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PETITIONER: SRINIVASA THEATRE AND ORS. ETC. ETC.

       Vs.

RESPONDENT: GOVERNMENT OF TAMIL NADU AND ORS. ETC. ETC.

DATE OF JUDGMENT12/03/1992

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) VENKATACHALLIAH, M.N. (J)

CITATION:  1992 AIR  999            1992 SCR  (2) 164  1992 SCC  (2) 643        JT 1992 (2)   312  1992 SCALE  (1)643

ACT:      Tamil Nadu Entertainment Tax Act, 1939 : Section  5A(1) (As amended by Act 40 of 1989)-Constitutional validity of.      Cinema Theatres-Entertainment Tax-Levy on the basis  of ’admission   system’  and  ’compositionsystem’-Classification   of theatres  for the purpose of levy-Theatres  situated  within the Municipal Corporations and Special Grade  Municipalities governed  by ’admission system’-Theatres situated  in  other local  areas  of  Stage governed  by  ’composition  system’- Theatres  situated within the radius of the five  kilometers of  Municipal Corporation and Special  Grade  Municipalities brought   over  from  ’composition  system’  to   ’admission system’-But  temporary  and  open  theatres  exempted   from ’admission  system’-Held  classification  of  theatres   was reasonable  and has nexus with the object of  enactment-Held change-over to ’admission system’ from ’composition  system’ is  not  an unreasonable restriction-Exemption to  open  and temporary  theatres  held not  discriminatory-Section  5A(1) held not violative of Articles 14 and 19(1)(g).      Constitution of India, 1950 : Articles 14 and 38.      Expression ’Equality before law’ and ’equal  protection of laws’-Meaning of-Relevance of State’s obligation to bring equality as contemplated by Article 38-Discussed.      Doctrine of legitimate-Legitimate expectation based  on legislative  practice cannot be invoked for  invalidating  a legislation.      Doctrine    of    legitimate     expectation-Legitimate expectation based on legislative practice cannot be  invoked for invalidating a legislation.

HEADNOTE:      The Tamil Nadu Entertainment Tax Act, 1939 provides for levy of entertainment tax on admission to cinema theatres in the  State of Tamil Nadu.  Until 1978 the entertainment  tax was  levied on the basis of ’admission system’ i.e.  on  the actual number of tickets sold.  In 1978 the Act was  amended and  section 5(A) and 5(B) were introduced.  These  sections introduced   the  ’composition  system’  of  collection   of entertainment tax                                                        165 under  which tax was levied based upon the gross  collection

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capacity  of  cinema  theatres irrespective  of  the  actual number  of  tickets  sold.  However,  the  newly  introduced ’composition  system’ was not made applicable to the  entire State.   While  the theatres situated within  the  Municipal Corporations of Madras, Madurai, Coimbatore and the  Special grade  municipalities  continued  to  be  governed  by   the original  system  of taxation i.e.  ’admission  system’  the theatres situated in all other local areas of the State were governed by the composition system.      In 1989 the Act was further amended and Sub-section (1) of  Section  5(A)  of  the Act  was  substituted.   By  this amendment, the percentage of entertainment tax via-a-vis the rates of admission in force in corporation and special grade municipality areas was reduced from 53% to 40%.  At the same time  all  the theatres situated within the radius  of  five kilometers  from the peripheral limits of such areas  (belt) which were hitherto governed by the composition system  were brought   over  to  the  admission  system.   However,   the temporary  and open air theatres even though located in  the belt of five kilometers were excluded from this switch-over.      The  appellants  challenged  the  validity  of  section 5(A)(1)   by  filing  various  writ  petitions  which   were dismissed by a Division Bench of the Madras High Court.      In appeals to this Court, it was contended on behalf of the  appellants (1) that the Amendment Act is arbitrary  and violative  of  Article  14 inasmuch  as  (a)  it  classifies theatres  situated  in  a local  area  into  two  categories subjecting one such category to a hostile treatment; (b)  it equates  the  theatres situated in  village  panchayats  and village townships and other lesser grade municipalities with the   theatres  in  corporation  areas  and  special   grade municipalities  area and that such a classification  has  no relation  to the object of the enactment; (2)  exemption  of temporary  and open theatres from the ’admission system’  of taxation is discriminatory; (3) the impugned provisions  are confiscatory  in nature and they constitute an  unreasonable restriction upon the petitioners’ fundamental right to trade guaranteed by Article 19(1)(g); (4) The petitioners had come to entertain a legitimate expectation, based on  legislative practice,   that  they  would  not  be  brought   over   to ’admission system’ of taxation. Dismissing the appeals, this Court,                                                       166      HELD:  1.  The Tamil Nadu Legislature is  competent  to declare that the theatres situated within the five kilometer radius  (belt)  of the municipal corporation areas  and  the areas of special grade municipalities shall be subjected  to the same method of taxation as the theatres situated  within the  said  areas.  The Act no doubt adopt  the  local  areas declared  under  the Tamil Nadu Municipal  Corporation  Act, Tamil Nadu Municipalities Act and Tamil Nadu Gram Panchayats Act as the basis for prescribing the rate of taxation.   But it  must be remembered that it was not obligatory  upon  the legislature  to  do  so.  It could have  adopted  any  other basis.   It  is only for the sake of  convenience  that  the existing   local  areas  -  convenient  existing  units   of references  -  were adopted, it is not a question  of  power but one of convenience.  [177C-D]      1.1 The theatres situated within the belt are proximate to the corporation and special grade municipality areas  and thus enjoy a certain advantage which the theatres beyond the belt  do not.  They draw custom from within the  corporation areas  by virtue of their proximity.  The corporation  areas have  a  larger percentage of affluent  persons  than  other areas,  who have more money at their disposal.   They  spend

