1985 (3) TMI 301 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Vires of Section 6-A of the Gujarat Entertainment Tax (Amendment) Act, 1984.
2. Challenge to Rules 13 and 19 of the Gujarat Cinema (Regulation of Exhibition by Video) Rules, 1984.

Detailed Analysis:

1. Vires of Section 6-A of the Gujarat Entertainment Tax (Amendment) Act, 1984:

The primary contention against Section 6-A was that it imposed a tax on the person providing entertainment, rather than on the person being entertained. This argument was dismissed based on the precedent set by the Supreme Court in Western India Theatres Ltd. v. Cantonment Board, Poona, which held that a tax on the giver of entertainment falls within the ambit of Entry 62 of List 2 of Schedule VII of the Constitution, which pertains to "taxes on luxuries including taxes on entertainments, amusements, betting and gambling."

Further, the presumption in Section 6A(2) that proprietors provide a certain number of shows daily was contested. The court noted that presumptions are rebuttable and proprietors could inform the prescribed officer if fewer shows were held. However, the court found the provision for calculating tax based on the total number of seats available, rather than actual occupancy, to be illegal. This was because it did not account for unoccupied seats on certain days, making the tax on a notional basis rather than actual entertainment.

The court referenced the Bombay High Court's judgment in Ramesh Waman Toke and Ors. v. State of Maharashtra, which criticized a similar tax structure for not considering actual entertainment provided. The judgment emphasized that the tax should be based on actual entertainment, not on the theoretical maximum capacity.

Consequently, the court declared Section 6A ultra vires the Constitution as it levied tax on notional entertainment, which is beyond the legislative power conferred under Entry 62 of List II of Schedule VII of the Constitution.

2. Challenge to Rules 13 and 19 of the Gujarat Cinema (Regulation of Exhibition by Video) Rules, 1984:

Rule 13(1): The rule allowed the licensing authority to refuse a license if the video cinema was likely to cause obstruction, inconvenience, annoyance, risk, danger, or damage to residents or passersby. The court interpreted "in the vicinity of the cinema" to mean "in the vicinity of the video-cinema" and not any other cinema. This interpretation was agreed upon by the Government Pleader.

Rule 13(2): This rule mandated a minimum distance of 150 meters between a video cinema and any existing permanent, semi-permanent, or touring cinema. The court found no rationale behind this provision, noting that in many cities, permanent cinemas exist in close proximity without legal issues. The court inferred that this rule imposed an unreasonable restriction on video cinemas to benefit permanent cinemas, thereby violating Article 14 of the Constitution of India.

Rule 19(ii): This rule granted any Police Officer, authorized by the licensing authority, free access to the video cinema. The court clarified that such access should be for maintaining law and order, as conceded by the Government Pleader.

Judgment:

The court allowed all three petitions, declaring Section 6-A of the Gujarat Entertainments Tax (Amendment) Act, 1984, and Rule 13(2) of the Gujarat Cinemas (Regulation of Exhibition by Videos) Rules, 1984, as ultra vires the Constitution of India. The rule was made absolute with costs. The request for a certificate under Article 133 of the Constitution was rejected. The operation of the judgment was stayed for six weeks to allow the State of Gujarat to take appropriate legal recourse.