Full Judgment Text
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PETITIONER:
STATE OF UTTAR PRADESH & ORS.
Vs.
RESPONDENT:
VINAY KUMAR JAIN
DATE OF JUDGMENT: 19/11/1996
BENCH:
B.P. JEEVAN REDDY, K.S. PARIPOORNAN
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
B.P.JEEVAN REDDY, J.
The Uttar Pradesh Entertainments and Petting Tax Act,
1979 provides for two modes of levy of entertainment tax on
cinemas. Sub-section (1) of Section 3 says that subject to
the provisions of the Act, there shall be levied and paid on
all payments for admission to any entertainment, other than
an entertainment to which Section 4 or Section 4-A or
Section 4-B applies or a compounded payment is made under
the proviso to this sub-section, an entertainment tax at
such rate........:. The proviso to sub-section (1), which
provides the other mode of levy, reads:
"Provided that a proprietor of a
cinema in a local area having a
population not exceeding one lac,
may, in lieu of payment under this
sub-section, pay a compounded
payment to the State Government on
such conditions and in such rate as
the State Government may from time
to time notify, and different rates
of compounded payments may be
notified for different categories
of local areas."
The respondent is running a cinema theatre in a local
area having a population of less than one lakh. He took
advantage of the aforesaid proviso and has been entering
into composition agreements from year to year. The year for
this purpose means the financial year. On February 22, 1995,
the respondent filed an application before the "District
Magistrate, District Entertainment Tax Office, Hardoi"
requesting for permission to reduce the seating capacity of
his cinema theatre from 540 to 450 for the ensuing financial
year 1995-96. On March 24, 1995, the respondent submitted an
application opting for the composition system for the
ensuing financial year, 1995-96. No order were passed by the
District Magistrate on either of the said applications
whereupon the respondent approached the Allahabad High Court
by way of a writ petition. By an order dated My 9, 1995, the
High Court directed the Collector to consider the
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applications and to pass order thereon. Accordingly, the
District Magistrate passed orders on May 31, 1995 rejecting
the application for option, inasmuch as the application
exercising option for composition scheme was supposed to be
linked up with the request for reduction of the seating
capacity. The respondent filed writ petition [No. 1773 of
1995] in the Allahabad High Court challenging the order
dated May 31, 1995. A Division Bench of the High Court has
allowed the writ petition saying that there is nothing in
the Act or the Rules empowering the District Magistrate to
ignore or change the seating capacity indicated in the
petitioner’s option application merely because for the
previous financial year the seating capacity indicated by
the applicant was higher. The High Court observed, "the
petitioner has been given liberty to reduce or increase the
number; of seats in various classes irrespective of the fact
as to what he has been stating in Form ‘R’ of the previous
financial year". The High Court observed further that the
reasons given by the District Magistrate, viz., there will
be a loss of revenue to the State by reduction of seating
capacity is not a relevant reason. The correctness of the
judgment of the High Court is challenged by the State of
Uttar Pradesh in this Special Leave Petition.
Leave granted.
Rule 24-A of the Uttar Pradesh Entertainments and
Betting Tax Rules, 1981 deals with compounded payment of
tax. Sub-rules (1) to (4) of Rule 24-A are relevant for our
purpose and must be set out in full:
"24-A. Compounded payment of Tax.--
(1) The proprietor of a cinema
opting to make compounded payment
of entertainment tax under the
proviso to sub-section (1) of
Section 3 of the Act shall submit
his written option in duplicate to
the District Magistrate before the
last date in Form ‘R’ appended to
these rules declaring the total
number of shows to be exhibited in
a day, number of seat in the cinema
classwise and the rates of tickets
at full price and on reduced price
if any.
(2) The option once exercised
shall be valid for the period of a
financial year.
(3)(i) The District Magistrate
shall within a week of the receipt
of the application, communicate to
the proprietor the gross collection
capacity and the weekly tax payable
by the cinema in Form ‘S’.
(ii) The gross collection capacity
shall be calculated by multiplying
the number or seats on various
classes in a cinema by the
respective current ticket rates
(including payment for admission
and entertainment tax thereon) and
multiplying the sum so derived by
such number of shows as the
proprietor of the cinema declares
to give in a day.