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more  on  entertainment.   The  municipal  boundary  has  no significance  for  them.  If there is a good  picture  in  a theatre  situated  beyond the municipal  corporation  limits they would go and see it. [177H, 178A-B]      1.2 The classification or the distinction made  between theatres  situated within the belt and the theatres  outside the  belt is not an unreasonable one.  The  material  placed before  the  Court shows that theatres situated  within  the belt are substantially in the same position as those  within the corporation or special grade municipality areas, if  not better.   The  theatres  within the belt  are  akin  to  and comparable  to  the theatres situated within  the  areas  of corporations  and Special Grade Municipalities.  Further  it is  not  disputed  that the admission  system  fetches  more revenue to the State.  It is precisely for this reason  that the said system is continued in the major cities.  It cannot be said that the classification has no nexus to the  object. [178H, 179A-C]      2. The argument that if the theatres situated within  a gram  panchayat  or a lesser grade municipality  are  to  be equated  with the theatres within the corporation and  other areas  they  should also be allowed to charge the  rates  of admission prevalent in corporation areas                                                        167 cannot  be  accepted.  Firstly, rates of  admission  do  not merely depend upon the category of local areas but also upon the amenities provided in the theatres.  Secondly, the  very system of levy in both areas is different.  Under section  4 i.e.,  admission  system  the rate of tax  was  53%  of  the admission  charge, which is now brought down to 40%  by  the impugned Amendment Act on the actual number of tickets  sold whereas  in  respect  of theatres  governed  by  composition system,  the  rate  of levy is  upon  the  gross  collection capacity  irrespective of the actual number of tickets  sold for a show or over a week.  Thirdly, the rates of  admission are prescribed under a different enactment. [179F-H, 180A]      Moreover,  the petitioners are not suffering  any  real prejudice.   Whichever  the system of taxation,  the  amount collected by way of entertainment tax is to be made over  to the  State.  Even under the composition system, the  formula evolved is supposed to represent the amount really collected by way of entertainment tax.  It may be that in a given case or  probably in many cases - the exhibitors may be saving  a part of the amount collected by way of entertainment tax  by paying   only  the  compounded  amount.   But  it  may   not necessarily be so.  There may be theatres where the  formula may  work to their prejudice because of their low  occupancy rate.  In any event, the mere fact that an exhibitor is able to  save a part of the tax by paying the  compounded  amount cannot  be treated as a benefit in law which he is  deprived by following the admission system.  [180B-D]      3.Open-air  theatres and temporary theatres stand on  a different footing from permanent theatres.  They suffer from several  disadvantages which the others do not.  They are  a class apart.  If the impugned provision has treated them  as a separate class, no objection can be taken thereto. [181B]      4.  The  theory of legitimate  expectation  based  upon legislative  practice  cannot  be brought in  to  defeat  or invalidate  a  legislation.   It may at  the  most  be  used against an administrative action, and even there it may  not be  an indefeasible right.  No case has been brought to  the notice of the Court where a legislation has been invalidated on  the basis that it offends the legitimate expectation  of the persons affected thereby.  [181C-F]      Council  of Civil Service Unions and Ors.  v.  Minister

