2007 (11) TMI 395 - SC - VAT and Sales Tax

Penalty levy - Held that - Appeal allowed. It is irrational that as against a tax liability of Rs. 3,006, penalty of Rs. 4,39,000 was to be imposed. Though in all cases quantum would not be a relevant factor, but on analysing the scheme of the statute it is clear that the stress is on the contravention. The contravention essentially is of admitting persons without valid ticket and at the relevant point of time, had no nexus with the number of persons. To make the provision stringent the shift has been made to per person. But the amendment has no retrospective effect and is not clarificatory. As noted the amendment does not appear to be clarificatory in nature as contended by learned counsel for the respondent-State. The view of the High Court, therefore, is not correct. The conclusion of the Taxation Board was the correct view.

Summary

Issues:
Challenge to order passed by a learned single judge of the Rajasthan High Court allowing the revision filed under section 86 of the Rajasthan Sales Tax Act, 1994. Interpretation of penalty provisions under the Rajasthan Entertainments and Advertisements Tax Act, 1957. Examination of legislative history and amendments to penalty provisions.

Analysis:
The appellant, an exhibitor of cinematograph films, faced a show cause notice under the Rajasthan Entertainments and Advertisements Tax Act, 1957, for admitting viewers without tickets during a movie screening. The Commercial Tax Officer imposed penalties under the Act, leading to appeals and revisions. The Taxation Board reduced the penalty, but the High Court restored the initial penalty based on a specific interpretation of the penalty provisions. The appellant argued against the High Court's reliance on a previous decision and highlighted the legislative history of the statutory provisions.

The key issue revolved around the penalty imposition per viewer under section 10(3)(b) of the Act. The legislative history was crucial in understanding the amendments made to the penalty provisions over time. The amended section allowed for penalties per person, indicating a shift in the penalty structure. The Statement of Objects and Reasons for the amendment shed light on the legislative intent behind the changes, emphasizing practicality and effective recovery of taxes. The amendment was not retrospective and did not merely clarify existing provisions, as argued by the respondent-State.

The Supreme Court analyzed the legislative amendments and the intent behind the changes to the penalty provisions. It was observed that the penalty imposition was not solely based on the number of viewers but on the contravention of admitting persons without valid tickets. The Court concluded that the High Court's interpretation was incorrect, and the view taken by the Taxation Board was more aligned with the legislative intent. Consequently, the appeal was allowed, overturning the High Court's decision, with no order as to costs.