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Judgment
S. Manikumar, J.—In all these writ petitions, the theatre owners have challenged the order of the Joint Commissioner of Commercial Taxes, Chennai, the first respondent herein, in dismissing the revision petitions filed by them, against the levy of entertainment tax made by the Deputy Commissioner (CT), Salem Division, Salem, the second respondent herein and consequently, sought for a direction to the Entertainment Tax Officer, Omalur, fourth respondent herein, to refrain from levying or collecting entertainment tax from them. Though the respondents have not filed any counter-affidavit, Mr. K. Radhakrishnan, learned counsel appearing for the Revenue, made submissions on the basis of a judgment rendered by this court in a batch of writ petitions in W.P. Nos. 16668 of 1990, etc., dated January 20, 1994 (Devi Theatre v. Deputy Commercial Tax Officer).
As common questions of law and facts are involved in all these writ petitions, they are taken up together, and disposed of by a common order.
Facts leading to the writ petitions are as follows :
The petitioners-theatre owners have registered themselves on the files of the Entertainment Tax Officer, Omalur, the fourth respondent herein, under the Tamil Nadu Entertainments Tax Act, 1939 (hereinafter referred to as, "the Act"). For the assessment years 1977-78 (December 26, 1977 to March 31, 1978, 1979-80, 1980-81, 1981-82, 1982-83 (April 1, 1982 to October 3, 1982) (in respect of petitioner in W.P. No. 35078 of 2002), 1981-82 (January 7, 1981 to March 31, 1981), 1981-82 (April 1, 1981 to March 31, 1982), 1982-83 (April 1, 1982 to October 3, 1982) (in respect of petitioner in W.P. No. 35087 of 2002), 1978-79 (December 11, 1978 to March 31, 1979), 1979-80, 1980-81, 1981-82 and 1982-83 (in respect of petitioner in W.P. No. 35123 of 2002) and 1981-82 (August 31, 1981 to March 31, 1982), 1982-83 (April 1, 1982 to October 10, 1982) (in respect of petitioner in W.P. No. 35124 of 2002), the fourth respondent has proposed to make revision of the petitioners'' assessments, involving additional levy of entertainment tax to the tune of Rs. 68,477, Rs. 28,665, Rs. 35,640 and Rs. 43,816, respectively for the above said assessment years, on the ground that the reduction in the rates of admission by the petitioners was done without the approval of the licensing authority, viz., the District Collector and hence, the petitioners are liable to pay tax as per the original rates of admission noted in the C form licence issued by the said licensing authority. The petitioners have objected to the fourth respondent''s proposal, stating that during the period in question, for reduction in the rates of admission, no prior approval was required from the licencing authority, as per the Tamil Nadu Cinema (Regulation) Act, 1955. Despite the objections, the fourth respondent has confirmed his proposals in respect of each of the writ petitioners. Aggrieved by the same, the petitioners preferred individual appeals to the Assistant Commissioner, (CT), Namakkal, the third respondent herein and contended, inter alia, that C form licence makes it obligatory on the part of the theatre owners to get permission from the licensing authority only in the case of increase in the rates of admission already fixed, and this was the legal position until the Government have issued G.O. Ms. No. 1016, Home (Cinema) Department, dated April 23, 1987, amending condition No. 6, to the effect that prior permission from the licensing authority is not necessary, for any alteration in the rates of admission.
It is the case of the petitioners that despite the above said valid and legal objections, the appeals were dismissed on the ground that the theatre owners have no power to reduce the rates of admission, without the prior approval of the licencing authority. Against the orders of the third respondent, the petitioners preferred individual revision petitions to the Deputy Commissioner (CT), Salem Division, Salem, the second respondent herein and the revision petitions were also dismissed.
It is the grievance of the petitioners that the second respondent has failed to note that the word "increase" occurring in condition No. 6 of the C form licence, was substituted with effect from April 23, 1987 only and therefore, the authorities have failed to consider the scope and the purport of the amendment. Left with no other option, the petitioners filed further revision petitions to the Joint Commissioner (CT), Chennai, the first respondent herein, reiterating the contentions made earlier. It was also brought to the notice of the first respondent, a circular instruction issued by the then Board of Revenue and communicated by the Additional Secretary to Government (CT), Chennai to all the Entertainment Officers in Ref. No. R3/426/78, dated April 10, 1978, which states that, "it is open to the licencee to fix the rates of admission below the maximum for each class and that no orders are required for reduction". It was further contended by the petitioners that when the Entertainment Tax Officers were informed that permission from the licensing authority, viz., the District Collector, is not necessary for such reduction of rates of admission, the revision of assessment for the period in question on the ground of not obtaining prior permission from the licencing authority, is illegal and contrary to statutory provisions. Despite the contentions, the first respondent herein, has mechanically confirmed the revision of assessment and dismissed all the revision petitions filed by the theatre owners. Being aggrieved by the orders of the first respondent, the petitioners-theatre owners have filed the present writ petition.
Taking this court through the circular-instructions of the then Board of Revenue, Madras, dated April 10, 1978 communicated to all the Entertainment Tax Officers and G.O. Ms. No. 1245, Home (Cinema) Department, dated May 18, 1979, Mr. P. Rajkumar, learned counsel for the petitioners, submitted that by the above said circular-instructions, the Government have made it clear that only for the increase in the rates of admission, from the rates already prescribed in the C form licence, the theatre owners have to get prior permission from the licencing authority, viz., District Collector and in respect of reduction in the rates of admission from the maximum rate prescribed, the theatre owners need not get any prior permission from the said authority. He further submitted that during the period in question, it was always open to the theatre owners to fix the rates of admission, within the maximum rates fixed by the licencing authority and condition No. 6 of C form licence, does not contemplate prior permission for reduction in the rates of admission from maximum rates prescribed in the licence, issued to the theatre owners.