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for the Civil Service, (1985) A.C, 374, referred to.      5.  The impugned change-over to the ’admission  system’ does not                                                        168 amount  to  unreasonable restriction upon  the  petitioners’ fundamental right to trade. [182A]      6.  Article  14 of the Constitution  enjoins  upon  the State not to deny any persons ’Equality before law’ or  ’the equal protection of law’ within the territory of India.  The two expressions do not mean the same thing even if there may be  much  in common.  Their meaning and content  has  to  be found and determined having regard to the context and scheme of   our  Constitution.   The  word  "law"  in  the   former expression  is  used in a generic sense  -  a  philosophical sense  -  whereas the word "laws" in the  latter  expression denotes specific laws in force. [173C-E]      7.  Equality  before law is a  dynamic  concept  having many facets.  One facet - the most commonly acknowledge - is that  there shall be no privileged person or class and  that none  shall  be above law.  A facet which  is  of  immediate relevance  herein is the obligation upon the State to  bring about,  through the machinery of law, a more  equal  society envisaged  by the preamble and part IV of our  Constitution. For  equality before law can be predicate meaningfully  only in  an  equal  society i.e., in a  society  contemplated  by Article 38 of the Constitution. [173F-G]      8. The instrument of taxation is not merely a means  to raise  revenue in in India; it is, and ought to be, a  means to  reduce inequalities.  It is for this reason  that  while applying the doctrine of classifications - developed  mainly with   reference  to  and  under  the  concept  of    "equal protection  of law" - Parliament is allowed more freedom  of choice  in the matter of taxation vis-a-vis other laws.   If this be the situation in the case of direct taxes, it should be more so in the case of indirect taxes, since in the  case of  such  taxes the real incidence is upon some  other  than upon  the  person who actually makes it over to  the  State, though,  it  is true, he cannot avoid the liability  on  the ground  that  he  has not passed it on.  In  the  matter  of taxation  it  is, thus, not a question of power but  one  of constraints  of policy- the interest of economy,  of  trade, profession  and  industry, the justness of the  burden,  its ’acceptability’  and other similar consideration.  But  this does  not  mean that taxation laws are  immune  from  attack based  upon  Article  14.It  is  only  that  parliament  and legislatures are accorded a greater freedom and latitude  in choosing the persons upon whom and the situations and  stage at which it can levy tax.  Under the Constitution, there  is an  added  obligation upon he State to employ the  power  of taxation-nay, all its powers - to achieve the goal                                                        169 adumbrated in Article 38. [174C-H, 175A]      Gorantia Butchayya Chowdary & Ors. v. The State of A.P. JUDGMENT: Kerala,  [1961]  3 S.C.R. 77; Spences Hostel  Pvt.  Ltd.  v. State of West Bengal, [1991] 2 S.C.C. 154; S.K. Datta, I.T.O v. Lawrence Singh Ingty, [1968] 2 S.C.R. 165 and Elel Hostel and Investments Ltd. v. Union of India, [1991] 2 S.C.C. 166, referred to.      East  India  Tobacco  Co. v. State of  A.P.,  [1963]  1 S.C.R.  404 and Sanjeev Coke Mfg. Co. v. Bharat Coking  Coal Ltd & Anr., [1983] 1 S.C.R. 1000 cited.

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&      CIVIL  APPELLATE JURISDICTION : Civil Appeal Nos.  2004 to 2012 o 1992.      From  the  Judgment and order dated 8.10.90  of  Madras High Court in W.P. Nos. 8710/89, 8734/89, 8736/89,  8751/89, 8748/89, 8735/89, 8749/89, 8727/89 and 8737/89.                          WITH      Civil  Appeal  Nos. 2013 to 2021/92, 2022  to  2024/92, 2025, 2026, 2027-2028 and 1029 of 1992.      A.K.Ganguli,  K. Parasaran, B.R.L Iyenger, Mrs.  Nalini Chidambaram, A.V. Rangam, A.T.M. Sampath, Probir  Choudhary, M.N. Krishnamani, K.P. Sunder Rao and G. Srinivasan for  the Appellants.      R. Mohan and V. Krishnamoorthy for the Respondents.      The following Judgment of the Court was delivered by      B.P.  JEEVAN  REDDY, J. Heard learned counsel  for  the petitioners and the respondents.      Leave granted.      These appeals are preferred by the Writ petitioners  in a batch of writ petitions which were dismissed by a Division Bench of Madras High Court by its common judgment and  order dated 8th October, 1990.  Questions arising in these appeals are  common.   So are the relevant facts.  For the  sake  of convenience,  we  shall take the facts in Civil  Appeal  No. 2008                                                        170 of  1992 arising from writ petition No. 8748 of 1989  (filed by Raja Theatre, represented by it licencee-Parasuram Petty. village, Madurai).      Tamil  Nadu  Entertainment Tax Act, 1939  provides  for levy  of entertainment tax on admission to cinema  theatres, among others.  The rates of admission to cinema theatres  in the State of Tamil Nadu are prescribed under the Tamil  Nadu Cinema  (Regulation)  Act  and the  rules  made  thereunder. Different  rates of admission are prescribed depending  upon the  locality  in  which  the theatre  is situated  and  the amenities provided therein.  Entertainment Tax is prescribed at  a particular percentage of the rate of admission,  which percentage   again  differs  from  locality   to   locality. Entertainment  Tax,  thus, constitutes a  component  of  the total amount charged for admission to a cinema theatre.      Until the year 1978, entertainment tax was collected on the actual number of tickets sold.  The owners/exhibitors of cinema theatres were required to make over the actual amount of entertainment tax collected by them for each shoe to  the Government.  With a view to simplify the collection of  tax, Section 5(A) and 5(B) were introduced by the 1978  Amendment Act.  These Sections, introduced a new and substitute method of  collection  of entertainment tax based  upon  the  gross collection  capacity  of  a cinema theatre.  A  formula  was devised to determine the tax payable per show or per week as the case may be.  Gross collection capacity meant the  total amount  that would be collected by a cinema theatre  if  all the  seats  therein are filled.  But inasmuch as  no  cinema theatre can expect to have its full capacity filled for each show  on  each show on each day of the month,  a  reasonable figure was adopted and the tax payable per show  determined. If  the  exhibitor opted to pay the tax every week,  he  was entitled  to  exhibit any number of shows in  the  week  not exceeding  28  shows.   This system,  which  may  be  called ’composition system’, for the sake of convenience, dispensed with the requirement of verification of the number of ticket sold for each show in each cinema theatre. It appears to  be convenient to theatre-owners as well since they are relieved of  the botheration of submitting returns  and  establishing

