2010 (2) TMI 1117 - HC - VAT and Sales Tax

Levy of entertainment tax made by the Deputy Commissioner (CT), Salem Division, Salem, the second respondent herein challenged - Held that - On perusal of the impugned orders, it could be seen that though the petitioner has brought to the notice of the authorities that the amendment can be given only prospective effect, the respondents have not adverted to the same, in their orders, excepting to fasten the liability of the petitioner on the sole ground of not obtaining prior permission from the licensing authority. Unless the amendment issued in the year 1987 to the word, increase in condition No. 6 in form C licence has been given retrospective effect with clear expression, the revision of assessment for the years 1982-83, 1983-84, cannot be made by applying the said amendment and consequently, the demand notices are without the sanction of law and therefore, without jurisdiction. For the reasons stated supra, the impugned orders are liable to be set aside and accordingly, set aside.

Issues Involved:
1. Legality of the levy of entertainment tax by the Deputy Commissioner (CT), Salem Division.
2. Requirement of prior approval from the licensing authority for reduction in rates of admission.
3. Retrospective application of the amendment to condition No. 6 of the C form licence.
4. Validity of the revision of assessments and the consequential demand notices.

Detailed Analysis:

1. Legality of the Levy of Entertainment Tax by the Deputy Commissioner (CT), Salem Division:
The petitioners, theatre owners, challenged the levy of entertainment tax imposed by the Deputy Commissioner (CT), Salem Division, on the grounds that the reduction in the rates of admission was done without the approval of the licensing authority, the District Collector. The petitioners argued that during the period in question, no prior approval was required from the licensing authority for reduction in rates of admission as per the Tamil Nadu Cinema (Regulation) Act, 1955. Despite their objections, the Deputy Commissioner confirmed the additional levy of entertainment tax.

2. Requirement of Prior Approval from the Licensing Authority for Reduction in Rates of Admission:
The petitioners contended that the C form licence required prior permission from the licensing authority only for an increase in the rates of admission, not for a reduction. They referenced a circular from the then Board of Revenue and a communication from the Additional Secretary to Government (CT) which stated that no orders were necessary for reducing the maximum rates of admission. The respondents, however, argued that the theatre owners needed prior approval for any alteration in the rates of admission, as interpreted in the judgment of Devi Theatre v. Deputy Commercial Tax Officer.

3. Retrospective Application of the Amendment to Condition No. 6 of the C form Licence:
The petitioners argued that the amendment made in 1987, which substituted the word "increase" with "alteration" in condition No. 6 of the C form licence, could not be applied retrospectively. They asserted that the amendment should only apply prospectively and that prior to the amendment, no approval was required for reducing rates of admission. The respondents did not address this argument adequately in their orders.

4. Validity of the Revision of Assessments and the Consequential Demand Notices:
The petitioners contended that the revision of assessments and the consequential demand notices were illegal and contrary to statutory provisions. They argued that the Entertainments Tax Officer had stamped and sealed the tickets with the reduced rates of admission, which amounted to implied approval. The respondents, however, relied on the judgment in Devi Theatre v. Deputy Commercial Tax Officer, which held that prior permission was required for any alteration in rates of admission, and that the Entertainments Tax Officer's acceptance of returns and issuance of sealed tickets did not invalidate the revision of assessments.

Conclusion:
The court held that the amendment to condition No. 6 of the C form licence, substituting the word "increase" with "alteration," could only be applied prospectively. The court found that the authorities had failed to consider the effect of the amendment properly and that the revision of assessments for the years 1982-83 and 1983-84 was without jurisdiction. Consequently, the impugned orders were set aside, and the writ petitions were allowed.

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