Inviting the attention of this court to G.O. Ms. No. 1016, Home (Cinema) Department, dated April 23, 1987, by which, the Government have issued an amendment to condition No. 6, of C form licence, wherein, the word "increase" occurring in the said condition was substituted by the word "alteration", learned counsel for the petitioners submitted that prior to the said amendment, the theatre owners were not required to obtain prior permission from the licencing authorities, if the rates of admission were to be reduced and only in the case of increase in the rates of admission, such permission was required.
The learned counsel for the petitioners further submitted that the amendment made in the year 1987, cannot be applied retrospectively for the earlier periods. He further submitted that the position which stood before the amendment has been properly interpreted by then Board of Revenue, as stated supra, as well as by the District Collector, Salem, in his Reference in Mu. Mu. No. 189481/82, dated September 30, 1982, wherein, he has clarified the Deputy Commercial Tax Officer, Omalur, that with regard to reduction in the rates of admission, the theatre owners were not required to obtain prior permission from the licensing authorities. He submitted that all the authorities have manifestly erred in confirming the revision of assessment made by the fourth respondent, without considering the effect of the amendment in proper perspective.
Referring to rule 32M of the Tamil Nadu Entertainments Tax Rules, 1939, learned counsel for the petitioners submitted that when the rates of admission are modified or revised, the tickets bearing the modified or revised rates shall not be issued until they are stamped with the seal of the Entertainments Tax Officer. In the instant case, the Entertainments Tax Officer, Omalur, fourth respondent, after verifying the rates of admission, has stamped the tickets with the seal of the Entertainments Tax Officer, for the periods in question and after the issuance of the tickets, the appropriate rate of tax on the reduced rates of admission from the patrons were collected and that the returns submitted to the competent authority were also accepted. In these circumstances, he contended that once the tickets are stamped and sealed by the Entertainments Tax Officer, it amounts to implied approval from the competent authority as required under rule 32M of the Tamil Nadu Entertainments Tax Rules and therefore, the fourth respondent has no inherent jurisdiction to revise the assessment made earlier.
According to the learned counsel for the petitioners, all the authorities have failed to consider the effect of the amendment to condition No. 6 in C form licence, as per G.O. Ms. No. 1016, Home (Cinema) Department, dated April 23, 1987 can be made only prospectively and that the implied approval of the fourth respondent, by affixing the official seal of the Entertainments Tax Officer on the tickets for various assessment years, cannot be ignored.
Per contra, Mr. Radhakrishnan, learned counsel appearing for the respondents, submitted that in similar circumstances, when the correctness of the revised assessment made by the fourth respondent in respect of some other theatre owners of the same District, was tested, a learned single Judge of this court in W.P. Nos. 16668 of 1990, etc., batch, dated January 20, 1994 (Devi Theatre v. Deputy Commercial Tax Officer), after analysing the statutory provisions, viz., the Tamil Nadu Cinema Regulation Act, 1955 and the provisions of the Tamil Nadu Entertainments Tax Act, 1939 and the Rules made thereunder and also taking into consideration a judgment of the Division Bench of this court in Annamalai v. Assistant Commissioner (CT) reported in [1990] 76 STC 271, held that the licencees have to get prior permission for reduction of rates of admission from the licensing authority concerned and approved by the Entertainments Tax Officer, as required under rule 32M of the Tamil Nadu Entertainments Tax Rules, 1939, even if the tickets were issued with the seal of the Entertainments Tax Officer, that would not invalidate the revision of assessment made for the earlier period. He therefore submitted that the issues raised in the present writ petitions have been already dealt with and the decision made in W.P. Nos. 16668 of 1990, etc., batch, dated January 20, 1994 (Devi Theatre v. Deputy Commercial Tax Officer [1994] 5 MTCR 183) squarely applies to the facts of the present case and hence, prayed for dismissal of the writ petitions.
Heard the learned counsel for the parties and perused the materials available on record.
Before adverting to the facts of this case, it is necessary to have a cursory look at some of the provisions dealing with the prescription of rates of admission by the licensing authorities, under the Tamil Nadu Cinema (Regulation) Rules, 1957 and the Tamil Nadu Entertainments Tax Act, 1939 and the Rules made thereunder. Rule 83(1A)(a) of the Tamil Nadu Cinema Regulation Rules, 1957 deals with the power of the licensing authority to fix the actual rates of admission and the same is extracted hereunder :
The licensing authority shall fix the actual rates of admission to each class of accommodation, provided in the auditorium, after taking into account the proposals of the licensee, the amenities provided in the theatre, the prevailing rates of admission in similar theatres in similar localities within his jurisdiction and any other relevant factor.
Clause (c) of rule 83(1) (a) of the above said Rules states that the licensing authority may, on application by the licencee, alter the rates of admission for any class of accommodation, if there has been any change in the amenities provided either in that class or accommodation or generally in the theatre for any other valid reasons.
Section 5A of the Tamil Nadu Entertainments Tax Act, 1939, deals with tax on shows held in certain theatres and the same is extracted hereunder :
5A. Tax on shows held in certain theatres.-(1) Notwithstanding anything contained in this Act, in the case of cinematograph exhibitions held in the theatres specified in column (2) of the Table below and located in the local areas specified in the corresponding entry in column (1) of the said Table, there shall be levied and paid to the State Government, a tax,-
(i) at the rate specified in the corresponding entry in column (3) thereof (for new film); and
(ii) at the rate specified in the corresponding entry in column (4) thereof (for old film :)
Provided that nothing contained in this sub-section shall apply to theatres, other than the temporary (touring) and open air theatres, located in the area within five kilometres from the outer peripheral limits of the area where clause (a) of sub-section (1) of section 4 is in force :
Provided further that where the theatres, other than the temporary (touring) and open air theatres, located in the local areas specified in the Schedules fall within the scope of clause (a) of sub-section (1) of section 4 in view of their location within five kilometres from the outer peripheral limits of the area where clause (a) of sub-section (1) of section 4 is in force, nothing contained in the Schedules shall apply to such theatres.