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their  correctness.   However,  this  method  was  not  made applicable  to  the  entire State.   The  theatres  situated within the Municipal Corporations of Madras, Coimbatore  and the special grade municipalities continued to be governed by the  original system of taxation, which may for the sake  of convenience be called ’admission system’.  Theatres situated in all other local areas of the State are governed by the                                                        171 composition system.      In 1989, the Act was further amended by Tamil Nadu  Act 40 of 1989, the Act impugned herein.  By virtue of this Act, the  percentage of entertainment tax vis-a-vis the rates  of admission   in  force  in  corporation  and  special   grade municipality areas was brought down from 53% to 40%.  At the same  time, all the theatres situated within the  radius  of five  kilometers  from the peripheral limits of  such  areas were brought within the purview of the admission system.  In other words, the theatres situated within the five kilometer ’belt’ abutting the said areas, which were hitherto governed by the composition system were brought over to the admission system.   The  several theatres concerned in this  batch  of appeals  are  all  situated within one  or  the  other  such ’belt’.  The theatre concerned in writ petition No. 8748  to 1989 is situated in village Parasuram Petty and was governed by  composition  system but since it falls within  the  five kilometer  belt  abutting Madurai Corporation  area,  it  is brought  over to admission system.  This change  is  brought about  by substitution of Sub-Section (1) of  Section  5(A), and in particular, by virtue of the two provisos appended to Sub-section 5(A) (i).  However, the temporary (tourist)  and open  air  theatres  even though located  in  the  belt  are excluded from this switch-over.      Petitioner-appellants impugned the validity of  Section 5(A)(i) on several grounds all of which have been  negatived by the High Court.      S/Sri B.R.L Iyengar, K. Parasarn and Sampath urged  the following contentions before us;      1.  The Act classifies the theaters in the  State  with reference  to  their location i.e., with  reference  to  the local area wherein they are situated.  The theatres situated within  the municipal corporation limits are subjected to  a higher  rate  of  tax  than the  theatres  situated  in  the selection  grade municipalities.  Similarly,  the  theaters situated  within the area of selection grade  municipalities are  subjected  to a higher rate of tax  than  the  theatres situated in the first grade municipalities and so on.   This classification  is  an eminently reasonable one.   Even  the rates  of  admission  prescribed  under  Tamil  Nadu  Cinema (Regulation)  Act and rules recognize this distinction.   By virtue of the impugned amendment, however, several  theatres situated  within  panchayat towns,  village  panchayats  and other  lesser  grade  municipalities,  which  theatres  were hitherto  enjoying  the benefit of  composition  system  are suddenly deprived of the said beneficial system and                                                        172 placed  on  par with the theatres  situated  in  corporation areas and special grades municipalities for no other  reason than  that  they happen to fall within  the  five  kilometer radius   of   such  areas.   The  result  is   that   in   a village/municipality abutting a municipal corporation  area, while some theatres are governed by the composition systems, the other theatres (which happen to fall within the  ’belt’) are  governed  by  a  different  systems,  namely  admission system.   This invidious distinction, amounting  to  hostile discrimination, has been brought about for no valid  reason.

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Having adopted the gradation of the local area as the  basis for method of taxation, rate of tax and all other  purposes, there  is  no justification to treat some  of  the  theatres situated  in some of these areas differently.   Indeed,  the very creation and concept of ’belt’ is impermissible.      2.  The  Amendment Act is arbitrary,  unreasonable  and violative  of  Article  14 inasmuch  as  (a)  it  classifies theatres  situated  in  a local  area  into  two  categories subjecting  one  such situated in a category  to  a  hostile treatment;      (b)  it  equates  the  theatres  situated  in   village panchayats  and  village town-ships and other  lesser  grade municipalities  with the theatres in corporation  areas  and special  grade municipalities areas; in short, it  seeks  to treat  unequals equally, which itself is a negation  of  the guarantee of equal protection of laws.      There  is  absolutely no basis for the  above  two  war classification  nor such classification has any relation  to the  object  of the enactment.  The  respondents  failed  to place   before  the  court  any  material  justifying   such classification and discrimination.      3.  The unreasonableness of the impugned  provision  is evident  from the fact that the appellant-theatres  continue to  be  governed by the rates of  admission  prescribed  for their  respective  local areas.  For  example,  the  theatre concerned  in writ petition No. 8748 of 1989 is governed  by and  permitted to charge rates of admission  prescribed  for similar theatres situated in Madurai corporation  area-while in  the matter of method of taxation it is equated with  the theatres in the said corporation area.  This is a clear case of hostile discrimination.      4  The petitioners had come to entertain  a  legitimate expectation,                                                        173 based  on  legislative  practice, that  they  would  not  be treated  on  par  with the theatres  situates  in  municipal corporation  and  special grade municipality areas  and  had adjusted  their  affairs  accordingly.   The  sudden  change brought about by the impugned Act has dealt a severe blow to them and has put their vary  continued existence in peril.      5. The impugned provisions are confiscatory in  nature. They   constitute  an  unreasonable  restriction  upon   the fundamental  right  to trade guaranteed to them  by  Article 19(1)(g) of the Constitution of India.      Article  14 of the Constitution enjoin upon  the  State not  to  deny to any person ’Equality before  law’  or  ’the equal  protection  of laws’ within the territory  of  India. The two expressions do not mean the same thing even if there may  be much in common.  Section 1 of the XIV  Amendment  to U.S.  Constitution uses only the latter  expression  whereas the   Irish   Constitution  (1937)  and  the   West   German Constitution  (1949) use the expression "equal  before  law" alone.   Both  these expressions are used  together  in  the Universal  Declaration  of  Human Rights,  1948,  Article  7 whereof says "All are equal before the law and are  entitled without any discrimination to equal protection of the  law." While   ascertaining  the  meaning  and  content  of   these expression,  however,  we  need not be  constrained  by  the interpretation  placed upon them in those  countries  though their  relevance is undoubtedly great.  It has to  be  found and  determined having regard to the context and  scheme  of our  Constitution.  It appears to us that the word "law"  in the   former  expression  is  used  in  a  generic   sense-a philosophical  sense-whereas  the word "law" in  the  latter expression denotes specific laws in force.

