SAW/860/1994 of M/S THEATRE JWALA MANDIR,RAWATSAR Vs STATE and ORS on 15 April 1996

Conclusion

:: J U D G M E N T ::

D.B. CIVIL SPECIAL APPEAL NO.860/1994

M/s Theatre Jwala Mandir, RawatsarVs. The State of Rajasthan & Ors.

Date of Order :: 8[th] August, 2006

P R E S E N T

HON’BLE THE CHIEF JUSTICE SHRI S.N. JHAHON’BLE SHRI JUSTICE MOHAMMAD RAFIQ

::

Shri Vijay Agarwal, for the appellant.Shri Sangeet Lodha, for the respondents.*****

BY THE COURT (PER HON’BLE THE CHIEF JUSTICE)

This special appeal is directed againstthe order of the learned Single Judge dated12.9.1994 in S.B. Civil Writ Petition No.4161/1994dismissing the writ petition of the appellant.

The appellant had filed writ petition forquashing the admission rates fixed by the Sub-Divisional Magistrate, Nohar as the authorityundertheRajasthanEntertainmentsandAdvertisements Tax Act, 1957 (in short ‘the Act’), the assessment order assessing the appellant’sliability under the said Act and orders passed onrectification application and revision preferredby the appellant. The case of the appellant –which is a cinema hall – is that for new cinemasconstructed at municipal towns having populationof less than one lac, the State Governmentannounced a package allowing 100% remission inentertainment tax including the additionalentertainment tax chargeable under the Act, in thefirst year of business, 50% in the second year and25% in the third year of business. Notification tothat effect under Section 7(2) of the Act wasissued on 16.12.1982. The appellant-cinema startedits screening business on 12.4.1984 at Rawatsarhaving population of less than one lac andtherefore, it was entitled to remission to theextent of 100% in the first year i.e.1984-85, 50%in the second year i.e. 1985-86 and 25% in thethird year i.e.1986-87. The dispute in the presentcase, it may be stated, relates to the year 1986-87. For the year 1986-87, the admission rates werefixed by the Sub-Divisional Magistrate being thelicensing authority vide his letter dated31.3.1987 taking into account 25% remissionallowed for the year. The admission fee and entertainment tax respectively were fixed fordifferent classes as under :

Case of the appellant is that theentertainment tax under Section 4(1) of the Act isleviable at a rate not exceeding 100% of theadmission fee. The benefit of remission in tax hasto go to the cinema owner and therefore, it wasentitled to retain the amount comprising 25% ofthe entertainment tax. However by reason of wrongfixation of rates by the Sub-Divisional Magistratethe appellant deposited Rs.2.55 for Box, Rs.2.15for Balcony, Rs.1.50 for Upper Class and Rs. 0.85for Lower Class as tax as per the order of Sub-Divisional Magistrate even though it was entitledto retain 25% of it by way of remission. Theappellant, in the circumstances, claimed refund ofthe excess amount deposited by it as entertainmenttax which was refused by the assessing officer.The appellant filed application for rectificationand then revision against the assessment order.Those remedies having gone in vain, the appellant filed writ petition which was too dismissed by thelearned Single Judge, it has now come to DivisionBench in this appeal.

It is relevant to mention here thatagainst similar assessment for the year 1985-86,the appellant had filed S.B. Civil Writ PetitionNo.4154/1992 which was dismissed by identicalorder on the same day i.e. 12.9.1994. Theappellant then filed D.B. Civil Special AppealNo.870/1994 which was also dismissed albeit ex-parte but by a speaking order on 10.3.2003.

We heard counsel for the appellantnotwithstanding the fact that assessment forpreceding year 1985-86 stands confirmed by reasonof dismissal of the writ petition as well as thespecial appeal. As indicated above, the appeal wasdismissed in absence of the appellant’s counseleven though by a speaking order.