Explanation I.-For the purposes of this section and section 5B, ''gross collection capacity in relation to a cinematograph exhibition, means the notional aggregate of all payments, for admission for a show (inclusive of the entertainments tax) if all the seats or other accommodation in the theatre as specified in the licence issued by the competent authority under the Tamil Nadu Cinemas (Regulation) Act, 1955 (Tamil Nadu Act No. IX of 1955) were occupied by spectators.
Explanation II.-For the purposes of this section and of section 5B-
(i) ''Municipalities, Selection Grade'' means the Municipalities specified in Part A of Schedule I;
(ii) ''Municipalities, First Grade'' means the Municipalities specified in Part B of Schedule I;
(iii) ''Municipalities, Second Grade'' means the Municipalities specified in Part C of Schedule I;
(iv) ''Municipalities, Third Grade'' means the Municipalities specified in Part D of Schedule I;
(v) ''Selection Grade Panchayat Towns'' means the selection grade panchayat towns specified in Schedule II;
(vi) ''Townships (Municipal)'' means the townships specified in Part A of Schedule III;
(vii) ''Townships (Panchayat)'' means the townships specified in Part B of Schedule III.
Explanation III.-For the purposes of this section and section 5B ''show'' means one complete exhibition or the repeated exhibition, of a full length feature film with or without approved documentaries and news reviews, for one payment for admission.
(2) The tax levied under sub-section (1) shall be recoverable from the proprietor.
(3) (a) Every proprietor of a cinematograph exhibition who is liable to pay tax under this section or who opts to pay tax u/s 5B shall submit a return relating to the actual number of shows held by the proprietor in a week to the prescribed authority in such manner and within such period as may be prescribed and also give prior notice to the prescribed authority of any proposed variation in the gross collection capacity per show in respect of the place of entertainment. Such prior notice shall not be less than such period as may be prescribed.
(b) If the prescribed authority is satisfied that any return submitted under clause (a) is correct and complete, it shall assess the proprietor on the basis thereof.
(c) If no return is submitted by the proprietor under clause (a) within the prescribed period, or if the return submitted by him appears to the prescribed authority to be incomplete or incorrect, the prescribed authority shall, after making such enquiry as it may consider necessary, assess the proprietor to the best of its judgment :
Provided that before taking action under this clause, the proprietor shall be given a reasonable opportunity of proving the correctness or completeness of any return submitted by him or that no return was due from him.
Section 5B speaks about the option to pay tax and it reads as follows :
5B. Option to pay. -(1) In lieu of the tax payable u/s 4 in respect of the areas of Municipal Corporations and Special Grade Municipalities or u/s 5A, in the case of cinematograph exhibition held in the theatres specified in column (2) of the table and located in the local areas specified in the corresponding entry in column (1) of the said table, the proprietor of such cinematograph exhibition may, at his option and subject to such conditions as may be prescribed, pay the amount of tax to the State Government every week-
(i) as specified in the corresponding entry in column (3) thereof for new film; and
(ii) as specified in the corresponding entry in column (4) thereof for old film;
Section 7B of the said Act deals with payment for admission and escaped assessment and the same is extracted hereunder :
7B. Payment for admission, etc., escaping assessment.-(1) Where, for any reason any payment for admission to any entertainment or any amount collected for television exhibition has escaped assessment to tax u/s 4, 4E or 4F or 4G or 5A or 5B, as the case may be, the authority prescribed under sub-section (1) of section 7A may, subject to the provisions of sub-section (3) and at any time within such period as may be prescribed, assess to the best of its judgment the tax due on such payment or exhibition u/s 4 or 5A or 5B or on such amount collected for television exhibition u/s 4E or on such payment u/s 4F, or on such payment for recreation parlour u/s 4G as the case may be, after making such enquiry as it may consider necessary and after giving the proprietor a reasonable opportunity to show cause against such assessment.
(2) Where, for any reason, any payment for admission to any entertainment or any cinematograph exhibition or any amount collected for television exhibition has been assessed at a rate lower than the rate at which it is assessable u/s 4, or 4E, or 4F or 4G or 5A or 5B as the case may be the authority prescribed under sub-section (1) of section 7A may, subject to the provisions of subsection (3) and at any time within such period as may be prescribed, reassess the tax due on such payment or exhibition u/s 4 or 5A or 5B or on such amount collected for television exhibition u/s 4E, or on such payment u/s 4F, or on such payment for recreation parlour u/s 4G as the case may be, after making such enquiry as it may consider necessary and after giving the proprietor a reasonable opportunity to show cause against such reassessment.
(3) In making an assessment or reassessment under sub-section (1) or sub-section (2), as the case may be, the authority prescribed under sub-section (1) of section 7A may, if it is satisfied that due to wilful mis-statement or suppression of facts by the proprietor, the tax has not been levied or has been levied at a rate lower than the rate at which it is leviable, direct the proprietor to pay by way of penalty in addition to the tax assessed or reassessed under sub-section (1) or sub-section (2), as the case may be, a sum which shall be,-
(a) fifty per cent of tax assessed or reassessed, if the tax paid as per the return, falls short of the tax assessed or reassessed by not more than ten per cent;
(b) one hundred per cent of tax assessed or reassessed, if the tax paid as per the return, falls short of the tax assessed or reassessed by more than ten per cent but not more than fifty per cent;
(c) one hundred and fifty per cent of tax assessed or reassessed, if the tax paid as per the return falls short of the tax assessed or reassessed by more than fifty per cent :
Provided that no penalty under this sub-section shall be imposed unless the proprietor affected has had a reasonable opportunity of showing cause against such imposition.
(3A) Notwithstanding anything contained in sub-section (1) or sub-section (2), in making an assessment or reassessment under subsection (1) or sub-section (2), as the case may be, the authority prescribed under sub-section (1) of section 7A may pass a single order in respect of a financial year or any part thereof.
