1987 (8) TMI 423 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to rule 41C of the Karnataka Entertainments Tax Rules, 1959 as amended by the Karnataka Entertainments Tax (Amendment) Rules, 1986.

Detailed Analysis:
The petitioners, who are exhibitors of cinematograph shows, challenged rule 41C of the Karnataka Entertainments Tax Rules, 1959, as amended by the Karnataka Entertainments Tax (Amendment) Rules, 1986. The petitioners are assessed to entertainment tax under the Karnataka Entertainments Tax Act, 1958. The Act provides for two modes of tax levy: tax on entertainment under section 3 based on admission and a surcharge under section 3A. Additionally, section 4 levies show-tax on cinematograph shows in addition to the taxes under section 3 and 3A. Section 4A allows exhibitors in certain places to opt for tax payment under section 3 or on each show under section 4A based on the population of the place. The petitioners in the cases had different population settings, affecting their tax liabilities under the Act.

The petitioners challenged the requirement under rule 41C for exhibitors under section 4A to maintain a register in form XB and submit an extract of accounts with the return. The petitioners argued that this requirement was ultra vires the Act and unnecessary for entertainment tax levy under section 4A. The court considered the arguments presented by the petitioners' counsels and also referred to a related case challenging section 4A(6) of the Act, which required a certificate from the local authority if a show was not conducted. The court noted that the purpose of both the rule and the provision was to prevent tax evasion and ensure revenue collection. The court had previously upheld the validity of section 4A(6) in the related case.

The court acknowledged the department's submission that they would not insist on the maintenance of register in form XB but emphasized the importance of producing a certificate in form XC as required by section 4A(6) to prevent tax evasion. Given this submission, the court disposed of the writ petitions without delving into other contentions raised by the petitioners, as the main issue regarding the requirement of maintaining the register was resolved.

In conclusion, the court disposed of the writ petitions without further examination of the contentions, as the department agreed not to enforce the register maintenance requirement but emphasized the necessity of producing the required certificate to prevent tax evasion and ensure revenue collection under section 4A of the Act.