Shri Vijay Agarwal appearing for theappellant submitted that remission scheme wasintended to provide incentive to the owners of newcinema halls. The Remission Scheme notified underSection 7(2) of the Act vide S.O. 50 dated27.6.1987 as amended by S.O. 158 dated 1.11.1988,entitled the cinema owner to retain 50% or 25% oftax, as the case may be, and deposit only thebalance amount. The entire tax having been deposited by mistake, the appellant was entitledto refund of the amount to the extent ofremission. Reference was made to clause (5.5) ofS.O. 50 dated 27.6.1987 which runs as under :- “(5.5) The Cinema-owner will retain theamount of remission covered by theauthorization permitted under thisnotification and shall deposit thebalance amount of entertainment tax asper provisions of the Act, the Rules andthe notifications issued thereunder.”

Reference to S.O. 50 dated 27.6.1987

appears to be totally misplaced, for, the schemenotified by the said order/notification wasapplicable from the date of its publicationi.e.27.6.1987 to 31.3.1992. Clause 2(i) of thenotification defined ‘New Cinema’ to mean a cinemanewly constructed during the immediate precedingone year from the date of issue of thenotification making commercial exhibition of afilm after 31.3.1987 but before 1.4.1988. Theappellant-cinema hall, it would appear, did notcome within the ambit of the above definition. Asa matter of fact, the entire case of the appellantis totally misconceived.

Section 4 of the Act provides for levy oftax on payment for admission to an entertainmentand lays down, inter alia, that entertainment taxshall be levied, charged and paid to the State Government on all payments for admission to anentertainment, a tax at such rate not exceeding100 percent of the payment for admission, as maybe notified by the State Government from time totime. The tax shall be levied and paid to theState Government also on every complimentaryticket issued by the proprietor for everyentertainment, as if full payment had been madefor admission to such entertainment according tothe class of seat or accommodation subject tocertain exceptions, which are not necessary tonotice for the purpose of this case. The questionis whether the tax chargeable and payable to theState Government under Section 4 of the Act can beretained by owner of the cinema hall ? The question is squarely covered by thedecision of the Apex Court in Amrit Banaspati Co.Ltd. & Anr. Vs. State of Punjab & Anr., (1992) 2SCC 411. That was a case of grant of taxconcession to new industrial units set-up pursuantto promise/representation of the government to theeffect that new units shall be entitled to certainconcessions. One of the concessions was in theform of refund sales tax. The appellant claimedrefund of sales tax paid by it to the StateGovernment on sale made by it of its finishedproducts. Upholding the plea of promissory

estoppel, in principle, the Supreme Court heldthat promissory estoppel is an extension ofprinciple of equity, the basic purpose of which isto promote justice founded on fairness and relievea promisee of any injustice perpetrated due topromisor’s going back on its promise, but it isincapable of being enforced in a court of law ifthe promise which furnishes the cause of action orthe agreement, express or implied, giving rise tobinding contract is statutorily prohibited or isagainst public policy. Their Lordships observed asunder :- “10. . . . . . . . . .

Therefore even a legislature, much less agovernment, cannot enact a law or issuean order or agree to refund the taxrealized by it from people in exercise ofits soverign powers, except when the levyor realization is contrary to a lawvalidly enacted. A promise or agreementto refund tax which is due under the Actand realized in accordance with law wouldbe a fraud on the Constitution and breachof faith of the people. Taxes like salestax are paid even by a poor manirrespective of his savings with a senseof participation in growth of nationaleconomy and development of the State. Itsutilization by way of refund not to thepayer but to a private person, amanufacturer, as an inducement to set upits unit in the State would be breach oftrust of the people amounting todeception under law.11. Exemption from tax to encourageindustrialization should not be confusedwith refund of tax. They are twodifferent legal and distinct concepts. Anexemption is a concession allowed to aclass or individual from general burdenfor valid and justifiable reason. Forinstance tax holiday or concession to new or expanding industries is well known tobe one of the methods of grant incentiveto encourage industrialization. Avowedobjective is to enable the industry tostand up and compete in the market. Salestax is an indirect tax which isultimately passed on to the consumer. Ifan industry is exempt from tax theultimately beneficiary is the consumer.The industry is allowed to overcome itsteething period by selling its productsat comparatively cheaper rate as comparedtoothers.Therefore,boththemanufacturer and consumer gain, one byconcession of non-levy and other by non-payment. Such provisions in an Act orNotification or orders issued byGovernment are neither illegal noragainst public policy.12. But refund of tax is made inconsequence of excess payment of it orits realization illegally or contrary tothe provisions of law. A provision oragreement to refund tax due or realizedin accordance with law cannot becomprehended. No law can be made torefund tax to a manufacturer realizedunder a statute. It would be invalid andultra vires. . . . . . . . . .To illustrate it the appellant claimedrefund of sales tax paid by it to theState Government on sale made by it ofits finished products. But the tax paidis not an amount spent by the appellantbut realized on sale by it. What isdeposited under this head is tax which isotherwise due under the provisions of theAct. Return or refund of it or itsequivalent, irrespective of form isrepayment or refund of sales tax. Thiswould be contrary to Constitution. Anyagreement for such refund being contraryto public policy was void under Section23oftheContractAct.Theconstitutional requirements of levy oftax being for the welfare of the societyand not for a specific individual theagreement or promise made by thegovernment was in contravention of publicpurpose thus violative of public policy.No legal relationship could have arisenby operation of promissory estoppel as itwas contrary both to the Constitution andthe law. Realisation of tax through State

