AI Structured Summary
Not yet generated for this judgment
Judgment
R. Balasubrannanian, J.—The writ Petitioner and the Respondent are the same in both the above writ petitions. In the first writ petition, the assessment period is from 17.12.81 to 28.03.82. In the second writ petition, the assessment period is from 29.03.82 to 14.02.83. By two separate orders, each dated 08.12.92 in R. C. No. B4.4059/86, the assessment proceedings already completed against the writ Petitioner in each case for the above referred to periods have been reopened and assessed again. It is those two orders that are being challenged in these two writ petitions.
Heard Mr. P. K. Krishnaswamy , learned Counsel appearing for the writ Petitioner in each case and the learned Government Advocate appearing for the Respondent in each case. Under the order challenged in the first writ petition the writ Petitioner was assessed to pay a sum of Rs. 10,095/- as tax on escaped assessment for the period from 17.12.81 to 28.03.82. Likewise under the order challenged in the second writ petition, the writ Petitioner was assessed to pay a sum of Rs. 31,431/- as tax on escaped assessment for the period from 29.03.82 to 14.02.83. The facts are more or less similar, except the difference in the period of assessment and therefore this Court, in this judgment, is stating the facts only in the first case. The writ Petitioner is the ''C Form licence holder. The writ Petitioner had been paying weekly entertainment tax by following the procedure u/s 5B of the Tamil Nadu Entertainments Tax Act, 1939 (in short "E.T. Act"). All the taxes, as assessed, had been paid by the writ Petitioner in each case. Two separate notices, each dated 27.10.92 had been issued by the Respondent to the "C" Form licence holder to pay a sum of Rs. 10,095/- and Rs. 31,431/- as entertainment tax for the periods already referred to. The notices are illegal and in any event the notices having been issued beyond the period of five years, are barred by limitation. On an earlier occasion, the writ Petitioner tiled W.P. Nos. 18154/92 and 18155/92 to quash those two notices. Those writ petitions came to be dismissed on 17.11.92 on the sole ground that the Petitioner could file objections to those notices. Thereafter the writ Petitioner filed objections. The Respondent confirmed his proposals contained in those notices and raised the demand.
Mr. P. K. Krishnaswamy learned Counsel appearing for the writ Petitioner in each case urged only the following two points before this Court and they are as follows:
The first one is on limitation and the second one is about the legality, correctness or otherwise of the re-assessment order made in this case. According to him, the assessment period is from 17.12.81 to 28.03.82 and from 29.03.82 to 14.02.83. The assessment orders in this case had been passed pursuant to the pre-assessment notice dated 27.10.92. Such a notice had not been issued before the expiry of the period of five years ,and such five year period should be calculated from the expiry of the assessment year. Therefore the present action is illegal. On the legality or otherwise of the order under challenge, the sum and substance of the argument of the learned Counsel for the writ Petitioner is that, during the relevant assessment periods referred to already, entertainment tax was levied and collected on the basis of the actual rates of admission collected by the licence holder for various classes strictly in accordance with the provisions then in-existence, irrespective of the fact that the rates of admission prescribed in the "C" Form licence was higher or lower. According to the learned Counsel, only from the year 1985, when the Tamil Nadu Entertainments Tax was amended, it was mandatory that entertainment tax should be collected on the basis of the actual rates of admission prescribed in the "C" Form licence and not on the basis of the rates of admission charged and collected by the licence holder, which was lesser than the rates of admission prescribed in the "C" Form licence. Such an amendment cannot have a retrospective effect and it can only be prospective. Therefore the reopening of the assessment, is wholly uncalled for.
The learned Government Advocate would respond to the arguments advanced by the learned Counsel for the writ Petitioner by contending that, for the relevant assessment periods within the period of five years from the assessment year, a notice dated 28.08.86 had been issued and the assessment was completed on that basis. There was an appeal. by the Assessee against that consolidated order (for the two assessment periods) and the appellate authority set aside that order of assessment stating that there cannot be a consolidated order and for each assessment order, there must be a separate assessment order. Consequently the order of assessment was set aside and the proceedings were remitted back to the assessing authority. Only in continuation thereof, the pre-assessment notice dated 27.10.92 in each case had been issued, which had ended in the assessment proceedings challenged in this case. Therefore according to him the action having been initiated within a period of five years by issuing the show cause notice dated 28.08.86, it cannot be held that the assessment proceedings is barred by limitation. The effect of the remand order could not be taken to mean that the proceedings initiated lawfully within the period of five years had been snapped and whatever proceedings that have been initiated subsequent to the remand order, is only a fresh proceeding.
