2015 (5) TMI 1021 - HC - VAT and Sales Tax

Eligibility for benefit of exemption notification dated March 26, 1999 - Demand of entertainment tax under the Rajasthan Entertainments and Advertisements Tax Act, 1957 - Assessee engaged in providing service of video game and other indoor game facility to its customers - Whether video games and video games parlors can be considered even otherwise to fall within the purview of all kind of sports and games to be eligible for benefit of exemption - Held that - by following the judgment of Hon ble Supreme Court in the case of Novopan India Limited, Hyderabad v. Collector of Central Excise and Customs, Hyderabad 1994 (9) TMI 67 - SUPREME COURT OF INDIA , the Supreme Court recently in State of Gujarat v. Essar Oil Ltd. 2012 (1) TMI 47 - SUPREME COURT OF INDIA , in case of ambiguity, a taxing statute should be construed in favour of the assessee, does not apply to the construction of an exception or an exempting provision, as the same have to be construed strictly and that in construing the exemption notification, question of equity does not arise. The exception or exemption provision must be construed strictly. Give it or does not give it at all. An exemption is a standalone process. Therefore, the assessee is not eligible for benefit of exemption notification. - Decided against the assessee

Issues Involved:

1. Taxability of video games under the definition of 'games' and the applicability of the notification dated March 26, 1999.
2. Validity of withdrawing benefits granted by a notification through a non-speaking and non-clarificatory clarification.
3. Jurisdiction of anti-evasion authorities versus the regular assessing authority.
4. Compliance with procedural requirements and principles of natural justice in the assessment process.

Issue-wise Detailed Analysis:

1. Taxability of Video Games:
The primary issue was whether video games fall within the definition of 'games' under the notification dated March 26, 1999, which exempts 'all kinds of sports and games' from entertainment tax. The petitioner argued that video games should be included within this definition and thus be exempt from tax. However, the court referred to the clarification issued on October 23, 2004, which explicitly excluded video games and video game parlors from the purview of the exemption. The court held that the clarification was necessary due to confusion regarding the inclusion of video games and was consistent with the inherent nature of the original notification. The court emphasized that in common parlance, 'games and sports' refer to traditional physical activities and tournaments, not video games.

2. Validity of Withdrawing Benefits:
The petitioner contended that the benefits granted by the notification dated March 26, 1999, could not be withdrawn by a non-speaking and non-clarificatory clarification. The court, however, upheld the validity of the clarification, stating that it was a logical exercise to clarify the scope of the original notification. The court referenced the Supreme Court's judgment in Geeta Enterprises v. State of U.P., which recognized video games as a form of entertainment subject to tax. The court also cited the principle that exemptions must be strictly construed, and any ambiguity should be resolved in favor of the revenue.

3. Jurisdiction of Anti-Evasion Authorities:
Although this issue was raised, it was not argued by the parties and thus was not addressed in the judgment.

4. Procedural Requirements and Natural Justice:
The petitioner argued that the assessment order was passed ex parte and in a hasty manner without following due process, including separate show-cause notices for different months. The court found that the assessment was conducted following a survey by the Anti-Evasion Wing, and the petitioner failed to provide a satisfactory reply to the notice. The court held that the assessing authority acted within its jurisdiction and followed the necessary procedural requirements. The court also noted that the first appellate authority and the Tax Board had already considered and partly allowed the petitioner's appeal by setting aside the penalty for non-disclosure of revenue.

Conclusion:
The court dismissed all the revision petitions, upholding the judgments of the first appellate authority and the Tax Board. The court concluded that the clarification excluding video games from the exemption was valid and necessary, and the assessment process followed due procedure and principles of natural justice. The court emphasized the principle that exemptions in tax laws must be strictly construed, and any ambiguity should favor the revenue.

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