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CASE NO.: Appeal (civil)  5161 of 2007

PETITIONER: M/s Jaswant Talkies

RESPONDENT: Commercial Taxes Officer, Bhilwara

DATE OF JUDGMENT: 12/11/2007

BENCH: Dr. ARIJIT PASAYAT & D.K. JAIN

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO.        5161      OF 2007 (Arising out of SLP (C) No. 7053 of 2006)

Dr. ARIJIT PASAYAT, J.

1.      Leave granted.          2.      Challenge in this appeal is to the order passed by a  learned Single Judge of the Rajasthan High Court at Jodhpur,  allowing the revision filed by the respondent. The said revision  petition was filed under Section 86 of the Rajasthan Sales Tax  Act, 1994 (in short the ’Act’).  

3.      Factual position which is almost undisputed is as  follows:

The appellant is an exhibitor of cinematograph films. On  3.2.1996 cinema hall of the appellant was inspected by the  Commercial Tax Inspectors. At that time a movie "Alladdin"  was being shown in the morning show. At the time of  inspection, 878 viewers were found watching the movie  without tickets. It was found that the daily collection register  maintained by the appellant was not properly maintained. The  inspectors put their signatures after drawing a line in the  register so that no entry can be made thereafter. Alleging that  the appellant admitted 878 viewers without tickets, a show  cause notice was issued under Section 10 of the Rajasthan  Entertainment and Advertisement Tax Act, 1957 (in short the  ’Entertainment Act’) prima facie being of the view that offence  under Sections 6(1) and 6(2) of the Entertainment Act has  been committed. The appellant submitted its reply and stated  that girl students of a school had gone to watch the movie  which was meant for children and in any event there was no  scope for imposition of penalty of Rs.500/- in respect of each  viewer. The Commercial Tax Officer, Bhilwara was of the view  that penalty at the rate of Rs.500/- per viewer was to be  imposed and in addition penalty of Rs.500/- under Section  10(3)(b) was also to be imposed.  The officer was of the view  that mere fact that children of Mahila Aashram were being  shown the picture and the tickets were to be handed over to  the school authorities after counting the number of children  was not relevant.

The inspection was done at 10.00 a.m. when the school  children had just entered the hall and, therefore, even before

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the show started the inspection was done. The order of  assessment was challenged before the Commissioner  (Appeals). The said authority found that all the tickets were  with the Manager of the Cinema, but since each viewer did not  possess a ticket there was contravention.  Therefore, penalty  under Section 10(3)(a) of the Entertainment Act was upheld  while setting aside the penalty imposed under Section  10(3)(b)(iii). The appellant preferred an appeal against the said order  before the Rajasthan Taxation Board, Ajmer (in short the  ’Taxation Board’). Before the Taxation Board, it was   contended that the total cost of the tickets was Rs.3006/- and  penalty of Rs.4,39,000/- at the rate of Rs.500/- per viewer  was unconscionable. The Taxation Board found that the  penalty that was imposed was not imposable at the rate of  Rs.500/- per viewer and the maximum penalty imposable was  Rs.500/-.  

Revenue filed a revision petition as noted above and by  the impugned order penalty imposed by the Assessing Officer  was restored.  

4.      In support of the appeal, learned counsel for the  appellant submitted that the High Court has relied on a  decision of its own Court in Maharana Talkies, Bhilwara v.  State of Rajasthan and Ors. (2004 (1) STT 237 (Raj.HC))  ignoring the view expressed in State of Rajasthan and Ors. V.  RTT and Ors. (2003 WLC (Raj.) which held that no penalty can  be levied per person. The High Court also, it is pointed out,  held in that case that the subsequent amendment was not  clarificatory.   5.      Learned counsel for the State on the other hand  supported the order.

6.      The legislative history of the statutory provision needs to  be noted.

Section 10 of the Rajasthan Entertainment and  Advertisement Act, 1957 existing pre-1982  

10. Offence and penalties. - (1)  Notwithstanding anything contained in any law  for the time being in force, a ticket for  admission to an entertainment shall not be  resold for profit by the holder thereof. (2) Whoever re-sells any ticket for admission in  contravention to the provisions of sub-section  (1) shall, on conviction before a Magistrate, be  liable to pay fine which may extend to two  hundred rupees. (3)(a) The proprietor of any entertainment or any  person employed by him in any place of  entertainment, who admits any person to any  place of entertainment in contravention of the  provisions of sub-section (1) or sub-section (2)  of Section 6, or (b)     The proprietor of an entertainment who \026