On the next point, it is contended by the learned Government Advocate that the Tamil Nadu Amending Act of 1985, amending the Tamil Nadu Entertainments Tase Act 1939, has no bearing on the issue involved in this case. At all times, even prior to the amendment, the entertainment tax was levied only on the basis of the rates of admission prescribed in the "C" Form licence and not on any other basis. Unless the licensing authority under the cinematography manual, who alone has the power to vary the rates of admission, any unilateral act on the part of the licensee in reducing the rates of admission lower than the rates of admission prescribed in the "C" Form licence, cannot be taken advantage of by him to deny the State the revenue legally due to it.
The learned Counsel for the Petitioner brought to my notice the following judgments namely:
a) Sha Bhoormull Buboothmull Jain Vs. Joint Commercial Tax Officer, Sowcarpet Division I, ;
b) Victor Cables Corporation Vs. State of Uttar Pradesh and Another, ;
c) Doma Sao Mohanlal v. State of Bihar 25 S.T.C. 473 (S.C.);
d) Sri Krishna Chandra Vs. The State of Uttar Pradesh, ;
e) (1989) 74 S.T.C 21
f) Devi Theatre and Anr. v. Deputy Commercial Tax Officer and Ors. 1994 (5) M.T.C.R. 183; and
g) an unreported judgment dated 22.10.96 in W.P. No. 140/83 batch on the ills of this Court.
The learned Government Advocate brought to the notice of this Court the following judgments namely,
a) Deputy Commissioner of Commercial Taxes v. Abdul Shukoor & Company (1977) S.T.C. 137;
b) Gangabai v. State of Tamil Nadu [1981] 48 S.T.C. 508; and
c) Annamalai v. Assistant Commissioner (C.T.) (1990) 76 S.T.C 271.
Let me first take up the point of limitation urged by the learned Counsel for the writ Petitioner in each case. Under Rule 43E of the Tamil Nadu Entertainments Tax Rules (in short "Rules"), the Entertainment Tax Officer is authorised, within a period of five years from the expiry of the period to which the tax relates, to take action under Sub-section (1) of Section 7B of the Act. There is no dispute that for assessing the tax or for assessing on the escaped assessment, the power u/s 7-B is available. The assessments in these two writ petitions are for the period from 17.12.81 to 28.03,82 and from 29.03 .82 to 14.02.83. If the pre-assessment notice dated 27.10.92 for each of the above two periods is taken as the first action initiated by the Officer u/s 7-B of the Act, then there cannot be any doubt that the initiation of the proceedings to assess tax on escaped assessment is definitely beyond the period of five years. It is also not in dispute as laid down by this Court in Gangabai and Others Vs. The State of Tamil Nadu, , that the proceedings need not reach a finality within a period of five years and it is enough proceedings have been initiated before the expiry of the five year period. Whenever re-assessment is sough to be made, a show cause notice has to be given under the Act and that marks the commencement of the proceedings. In this case, as already noticed, within a period of five years for both the assessment periods, two separate notices each dated 28.08.86 had been issued. The assessment completed on that basis by a consolidated order for both the assessment years had been set aside by the appellate authority and the proceedings were remitted back to the assessing authority to pass to two separate orders. Passing separate orders for each assessment year, is the requirement of law. In the appeal arising out of that consolidated assessment order, the appellate authority held as follows:
From the above provision, it is clear that the prescribed authority should make a single order for each financial year or any part thereof. Each financial year is a separate entity in so far as the assessment proceedings is concerned. Therefore, while making assessment, an order should not be concerned with more than one financial year. This Statutory prescription has been flagrantly violated by the assessing authority. The action of the assessing authority in having combined the two financial years is one single order, while making assessment u/s 7-B has rendered the impugned order null and void. Therefore, in view of this procedural flaw and having considered the provisions as stated earlier, I am not able to sustain the assessment made by the assessing authority in one assessment proceedings for two financial years. The assessment is therefore liable to be set aside and is remanded back to the assessing authority with direction to make fresh assessment for each financial year separately as per the provisions discussed earlier. In the result the appeal is remanded.
It can be seen from the above, that the assessment notices themselves were not quashed but it is only the final order of assessment that was quashed on account of a procedural violation. Consequent to the remand order, the assessing officer had again sent his notice dated 27.10.92 to the Assessee. The issuance of such a notice dated 27.10.92 consequent to the remand order would not amount to initiating the proceedings for re-assessment on escaped assessment for the first time.