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    Equality  before law is a dynamic concept  having  many facets.   One  facet-the most commonly  acknowledged-is that there  shall be no previleged person or class and that  none shall be above law.  A facet which is of immediate relevance herein  is  the obligation upon the State  to  bring  about, through the machinery of law, a more equal society envisaged by  the  preamble  and part IV  of  our  Constitution.   For equality  before law can be predicated meaningfully only  in an equal society i.e., in a society contemplated by  Article 38 of the Constitution, which reads;           "38  State  to  secure  a  social  order  for  the          promotion  of welfare of the people. (1) The  state          shall  strive to promote the welfare of the  people          by securing and protecting as effectively as it may                                                        174          a social, economic and political, shall inform  all          the institutions of the national life.          (2)  The  State  shall,  in  particular  strive  to          minimise the inequalities in income, and  endeavour          to  eliminate inequalities, in  status,  facilities          and opportunities, not only amongst individuals but          also amongst groups of people residing in different          areas or engaged in different vocations."      The  instrument  of taxation is not merely a  means  to raise  revenue in India; it is, and ought to be, a means  to reduce inequalities.  You don’t tax a poor man.  You tax the rich and the richer one gets, proportionately greater burden he has to bear.  Indeed, a few years ago, the Income Tax Act taxed  94p out of every rupee earned by an  individual  over and  above Rupees one Lakh.  The Estate Duty Act,  no  doubt since  repealed,  Wealth Tax Act and Gift Tax  Act  are  all measures  in the same direction.  It is for the reason  that while  applying  the  doctrine  of  classification-developed mainly  with  reference to and under the concept  of  "equal protection  of laws"-Parliament is allowed more  freedom  of choice  in the matter of taxation vis-a-vis other laws.   If this be the situation in the case of direct taxes, it should be more so in the case of indirect taxes, since in the  case of  such  taxes the real incidence is upon some  other  than upon  the  person who actually makes it over to  the  State, though,  it  is true, he cannot avoid the liability  on  the ground  that  he  has not passed it on.  In  the  matter  of taxation  it  is, thus, not a question of power but  one  of constraints  of policy-the interests of economy,  of  trade, profession  and  industry, the justness of the  burden,  its ’acceptability’ and other similar considerations.  We do not mean  to  say that taxation laws are  immune    from  attack based  upon  Article  14.  It is only  that  parliament  and legislatures are accorded a greater freedom and latitude  in choosing  the persons upon whom and the situation and  stags at  which  it can levy tax.  We are not  unaware  that  this greater  latiude  has  been recognised in USA  and  UK  even without  resorting to the concepts of ’equality before  law’ or  "the  equal protection of laws" -as  something  that  is inherent  in  the  very power of taxation and  it  has  been accepted  in this country as well.  (See in this  connection the decision of Subba Rao, CJ., (as he then was) in Gorantia Butchavva Chowdary & Ors., v. The State of A.P. & Ors., 1958 A.P.  294,  where the several US and English  decisions have been  carefully analysed and explained).  In the context  of our Constitution, however, there is an added obligation upon the                                                        175 State to employ the power of taxation-nay, all its powers-to achieve the goal adumbrated in Article 38.

