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Judgment
S. Ananda Reddy, J.—This writ petition is filed praying for the issue of writ of mandamus declaring the action of the 1st respondent in Memo No.G1. 61378/ General.A2/96-3, dated 16-6-1997 and the subsequent demand of the 3rd respondent dated 29-7-1997 issued u/s 25 of the Andhra Pradesh Revenue Recovery Act as illegal, null, void and against the principles of natural justice and consequently direct the respondents to endorse the reduction of seats in B-Form Licence of the petitioner theatre with effect from 24-4-1984 with 708 seats.
The petitioner is a registered firm carrying on the business of screening the pictures in its theatre. Prior to 1984 under the provisions of the Andhra Pradesh Entertainments Tax Act, 1939 (hereinafter referred to ''the Act''), tax was being levied and collected on the actual sale of tickets without reference to the number of seats or the gross collection capacity of the theatre. After 1984, there was a change in the method of levy and collection of Entertainment Tax i.e., the system has changed for collection of the entertainment tax based on the gross collection capacity and u/s 5 of the Act, the owner of the theatre is given an option to compound the tax payable for the entire year by executing an agreement basing on certain percentage of the gross collection capacity at particular number of shows screened per week/year, as provided in the Act. While so, the petitioner made an application on 24-4-1984 to the 2nd respondent, licensing authority, for reduction of seats in its theatre from 813 to 708. Basing on the said representation, it is stated that the Revenue Divisional Officer, Narsaraopet inspected the theatre and submitted his report dated 4-11-1986 to the District Collector. As per the said report, the Revenue Divisional Officer found that there are only 708 seats on the date of inspection and accordingly he recommended for the reduction of the seats to the actual number of seats existing. It is also stated that the petitioner was paying tax regularly without any arrears, basing on the actual seats. While so, the 3rd respondent issued a demand notice for payment of the difference of tax on the ground that there is no order from the 2nd respondent for reduction of seats. Assailing the said demand notice, the petitioner filed WP No.1917 of 1987, which was disposed of on 19-2-1987 directing the 2nd respondent to pass appropriate orders on the application of the petitioner within one month from the date of the receipt of the order of this Court. It is also stated that the amount outstanding, as per the demand notice issued by the 3rd respondent, was directed to be paid in instalments. It is stated by the petitioner that in response to the application made by the petitioner and also the directions of this Court, finally the 2nd respondent passed orders on 18-11-1996, reducing the number of seats from 813 to 782 and the reduction of seating capacity effective from 21-5-1988. Aggrieved by the said order, the petitioner preferred an appeal before the 1st respondent. The said appeal was dismissed by the 1st respondent by its Memo No.G1.61378/Genl.A2/96-3, dated 16-6-1997, But, however, modified the effective date from which the reduction was given, by changing from 21-5-1988 to 30-12-1996. It is further stated that in the meanwhile the petitioner made another application on 31-11-1988 for further reduction of seats to 626, as the theatre was running in loss and on that application the 2nd respondent passed orders reducing the seats from 780 to 627 by an order dated 31-12-1996, with which we are not concerned in the present writ petition. Consequent on the dismissal of the appeal of the petitioner by the 1st respondent, the 3rd respondent issued a demand notice dated 29-7-1996 in Form-IV under the provisions of the Revenue Recovery Act, demanding an amount of Rs. 12,66,666/-. Assailing the said order of the 1st respondent as well as the consequential demand the petitioner is before this Court.