In Gangabai and Others Vs. The State of Tamil Nadu, , a Division Bench of this Court had held, in the context of the provisions of the Tamil Nadu General Sales Tax Act, wherein also a similar provision of limitation is available u/s 16 of that Act that the period of limitation will have to be counted with reference to the notice, issued u/s 16 and not with reference to the revised assessment order made subsequently after remand by the appellate authority. In the above decided case, originally a notice was issued only to the widow of the deceased Assessee and not to all the legal representatives. On the basis of that notice, an assessment came to be made. Alleging that non-issuance of the notice to all the legal representatives of the deceased Assessee would vitiate the order of re-assessment, an appeal was filed and the appellate authority accepted that point. Accordingly re-assessment was set aside and remanded to the assessing officer for a fresh disposal, after notice to all the legal representatives. Consequent to the order of remand, notice came to be issued to all the legal representatives, which also ended in a reassessment order in favour of the State. It was argued that issuance of notice to all the legal representatives alone would be a valid notice as called for under that Act and since that notice came to be issued for the first time only after the period of five years, the whole assessment proceedings is illegal. In that context, this Court held that merely because the notice was issued originally to the widow alone, it cannot be said that the re-assessment proceedings were not validly initiated and that since there was no dispute that the said notice was within the period of five years, no question of limitation arose. In Deputy Commissioner of Commercial Taxes, Tiruchirapalli Division Vs. A. Abdul Shukoor and Company, of the Tamil Nadu General Sales Tax Act came up for consideration. The learned Judges, in the context of that provision of law, held as follows:
Now the question is. for an order to be made in the remanded proceedings, does the limitation prescribed u/s 32(2) apply? We have no doubt that the period prescribed u/s 32(2) is applicable only for an order made by the Deputy Commissioner in his suo motu proceedings but it will not apply to a case where he was dealing with-it in pursuance of the directions of the appellate or revisional authority. In fact, if it were to be otherwise, it will lead to very absurd results.
No doubt in this case the question of issuing notice does not arise. In the context of the law laid down in the above referred to two Judgments, I perused Rule 43E(1) of the Tamil Nadu Entertainments Tax Rules carefully. A reading of the Rule clearly shows that it only contemplates commencement of the proceedings towards re-assessment and not passing of the final order. To say that the requirement of Rule 43E(1) of the Rules would not only apply to the first stage when the action is taken but also to subsequent stages when the assessment proceedings were remitted back to the original authority for a fresh disposal, would definitely result in absurd results. There may be cases where proceedings towards re-assessment on the escaped assessment might have been commenced within the period of limitation provided for under the above Rule and might have reached the finality either within the period of five years or after the expiry of five years at the first stage namely, at the level of the original assessing authority. That order may be open to challenge and if on such challenge the original assessment proceedings are directed to be reopened and comes back to the original authority for fresh disposal, then by that time the period of five years would have come to an end. Pursuant to the order of such remand if another notice is given (though not strictly required) either under the remand order or even by the provision of law, could it be said that the said notice alone shall be taken as the starting point to count the - period of limitation or can the original assessing authority fall back upon the earlier notice issued within the period of five years and yet complete the proceedings. In my opinion, the answer is in favour of the State for the following reason:
In this case, on facts, the proceedings u/s 7B(2) of the Act had been validly commenced by issuance of two separate notices each dated 28.08.86 for the two assessment period. The issuance of the notice dated 27.10.92 consequent to the order of remand, cannot be taken to mean initiation of the proceedings u/s 7-B(2) of the Act for the first time only as that time. Section 7B(3A) contemplates passing of a separate order for each assessment year. It is not shown to this Court that the notice dated 28.08.86 issued at the first instance, is in any way illegal. Mere quashing of the re-assessment order on the basis of those notices dated 28.08.86 would not amount to obliterating the said notices themselves. As already noticed, the appellate authority, at the first instance, had not held anywhere that the said notices were illegal. On the other hand, only the assessment orders have been quashed with a direction to make fresh assessment for each financial year separately. Under these circumstances, I have no difficulty at all to hold that the two notices, each dated 28.08.86, are valid notices and that marks the commencement of the proceedings for re-assessment in respect of the two assessment orders against the Assessee.
In view of my above finding, the judgment reported in (1972) 29 S.T.C. 635 brought to the notice of this Court by the learned Counsel for the Petitioner, would not apply to the case on hand. In that case, the service of notice u/s 21 of the Uttar Pradesh Sales Tax Act 1948 was under consideration. In Sha Bhoormull Buboothmull Jain Vs. Joint Commercial Tax Officer, Sowcarpet Division I, , a learned Judge of this Court, following the judgment of the Hon''ble Supreme Court of India, held that initiation of the proceedings for levying tax on escaped assessment within the period of five years is enough and there is no need to complete the order within the period of five years. The judgment reported in Victor Cables Corporation Vs. State of Uttar Pradesh and Another, brought to my notice by the learned Counsel for the Petitioner deals with an ambiguous notice and holding that the issuance of such an. invalid notice would not amount to initiation of proceedings in accordance with law. Such a situation does not arise in this case. In 25 S.T.C.473 (S.C.), the Hon''ble Supreme Court of India had held that each assessment period is distinct and the decision in respect of one assessment cannot operate as in respect of another assessment period. I respectfully state that in the case on hand, the question raised and answered by the Hon''ble Supreme Court of India in the decided case referred to above, does not come up for consideration at all. On facts I find that the un-reported judgment dated 22.10.90 in W.P. No. 140/83 batch does not get attracted to the case on hand. The issue involved in that case was about the reduction in the seating capacity, and the tax collected on the basis of the reassessment proceedings without issuance of a show cause notice. For the reasons stated above, I am of the view that the order of re-assessment passed in these two cases are not hit by the period of limitation, since the proceedings had been commenced well within the period of limitation.