(4) The powers under sub-section (1) or sub-section (2) may be exercised by the authority prescribed under sub-section (1) of section 7A even though the original order of assessment, if any, passed in the matter has been the subject-matter of an appeal or revision.
(5) In computing the period of limitation for assessment or reassessment under this section, the time during which the proceedings for assessment or reassessment remained stayed under the orders of a civil court or other competent authority shall be excluded.
Let us now see the various changes made by the authorities to the words used in the statutory provisions and as to how the authorities have understood the word "alteration" employed in condition No. 6 of the C form licence, from 1975 to 1987. When the question of obtaining permission from the licensing authority for reduction in rates of admission, came up for consideration, the then Board of Revenue, in its letter in L. Dis 5297/75, dated October 20, 1975, has ordered that, "what had been fixed were only the maximum rates and that it was open to the licensees to fix any actual rates of admission below these maximum for each class and that no orders were necessary to reduce the maximum and that suitable instructions might be issued to the Entertainments Tax Officers.
A perusal of the circular of the Additional Secretary to Government, Commercial Taxes, Madras, dated April 10, 1978, shows that after considering the representations, dated December 30, 1977 and January 25, 1978 the said authority has issued following instructions :
All the E. T. Os are informed that the licensing authority under the Tamil Nadu Cinemas (Regulation) Act, 1955, fixes only the maximum rates of admission for each class. It is open to the licensee to charge less than these rates and he need not get this actual rate incorporated in the licence so long as it is less than the maximum fixed. The E. T. Os., are therefore informed that permission from the licensing authority, i.e., the Collector, is not necessary for such reduction and it is open to the theatre owners to fix the rates of admission within the maximum rates fixed by the licensing authority. For the purpose of the TNET Act 1939, the E. T. Os., should deal with requests for change or variation in the gross collection capacity by virtue of any modification or revision of the rate or rates of admission in accordance with rule 32E or 32M of the TNET Act, 1939, as the case may be.
By G.O. Ms. No. 1245, Home (Cinema) Department, dated May 18, 1979, the Government issued an amendment to condition No. 6 contained in the C form licence and it reads as follows :
The actual rates of payment for admission to the different classes in the licenced premises shall be as indicated below and these rates shall not be altered during currency of this licence without an order in writing by the licensing authority permitting such increase.
The District Collector, Salem, by his proceedings in Mu. Mu. No. 189481/82, dated September 30, 1982, has issued instructions to the Deputy Commercial Tax Officer, Omalur, on the same lines as stated supra. The operative portion of the said letter reads as follows :
At this juncture, it is also to be noted that by G.O. Ms. No. 1245, Home (Cinema) Department, dated May 18, 1979, the Government have also made an amendment to the word "maximum" occurring in form C licence before the heading "conditions of licence" and substituted the same with word "actual".
In the year 1987, the Government, by G.O. Ms. No. 1016, Home (Cinema) Department, dated April 23, 1987, have issued a notification, by which, an amendment to condition No. 6 in C form licence was issued and the said amendment is extracted hereunder :
In the said Rules, in form C, in condition 6, for the word ''increase'', the word ''alteration'' shall be substituted.
The moot question to be considered in these writ petitions is, what is the effect of the change to the word from "increase" to "alteration" in condition No. 6 of C form licence and by such modification in the language, whether the Legislature has imposed a condition that, whenever the theatre owners reduce the rates of admission to any class fixed earlier by the licencing authority, prior permission is required for both reduction in rates of admission and also for enhancement of the rates from the date of amendment, i.e., prospectively or whether such amendment would cover all the cases, where the rates of admission were reduced by the theatre owners, without the prior approval of the licensing authority, based on the position, which stood before the amendment and as interpreted by the then Board of Revenue, in their proceedings, dated April 10, 1988, wherein all the Entertainment Tax Officers, were informed that the licensing authorities under the Tamil Nadu Cinema (Regulation) Act, 1955, fix only the maximum rates of admission, for each class and it was open to the licensees to charge, less than these rates and that they need not get the actual rates incorporated in the license, so long as it was less than the maximum rate fixed.
The instructions of the Additional Secretary, Commercial Taxes, Madras makes it clear that the Entertainments Tax Officers, were informed that permission of the licensing authority, viz., the District Collector, was not required for reduction of rates of admission and it is open to the theatre owners to fix the rates of admission within the maximum rates fixed by the licensing authority. At that time, for the purpose of the TNET Act, 1939, what was required was that the Entertainment Tax Officers should deal with requests for change or variation in the gross collection capacity by virtue of any modification or revision of the rate or rates of admission in accordance with rule 32E or 32M of the TNET Rules, 1939, as the case may be.
In this context, it is relevant to extract rules 32E and 32M of the Tamil Nadu Entertainments Tax Rules and the same are extracted hereunder :
32E. The proprietor shall intimate in writing to the Entertainments Tax Officer, every proposed change or variation in the gross collection capacity of the place of entertainment by virtue of any modification or revision of the rate or rates of admission or any change in the accommodation as approved by the competent authority not less than fifteen days prior to such change. Where the rates of admission are modified or revised, the tickets bearing the modified or revised rates shall not be issued until they are stamped with the seal of the Entertainments Tax Officer. The tax as per the revised or modified gross collection capacity shall be payable for the shows held thereafter. Where any modification or revision in the rates of admission has the effect of reducing the gross collection capacity, the proprietor shall be liable to pay tax at the old rates till the tickets bearing the new rates are sealed and issued.
32M. The proprietor shall intimate in writing to the Entertainments Tax Officer every proposed change or variation in the gross collection capacity of the place of the entertainment either by virtue of any modification or revision of the rate or rates of admission or any change in the accommodation or class of accommodation as approved by the competent authority, not less than fifteen days prior to such change. Where the rates of admission are modified or revised, the tickets bearing the modified or revised rates shall not be issued until they are stamped with the seal of the Entertainments Tax Officer. The tax as per the revised or modified gross collection capacity shall be payable for the shows held thereafter. Where any modification or revision in the rates of admission has the effect of reducing the gross collection capacity, the proprietor shall be liable to pay tax at the old rates till the tickets bearing the new rates are sealed and issued.