Explanation.-- For purpose of this
sub-rule ‘the number of seats in
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various classes in a cinema’ means
the maximum permissible number of
seats in various classes mentioned
in the licence thereof and shall
include any increase in the maximum
number of seats by an amendment
allowed by the Licensing Authority.
(4) The proprietor shall strictly
adhere to the declaration under
sub-rule (1) and shall obtain
permission of District Magistrate
before effecting any change in the
number of seats, the ticket rate
and the number of shows. The
licensing authority shall have the
power to revise the compounded
amount to tax upwards if the gross
collection capacity increases as a
result of such permitted change."
Form ‘R’ referred to in sub-rule (1) is an application
indicating the applicant’s option to be governed by the
composition scheme under the proviso to Section 3(1) of the
Act. It is both an application exercising option and also a
declaration containing several particulars including the
total number of seats in the cinema, the classes into which
they are categorised and ticket rates. At the foot of the
application the applicant has to append a declaration to the
effect: "Certified that information given above is correct;
kindly permit compounded payment of tax. I shall abide by
all the conditions and restrictions imposed in this behalf".
Form ‘S’ referred to in sub-rule (3) is the Form in which
the District Magistrate grants the permission to the
applicant to come under the composition scheme. This order
also contains several relevant particulars including the
number of seats in the cinema, the classes into which they
are divided, the rate of tickets for each class and so on.
Clauses (2), (3) and (4) of Form ‘S’ read thus:
"(2) He is hereby directed to--
(i) make payment of weekly tax as
per rules.
(ii) inform the undersigned at
least three days in advance if any
show/shows is/are proposed to be
held at reduced price of tickets.
(iii) obtain permission for any
change in respect of number of
seats, number of shows and ticket
rates.
(iv) make available to the
inspecting authorities a copy of
the order along with the copy of
the application for option and
declaration if required by him.
(3) No rebate shall be permitted
for any show not held.
(4) for the purposes of
calculating the gross collection
capacity, the maximum permissible
number of seats mentioned in the
licence and where the maximum
number is increased by amendment by
the licensing authority, such
increased number shall be taken
into account."
[Emphasis added]
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These conditions appear to be consistent with sub-rule
(4) of Rule 24-A, both of which deal with post-composition
agreement period. We are, however, not concerned with that
situation in this case.
It is necessary to read closely Rule 24-A and the above
Forms for the purpose of appreciating and adjudicating the
controversy arising herein. Sub-rule (1) of Rule 24-A says
that a proprietor of a cinema theatre seeking to apt for the
compounded payment of entertainment tax has to submit Form
‘R’ with all the particulars mentioned therein. Sub-rule (3)
requires the District Magistrate to communicate his order in
Form ‘S’ to the proprietor of the application Form ‘R’
mentioning in his order the gross collection capacity
[G.C.C.] and the weekly tax payable by the cinema theatre.
The Explanation appended to sub-rule (3) is of crucial
significance. It says that for the purpose of sub-rule (3),
the expression "the number of seats in various classes in a
cinema" means the maximum permissible number of seats in
various classes mentioned in the licence thereof and shall
include any increase in the maximum number of seats by an
amendment allowed by the licencing authority. Sub-rule (4)
says that the proprietor shall strictly adhere to the
declaration in Form ‘R’ and shall obtain the permission of
the District Magistrate for effecting any change in the
number of seats, the ticket rate and the number of shows.
The licencing authority is empowered to revise the
compounded amount of tax upwards if the G.C.C. increases as
a result of such permitted change.
It is equally evident - and also beyond dispute - that
the words "the maximum permissible number of seats in
various classes mentioned in the licence thereof" in the
Explanation to sub-rule (3) mean and refer to the relevant
provisions of the Uttar Pradesh Cinemas Regulation Act, 1955
and the U.P. Cinematograph Rules, 1951. [The Uttar Pradesh
Cinemas Regulation Act, 1955 repeals the Cinematograph Act,
1948 but at the same time continues the rules made
thereunder and it is by virtue of the said provision
contained in Section 12 that the 1951 Rules made under the
repealed enactment are continued and are treated as the
Rules made under the 1955 Act.] The 1955 Act regulates all
aspects of the construction of a cinema theatre including
the seating capacity therein. Clause (v) of Rule 2 of the
Cinematograph Rules defines the expression "licence" in the
following words:
"(v) ‘Licence’ means a written
authorisation by the Licensing
Authority to give cinematograph
exhibitions and granted in the form
set out in Appendix I to these
rules and shall be subject to
necessary modifications or
amplifications in accordance with
any terms or conditions imposed
under sub-section (3) of Section 5
of the Act."