mechanism for the sake of paying it to aprivate person directly or indirectly isimpermissibleunderconstitutionalscheme. The law does not permit it norequity can countenance it. . . . . . . . . .”

It is to be kept in mind thatentertainment tax is an indirect tax collected onbehalf of the State from the viewers of theentertainment. The owner of entertainment ismerely the collecting agent of the government. Thelaw obliges it to collect the tax and deposit itwith the government. The tax once paid can berefunded only if the levy is found to be illegalbut where the benefit of the refund can not bemade available to person from whom the tax wascollected, it would be against public policy torefund the amount to be retained by the owner.Refund of any part of the tax will amount tounjust enrichment. Any amount collected as tax ismeant for the exchequer and the owner of cinemahas no option but to deposit the entire amountcollected with the government.

The relevant part of the letter dated31.3.1987 (supra) communicating the fixation ofrates for the year 1986-87 and the proposed ratesfor the year 1987-88 may be extracted as under :- Concession:

Concession:

Complimentary :

Complimentary:

A bare glance at the above table wouldmake it clear that while fixing the admissionrates for the year 1986-87 at Rs.3.40 for Box,Rs.2.85 for Balcony, Rs.2.00 for Upper Class andRs.1.10 for Lower Class, the tax payable wasRs.2.55, Rs.2.15, Rs.1.50 and Rs.0.85 respectivelywhich worked out to 75% of the admission fee. Thesame amount was shown as payable even oncomplimentary tickets in accordance with Section 4

of the Act. For the year 1987-88 for which therewas no remission, the tax being 100% of theadmission fee was accordingly mentioned asRs.3.00, Rs.2.50, Rs.1.75 and Rs.1.00 for Box,Balcony, Upper Class and Lower Class respectively.It is relevant to mention here that the rates wereapparently fixed on the suggestion of theappellant itself vide letter dated 25.3.1987 whichis evident from a bare reading of the letter.

It is one thing to claim the benefit ofreduced rates but another thing to claim refund oftax already paid. Tax already paid can be refundedwhere its levy is held to be illegal or in case ofexcess payment. The present case is not one ofexcess payment. The object of the incentive schemewas to reduce the tax burden as is evident fromthe notification dated 16.12.1982 which is thebasis of appellant’s claim. The notification dated16.12.1982 runs as under :- “Notification No.F.4(19)FD/Gr.IV/82 dated16.12.1982---- Whereas, the State Government is ofthe opinion that reasonable ground existin doing so, in the public interest :

Now, therefore, in exercise of thepowers conferred by sub-section (2) ofSection 7 of the Rajasthan Entertainmentsand Advertisements Tax Act, 1957(Rajasthan Act 24 of 1957), the StateGovernment herebyremitsthe entertainmenttaxincludingtheadditional entertainments tax chargeableunder the said Act, as mentioned belowfor the new cinemas constructed inmunicipal town where a population of lessthan one lac exist, after the issue ofthis notification :- This concession shall be available tothose new cinemas which are constructedon or before 31[st] March, 1987.”

