against such order, the petitioners preferred revision application before the Government. The Government also dismissed the revision application by order dated 5th May 2003. Upon which, the present petition came to be filed. In Special Civil Application No.2573 of 2004 only material difference is that the raid was carried out by Deputy Commissioner of Entertainment Tax, Surat.
6) Learned counsel Mr.Mehul K. Vakharia for the petitioners challenged the impugned orders on the following grounds:-
6.1) That the procedure of issuance of fresh notice was wholly irregular. Additionally, even after the remand, the respondent No.3 did not provide necessary documents. According to the counsel, therefore, the order was passed in breach of principles of natural justice.
6.2) Counsel further submitted that the respondents had not produced any evidence to establish that the petitioners had sold duplicate tickets and, therefore, the findings arrived at by the authorities below are unsustainable on record.
6.3) Counsel also submitted that the Deputy Commissioner of Luxury Tax could not have been authorised to carry out inspection. He submitted that there was no authorisation issued by the competent authority. In any case, such authorisation, even if issued, would run counter to the statutory provisions contained in section 11A of the Act. With respect to Special Civil Application No.2573 of 2004 he additionally submitted that Deputy Commissioner of Entertainment Tax, Surat had no authority to carry out the raid.
In this regard, counsel submitted that in case of Central Talkies (Special Civil Application No.2568 of 2004), raid was carried out by the Deputy Commissioner of Luxury Tax, who could not have been authorized in terms of section 11A of the Act. In case of Jaihind Cinema (Special Civil Application No.2573 of 2004), raid was carried out by the Deputy Commissioner of Entertainment Tax, Surat. Quite apart from the fact that such officers could not have been authorized to carry out such raid, in the present case, no authorization has also been produced by the respondents.
7) On the other hand, learned Assistant Government Pleader Ms.Maithili Mehta opposed the petition contending that after giving full opportunity to the petitioners, the impugned order came to be passed. Insofar as the factual aspects are concerned, three authorities have concurrently held that the charges were proved. The petitioners were found indulging in irregularities. The order, therefore, should be upheld.
8) Counsel relied on the further affidavit filed by the respondents and documents produced on record to contend that necessary notifications of authorisation were issued. The Deputy Commissioner of Luxury Tax was duly authorised to carry out the inspection. She submitted that at the relevant time, the Commissioner of Entertainment Tax was given an additional charge of the Commissioner of Luxury Tax as well. She submitted that, therefore, the requirement contained in section 11A of the Act stood satisfied.
9) With respect to the first contention, namely, that there were procedural irregularities in conducting the inquiry and passing the final order thereon, we are of the opinion that the petitioner was supplied all the necessary documents, on which the department had placed reliance. The petitioners could not point out any documents which the authorities relied on without supplying copies thereof to the petitioners. The competent authority had passed an order after remand, after giving further opportunity to the petitioners of being heard. No breach of natural justice could be established. It is, of course, true that respondent No.3, after his order was set aside by the Appellate Authority and proceedings were placed for fresh consideration, instead of proceeding further afresh, issued, rather mistakenly, a fresh show-cause notice. However, admittedly, such show-cause notice was founded on same set of facts. Such minor irregularities, therefore, in our opinion would not vitiate the entire proceedings. If the subsequent show-cause notice erroneously issued, had deviated materially in contents as compared to the original show-cause notice, the petitioner would have been justified in contending that issuance of such fresh show-cause notice prejudiced the petitioners. In the present case in absence of any such facts, in our opinion an erroneous issuance of such fresh show-cause notice would not vitiate the entire proceedings.
10) With respect to the factual findings regarding irregularities noticed by the authorities, we find that such conclusions are purely factual in nature. The respondent No.3 as the original adjudicating authority and two higher authorities, that is, Appellate and Revisional authorities have concurrently held that the irregularities as mentioned in the show- cause notice were committed. With such factual findings, we would not be in a position to interfere unless such findings are shown to be perverse.
11) The material question, however, remains is whether the inspections were carried out with valid authorization and if the answer of this question is in the negative, what would be the legal effect thereof.