The learned Counsel for the petitioner contended that the 1st respondent has committed illegality by violating the principles of natural justice in disposing of the appeal filed by the petitioner without giving any notice and hearing the petitioner. It is also contended that the 1st respondent not only dismissed the appeal, but also passed an order against the petitioner, who was the appellant before it, enhancing the liability by changing the effective date of reduction in the seating capacity from 21-5-1988 to 31-12-1996. The said order passed by the 1st respondent, violating the principles of natural justice, is clearly illegal and unsustainable. The learned Counsel contended that the petitioner made its application as early as on 24-4-1984; and the law stood as on that date, there was no prohibition from reducing the seating capacity and the authorities are not justified in sitting over the matter till 1996. It is contended that in an earlier writ petition this Court also directed the 2nd respondent to dispose of the petitioner''s application within a period of one month, while disposing of the WP 1917 of 1987, dated 19-2-1987. Inspite of such direction also, the 2nd respondent sat over the matter nearly ten years and the 2nd respondent while passing the orders on 18-11-1996 granted the relief only from 21-5-1988, instead of granting the same from the date of the application of the petitioner. The learned Counsel contended that the restriction as to the reduction in the seating capacity was introduced in the year 1988 by insertion of Rule 10-A by G.O. Ms. No.185, dated 21-5-1988 in the A.P. Cinemas (Regulation) Rules, 1970 (hereinafter referred to as ''the Rules, 1970''). The learned Counsel also contended that the 1st respondent issued G.O. Ms. No.539, dated 5-3-1980, which was circulated to all the licensing authorities intimating that there was no restriction as to the reduction in the seating capacity and the licensees are at liberty to change the seating capacity and the licensing authority are advised to incorporate necessary corrections in B-From licence as and when an intimation is given by the licensees for such reduction. By the same the taxing authorities were also directed to reassess or determine the revised tax liability of the licensees on that basis. In view of the above G.O. issued by the 1st respondent, the licensing authority, the 2nd respondent, who is bound by the G.O., ought to have granted relief of reduction in the seating capacity by making necessary endorsement in the B-Form licence with effect from the date of the petitioner''s application i.e., from 24-4-1984. The learned Counsel contended that if such an endorsement is made with effect from the date of the application and the tax payable thereon is revised, the petitioner is not liable to pay any more tax. In fact, on that basis, the petitioner seems to have paid over and above the tax payable by it. The learned Counsel also contended that his application is based on the actual existence of the number of seats. According to the learned Counsel, from the beginning i.e., when the petitioner''s theatre was constructed, prior to 1978, there existed only 708 seats and not 813 seats as endorsed in B-Form License. The learned Counsel relied upon a report of the Revenue Divisional Officer, dated 4-11-1986 and contended that as the number of seats available in the petitioner''s theatre are only 708, the computation and demand of tax based on the non-existing number of seats is illegal and liable to be quashed. Therefore, the learned Counsel contended that the impugned proceedings are liable to bet set aside.
The learned Government Pleader on the other hand, supported the order of the 1st respondent. It is stated that though the petitioner made an application for reduction in the seating capacity, unless an order is passed permitting the petitioner to reduce the seating capacity by making an endorsement in the B-Form Licence, the tax payable u/s 5 of the Act would be computed only as per the seating capacity endorsed in the B-Form Licence. It is stated that in fact, the petitioner entered into agreement u/s 5 of the Act from time to time and agreed to pay the compounded tax payable basing on the number of seats as endorsed in B-Form Licence. When once the petitioner had entered into an agreement with the authorities under the provisions of the Act, it is not open to the petitioner now at this stage to seek revision of all those agreements. In fact there is a prohibition u/s 5(3) of the Act that once an agreement is entered into to pay certain amount of tax, the said amount of tax cannot be reduced under any of the circumstances. On the other hand, if there is any increase in the gross collection capacity, the said agreement can be modified to increase the liability of the petitioner to pay higher amount of tax. Therefore, it is contended that as there was no reduction in the seating capacity till the order was passed by the 2nd respondent on 18-11-1996, the petitioner is not entitled for any reduction in the tax liability. It is stated that a provision was made under the provisions of Rule 10-A of the Rules 1970, for claiming reduction in the seating capacity by the owner of the theatre. In terms of said provision, the 2nd respondent passed orders giving effect to the reduction in the seating capacity from 21-5-1988. The learned Counsel also contended that aggrieved by the said order, the petitioner preferred appeal to the 1st respondent and the 1st respondent after considering the material placed before it, passed orders, of course, modifying the effective date of reduction in the seating capacity from 21-5-1988 to the actual date of the order i.e., 31-12-1996. According to the learned Counsel, there is no provision to give any notice of hearing, while disposing of the appeal. Therefore, there is no error warranting interference with the impugned order. The learned Government Pleader also contended that this Court directed the petitioner to pay the arrears in instalments as early as in 1987, except a sum of Rs.10,000/-, in pursuance of the said order, the petitioner did not pay any amount. Therefore, there is absolutely no justification for the petitioner in not paying the outstanding amount. In view of non-compliance/non-payment of the arrears of tax, the petitioner is not entitled for any relief sought for in the present writ petition.