On a plain reading of the above, it wouldbe manifest that 100% remission was allowed in thefirst year, 50% was allowed in the second year and25% was allowed in the third year. Fixing of ratesunder letter dated 31.3.1987(supra) clearlyreflected the remissions allowed under thenotification by reducing the tax from Rs.3.00 toRs.2.55 for Box, from Rs.2.50 to Rs.2.15 forBalcony and so on.

The remission scheme was no doubt in thenature of incentive scheme to attract viewers tosee cinema shows at reduced rates. As observed inAmrit Banaspati Co. Ltd. Vs. State of Punjab(supra), quoted hereinabove, “Therefore, both themanufacturer and consumer gain, one by concession of non-levy and other by non-payment” by allowingreduced tax. Lower admission rates not onlyprovided the viewers opportunity to see shows atreduced rates but also apparently resulted in gainto the owners of the cinema halls because morebusiness meant more money.

Counsel placed reliance on Tulsipur SugarCo. Ltd. Vs. Secretary, Govt. of U.P. & Ors.,(1986) 3 SCC 267. That was a case of remission inpurchase tax. The Central Government fixed priceof sugarcane for the factories situated in UttarPradesh. Cane growers felt that the price was muchtoo low and they made representation to the StateGovernment, which intervened in the matter andfixed sugarcane price at higher rate. According tothe appellant-Sugarcane Factory, price so fixedwas exorbitant. They approached the StateGovernment bringing to its notice that they werenot in a position to pay the higher sugarcaneprice. According to the appellant, the ChiefMinister assured them that the government wouldgrant remission in purchase tax to all factoriessituated in East Zone. By notification underSection 14(1) of the U.P. Sugarcane (Purchase Tax)Act, 1961, the State Government granted remissionto the extent of 0.51 paise per quintal to 18

sugar factories of the area. By anothernotification, two more factories were grantedsimilar remission but similar remission was notallowed to the appellant and some other factories.Thereafter they approached the High Courtchallenging the said notifications. They alsosought mandamus to grant similar benefit ofremission in purchase tax to them. The SupremeCourt found that remission was granted to thosesugar factories where recovery from sugarcane waslow to enable them to make timely payments towardscost of sugarcane and non-payment of the caneprices affecting the supply of cane to factories.The object of remission was to provide help tosuch factories and the appellants being notsimilarly situated, were not allowed similarbenefit. It would appear, the point involved inthat case was entirely different from the presentcase and the decision lends no help to theappellant.

Reliance was also placed on State ofRajasthan & Anr. Vs. Mahaveer Oil Industries &Ors., (1999) 4 SCC 357. The dispute in that casehad arisen from withdrawal of Sales Tax IncentiveScheme by notification issued by the StateGovernment. The High Court set aside the said

notification and directed the State Government toissue eligibility certificate. The StateGovernment approached the Supreme Court. TheSupreme Court did not stay the operation of theorder of High Court and the government had grantedeligibility certificate and issued circularclarifying that the respondent was eligible to thebenefit of Incentive Scheme. The Supreme Courtultimately decided the case in favour of theState. The Court rejected the contention of therespondent-assesseee that it had not collectedsales tax under the State Act and Central Act andit should not therefore be asked to pay the taxbut as in earlier case of Gopal Oil Mills, therespondent-oil mill had been allowed to retain thebenefit obtained under the Incentive Scheme up to4.4.1994 - when the Supreme Court had stayed theHigh Court’s order, the same benefit was alsoallowed to the respondent to avoid discrimination.The decision is not an authority on the point ofrefund or retention of the amount of tax.

In view of the discussions made

hereinabove, we are satisfied that the assessementorder does not suffer from any illegality and theapplication for rectification and revision wererightly rejected by the authorities. The learned Single Judge thus did not commit any error indismissing the writ petition to warrantinterference by the Division Bench.

In the result, the appeal is dismissedbut without any order as to costs.

[MOHAMMAD RAFIQ], J.

[S.N. JHA], CJ.

Skant/-