PETITIONER:
STATE OF GUJARAT ETC.
Vs.
RESPONDENT:
HOTEL RATRANI THROUGH ITS PROPRIETORSHRI KANJI VISHWRAM PATE
DATE OF JUDGMENT: 10/12/1996
BENCH:
K. RAMASWAMY, G.T. NANAVATI
ACT
HEADNOTE
JUDGMENT
WITH
CIVIL APPEAL NOS.4514-15/84 AND 132-33/86
ORDER
The main appeal by special leave arises from the judgment and order of the High Court of Gujarat, made on March 1/4, 1985 in Special Civil Application No.4459/84 and batch. The other appeals relate to the decision of the Bombay High Court in Ramesh Waman Roke & Ors. vs. State of Maharashtra [AIR 1984 Bom.345]. The Gujarat High Court has followed the decision of the Bombay High Court. In all the cases, the facts are not in dispute.
The respective legislatures brought Section 6-A in Bombay and the Gujarat Entertainment Tax Act, 1977 providing for levy and collection of tax on entertainment by Video Cassette Recorder or Player on Television or Videoscope in any place of entertainment or omnibus etc. at the rates specified therein. The latter Act came into force w.e.f. June 14, 1984. The Government made Rules by name, Gujarat Cinema (Regulation & Exhibition by Video) Rules, 1984 9 for short, the "Rules"). The Rules have come into force on the same date. The respondents filed the writ petitions challenging the constitutionality of Section 6-A, Rules 13(1) and 19(ii) of the Rules. The High Court while upholding the constitutionality of the Act and the Rules held that the gross collection of the entertainment tax on the Video Recorder or Video Player on Television or Videoscope is arbitrary and violative of Article 14. It also held that the Rules are ultra vires. Thus, these appeals by special leave.
In Venkateshwara Theater vs. State of A.P. & Ors [(1993) 3 SCC 677], this Court considered the constitutionality of Sections 4, 4-A and 5 of the A.P. Entertainment Tax Act, 1939 providing for levy and collection of entertainment tax on the gross collection in Cinema theater. It was held in paragraph 16 that entertainment tax that would be collected over and above the average occupancy rate would constitute the profit of the proprietor. In the circumstances, it cannot be said that the adoption of the system of consolidated levy in Section 4(1), as amended by Act 24 of 1984, alters the nature of tax and it ceases to be a tax on entertainment.
In paragraph 17, on the gross collections, it was held thus:
"It has been urged that since both
the modes of levy of tax were
prevalent prior to the enactment of
Act 24 of 1984, an option should
have been given to the proprietor
of a cinema theatre to choose
between either of the two modes and
that under the impugned provisions
the choice is confined to two modes
of assessment under the same system
of consolidated levy based on the
gross collection capacity per show,
one on the basis of gross
collection capacity power show
under Section 4(1) and other on the
basis of gross collection capacity
per show for a prescribed number of
shows per week under Section 5. We
find no substance in this
contention. Once it is held that
tax on entertainment could be
levied by either of the two modes,
viz., per payment for admission or
gross collection capacity per show,
it is for the legislature to decide
the particular mode or modes of
levy to be adopted and whether a
choice should be available to the
proprietor of the cinema theatre in
this regard. The legislature does
not transgress the limits of its
legislative power conferred on its
under Entry 62 of List II if it
decides that consolidated levy on
the basis of gross collection
capacity per show shall be the only
mode for levy of tax on
entertainments."
In paragraph 29 and 30, it was held thus:
"29. In the instant case, we find
that the legislature has prescribed
different rates of tax by
classifying theaters into different
classes, namely, air-conditioned,
air-cooled, ordinary (other than
air-conditioned and air-cooled),
permanent and semi-permanent and
touring and temporary. The theaters
have further been categorised on
the basis of the type of the local
area in which they are situate. It
cannot, therefore, be said there
has been no attempt on the part of
the legislature to classify the
cinema theatres taking into
consideration the differentiating
circumstances for the purpose of
imposition of tax. The grievance of
the appellants is that the
classification is not perfect. What
they went is that there should have
been further classification amongst
the theatres falling in the same
class on the basis of the location
of the theatre in each local area.
We do not think that such a
contention is well founded.