Coming to the next point namely, about the correctness or otherwise of the order under challenge, it may be noticed once again here that the escaped assessment period is from 17.12.81 to 28.03.82 and from 29.03.82 to 14.02.83. During the above referred to periods, the licence holder had reduced the rates of admission unilaterally. Rates of admission, there cannot be any dipute, have to be fixed necessarily by the licensing authority under the Tamil Nadu Cinematograph Manual.
It is only that Authority, who has the power to vary the rates of admission. It is also not in dispute that during the relevant period, entertainment tax was levied and collected from the Petitioner on the basis of the rates of admission shown by him in his returns, which is lower than the rates of admission prescribed by the licensing authority. It is also not in dispute that the licensing authority under the Tamil Nadu Cinematograph Manual had not reduced the rates of admission and such reduction in the rates of admission was an unilateral decision on the part of the licence holder. u/s 5-B of the said Entertainment Tax Act, the gross collection capacity of a show is the basis for levying entertainment tax. Explanation 1 to Section 5-A of the Act defines "gross collection capacity" as meaning the notional aggregate of all payments for admission for a show (inclusive of the entertainments tax and the surcharge and additional surcharge on the entertainment tax leviable under the Local Authorites Finance Act or under the Act) 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 IX of 1955) were occupied by spectator. This was the original Explanation and by Amending Act 35/85, which came into effect on 31.07.85 after the word "accommodation" and before the words "were occupied by spectators," the following was added:
In the theatre as specified in the licence issued by the competent authority under the Tamil Nadu Cinemas (Regulation) Act, 1955
According to the learned Counsel for the Petitioner, by bringing the above referred to Amendment in the Explanation, the Legislature has made it very clear that only from that time onwards, the entertainment tax .must be levied and collected only on the basis of the rates of admission prescribed by the licensing authority in the "C" Form licence and not on the basis of any unilateral reduction in the rate of admission made by the Assessee. The argument of the learned Government Advocate on this aspect is that the Amendment brought about does not make any change as contended by the learned Counsel for the writ Petitioner as it was only with reference to the seating capacity and definitely not with reference to the rates of admission.
According to the learned Government Advocate the rates of admission as prescribed by the licensing authority was always the basis for arriving at the gross collection capacity. I am able to see force in the argument of the learned Government Advocate and it is not possible to agree with the submission of the learned Counsel for the Petitioner that prior to the Amending Act 35/85, the Act permitted collection of entertainment tax on the basis of the actual rates of admission collected by the "C" Form licence holder and not on the basis of the rates of admission fixed in the "C" Form licence by the licensing authority. A learned Judge of this Court in 1994 (5) M.T.C.R. 183 had an occasion to go into a similar question and held that entertainment tax to be collected, would be only on the basis of the rates of admission prescribed in the "C" Form licence by the licensing authority and not on the basis of the actual amount of admission charges collected by the licence holder. The learned Judge in that case had also held as follows:
In the case on hand, the reduced rates of admission had not at all got the approval of the competent authority. But, no doubt true it is, the returns submitted by the licensees of the said theatres on the reduced rates of admission and consequent payment of tax had been accepted by the Entertainments Tax Officer. It is also true that the tickets bearing the revised or modified rates of admission had been sealed for issuance to the spectators in the auditorium during the periods covered by the revision of assessment relatable to the years in question. But all these things appeared to have been done, without the verification with the licensing authority concerned as to the grant of approval for such reduced rates. Such reduction of rates of admission and consequent payment of tax therefor is opposed to the statutory provisions adumbrated u/s 5-B of the Tamil Nadu Entertainments Tax Act, Rule 32M of the Tamil Nadu Entertainments Tax Rules, and Rule The Writ Law Rep 83 (lA)(a) & (c) of the Tamil Nadu Cinemas (Regulation) Rules.
I am not impressed with the argument of the learned Counsel for the writ Petitioner that the above referred to judgment had been rendered without noticing the Amendment to the Explanation extracted earlier, which was only prospective in nature and not retrospective in nature, since I am of the opinion that the Amendment brought about by Amending Act 35/85 does not alter the existing situation of collecting entertainment tax on the basis of the rates of admission prescribed in the ''''C" Form licence by the licensing authority.
Accordingly both the points raised by the learned Counsel for the writ Petitioner in each case fail and consequently both the writ petitions are dismissed. No costs. Pending W.M.P s are also dismissed.