2009 (11) TMI 840 - HC - VAT and Sales Tax

Benefit of the promotion scheme denied - Whether once the composition charge of ₹ 50,000 was accepted by the authorities, the requirement of rule 3(3) of the Rules, 1951, stood automatically waived and the petitioner ought to have been given the relevant licence? Held that - As in paragraph No. 19 of the counter-affidavit, it has been admitted that the petitioner has deposited ₹ 50,000 as composition charges. Since composition fee was paid and accepted, any irregularity that may have been committed stood regularised. Therefore, only on this account, the benefit of promotion scheme cannot be denied to the petitioner. Writ petition deserves to be allowed

Summary

Issues:
1. Construction of cinema hall in a town area with a population of less than twenty thousand.
2. Compliance with the U.P. Cinematography Rules, 1951 for obtaining a license.
3. Application for exemption from payment of entertainment tax under a promotion scheme.
4. Dispute regarding the benefit of the promotion scheme and entertainment tax recovery.
5. Legal challenge through Civil Misc. Writ Petition and subsequent dismissal.
6. Restoration of the writ petition and the claim for exemption under the promotion scheme.
7. Interpretation of the rule regarding composition charges for exemption from payment of tax.
8. Admissibility of the petitioner's claim for exemption based on the payment of composition charges.

Analysis:
The judgment revolves around the petitioner's application for constructing a cinema hall in a town area with less than twenty thousand population. After fulfilling formalities, permission was granted, and the petitioner applied for a license under the U.P. Cinematography Rules, 1951. Amendments to the rules required payment of composition charges of Rs. 50,000 for compliance with rule 3(3). The petitioner deposited the amount and applied for a license. However, a dispute arose regarding exemption from entertainment tax under a promotion scheme, with authorities conditioning exemption on not claiming benefits under the scheme.

The petitioner argued that payment of composition charges automatically waived the requirement of rule 3(3) and entitled them to the benefit of the promotion scheme. A writ petition was filed challenging the authorities' decision, leading to an interim order for license processing without additional conditions. Despite subsequent developments, the petitioner was denied the promotion scheme benefits, leading to the dismissal of the writ petition in default.

Upon filing a fresh writ petition, the court considered the petitioner's claim for exemption under the promotion scheme. The counter-affidavit contested the petitioner's entitlement due to lack of prior permission for construction. However, it admitted the payment of composition charges, regularizing any irregularities. The court, considering these facts, quashed the impugned orders, directing authorities to reevaluate the petitioner's eligibility for the promotion scheme benefits based on the composition fee payment.

The judgment allowed the writ petition, emphasizing that the petitioner should not be denied the promotion scheme benefits solely due to constructing the cinema hall without prior permission, given the payment of composition charges. It further directed prompt consideration of the petitioner's claim for tax refund if entitled to the promotion scheme benefits, ensuring compliance within a specified timeframe.