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    The  decisions  of this court on the above  aspect  are legion, starting from Moopil Nair v. State of Kerala, [1961] 3  SCR 77.  One of the latest decisions is in Spences  Hotel Pvt.  Ltd.  v.  State of West Bengal, [1991]  2  S.C.C.  154 wherein  almost all the earlier decisions of this  court  on this  aspect have been referred to and discussed.  To  bring out the principle, it would be sufficient if we refer to two of  them namely S.K. Datta, I.T.O v. Lawrence  Singh  Ingty, [1968]  2 S.C.R. 165 and Elel Hotel and Investments Ltd.  v. Union  of India, [1991] 2 S.C.C. 166.  In the  former  case, this court observed:-          "It is not in dispute that taxation laws must  also          pass the test of Art. 14.  That has been laid  down          by  this Court in Moopil Nair v. State  of  Kerala,          [1961] 3 S.C.R. 77.  But as observed by this  Court          in  East  India  Tobacco Co.  v.  State  of  Andhra          Pradesh, [1963] 1 S.C.R. 4040, in deciding  whether          a  taxation  law  is discriminatory or  not  it  is          necessary to bear in mind that the State has a wide          discretion in selecting persons or objects it  will          tax,  and that a statute is not open to  attach  on          the  ground that it taxes some persons  or  objects          and not others; it is only when within the range of          its selection, the law operates unequally, and that          cannot  be  justified  on the basis  of  any  valid          classification,  that  it  would  be  violative  of          Article  14.  It is well settled that a State  does          not  have  to  tax  everything  in  order  to   tax          something.  It  is  allowed  to  pick  and   choose          district, objects, persons, methods and even  rates          for taxation if it does so reasonable."      Similarly, it was observed in the other case by one  of us (Venkatachaliah, J.):          "It  is now well settled that a very wide  latitude          is  available to the legislature in the  matter  of          classification  of objects, persons and things  for          purposes  of  taxation.   It must need  to  be  so,          having  regard to the complexities involved in  the          formulation of a taxation policy.  Taxation is  not          now  a  mere  source of  raising  money  to  defray          expenses of government.  It is a recognised  fiscal          tool to achieve fiscal and social objectives.   The          differentia of                                                        176          classification  presupposes  and  proceeds  on  the          premise that it distinguishes and keeps apart as  a          distinct  class hotels with higher  economic  class          hotels with higher economic status reflected in one          of  the indicia of such economic superiority.   The          presumption  of  constitutionality  has  not   been          dislodged  by the petitioners by demonstrating  how          even hotels, not brought into the class, have  also          equal  or  higher chargeable receipts and  how  the          assumption  of  economic superiority of  hotels  to          which   the   Act  is  applied  is   erroneous   or          irrelevant."      We shall now proceed to examine the contentions  before us  in the light of the above principles, but before  we  do that  we  think it appropriate to remind  ourselves  of  the following dictum :          "...in the ultimate analysis, we are not really  to          concern our selves with the hollowness or the self-          condemnatory  nature of the statements made in  the          affidavits filed by the respondents to justify  and          sustain  the  legislation.  The  deponents  of  the

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        affidavits  filed  into  court may  speak  for  the          parties   on  whose  behalf  they  swear   to   the          statement.   They do not speak for the  Parliament.          No one may speak for the Parliament and  Parliament          is  never before the Court.  After  Parliament  has          said what is intends to say, only the Court may say          what  the  Parliament to say.  None else.   Once  a          statute leaves Parliament House, the Court’s is the          only authentic voice which may echo (interpret) the          Parliament.  This the Court will do with  reference          to   the   language  of  the  statute   and   other          permissible  aids.   The executive  Government  may          place before the court their understanding of  what          Parliament has said or intended to say or what they          think was Parliament’s object and all the facts and          circumstances  which  in  their  view  led  to  the          legislation.   When they do so, they do  not  speak          for Parliament.  No Act of Parliament may be struck          down    because    of    the    understanding    or          misunderstanding of Parliamentary intention by  the          executive   government   or  because   their   (the          Government’s)  spokesmen do not bring out  relevant          circumstances  but  indulge  in  empty  and   self-          defeating affidavits.  They do not and they cannot          bind Parliament. Validity of Legislation is not  to          be judged merely judged merely by affidavits  filed          on behalf of the State, but by all the relevant                                                        177          circumstances  which the court may ultimately  find          and  more especially by what may be  gathered  from          what  the  legislature has itself  said.   We  have          mentioned  the facts as found by us and we  do  not          think  that there has been any infringement  of  the          right  guarantee  by  Article  14."  (Sanjeev  Coke          Manufacturing Company v. Bharat Cooking Coal Ltd. &          Anr., [1983] 1 S.C.R. 1000 at 1029).      We shall first examine whether it was not competent for the  Tamil  Nadu Legislature to declare  that  the  theatres situated  within  the five  kilometer radius (belt)  of  the municipal  corporation areas and the areas of special  grade municipalities  shall  be subjected to the  same  method  of taxation as the theatres situated within the said area ?  It is  true that the Act adopts the local areas declared  under the  Tamil  Nadu  Municipal  Corporation  Act,  Tamil   Nadu Municipalities Act and Tamil Nadu Gram Panchayats Act as the basis  or prescribing the rate of taxation.  But it must  be remembered  that it was not obligatory upon the  legislature to  do  so.  It could have adopted any other basis.   It  is only  for  the sake of convenience that the  existing  local areas, convenient existing units of reference, were adopted. It  is not a question of power but one of  the  convenience. There  was  nothing  precluding  the  legislature  to   have declared  in  the very first instance (i.e. at the  time  of 1978  Amendment  Act)  that  the  admission  system  was  to continue in force now only in the corporation areas but also in  five  kilometer  radius (belt) abutting  each  of  those areas.   The only question then would have been, as  not  it is,  whether  such  a course brings  about  an  unreasonable classification or whether it amounts to treating unequals on a uniform basis.      It  is  urged for the appellants that as  a  result  of creation  of such belts, theatres situated in a given  local areas,   be   it  a  gram  panchayat  or  a   lesser   grade municipality, are getting categorised into two classes-those which happen to fall within the belt and those outside.  The