Reading of the rules indicate that if the modification or revision of rates of admission or any change in the accommodation as approved by the competent authority should be brought to the notice of the Entertainments Tax Officer, not less than 15 days prior to the change. The rules do not specifically speak about reduction in the rates of admission, whereas section 83(1A)(c) speaks about the power of the licensing authority to grant permission to "alter" the rates of admission to be given in writing in case of "such increase".
As the Revenue has placed strong reliance on the judgment of this court made in W.P. Nos. 16668 of 1990, etc., batch, dated January 20, 1994 (Devi Theatre v. Deputy Commercial Tax Officer [1994] 5 MTCR 183), it is necessary to consider as to whether there is any similarity of facts and whether the contentions raised in the present writ petitions, with reference to the interpretation of the word "alter" employed in condition No. 6 of the C form licence, as it stood in the year 1979 and later on amended in 1982, by G.O. Ms. No. 1016 were considered or not. Facts of the above unreported judgment are as follows :
Two theatres in Salem District have questioned the revision of assessment for the years 1981 to 1984 and the consequential demand notice issued to them for the difference of compound tax. The licensees of the said theatres opted to pay entertainment tax u/s 5B of the Tamil Nadu Entertainments Tax Act, 1939 (Tamil Nadu Act X of 1939) every week. They had to specify the percentage of the gross collection capacity for a show, as multiplied by a specified number and the gross collection capacity being arrived at by multiplying rates of admission for various classes with seating capacity. In such a process, reduction or increase of either in the seating capacity or in the rates of admission to various categories of classes, will have an impact on the amount of tax to be paid.
The licensees have revised the rates of admission to various classes, during the periods covered by the assessment years in question, without getting his prior permission or approval from the licensing authority, though it was said, that subsequently, such an approval has been obtained. The concerned Deputy Commercial Tax Officer/Entertainments Tax Officer (first respondent) also appeared to have accepted the weekly returns consequent payment of tax therefor. The Government of Tamil Nadu, by order dated August 29, 1990, informed the Assistant Commercial Tax Officers that the proposal to drop proceedings or revision of assessment, without verification from the licensing authorities concerned of the approval of reduced rates of admission, if any, was not agreeable to the Government and that therefore, the Deputy Commercial Tax Officer/Entertainments Tax Officer sent a circular, dated September 17, 1990 to all Assistant Commercial Tax Officers, informing them that the reduction of rates of admission can be done only with the prior approval of the competent licensing authorities. Besides the said authority also revised the assessments covered by the period relatable to the assessment years in question in respect of the aforesaid two theatres, adopting the original rates of admission prescribed by the licensing authority. Such revision of assessment fastened on the licensees with an additional tax burden, impelling them to resort to invocation of writ jurisdiction to quash the revisions of assessment during the years in question.
In the above unreported judgment, the points came up for consideration before this court, were as follows :
(1) The Tamil Nadu Cinemas (Regulation) Act, 1955 (Tamil Nadu Act IX of 1955-for short, ''TNC(R) Act'') and the Tamil Nadu Cinemas (Regulation) Rules, 1957 (for short, "the TNC (R) Rules") cannot at all be relied upon for levying tax under the TNET Act, which is a complete code, by itself.
(2) Arranging tax in such away, as a matter of business prudence, to void the burden of tax is not bad in law.
(3) The licensing authority-District Collector''s approval for reduced rates of admission should be presumed to be retrospective in operation.
(4) Entertainments Tax Officer has no powers of revision.
(5) Entertainments Tax Officer acts in a quasi-judicial way in assessment proceedings and therefore, it is, he has to apply his mind in passing such orders, without his being mandated to do so in a particular manner by his superiors, by issuance of a circular, or order or instructions of any kind.
In the above unreported judgment, though initially the reduced rates of admission were not approved by the competent authority, the returns submitted by the licencees on the reduced rates of admission and consequent payment of tax had been accepted by the Entertainments Tax Officer. Besides the tickets bearing the revised or modified rates of admission were also sealed for issuance to the patrons in the auditorium during the periods covered by the revision of assessment relatable to the years in question.
Facts further disclose that the licensing authority, the District Collector, appeared to have given his approval for reduced rates of admission to various classes of accommodation for the period, subsequent to the periods, covered by the revised assessment in question. Therefore, there is no doubt that for the period of revision of tax, i.e., 1981-82, 1982-83 and 1983-84, there was no prior approval for reduction of rates of admission to various classes by the licensing authority. While considering whether such reduced rates of admission should be presumed to have been accepted by the licensing authority, for the period covered by the revised assessment in question, the learned single judge held that there cannot be any presumption in law in respect of retrospectivity. At paragraph 20 of the unreported judgment, this court considered the issue as to whether the licencees therein can take advantage of the subsequent approval of the reduction of rates of admission by the licencing authority covered by the revised assessment in question and held that :
As adverted to earlier, the licensing authority-District Collector appeared to have given his approval for reduced rates of admission to various classes of accommodation for the period subsequent to the periods, covered by the revised assessments in question. The vexed question is as to whether such reduced rates of admission should be presumed to be retrospective in operation. The answer to such a question cannot be anyone except an emphatic ''no'', in the facts and circumstances of the case. There cannot at all be any presumption in law in respect of any retrospectivity.
As regards the tickets bearing the revised or modified rates of admission and sealed by the Entertainments Tax Officer for the purpose of issuance to the spectators, the learned single judge has observed that all these things appeared to have been done, without the verification of the licensing authority concerned, as to the grant of approval for such reduced rates. The learned single judge has further observed that the Entertainments Tax Officer in passing orders relatable to assessment proceedings, discharge his functions in a quasi-judicial way and basing of reasons in such orders is a sine qua non. The learned single judge has further observed that if such authority passes orders therefor without due application of mind, as to the relevant facts and circumstances of the case, then such an order would be definitely bad in law.