(i)     fails to pay the tax due from him  under this Act within the prescribed  time, or

(ii)    fraudulently evades the payment of  tax due from him under this Act,

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(iii)   contravenes any of the provisions of  this Act or the rules framed  thereunder for which no other  penalty has been provided under this  Act. shall be liable to pay by way of penalty, in  addition to the amount of tax payable by him a  sum not exceeding Rs.500/-. Section 10 of the Rajasthan Entertainment and  Advertisement Act, 1957 from 1982

10. Offence and penalties. - (1)  Notwithstanding anything contained in any law  for the time being in force, a ticket for  admission to an entertainment shall not be  resold for profit by the holder thereof. (2) Whoever re-sells any ticket for admission in  contravention to the provisions of sub-section  (1) shall, on conviction before a Magistrate, be  liable to pay fine which may extend to two  hundred rupees. (3)(a) The proprietor of an entertainment or any  person employed by him in any place of  entertainment, who admits any person to any  place of entertainment in contravention of the  provisions of sub-section (1) or sub-section (2)  of Section 6, or (b)     The proprietor of an entertainment who \026

(i) fails to pay the tax due from him under  this Act within the prescribed time, or (ii) fraudulently evades the payment of tax  due from him under this Act, or

(iii) contravenes any of the provisions of  this Act or the rules framed thereunder for  which no other penalty has been provided  under this Act. shall be liable to pay by way of penalty \026

(i)     in respect of cases referred  to in clause  (a) and sub-clauses (i) and (iii) of clause (b) in  addition  to the amount of tax payable  by him,  a sum not exceeding Rs.500/- and  

(ii)    in respect of cases referred to in sub- clause (ii) of clause (b) in addition to the  amount of tax payable by him a sum not  exceeding rupees five hundred or double the  amount of tax evaded whichever is higher.

(4)     The prescribed authority not below the rank of  an Assistant Commercial Taxes Officer may, after  affording a reasonable opportunity of being heard to  the person affected, impose  the penalty mentioned  in sub-section (3).

(5)     The person affected may, within one month of  the communication of the order directing payment  of any sum by way of penalty under sub-section (3)  appeal to the prescribed authority.

Amended Section 10 of the Rajasthan Entertainment and

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Advertisement Act, 1957 with effect from 31.7.1998

10.     Offence and penalties (1) Notwithstanding  anything contained in any law for the time being in  force a ticket for admission to an entertainment  shall not be resold for profit by the holder thereof.  (2) Whoever re-sells any ticket for admission in  contravention to the provisions of sub-section (1)  shall, on conviction before a Magistrate, be liable to  pay fine which may extend to two hundred rupees. (3)(a) The proprietor of an entertainment or any  person employed by him in any place of  entertainment, who admits any person to any place  of entertainment in contravention of the provisions  of sub-section (1) or subsection (2) of Section 6, or (b)     the proprietor of an entertainment who \026

(i) fails to pay the tax due from him under this  Act within the prescribed time, or (ii) fraudulently evades the payment of tax due  from him under this Act, or

(iii) contravenes any of the provisions of this  Act or the rules framed thereunder for which  no other penalty has been provided under this  Act shall be liable to pay by way of penalty- (i) in respect of cases referred to in clause  (a) and  sub-clause (1) of clause (b)  regarding  entertainment tax, in addition  to the amount of tax payable by him, a  sum not exceeding Rs.100/- per person;  (ii) in respect of cases referred to in sub- clause (1) of clause (b) regarding  advertisement tax and in respect of cases  referred to in sub-clause (iii) of clause (b)  in addition to the amount of tax payable  by him, a sum not exceeding Rs.500; and  (iii)in respect of cases referred to in sub- clause (ii) of clause (b) in addition to the  amount of tax payable by him a sum not  exceeding Rupees five hundred or double  the amount of tax evaded whichever is  higher. (4) The prescribed authority not below the rank of  an Assistant Commercial Taxes Officer may, after  affording a reasonable opportunity of being heard  to the person affected, impose the penalty  mentioned in sub-section (3).