30. In relation to cinema theatres
it can be said that the attendance
in the various cinema theatres
within a local area would not be
uniform and would depend on factors
which may vary from time to time.
But his does not mean that cinema
theatres in a particular category
of local area will always be at a
disadvantage so as to be
prejudicially affected by a uniform
rate as compared to cinema theatres
having a better location in the
same local area. It is, therefore,
not possible to accept the
contention that the impugned
provisions are violative of the
right to equality guaranteed under
Article 14 of the Constitution on
the basis that unequals are being
treated equally."
Thus this Court had upheld the power of the Legislature to levy gross collections on the entertainment tax. Section 6-A reads as under:
"6-A(1) There shall be levied and
paid to the State Government, a tax
on an entertainment by video
cassette recorded or video cassette
player on television or videoscope
calculated at the following rates,
namely:-
(a) in any place of entertainment
other than that mentioned in clause
(b).
(I) within the limits of a local
area, the population of which as
ascertained at the last preceding
census and notified by the State
Government in the official gazette
after such census is more than
1,00,000, two rupees per seat in
such place of entertainment:
(II) within the limits of a local
area, the population of which was
ascertained at the last preceding
census and notified by the State
Government in the official gazette
after such census is more than
50,000 but not more than 1,00,000,
on rupee per seat in such place of
entertainment.
(III) in any other area, seventy
paise per seat in such place of
entertainment.
(b) in any omnibus which is used to
the State exclusively as contract
carriage having provision for
entertainment by video cassette
recorder or video cassette player
on television or videoscope, two
rupees per seat in the omnibus.
(2) For the purpose of levy of tax
under this section, it shall be
presumed that
(a) in the case of a place of
entertainment falling under clause
(a) of sub-section (1), a
proprietor provides at least three
entertainments on every day, and
(b) in the case of any omnibus
falling under clause (b) of sub-
section (1), a proprietor provides
at least one entertainment on every
day;
unless the proprietor otherwise
informs the prescribed officer at
such time and in such manner as may
be prescribed.
3(a) Notwithstanding anything
contained in clause (a) of sub-sec.
(I), every proprietor to whom any
of the provisions of that clause
apply shall have an option of
payment of tax a the rates
specified in clause (d) to be
exercise as provided in clause (b)
within ninety days from the date of
the commencement of the Gujarat
Entertainments Tax (Amendment) Act,
1984 and any person who become such
proprietor after that date may
exercise such option within sixty
days from such date.
(b) A proprietor desiring to
exercise an option referred to in
clause (a) shall make an
application to the prescribed
officer in such form as may be
prescribed, to permit him to make
in lieu of amount of tax payable by
him under clause (a) of sub-section
(I), payment of tax at the rates
specified in clause (d).
(c) On an application under clause
(b), the prescribed officer may
grant such permission and thereupon
subject to clause (e) the payment
of tax shall be made accordingly.
(d) where a proprietor has been
permitted to pay tax under clause
(c) he shall be liable to pay
monthly at the following rates,
namely:-
In the case of a place of
entertainment within the local
limits of a local area referred to
-
(1) in sub clause (I) of clause (a)
of sub-section (1) -
(i) five rupees per seat per day
where the proprietor has declared
that he holds not more than three
entertainments per day; and
(ii) six rupees per seat per day
where the proprietor has declared
that he holds more than three
entertainments per day;
(2) in sub-clause (II) of clause
(a) of sub-section (1)
(i) three rupees per seat per day
where the proprietor has declared
that he holds not more than three
entertainments per day; and
(ii) four rupees per seat per day
where the proprietor has declared
that he holds more than three
entertainments per day,
(e) A proprietor who has opted for
payment of tax under clause (a),
may at any time but not before the
expiry of a period of twelve
months, by a notice in such form as
may be prescribed, addressed to the
prescribed officer, revoke his
option from the commencement of any
month following that in which the
notice is given.
(4) For the purpose of levy of tax
under sub-section (1) every
proprietor shall furnish such
returns to the prescribed officer
in such manner or such period and
before such date as may be
prescribed.