On the facts of the above case, finding that the licensing authority had not approved the reduction in rates of admission for various classes and after observing that the orders passed by the Entertainments Tax Officer, accepting the returns and the consequent issuance of the sealed tickets, as not in accordance with the mandate of law, the learned judge has sustained the revision of assessment and consequential demand notices, issued to the aforesaid licensees for the period stated surpa.
Reading of the judgment in entirety would show that the correctness of the revision of tax and the consequential demand notices were decided on the ground of not obtaining prior approval from the licensing authority for the period in question, regarding the reduced rates of admission by the licensees, the points framed for consideration in the unreported judgment, with due respect, in my considered opinion, do not deal with the issue, raised in the present writ petitions, i.e., as to whether the theatre owners should obtain prior approval from the licensing authorities in the case of reduction in rates of admission, before the amendment to condition No. 6 of C form licence, which substituted the word "increase" employed in condition No. 6, as "alteration". Therefore, on comparison of the facts of the unreported case with the present writ petitions, no doubt that there are similarities in some aspects, i.e., whether the acceptance of the returns submitted by the licensees and the consequent issuance of the sealed tickets by the Entertainments Tax Officers would restrict them from exercising the powers of reassessment as provided in section 7B of the Tamil Nadu Entertainments Tax Act, which expressly refers to the power to make a best of judgment assessment for the tax, which the cinematograph exhibitor is liable to pay under sections 5A and 5B of the Act, as the case may be.
The judgment relied on by the learned counsel for the Revenue, in my considered opinion, may not be applicable to the facts of the present case in all force, for the reason that the issue as to whether the licensees were to obtain prior approval for reduction of rates of admission, in view of the subsequent amendment to the word, "increase" employed in condition No. 6 of C form licence has not been considered.
Whether the judgments relied on by the learned counsel for the Revenue can be applied as a precedent to the facts of the present case, has to be examined on the basis of the law laid down by the Supreme Court in Bihar School Examination Board v. Suresh Prasad Sinha reported in [2009] 8 MLJ 1306 (SC), wherein, their Lordships have extracted some of the earlier decisions on the law of precedent, as follows :
The courts should guard against the danger of mechanical application of an observation without ascertaining the context in which it was made. In Commissioner of Income Tax Vs. M/s. Sun Engineering Works (P.) Ltd., , this court observed :
... It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete "law" declared by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court. A decision of this court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this court, to support their reasonings.
It is also necessary to keep in mind the following principles laid down in Government of Karnataka v. Gowramma AIR 2008 SC 863 with reference to precedential value of decisions :
.. Reliance on the decision without looking into the factual background of the case before it is clearly impermissible. A decision is a precedent on its own facts. Each case presents its own features. It is not everything said by a judge while giving (a) judgment that constitutes a precedent. The only thing in a judge''s decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well-settled theory of precedents, every decision contains three basic postulates : (i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically flows from the various observations made in the judgment. The enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent. (See : State of Orissa v. Sudhansu Sekhar Misra AIR 1968 SC 647 and Union of India (UOI) and Others Vs. Dhanwanti Devi and Others, A case is a precedent and binding for what it explicitly decides and no more. The words used by judges in their judgments are not to be read as if they are words in an Act of Parliament. In Quinn v. Leathern [1901] AC 495 (H.L.), Earl of Halsburylc observed that every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which are found there are not intended to be exposition of the whole law but governed and qualified by the particular facts of the case in which such expressions are found and a case is only an authority for what it actually decides.
... Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on-which reliance is placed. Observations of courts are neither to be read as Euclid''s theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes.
The following words of Lord Denning in the matter of applying precedents have become locus classicus :
Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cardozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.
Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it.
(emphasis1 supplied)
In Sarva Shramik Sanghatana (K.V), Mumbai Vs. State of Maharashtra and Others, , this court cited the following passage from Quinn v. Leathern [1901] AC 495 with approval at page 141 of MLJ :
Here italicised.
15.... Now, before discussing the case of Allen v. Flood [1898] AC 1 and what was decided therein, there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but (are) governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all.
In Bhavnagar University Vs. Palitana Sugar Mill Pvt. Ltd. and Others, this court observed :
... It is also well-settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision.
As held in Bharat Petroleum Corporation Ltd. and Another Vs. N.R. Vairamani and Another, , a decision cannot be relied on without disclosing the factual situation. In the same judgment, this court also observed at page 151 of MLJ :
Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of courts are neither to be read as Euclid''s theorems nor as provisions of (the) statute and that too taken out of (the) context. These observations must be read in the context in which they appear to have been stated''.
(emphasis1 supplied)
The position as on May 18, 1979, till condition No. 6 was amended by G.O. Ms. No. 1016, Home (Cinema) Department, dated April 23, 1987, is as follows :
(1A)(a) The licensing authority shall fix the actual rates of admission to each class of accommodation, provided in the auditorium after taking into account the proposals of the licensee, the amenities provided in the theatre, the prevailing rates of admission in similar theatres in similar localities within his jurisdiction and any other relevant factor.
(b) The rates prescribed for each class of accommodation in the auditorium shall be clearly indicated by means of a beard or otherwise.
(c) The licensing authority may, on application by the licensee, alter the rates of admission for any class of accommodation, if there has been any change in the amenities provided either in that class or accommodation or generally in the theatre for any other valid reasons.
(IB) The Board of Revenue may, either suo motu or on application by the licensee, revise the order of the licensing authority under sub-rules (1) and (1A) after giving the licensee an opportunity of being heard.
