1996 (2) TMI 510 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of levying interest on delayed payments of entertainment tax during the period when no specific rate of interest was prescribed.
2. Retrospective application of Rule 20-A of the A.P. Entertainments Tax Rules, 1939.

Detailed Analysis:

1. Validity of levying interest on delayed payments of entertainment tax during the period when no specific rate of interest was prescribed:

The petitioner, a cinema theatre, challenged the validity of the proceedings initiated by the respondent for levying interest on delayed payments of entertainment tax for the period between September 27, 1984, and December 19, 1985. The petitioner argued that during this period, there was no specific rule prescribing the rate of interest, as Rule 20-A, which set the rate at Rs. 2 for every one hundred rupees or part thereof, was only inserted by G.O. Ms. No. 894 on July 25, 1985, and published in the Gazette on August 1, 1985.

The respondent contended that the liability to pay interest on delayed payments existed before and after January 1, 1984, under sections 5(8) and 10(1) of the A.P. Entertainments Tax Act, 1939. These provisions mandated the payment of interest on delayed tax payments, even though the specific rate was prescribed later.

The court noted that the liability to pay interest on delayed payments existed under the earlier provision of section 7(4) and continued under sections 5(8) and 10(1) after January 1, 1984. The term "prescribed" in section 3(8) of the Act meant prescribed by rules made under the Act, and section 16(2-A) authorized the State Government to make rules with retrospective effect.

2. Retrospective application of Rule 20-A of the A.P. Entertainments Tax Rules, 1939:

The petitioner argued that Rule 20-A, which prescribed the rate of interest, could not be applied retrospectively to periods before its insertion. The respondent countered that the rule's wording implied retrospective application from the date the tax became due.

The court examined Rule 20-A, which stated that interest was payable from the day/date specified for its payment. The court interpreted this to mean that the rule had retrospective effect by necessary implication, as it covered periods before its formal insertion. The court referenced several precedents, including State of Punjab v. Jullundur Vegetables Syndicate and Income-tax Officer, Alleppey v. M.C. Ponnoose, to support its interpretation.

The court concluded that the subordinate legislation (Rule 20-A) could have retrospective effect if the language implied it and if there was specific authority for retrospective legislation. In this case, the liability to pay interest existed before the rule's formal insertion, and Rule 20-A provided the rate of interest applicable from the date the tax became due but was unpaid.

Conclusion:
The court held that the impugned demand for levying interest on delayed payments of entertainment tax during the period from September 27, 1984, to December 19, 1985, was valid. The writ petition was dismissed, with no order as to costs.