7.      It is to be noted that Section 10 of the Entertainment Act  has been amended w.e.f. 31st July, 1998. The amended  provision permits imposition of penalty per person. Section  10(3)(b) contemplates two types of penalties. The first relates  to cases covered by clause (a) and sub-clauses (i) and (ii) of  Clause (b). The second relates to sub-clause (ii) of Clause (b) of  Sub-Section 3 of Section 10. The case at hand relates to  clause (a) of sub-section (3) of Section 10.  If the position was  clear as contended by learned counsel for the State that the  penalty is to be at the rate of Rs.500/- per person, there was  no reason for the amendment which specifically provided for  imposition of penalty per person.  

8.      The Statement of Objects and Reasons for the  amendment also throw considerable light on this position. The  same reads as follows:

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B. Amendment in the Rajasthan Entertainment  and Advertisements Tax Act, 1957 Certain amendments in the Rajasthan  Entertainment and Advertisements Tax Act, 1957  have been considered necessary and were under  consideration for quite some time past. Owing to repeal of the Rajasthan Sales Tax  Act, 1954 and coming into force of new Act of  1994, definition of the term ‘Sales Tax Act’, and  due to proposed induction of certain new  provisions in the ‘Act of 1957’, definitions of the  terms ‘appellate authority’, Tax Board’ and  Tribunal’ are proposed to be inserted vide clause 9  of the Bill. To provide for limitation for assessments, new  section 5BB, to ensure effective recovery of the  out-standing entertainment tax by providing  special mode of recovery, substitution of section 9,  to enable payment of outstanding dues in  installments, new section 5BB, to enable the  Commissioner to reduce or waive interest and  penalty under the Act in case of genuine hardship,  new section 9C are proposed to be inserted,  substituted or inserted, as the case may be, vide  clauses 12, 13 or 14 of the Bill respectively.         Moreover to make the penalty provision more  practicable, section 10 (3) (b) is proposed to be  substituted vide clause 15 of the Bill. Besides above, to provide for statutory  remedy of first appeal, new section 13-A, to provide  for appeal against order of appellate authority, new  section 13-B, to provide for revision to tribunal, new  section 13-C provide for powers of revision to  Commissioner in case of an order passed by the  prescribed authority being erroneous or prejudicial  to the interest of State revenue, new section 13D,  and to provide for rectification of mistakes apparent  from the record, new section 13-E; are proposed to  be inserted vide clause 19 of the Bill.

Some of the consequential or minor  amendments are also proposed in various sections  of the Act of 1957 vide clauses 10, 11, 17, 20 and  21 of the Bill. Extract of the Rajasthan Finance Bill, 1998 Relevant  portion: 15. Amendment of Section lO, Rajasthan Act  No. 24 of 1956: In section 10 of the principal Act, - (a)     for existing clause (b) of sub-section (3),  the following clause shall be substituted,  namely:         "(b) the proprietor of any entertainment  who - (i) fails to pay the tax due from him under  this Act within the prescribed time, or (ii) fraudulently evades the payment of tax  due from him under this Act, or (iii) contravenes any of the provisions of  this Act or the rules framed thereunder, for  which no other penalty has been provided  under this Act, shall be liable to pay by  way of penalty: (i)     in respect of cases referred to in  clause (a) and sub-clause (i) of clause (b)

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regarding entertainment tax, in addition to  the amount of tax payable by him, a sum  not exceeding Rs.100/- per person. (ii) in respect of cases referred to in sub - clause (i) of clause (b) regarding  advertisement tax and in respect of cases  referred to in sub-clause (iii) of cause (b),  in addition to the amount of tax payable by  him, a sum not exceeding Rs.500; and (iii) in respect of cases referred to in sub  clause (ii) of clause (b) in addition to the  amount of tax payable by him a sum not  exceeding Rupees five hundred or double  the amount of tax evaded whichever is  higher." (b)     sub-section (5) shall be deleted.  

9.      It is also irrational that as against a tax liability of  Rs.3006/-, penalty of Rs.4,39,000/- was to be imposed.  Though in all cases quantum would not be a relevant factor,  but on analyzing the scheme of the Statute it is clear that the  stress is on the contravention. The contravention essentially is  of admitting persons without valid ticket and at the relevant  point of time, had no nexus with the number of persons. To  make the provision stringent the shift has been made to per  person. But the amendment has no retrospective effect and as  noted above is not clarificatory.    

10.     As noted above, the amendment does not appear to be  clarificatory in nature as contended by learned counsel for the  respondent-State. The view of the High Court therefore is not  correct. The conclusion of the Taxation Board was the correct  view.  

11.     The appeal deserves to be allowed which we direct. There  shall be no order as to costs.