(2) In form C licence for exhibition under the Tamil Nadu Cinemas (Regulation) Act, 1955 :-
(a) for the word ''maximum'' occurring before the heading ''conditions of licence'', the word ''actual'' shall be substituted;
(b) for condition 6, the following condition shall be substituted, namely :-
The actual rates of payment for admission to the different classes in the licensed premises shall be as indicated below and these rates shall not be altered during currency of this licence without an order in writing by the licensing authority permitting such increase.
By virtue of the amendment issued in G.O. Ms. No. 1016, Home (Cinema) Department, dated April 23, 1987, in condition No. 6 in form C licence for the word "increase", the word "alteration" shall be substituted. In my considered opinion, the word "alteration" employed in rule in 83(1A)(c) in condition No. 6, prior to the amendment was indicative of only increase in rates of admission for the reason that the words "such increase" occurring in the latter part of the sentence assumes significance in interpreting the meaning of the word "alteration". Prior to the amendment, the taxing authorities themselves, have understood that the theatre owners need not obtain any prior approval from the licensing authority, in the case of reduction in rates of admission, if the rates of admission are less than the maximum rate, fixed by the licensing authority and that is the reason, why the then Board of Revenue has issued instructions to the Entertainments Tax Officers to deal with the request for change or variation in the gross collection capacity by virtue of any modification or revision of the rate or rates of admission in accordance with rule 32E or 32M of the Tamil Nadu Entertainments Tax Rules, 1939, as the case may be. If the word "alteration" occurring in condition No. 6 of C form licence, prior to the amendment, was intended to have a wider meaning to include reduction in the rate or rates of admission to a class of accommodation, then approval in writing would be required for any alteration in the rates of admission, whether reduction or increase. Literal meaning of the sentence conveys that permission is required only in the case of increase. If the word "alteration" employed in condition No. 6 of C form licence has to be meant to include reduction or increase, even prior to the amendment, then there is no necessity for amending the rule by substitution. By bringing in an amendment, i.e., substitution of the word, "increase" as "alteration", it could be easily be inferred that the Legislature has intended to extend the scope of the word, "alteration" and the power of the licensing authority. Substitution of the word must have been done with some purpose and the purpose, which this court could understand from the earlier proceedings of the Board of Revenue and the Government Order in G.O. Ms. No. 1245, Home (Cinema) Department, dated May 18, 1979, is that the Legislature has intended to employ an appropriate word or expression of connotation to include not only the increase in rate of admission, but also other kinds of alteration.
It is well-settled principle that courts cannot aid the legislative defect in phrasing of the Act and they cannot aid, mend and construct to make up the deficiency. Deficiency which prevailed before the amendment was that the word "alter" employed in section 83(1A) of the Act and "alteration" in condition No. 6 in C form licence, on conjoint reading, would indicate only an increase in the rates of admission. Otherwise, there would be incongruity. Therefore, it is evident that in order to rectify the defect noticed, an amendment has been issued in the year 1987 and that the Legislature has used an appropriate term of wider connotation to clear the ambiguity and to establish its intention. In this regard, it is worthwhile to apply following tests as propounded in Heydon''s rule, viz., (i) what was the situation prior to the amendment under construction, (ii) what mischief or defect was noticed before introducing the provision, (iii) whether it was remedial and (iv) reasons for remedy.
A perusal of the judgment relied on by the Revenue shows that there was some ambiguity regarding assessment of the returns and consequently, the levy of entertainment tax. Therefore, administrative instructions seemed to have issued in the year 1990, clarifying that prior approval from the licensing authority is required in the case of reduction in rates of admission. It is thus evident that the Legislature, which noticed the defect has resorted to remedy the same by substituting the word "increase", occurring in condition No. 6 of C form licence as "alteration" to mean alteration of any kind. As regards interpretation of the provision or word employed in a statute, it is useful to extract some of the decisions of the Supreme Court.
In Smt. Hira Devi v. District Board, Shahjahanpur reported in AIR 1952 SC 362, the Supreme Court, at paragraph 14, held that :
... No doubt it is the duty of the court to try and harmonise the various provisions of an Act passed by the Legislature. But it is certainly not the duty of the court to stretch the words used by the Legislature to fill in gaps or omissions in the provisions of an Act.
In A.R. Antulay v. Ramdas Sriniwas Nayak reported in [1984] 2 SCC 500, the Supreme Court held that :
It is well established canon of construction that the court should read the section as it is and cannot rewrite it to suit its convenience; nor does any canon of construction permit the court to read the section in such manner as to render it to some extent otiose. Section 8(1) says that the special judge shall take cognizance of an offence and shall not take it on commitment of the accused. The Legislature provided for both the positive and the negative. It positively conferred power on special judge to take cognizance of offences and it negatively removed any concept of commitment. It is not possible therefore, to read section 8(1) as canvassed on behalf of the appellant that cognizance can only be taken upon a police report and any other view will render the safeguard u/s 5A illusory.
In State of Kerala v. Mathai Varghese reported in [1986] 4 SCC 746, where at paragraph 6, the Supreme Court held as follows :
The court can merely interpret a provision so as to make explicit the intention of the Legislature. It cannot rewrite, recast or redesign the provision since the power to legislate has not been conferred on the court.
The court should make a purposeful interpretation so as to ''effectuate'' the intention of the Legislature and not a purposeless one in order to ''defeat'' the intention of the legislators wholly or in part.
In Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. Vs. Custodian of Vested Forests, Palghat and another, , the apex court has observed that, "in seeking legislative intention judges not only listen to the voice of the Legislature but also listen attentively to what the Legislature does not say.
In Nelson Motis Vs. Union of India and another, the Supreme Court held that
while interpreting statutes ''if the language of the statute is clear and susceptible to only one meaning, it must be given effect to irrespective of the consequences.
In Union of India and another Vs. Deoki Nandan Aggarwal, it was held as follows :
... It is not the duty of the court either to enlarge the scope of the legislation or the intention of the Legislature when the language of the provision is plain and unambiguous. The court cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the courts. The court cannot add words to a statute or read words into it which are not there. Assuming there is a defect or an omission in the words used by the Legislature the court could not go to its aid to correct or make up the deficiency. Courts shall decide what the law is and not what it should be. The court of course adopts a construction which will carry out the obvious intention of the Legislature but could not legislate itself. But to invoke judicial activism to set at naught legislative judgment is subversive of the constitutional harmony and comity of instrumentalities...