(5) Save as otherwise provided in
sub-sections (1) to (4), the
provisions of this Act (except
sections 3, 4 and 6) and the rules
made thereunder shall, so far as
may be, apply in relation to the
tax livable under sub-section (1)
as they apply in relation to the
tax livable under sections 3 and 4;
Rules 13 and 19 of the Gujarat
Cinemas (Regulations of Exhibition
by Video) Rules, 1984 are also
impugned here. They are also
reproduced herein-below:-
13. Power to refuse license: (1)
The Licensing authority shall have
absolute discretion to refuse a
licence if the video cinema is
likely to cause obstruction,
inconvenience, annoyance, risk,
danger or damage to the residents
or passers by in the vicinity of
the cinema.
(2) The licensing authority shall
refuse a license if the distance
between the existing permanent
semi-permanent or touring cinema
and the video cinema is less than
150 metres.
19. Access to inspecting officers,
The licensee shall give free access
to the video cinema at all honors
to -
(i) the licensing authority or any
officer nominated by the licensing
authority under the Act and the
Rules and for checking that the
provisions of the Act and the Rules
are being complied with;
(ii) any Police Officer who is
required by a general or special
order of the licensing authority of
the District Superintendent of
Police or the Commissioner of
Police, as the case may be."
Shri Krishan Mahajan, learned counsel appearing for the respondents, contends that Section 3 of the Act envisages levy of the tax on payment for admission to entertainments on every payment for admission to an entertainment, other than the payment for admission referred to in clause (b), a tax at the following rates specified therein. The Video Recorder or a Player when exhibited entertains the customer; it does not entertain a person on admission. For admission, therefore, it is not an entertainment tax. Accordingly it cannot be levied. We find no force in the contention. It is an admitted position that they entertain the persons on playing the Video Recorder or Video Games on admission or in the omnibus, as enacted under the Act. Thereby, obviously on charging the admission rates or while operating the omnibus during journey, the Video Recorder or Video Player has been exhibited for entertaining traveling passengers. Thus it is an admission to entertain the person on payment. It is then contended that the composition was not available to them at flat rate because there is no regular intake of the persons or of number of shows. Accordingly, the rule is arbitrary. We find no force in the contention.
It is seen that the Rule envisages imposition of the levy of the tax on the basis of the population of the place of exhibition. If it is a place where the population is one lakh and more @ Rs.2/- per seat and if the population is between one lakh and 50,000, @ Re. 1 per seat and in other places at Re.0.75 per seat. It is for the licensee to specify to the authorities, how many persons are entertained. As far as the gross collections are concerned, it cannot be investigated to recall by a rule as to how many of them in each show are admitted. Sub-section 3(2) provides that for the purpose of levy of tax under this section, it shall be presumed that in the case of a place of entertainment failing under clause (a) of sub-section (1), a proprietor provides at least three entertainments on every day and in the case of any omnibus failing under clause (b) of sub-section (1), a proprietor provides at least one entertainment on every day. It is only a presumptive evidence since in the absence of definite information, Rulemaking authority leaves it to the licensee to establish by making application as to how many persons he has been entertaining, unless the proprietor otherwise informs the prescribed officer at such time and in such manner as may be prescribed. Therefore, the proprietor or the licensee has been given option to inform the prescribed authority at such time and in such manner, as the case may be, as per the rules. Sub-section 3(d) postulates that where a proprietor has been permitted to pay tax under clause (c), he shall be liable to pay monthly at the rates specified thereunder. Clause (e) shows that a proprietor who has opted for payment of tax under clause (a), may at any time but not before the expiry of a period of 12 months, by a notice in such form as may be prescribed, addressed to the prescribed officer, revoke his option from the commencement of any month following that in which the notice is given.
Thus it could be seen that he has been given an option for payment of the entertainment tax in the manner laid down in Clause (b). Under Clause 3(a), he is required to make an application as provided under clause (e). Thus considered, it is a valid rule for the due collection of the entertainment tax when the proprietor of the videorecorder/video games entertains the persons admitted into the theater or exhibits the video recorder/video player in omnibus at the rates specified thereunder. Thus the Rule is valid and is not beset with any arbitrariness in the exercise of the power. Accordingly, we uphold Section 6-A and affirm the findings of the High Court declaring Rule 13(2) to be ultra vires. Rule 22 is void. Rule 14(2) is incidental to and consequence of enforcement of regulation.
The appeals are accordingly allowed, the writ petitions stand dismissed. No costs.