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former  are obliged to follow the admission  system  whereas the  latter  continue to enjoy the facility  of  composition system.  This is undoubtedly true as a fact but the question is  whether  such  a classification, brought  about  by  the impugned  provisions  of the Act, is  unreasonable  and  un- related to the object underlying the enactment? It cannot be denied  that  the  theatres situated  within  the  belt  are proximate to the corporation and special grade  municipality areas and thus enjoy a certain advantage which the  theatres beyond the belt do not.                                                        178 They draw custom from within the corporation areas by virtue of  their  proximity.  The corporation areas have  a  larger percentage  of affluent persons than other areas,  who  have more   money  at  their  disposal.   They  spend   more   on entertainment.   The municipal boundary has no  significance from them.  If there is a good picture in a theatre situated beyond  the municipal corporation limits they would  go  and see  it.  This is not a mere surmise.  The respondents  have given  a concrete instance which is also referred to in  the judgment  of the High Court.  A sketch drawn in  respect  of Erode  town alongwith the daily collection particulars of  a theatre, Bharati theatre, situated in the belt abutting  the said   town  was  placed  before  the  High  Court.   On   a consideration of the same, the High Court has observed:           "The sketch produced by the respondents shows  the          mushroom growth of theatres just outside the limits          of  the Erode Special Grade Municipality which  lie          within   the  five  kilometer  belt.    The   daily          collection of Bharati theatre which is in the  five          kilometer  belt shows that the theatres within  the          Special  Grade Municipality are mostly showing  old          pictures  whereas Bharati theatre was exhibiting  a          comparatively  new  picture.   We  are,  therefore,          satisfied  that the theatres in the five  kilometer          belt can be no stretch of imagination be said to be          not  on  par with the theatres  in  the  respective          corporation of the Special Grade Municipalities."      It is further stated in the counter-affidavit that  the distributors are preferring the theatres in the periphery of cooperation   and  Special  Grade  Municipality  areas   for exhibiting first run pictures over the theatres within those areas.   It is also averred that in  the interior  areas  of such abutting panchayats, (i.e., outside the five  kilometer radius)  the theatres exhibit only second run  pictures  and there  is  definitely  less population in  and  around  such theatres.    In  those  areas,  it  is  stated,   there   is practically no floating population, whereas in the  theatres within  the five kilometer belt, mostly first  run  pictures are exhibited and there is considerable floating population. It  is  also submitted by the respondents that a  number  of housing colonies have sprung up just outside the corporation limits  and the limits of Special Grade Municipalities,  the inhabitants  whereof  partronise theatres within  the  belt. All  this shows that the classification or  the  distinction made  between  theatres  situated within the  belt  and  the theatres outside the belt                                                   179 is  not an unreasonable one.  It also establishes  that  the theatres  within the belt are akin to and comparable to  the theatres  situated  within  the  areas  of  corporation  and Special  Grade Municipalities.  It is not disputed that  the admission  system fetches more revenue to the State.  It  is precisely for this reason that the said system is  continued in   the  major  cities.   It  cannot  be  said   that   the

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classification has no nexus to the object.      It  is then argued that the theatres situated within  a village  panchayat or a lesser Grade Municipality cannot  be equated  with the theatres situated within  the  corporation areas or for that matter those situated within the areas  of Special  Grade Municipalities merely by virtue of  the  fact that  they abut the latter areas.  The material referred  to above  does, however, establish that the  theatres  situated within  the belt are substantially in the same  position  as those  within  the  corporation/special  grade  municipality areas, if not better.  We may also mention that the  concept of  belt is not a novel one.  In adjoining  Andhra  Pradesh, this  concept  has  been in force since quite  a  few  years earlier to its introduction in Tamil Nadu.      It  is  then argued that while  equating  the  theatres situated  within the belt with the theatres situated  within the  corporation  areas,  the rates  of  admission  for  the theatres  in  the belt are retained at the  original  level. (As  stated hereinabove, rates of admission  are  prescribed under  the Tamil Nadu Cinema (Regulation) Act and the  rules and  orders made thereunder.  Different rates  of  admission are prescribed for theatres situated in different categories of  local  areas  and also having regard  to  the  amenities provided  therein).   The  petitioners  grievance  is   that theatres situated within a gram panchayat or a lesser  grade municipality,  as  the case may be, are permitted  only  the rates of admissible for that local areas, they are still not allowed to charge the higher rates of admission in force  in such areas.  The argument is that if they are to be  equated with  the  theatres within the corporation and  other  areas they should also be allowed to charge the rates of admission prevalent  in  corporation  areas.  We  are  not  impressed, Firstly,  rates of admission do not merely depend  upon  the category of local area but also upon the amenities  provided in  the theatre.  Secondly, the very system of levy in  both areas is different. Under section 4(i.e., admission  system) the  rate of tax was 53% of the admission charge,  which  is now brought down to 40% by the impugned Amendment Act on the actual number of tickets sold whereas in respect of theatres governed by composition                                                        180 system,  the  rate of levy-whether it is 27%  or  any  other percentage   is   upon   the   gross   collection   capacity irrespective of the actual number of tickets sold for a show or  over  a  week.   Thirdly, the  rates  of  admission  are prescribed under a different enactment.  If the  petitioners are  so  advised they can always apply  to  the  appropriate authority  for  revision of rates of admission.  It  is  not submitted  by the petitioners that any of them  has  applied and  have  been  refused.   The  contention,  therefore,  is unacceptable.   We may also mention in this connection  that the  petitioners  are  not  suffering  any  real  prejudice. Whichever  the system of taxation, the amount  collected  by way  of entertainment tax is to be made over to  the  State. Even  under the composition systems, the formula evolved  is supposed to represent the amount really collected by way  of entertainment  tax.   It  may be that in  a  given  case  or probably  in many cases-the exhibitors may be saving a  part of  the  amount  collected by way of  entertainment  tax  by paying   only  the  compounded  amount.   But  it  may   not necessarily be so.  There may be theatres where the  formula may  work to their prejudice because of their low  occupancy rate.  In any event, the mere fact that an exhibitor is able save  a  part  of the tax by paying  the  compounded  amount cannot  be treated as a benefit in law which he is  deprived