The Supreme Court held in Gurudevdatta VKSSS Maryadit v. State of Maharashtra reported in [2001] 4 SCC 534, that,
... it is a cardinal principle of interpretation of statute that the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plain and unambiguous, then the courts are bound to give effect to that meaning, irrespective of the consequences. It is said that the words themselves best declare the intention of the law-giver. The courts have adhered to the principle that efforts should be made to give meaning to each and every word used by the Legislature and it is not a sound principle of construction to brush aside words in a statute as being inapposite surpluses, if they can have a proper application in circumstances conceivable within the contemplation of the statute...
At paragraph 14, the Supreme Court in J.P. Bansal Vs. State of Rajasthan and Another, held as follows :
Where, however, the words were clear, there is no obscurity, there is no ambiguity and the intention of the Legislature is clearly conveyed, there is no scope for the court to innovate or take upon itself the task of amending or altering the statutory provisions. In that situation the judges should not proclaim that they are playing the role of a law-maker merely for an exhibition of judicial valour. They have to remember that there is a line, though thin, which separates adjudication from legislation. That line should not be crossed or erased. This can be vouchsafed by ''an alert recognition of the necessity not to cross it and instinctive, as well as trained reluctance to do so''. (See : Frankfurter : Some Reflections on the Reading of Statutes in ''Essays on jurisprudence'', Columbia Law Review, page 51.)
At paragraphs 57 and 62 of SCC (paragraphs 64 and 69 of ITR) of the judgement i Commissioner of Income Tax, Kerala Vs. Tara Agencies, the apex court held that:
The intention of the Legislature has to be gathered from the language used in the statute which means that attention should be paid to what has been said as also to what has not been said.
Therefore, the legal position seems to be clear and consistent that it is the bounden duty and obligation of the court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute which the Legislature in its wisdom has deliberately not incorporated.
Yet another substantial ground, though raised, not considered by all the authorities, is regarding the retrospective application of the amendment brought about in 1987, by substituting the word, "increase" as "alteration".
It could be seen that the amendment to the word, "alteration" has been made after eight years and there is nothing to indicate in the amendment that the substitution effected will have any retrospective operation. In Income Tax Officer, Alleppey Vs. M.C. Ponnoose and Others, relied on by the petitioner before the Deputy Commissioner (CT), Salem Division, third respondent, the court held as follows (at page 177 of ITR);
The courts will not, therefore, ascribe retrospectivity to new laws affecting rights unless by express words or necessary implication it appears that such was the intention of the Legislature... where any rule or regulation is made by any person or authority to whom such powers have been delegated by the Legislature it may or may not be possible to make the same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But where no such language is to be found it has been held by the courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect.
It is well-settled that unless the language of G.O., by which, an amendment is made, clearly expresses the intention of the rule-making authority to the effect that the amended rule should be given retrospective effect, the same must be presumed to have only prospective effect. In the case on hand, condition No. 6 in C form licence as it stood prior to the amendment, is indicative of only increase in rates of admission. By way of an amendment in G.O. No. 1016, the word "increase" has been substituted as "alteration". The amendment does not speak about any retrospective effect. In this context, it is useful to refer to few decisions of the Supreme Court regarding retrospective effect.
In Municipal Corporation for the City of Municipal Corporation for The City of Poona and Another Vs. Bijlee Products (India) Ltd. and Others, , the Supreme Court held that the interpretation that the exemption already granted shall continue until the expiry of the respective periods of their grants will be fully in consonance with the principle that any amendment affecting the legal rights of an individual must be presumed to be prospective unless it is made expressly clear or by necessary implication that it is retrospective. In case the opposite view is taken the result would be that the valuable rights vested in the respondents would be taken a way, and there is no evidence in the language of the Government order to indicate any such intention.
In Mohd. Rashid Ahmed v. State of U.P. reported in [1979] 1 SCC 596, the Supreme Court, at para 27, held that :
Retrospective operation is not to be given to the statute so as to impair an existing right or obligation other than as regards matters of procedure unless that effect cannot be avoided without doing violence to the language of enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. But where, as here, it is expressly stated that an enactment shall be retrospective, the courts will give it such an operation.
In N.T. Bevin Katti, etc., Vs. Karnataka public Service Commission and others, the Supreme Court held that :
A statutory rule or Government order is prospective in nature unless it is expressly or by necessary implication made to have retrospective effect. If the recruitment Rules are amended retrospectively during the pendency of selection, in that event selection must be held in accordance with the amended Rules. Whether the Rules have retrospective effect or not, primarily depends upon the language of the Rules and its construction to ascertain the legislative intent. The legislative intent is ascertained either by express provision or by necessary implication if the amended Rules are not retrospective in nature the selection must be regulated in accordance with the rules and orders which were in force on the date of advertisement. Determination of this question largely depends on the facts of each case having regard to the terms and conditions set out in the advertisement and the relevant rules and order.
On perusal of the impugned orders, it could be seen that though the petitioner has brought to the notice of the authorities that the amendment can be given only prospective effect, the respondents have not adverted to the same, in their orders, excepting to fasten the liability of the petitioner on the sole ground of not obtaining prior permission from the licensing authority. Unless the amendment issued in the year 1987 to the word, "increase" in condition No. 6 in form C licence has been given retrospective effect with clear expression, the revision of assessment for the years 1982-83, 1983-84, cannot be made by applying the said amendment and consequently, the demand notices are without the sanction of law and therefore, without jurisdiction. For the reasons stated supra, the impugned orders are liable to be set aside and accordingly, set aside. In the result, the impugned orders are set aside and the writ petitions are allowed. No costs.