Section 3 of the U.P. Cinemas [Regulation] Act, 1955
deals with "licence". The U.P. Entertainments and Betting
Tax Act, 1979 or the Rules framed thereunder, it may be
mentioned, do not define the expression "licence".
Sub-rule (1) of Rule 14 of the 1951 Rules provides that
"the Licensing Authority shall determine the maximum number
of seats for each class separately and the same shall be
specified in the licence and prominently displayed near the
entrance door to every class in the cinema". The Form of
licence granted to cinema theatre is prescribed in appendix-
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1 to the said Rules. Condition No.8 of the licence reads:
"(8) that the total number of seats in the auditorium and
the seats for each class shall not exceed the number
specified in the Schedule thereto appended nor shall the
number and description of fire appliances, exhaust fans,
electric fans or sanitary requirements be less than those
therein specified". The Schedule to the Rules contains the
particulars of seats class-wise. Now, therefore, when the
Explanation to sub-rule (3) of Rule 24-A of the
Entertainment Tax Rules speaks of "the maximum permissible
number of seats in various classes mentioned in the licence
thereof", it refers to "the maximum number of seats for each
class separately" mentioned in the licence as per Rule 14 of
the 1951 Rules read with From-I Licence. In short, according
to the aforesaid Explanation, the District Magistrate shall
take the maximum number of permissible seats specified in
the licence issued under the U.P. Cinema [Regulation] Act
and the Cinematograph Rules as the basis for working
out/calculating the G.C.C. and the weekly tax payable by the
cinema theatre and which figures the mentions in Form ‘S’.
The District Magistrate is not concerned with the actual
number of seats fixed in a cinema theatre for the purposes
of Rule 24-A. He will only look to the maximum number of
ssats specified in the licence [Form-I issued under the U.P.
Cinematograph Rules, 1951] and take that as the basis for
determining the G.C.C. and the weekly tax payable. This fact
necessarily means that if any person warts to enter into a
composition agreement with a reduced seating capacity [i.e.,
reduced with reference to the previous financial year], he
must go to the Authority under Rule 14 of the
U.P.Cinematograph Rules, 1951*, have his licence amended and
produce his licence before the authority under Rule 24-A to
take the maximum so specified therein as the basis for
calculating the G.C.C. and the weekly tax payable. The fact
that the District Magistrate mentioned in Rule 24-A of the
Uttar Pradesh Entertainments and Betting Tax Rules, 1981
also happens to be the licencing authority under Rule 14 of
the U.P.Cinematograph Rules, 1951 for the time are two
difference in law. In law, they are two different
authorities acting under two different statutory provisions.
It is open to the government to amend Rule 4 of the 1951
Rules and specify any other person or authority as the
licencing authority. There is yet another aspect which
requires to be clarified in view of the submissions made by
Sri Srivastava, learned counsel for the respondent. Though
sub-rule (3) of Rule 24-A uses the expression "shall", it
does not mean that
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*Though Rule 14 does not expressly provide for alteration or
amendment of the licence, it is obvious that the power to
"determine the maximum number of seats" conferred upon the
licencing authority necessarily implies and includes the
power to amend it including the increase or reduction in the
maximum seating capacity specified in the licence.