12) This question arises slightly differently in two petitions. We would presently record such different facts. In Special Civil Application No.2568 of 2004 in connection with the Central Talkies, the cinema theater is located at Gondal. The petitioner at the very outset contended that the inspection was carried out by the Deputy Commissioner of Luxury Tax, Gandhinagar who could not have been authorized for such purpose in view of the provisions contained in section 11A of the Act. The respondents had initially not filed any reply to this aspect. However, later on, the respondents produced a notification dated 1st January 1983, in which in terms of section 11A of the Act, the Government appointed the Deputy Commissioner of Entertainment Tax, Rajkot for the purpose of carrying out provisions of the said Act in relation to the Rajkot, Jamnagar, Junagadh, Amreli, Bhavnagar, Surendranagar and Kachchh District areas. The respondents, along with their further affidavit dated 11th July 2012 also produced an office order dated 5th December 1997, under which the Commissioner of Entertainment Tax had authorized one D.P. Desai, Deputy Commissioner of Luxury Tax, Gandhinagar to exercise powers vested in him under section 11A(2) of the Act specifying his jurisdiction to be Rajkot District.
13) In case of Special Civil Application No.2573 of 2004 connected with Jaihind Cinema, the respondents have in the reply not dealt with the detailed contention of the petitioners that no authorization could have been issued and in any case no such authorization was ever issued. We may recall that in case of Jaihind Cinema, which was located at Rajkot, the raid was carried out by the Deputy Commissioner of Entertainment Tax, Surat. Learned Assistant Government Pleader stated that despite best efforts, the authorization could not be traced due to passage of time. The fact remains that no such authorization has been placed on record. In fact in the reply also, there is no reference to any authorisation.
14) Turning to the legal question, first addressing the same in connection with Jaihind Cinema, we find that despite the petitioner, at the very outset, contended that the inspection could not have been authorized to be carried out by any officer other than one specified under section 11A of the Act, the respondents did not reply to such a contention in their affidavits. We may record that the petitioners had taken up such contention not for the first time before this Court but had agitated such a legal contention before all the authorities right from the outset. Despite such position, the respondents did not produce any documents under which the Deputy Commissioner of Entertainment Tax, Surat was authorized to carry out the inspection at the Cinema hall. Had any authorization been produced on record, the question of legality of such authorization could be gone into. In absence of any document even remotely suggesting that the Deputy Commissioner of Entertainment Tax, Surat was authorized to carry out such raid, we are unable to proceed any further. Had the petitioner raised such a contention rather belatedly, many years after filing the petition, we would have certainly considered the difficulty of the Government being unable to produce such documents. In the present case, no such plea could be taken nor in fact was taken. In absence of any rebuttal, therefore, the contention of the petitioner that there was no authorization in favour of Deputy Commissioner of Entertainment Tax, Surat, to carry out such inspection must be accepted.
15) Coming to the case of Central Talkies, it is of course, true that Mr. D.P. Desai, Deputy Commissioner of Luxury Tax, Gandhinagar was authorized by the Commissioner of Entertainment Tax, as is apparent from the above noted office order dated 5th December 1997 produced along with the affidavit dated 11th July 2012 by the respondents. The question, however, is whether such authorization was valid. This question has to be viewed in background of statutory provisions contained in section 11A of the Act. Section 11A reads as under:-
Section 11A:- (1)(a)For carrying out the purposes of this Act, the State Government may appoint:-
(i) an officer to be the Commissioner of Entertainment Tax for the whole of the State of Gujarat.
(ii) The Collector of a district or any other officer, not below the rank of a Collector, to be the Collector of Entertainment Tax for each district; and
(iii) Such number of other officers and persons (with suitable designations) as the State Government thinks necessary.
(b) An officer appointed under paragraph (iii) of clause (a) shall, within the limits of such area, exercise such powers and duties conferred or imposed on any other officer by or under this Act, as the State Government may, by notification in the Official Gazette, specify.
(c) The superintendence and control for the proper execution of the provisions of this Act and the rules made thereunder relating to the levy and collection of the tax and the additional tax shall,-
(i) in relation to the whole of the State, vest in the commissioner of Entertainments Tax, and
(ii) in relation to a district and subject to the superintendence and control of the Commissioner of Entertainments Tax under sub-clause (I), vest in the Collector of Entertainment Tax for the district.