From the above rival contentions, the issue that falls for consideration is regarding the legality and sustainability of the impugned order dated 16-6-1997 passed by the 1st respondent and whether the petitioner is entitled to the relief of reduction in the seating capacity from the date of the application i.e., 24-4-1984.
Admittedly, the petitioner made its application for reduction in the seating capacity on 24-4-1984 seeking reduction of the seats from 813 to 708. According to the petitioner, the actual number of seats in existence was only 708 from the inception of the theatre, but however, the licensing authority endorsed on the B-Form Licence, fixing the number of seats at 813. As the method of tax payable at that time was basing on the actual collections, the petitioner did not give much importance to the said variation of seats that were endorsed in the B-Form Licence, with reference to the actual existence of the number of seats. But a perusal of the report dated 4-11-1986 of the Revenue Divisional Officer, in pursuance of the petitioner''s application, who inspected the theatre, shows that the earlier Revenue Divisional Officer, who inspected the theatre in the year 1978, has stated that there were 800 seats existing in the theatre as mentioned below:-
Balcony � 116 seats
I Class (Chair) � 177 seats
II Class (Bench) � 186 seats
III Class (Floor) � 321 seats.
Total 800 Seats
The Revenue Divisional Officer has also given the number of seats, as fixed by the licensing authority by his proceedings, dated 14-11-1978, as-
Balcony � 114 seats
I Class (Chair) � 213 seats
II Class (Bench) � 203 seats
III Class (Floor) � 283 seats.
Total : 803 seats
Then the actual number of seats, according to the Revenue Divisional Officer, who inspected the premises and the existing number of seats is as under:
Balcony � 114 seats
Chair � 177 seats
Bench � 184 seats
Floor � 233 seats.
Total : 708 seats
In any case, in this writ petition we cannot go into the above factual aspects, as it is also not required for the adjudication of the issue in question. However, it is to be noted that the Revenue Divisional Officer has recommended only for reducing the seats in the floor class to 252 instead of the existing seating capacity as recorded by him. Except that there was no other finding recorded by him for reduction in the seating capacity. It is not in dispute that ultimately the 2nd respondent, who is the licensing authority, passed orders on 18-11-1996 allowing the reduction of the seating capacity from 813 to 782 by reducing the seats as recommended by the Revenue Divisional Officer. However, the said reduction was given with retrospective effect from 21-5-1988, perhaps the date from which, a provision was made in the Cinema Regulations for reduction in the seating capacity. When such order was assailed in appeal before the 1st respondent, the 1st respondent without giving any notice and hearing the petitioner, passed the impugned order, not only rejecting the relief sought for by the petitioner, but also modifying even the date of reduction in the seating capacity from 21-5-1988 to 31-12-1996. The said order is clearly in violation of the principles of natural justice. When a statutory appeal is provided to an aggrieved party, even in the absence of any express provision, the appellate authorities are bound to give a notice of hearing and an opportunity to the appellant to place before it, the relevant material in support of the appellant''s claim for reduction in the seating capacity. In fact, the appellate authority also passed an adverse order not only confirming the order of the 2nd respondent but also modifying the effective date of reduction in the seating capacity to a later date affecting the interest of the petitioner without giving any notice and opportunity to the petitioner.
Under the above circumstances, the impugned order is illegal and unsustainable and accordingly we set aside the order of the 1st respondent dated 16-6-1997. The appellate order also suffers from another vice viz., non-consideration of the material on record as is evident from the order, which is a non-speaking order. Hence, the matter is remitted to the 1st respondent for fresh consideration after giving notice and opportunity of hearing.
As we have remitted the matter to the 1st respondent, which is the appellate authority, it is not desirable to go into the merits of other contentions that are advanced by the petitioner and express any opinion.
In the result the writ petition is allowed accordingly to the extent indicated above. No costs.