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of by following the admission system.      Reference  in this connection may also be made  to  the position obtaining in Andhra Pradesh as is evidenced by  the Judgement in writ petition No. 6404 of 1986 and batch  dated 19th  July, 1984 which is now pending appeal in  this court. In  that State, the exhibitors are opposing the  composition system.   They  want the admission system to  continue.   We need  not go into the precise reason why the  exhibitors  in Andhra  Pradesh are opposing the composition system  or  why the  Tamil Nadu exhibits are opposing the admission  system. Suffice  it  to  say,  that composition  system  is  only  a substitute  system  and the formula  evolved  thereunder  is supposed   to  represent  approximately  the   true   amount collected  by  an exhibitors by way  of  entertainment  tax. Under both the systems, the entertainment tax collected from the  cinegoer has to be made over to he State.  May be  that the composition system is more convenient in the sense  that it   obviates   keeping  of  records.   establishing   their correctness and so on and so forth.      Yet  another argument urged is that while bringing  all the  theatres located in the belt to the  admission  system, the  impugned provision has exempted the  open-air  theatres and temporary theatres from such changeover.                                                        181 This  is  said  to be a discriminatory  action.   We  cannot agree.   So  fat as open air theatres are  concerned,  it is stated  by  the  respondents that there are  only  two  such theatres  in  the entire state.  It is not the case  of  the petitioners’ that any such theatre is located in any of  the belts  concerned herein.  Even otherwise, open-air  theatres and  temporary  theatres stand on a different  footing  from permanent  theatres.   They  are  a  class  apart.   If  the impugned provisions has treated them as a separate class, no objection can be taken thereto.      Another  argument  urged by Sri Parasaran is  that  the petitioners’ had come to entertain a legitimate  expectation based  upon  legislative  practice that they  would  not  be brought  over to admission system.  Factually  speaking,  we must say that no such legislative practice has been  brought to our notice.  Prior to 1978, all the theatres all over the State  were governed by admission system alone.  Even  after introduction of Section 5(A) and 5(B) it was made applicable to several local areas in two stages i.e., in 1978 and 1982. Indeed by Amendment Act 20/83 and 48/86 certain local  areas governed  by Section 5(A) and 5(B) were removed  from  their purview  and brought back to admission system.   The  entire experiment  has been spread over a period of only  about  14 years.   We  cannot say that this period  is  sufficient  to establish,  what  may be called, a  ’legislative  practice’. Even  otherwise, we are not satisfied that the  said  theory can be brought in to defeat or invalidate a legislation.  It may  at the most be used against an  administrative  action, and even there it may not be an indefeasible right.  No case has been brought to our notice where a legislation has  been invalidated  on  the  basis that it  offends  of  legitimate expectation of the persons affected thereby.  We may in this connection  refer to the decision of the House of   ords  in Council of civil Service Unions and Ors. v. Minister for the Civil  Service,  (1985)  A.C. 374, wherein  this  theory  is referred  to.   In  this  case,  the  staff  of   Government Communications  Headquarters  (G.C.H.Q)  had  the  right  to unionisation.  By an order made by the Government this right to unionisation was taken away insofar  as the employees  of G.C.H.Q. are concerned.  The Union questioned the same.   It was held by the House of Lords that though the Unions had  a

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legitimate   expectation  that  before  barring   them   for unionisation   they   would  be  consulted,   the   security consideration  put forward by the Government, over-ride  the right of the petitioner’s to prior consultation.                                                        182       We  are  also not impressed by the argument  that  the impugned  change-over  amounts to  unreasonable  restriction upon the petitioners’ fundamental right to trade.  Whichever the  system, the exhibitor’s liability is only to make  over the  tax  collected by him to the State.  We  have  referred hereinbefore  to  material placed before  the  court,  which shows that the theatres situated within the belts are in  no way  differently situated that the theatres  located  within the  corporation areas.  It may also be noted that  all  has been  done by the impugned provision is to bring back  these theatres  to admission system, by which they  were  governed prior to 1978 Amendment. For  all  the  above reasons, these  appeals  fail  and  are dismissed.  No order as to costs. T.N.A                             Appeals dismissed.                                                        183