(2) It shall be lawful for the Commissioner of Entertainments Tax and the Collector of Entertainment Tax or an Officer duly authorized by the Commissioner of Entertainments Tax to have access to, and to cause production and examination of books, registers, accounts or other documents maintained or required to be maintained by a proprietor for the purpose of this Act and such proprietor shall, whenever, called upon to do so, produce such books, registers, accounts or documents, for inspection by any such officer.
(3) The State Government may, by notification in the Official Gazette, delegate to the Commissioner of Entertainments Tax the powers conferred on it by paragraph (iii) of clause (a) and by clause (b) of sub-section (1) and the Commissioner may exercise the powers so delegated to him subject to such conditions as may be specified in such notification.
16) Sub-section (1) of section 11A authorizes the State Government to appoint for carrying out the purposes of the Act, various officers including the Commissioner of Entertainment Tax and such number of other officers as the State Government thinks necessary. Clause (b) of sub-section (1) provides that an officer appointed in paragraph-(iii) of clause(a) within the limits of such area as may be specified, shall exercise such powers and duties as a State Government by a notification in official gazette, specify.
17) In this case, we are not directly concerned with sub-section (1) of section 11A. To our mind, the office order dated 5th December 1997 is passed by the Commissioner of Entertainment Tax in exercise of powers under sub-section (2) of section 11A. Such sub- section permits the Commissioner of Entertainment Tax and the Collector of Entertainment Tax or an officer duly authorized by the Commissioner of Entertainment Tax to have access to, and to cause production and examination of books, registers, accounts or other documents maintained or required to be maintained by a proprietor of a Cinema Hall. Thus, the Commissioner of Entertainment Tax himself, the Collector of Entertainment Tax or an officer duly authorized by the Commissioner of Entertainment Tax could exercise such powers. Here “the term an officer duly authorized by the Commissioner of Entertainment Tax', assumes significance. Under such powers, the Commissioner of Entertainment Tax could authorize an officer who would exercise the same powers as that of the Commissioner for the purpose of having access to, and to cause production and examination of books, registers, accounts or other documents maintained or required to be maintained by the proprietor. The said Act was framed to consolidate and amend the law relating to imposition of tax on entertainment in the State of Gujarat. The Act, therefore, was enacted for the purpose of consolidation and amendment of laws relating to imposition of entertainment tax. The reference to an officer under sub-section (2) of section 11A of the Act, who should be authorized by the Commissioner of Entertainment Tax must therefore be understood in the context of an officer of the Department of the Entertainment Tax. The term “officer” has not been defined. The same must be understood in the context in which it is used. The term an officer under sub-section (2) of section 11A cannot be understood as wide enough to include any person, Government Servant or authority whether within or outside the establishment of the entertainment tax department. In our understanding, therefore, in terms of sub-section (2) of section 11A of the Act, the Commissioner of Entertainment Tax could have authorized any officer of the establishment of the Entertainment Tax to exercise same powers as that of the Commissioner with respect to having access to, and to cause production and examination of books, registers etc. maintained or required to be maintained by a proprietor. Such authorization could not have been granted in favour of any officer outside the hierarchy of the entertainment tax department. Admittedly, the Deputy Commissioner of Luxury Tax was not part of such establishment or hierarchy. The Commissioner of Entertainment Tax, authorizing such officer under sub-section (2) of section 11A of the Act, therefore, in our view committed an error. Such authorization was, therefore, invalid and outside the powers of the Commissioner to grant such authorization.
18) When we find that in neither of the two cases, the authorization for carrying out the inspection was valid, any action pursuant thereto must also fail. The materials collected during such inspection and the show-cause notice which was founded on the basis of such material, therefore, do not survive the test of law. Only on this ground, therefore, both the petitions need to be and hereby allowed. The impugned orders are quashed. Rule is made absolute accordingly in each petition with no order as to costs.
(AKIL KURESHI,J.) (HARSHA DEVANI,J.) Vahid