2011 (8) TMI 1011 - HC - VAT and Sales Tax

Assessee relied on the notification dated March 15, 1996 claiming 100 per cent tax exemption for a period of five years Held that - In the present case, licensing authority has throughout been relying on the notification dated March 15, 1996 while renewing the licenses of the assessees in these matters and no effort was made by the Commercial Taxes Department to get that condition of licence altered according to subsequent notification dated August 8, 2002. There is no explanation why if the licensing authority had issued the licence containing the stipulation of nil entertainment tax and renewal thereof was done on year to year basis, the Commercial Taxes Department, which is authorized to collect entertainment tax, did not take any steps to get the said condition of the licence modified, altered, varied or even revoked or rectified to indicate the amount of tax. The contention of the Revenue that condition incorporated in the licence by the licensing authority would, not be binding upon the Commercial Taxes Department, can neither be appreciated nor approved of because they are both two organs of the State, which cannot be permitted to speak two different voices. Even though the licensing authority was under an obligation to act according to the Act of 1952, yet the licensing authority has been assigned certain duties under section 11 of the Act of 1957 and both the authorities have to therefore act in tandem. Thus the revision petitions filed by the assessees deserve to be allowed and those filed by the Revenue deserve to be dismissed

Issues Involved:
1. Interpretation and applicability of government notifications regarding entertainment tax exemptions.
2. Validity of licensing authority's conditions regarding entertainment tax.
3. Binding nature of conditions imposed by different government departments.
4. Retrospective effect of tax exemption notifications.
5. Judicial propriety in differing opinions of the Tax Board.

Issue-Wise Detailed Analysis:

1. Interpretation and Applicability of Government Notifications:
The controversy revolves around different notifications issued under Section 7(2) of the Rajasthan Entertainments and Advertisements Tax Act, 1957. The assessees argued that they made significant investments based on the notification dated March 15, 1996, which exempted new cinema halls from entertainment tax for five years if commercial exhibitions started by March 31, 2000. This date was extended to March 31, 2002, by another notification dated March 30, 2000. The Revenue contended that these notifications applied only to unitary cinema houses and not multiplexes, for which a special notification dated February 18, 2002, was issued, providing a different tax exemption structure. Subsequent notifications further amended these provisions, creating a complex scenario regarding which notification applied to the assessees.

2. Validity of Licensing Authority's Conditions:
The assessees obtained licenses from the District Magistrate/District Collector under the Rajasthan Cinemas (Regulation) Act, 1952, which mentioned a nil entertainment tax in the license conditions. The assessees argued that they could not charge entertainment tax due to these conditions. The Revenue argued that the licensing authority's conditions do not bind the Commercial Taxes Department, which is authorized to levy and collect the tax under the Act of 1957. The court noted that the licensing authority and the Commercial Taxes Department, being two organs of the State, should not speak with different voices and must act in tandem.

3. Binding Nature of Conditions Imposed by Different Government Departments:
The court emphasized that different government departments must speak with one voice. The assessees relied on the notification dated March 15, 1996, and the licenses issued by the licensing authority, which mentioned nil entertainment tax. The court held that the Commercial Taxes Department should have approached the licensing authority to modify the license conditions if they believed the conditions were incorrect. The court cited the Supreme Court's judgment in Vadilal Chemicals Ltd., which held that the State, represented by different departments, must speak with one voice.

4. Retrospective Effect of Tax Exemption Notifications:
The court examined the retrospective effect of the notifications. The notification dated August 8, 2002, superseded the notification dated February 18, 2002, and provided a new tax exemption structure. The court noted that the subsequent notification dated February 25, 2008, amended the August 8, 2002 notification, making it effective from August 8, 2002. The court held that the earlier notification dated March 15, 1996, was not specifically superseded, and the assessees had acted based on this notification. Therefore, the assessees were entitled to the benefits of the March 15, 1996 notification.

5. Judicial Propriety in Differing Opinions of the Tax Board:
The court observed that the Rajasthan Tax Board had differing opinions in two sets of cases. In the earlier batch, the Tax Board allowed the appeals, holding that multiplex cinema halls were covered under the general definition of cinema halls. In the subsequent batch, the Tax Board took a contrary view. The court held that if a single bench of the Tax Board differed with the opinion of a coordinate bench, judicial propriety demanded a reference to a larger bench. The court set aside the judgment of the Tax Board dated October 29, 2009, which had remanded the matter for fresh assessment for subsequent three years.

Conclusion:
The court allowed the revision petitions filed by the assessees, dismissing those filed by the Revenue. The court affirmed the judgments of the Rajasthan Tax Board dated June 18, 2008, June 27, 2008, July 22, 2008, and July 30, 2008, and set aside the judgment dated October 29, 2009. The court held that the assessees were entitled to the benefits of the notification dated March 15, 1996, and the conditions imposed by the licensing authority were binding until modified or revoked. The court emphasized the need for different government departments to act in harmony and speak with one voice. There was no order as to costs.

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