the District Magistrate is bound by the particulars as
stated in the application Form ‘R’. The District Magistrate
is entitled to - and is obliged to - verify the correctness
of the particulars stated in the application Form ‘R’
including the particulars relating to the maximum number of
seats and their classes. So far as the maximum number of
seats and the classes are concerned, the only document he
has to see is the licence issued under the Cinematograph
Rules only if he is satisfied with the correctness of the
particulars stated in the application Form ‘R’ that the
District Magistrate comes under an obligation to issue the
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order in Form ‘S’ with relevant particulars. This is the
position if any proprietor wants to enter into a composition
agreement for the ensuing financial year with reduced
seating capacity. It may be mentioned that the case before
us deals with such a situation. In other words, the case
before us does not deal with the situation where the
proprietor, having entered into a composition agreement, is
seeking to reduce his seating capacity during the currency
of the composition agreement. This is a case where the
respondent is asking the District Magistrate to enter into a
composition agreement with him taking the seating capacity
in his cinema theatre as 450 whereas the maximum seating
capacity of his cinema theatre as per the licence issued
under the Cinematograph Rules is 540. The District
Magistrate has no power or authority to agree to such a
request - nor can the respondent make such a request, as
explained hereinabove so long as the licence of the cinema
theatre shows the maximum seating capacity as 540.
For the purposes of this case, it is not necessary to
deal with or interpret sub-rule (4) of Rule 24-A, which
deals with the post-composition agreement period. The
language of the sub-rule leaves much to be desired. It would
be in the fitness of things that the Government of Uttar
Pradesh recasts the sub-rule at its earliest to make its
meaning clear. Such a course would obviate avoidable
litigation in the State.
In short, the position emerging from the above
discussion may be stated in the following terms:
(1) A proprietor of a cinema theatre seeking to opt to be
governed by the compounded payment of entertainment tax
system shall have to submit an application in Form ‘R’ with
all the necessary particulars as specified in the said Form,
truly and fully.
(2) On receipt of the application Form ‘R’, it is open to
the District Magistrate to verify the correctness of the
particulars stated in Form ‘R’. If he is satisfied with the
correctness of the particulars in Form ‘R’, he shall issue
an order in Form ‘S’ mentioning therein the G.C.C. of the
cinema theatre and the weekly tax payable by it. While
calculating the G.C.C. and the weekly tax payable, the
District Magistrate shall take the maximum number of seats
in various classes mentioned in the licence [issued under
the U.P.Cinematograph Rules, 1951] as the basis.
(3) The option once exercised shall be valid for the
relevant financial year to which it pertains.
(4) It is not open to any proprietor to seek to enter into
a composition agreement indicating a lesser seating capacity
than the maximum mentioned in his licence [issued under the
U.P.Cinematograph Rules, 1951] nor is it open to the
District Magistrate to take any other figure of seating
capacity than the maximum seating capacity mentioned in such
licence. The remedy of any proprietor who wants to have the
seating capacity of his cinema theatre reduced is to
approach the licencing authority under Rule 14 of the
U.P.Cinematograph Rules, 1951 and have his licence amended
accordingly. Only then can that amended seating capacity be
taken into consideration for the purposes of Rule 24-A of
the Uttar Pradesh Entertainments and Betting Tax Rules,
1981.
Now, coming back to the facts of this case, the
judgment under appeal was rendered by the High Court on
March 25, 1996 by which date the Financial Year 1995-96 [for
which the respondent had opted through his application dated
March 24, 1995] had practically come to an end. We are told
that because of the absence of any composition agreement,
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the respondent’s cinema theatre was governed by the main
limb of sub-section (1) of Section 3 of the Uttar Pradesh
Entertainments Act and not by the proviso to sub-section (1)
of Section 3. During the current financial year, 1996-97, it
is stated, the respondent’s cinema theatre is operating with
the reduced capacity as per the impugned orders of the High
Court. We do not know whether any composition agreement has
been entered into for the financial year, 1996-97 or whether
the respondent’s cinema theatre is governed by the admission
system provided by the main limb of sub-section (1) of
Section 3 of the Uttar Pradesh Entertainments Tax Act. These
are the matters for the appropriate authorities to look into
and pass necessary consequential orders.
Inasmuch as the judgment under Appeal does not refer to
or deal with the aforesaid relevant Rules and has also not
correctly appreciated the legal position flowing therefrom,
we are obliged to set aside the impugned in the High Court.
It is open to the respondent to adopt such proceedings and
take such steps as are open to him in law in the light of
the legal position adumbrated herein.
The appeal is allowed in the above terms. No costs.
A copy of this judgment shall be communicated by the
Registry of this Court to the Secretary, Finance Department
[Entertainment Tax], Government of Uttar Pradesh, for
appropriate action.