2010 (12) TMI 1087 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of entertainment tax under the U.P. Entertainment and Betting Tax Rules, 1981 for the assessment years 1989-90 and 1990-91 based on compound payment scheme. Challenge against the notification issued on March 26, 1991, prescribing a tax rate of 22 per cent. Legality of the demand notice issued by the District Magistrate for payment of differential tax amount. Dismissal of earlier writ petitions and subsequent appeal leading to the present writ petition. Retrospective operation of the notification enhancing the tax rate to 22 per cent from April 1, 1990.

Analysis:
For the assessment year 1989-90, the petitioner availed the scheme of compound payment of tax under rule 24A of the U.P. Entertainment and Betting Tax Rules, 1981, where tax was to be paid at 18 per cent of the gross collection capacity of the cinema hall. However, for the assessment year 1990-91, no specific rate was prescribed through a notification. A writ petition was filed challenging this, and an interim order allowed the petitioner to continue paying tax based on the previous year's basis. Subsequently, a notification was issued on March 26, 1991, setting the tax rate at 22 per cent, leading to a demand notice by the District Magistrate for a differential amount.

The petitioner's earlier writ petitions and appeals were dismissed on various grounds, leading to the present writ petition challenging the retrospective operation of the notification increasing the tax rate to 22 per cent from April 1, 1990. The High Court referred to previous judgments, notably the decision in Writ Petition No. 4124 (M/B) of 1993, where a similar notification was held bad for charging an enhanced tax rate from a certain date. The Court held that the notification enhancing the rate to 22 per cent from April 1, 1990 was quashed, along with the demand notice. An interim order was granted in 2005, subject to providing adequate security, which could now be released.

In conclusion, the High Court allowed the writ petition based on the retrospective operation of the notification, following the reasoning of previous judgments. The notification increasing the tax rate was deemed invalid from April 1, 1990, leading to the quashing of the demand notice. The petitioner succeeded in challenging the imposition of the higher tax rate, providing relief in this legal dispute over entertainment tax assessment.