AJAWrit Appeal No.878 of 20001. The State of Tamilnadu v. Kannan Talkies

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 03.04.2007CORAMTHE HON'BLE MR.JUSTICE P.D.DINAKARANANDTHE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJAWrit Appeal No.878 of 20001. The State of Tamilnadu rep. By Secretary to Government Home (Cinema) Department Chennai-9.2. The Deputy Commercial Tax Officer Thirumangalam Madurai District. .. AppellantsVs.Kannan Talkies, rep. by itsLicensee, UsilampattiMadurai District. ..RespondentAppeal under Clause 15 of the Letters Patent against theorder of the learned Single Judge dated 15.10.1998 made inW.P.No.15868 of 1990 This writ of certiorified mandamus, callingfor the records of the second respondent made in Roc.No.3392/87/B5dated 27.7.87 and of the Government Letter No.30076/U-1/87-1Commercial Taxes, and Religious endowments Department dated29.8.90 and quash the same.For Appellants : Mr.Haja Nazirudeen Spl.Government Pleader (Taxes)For Respondent : Mr.A.JenasenanJ U D G M E N T(Delivered by P.D.DINAKARAN,J.)The appeal is directed against the order dated15.10.1998 made in W.P.No.15868 of 1990 quashing the proceedingsdated 27.7.1987, in and by which the second appellant demanded theshort levy of entertainment tax under the provisions of the TamilNadu Entertainment Tax Act, 1939 (for brevity, "the Act"). https://hcservices.ecourts.gov.in/hcservices/

2. For the purpose of convenience, the parties are arrayedas per their rank in the writ petition.3. The second respondent passed the impugned proceedingsdated 27.7.1987 as the petitioner-theatre did not obtain priorpermission from the licensing authority for reduction in the rate ofadmission to the petitioner-theatre.4. According to the petitioner, the theatre had opted topay entertainment tax under Section 5-B of the Act based on grosscollection capacity and therefore, the second respondent has no powerto reassess the tax due invoking Section 7-B of the Act, whichempowers the authorities to reassess only if the payment foradmission to any entertainment escaped assessment. It was alsosubmitted that as there was no payment for admission escapingassessment, the authorities ought not have invoked Section 7-B of theAct for passing the impugned order.5. Per contra, the learned counsel for the respondentsplacing reliance on the Government letter No.30076/C1/ 87-1 CT & REDepartment, dated 29.8.1990, which is also challenged in the writpetition, contended that the petitioner-theatre ought not to havereduced the admission fee without prior permission of the licensingauthority and such failure to obtain prior permission for reducingthe admission fee has empowered the authorities to invoke Section 7-Bof the Act for passing the assessment order for collecting the shortlevy of tax due to the Government, even though the theatre has optedfor payment of tax on gross collection capacity under Section 5-B ofthe Act.6. While the question was as to the power of the secondrespondent to pass the impugned order, what was contested before thelearned Single Judge was whether the reassessment proceedingsdemanding tax due from the petitioner by the second respondentamounts to a penalty and if the same is penalty, whether theauthorities have taken into consideration the petitioner's previousconduct, viz., whether the petitioner is free from punishments or isan habitual offender, and consequently, the learned Single Judge, byorder dated 15.10.1998 made in W.P.No.15868 of 1990, rendering afinding that the writ petitioner's previous service and conduct arefree from any punishments, quashed the impugned order, whichnecessitated the Revenue to prefer the above appeal.7. The power to reassess conferred on the authorities underSection 7-B of the Act, even in the case of theatres which aregoverned under Section 5-B of the Act is well settled. Whether thepower of assessment under Section 7-B of the Act, can be exercised tomake best of judgment assessment, in a case, where tax payable eitherunder section 5-A or 5-B of the Act, has escaped assessment, came upfor consideration before a Division Bench of this Court in the case https://hcservices.ecourts.gov.in/hcservices/ of ANNAMALAI v. ASSISTANT COMMISSIONER (CT), [1990] 76 STC 271, inwhich it was held as under:"The effect of sub-section (3) of Section 5-C of the TamilNadu Entertainments Tax Act, 1939, is that all provisions ofthe Act except sections 4, 4-A, 4-B, 4-C, 6 and 7 and therules made thereunder, applicable in the case of a tax payableunder Section 4-A of the Act can be invoked in the case of atax payable under section 5-A or 5-B. Section 7-B of the Actexpressly refers to the power to make a best of judgmentassessment where the tax which the cinematograph exhibitor isliable to pay under Section 4-A has escaped assessment.Therefore, by virtue of Section 5-C(3) the power of assessmentunder Section 7-B can also be exercised to make a bestjudgment assessment in a case where the tax payable eitherunder section 5-A or 5-B has escaped assessment."(emphasis supplied)8. In view of the above settled proposition, we areconvinced that the petitioner is not entitled to contend that thesecond respondent has no authority and jurisdiction to pass theimpugned order dated 27.7.1987.9. At this juncture, Mr.Jenasenan, learned counsel for thepetitioner invited our attention to the fact that the petitioner hasalready preferred an appeal against the impugned order dated27.7.1987 as provided under Rule 49(1) of the Tamil NaduEntertainments Tax Rules, 1939 and the Appellate Authority has toconsider the said appeal on merits taking into consideration theother relevant facts and decide whether the assessment order is basedon materials.10. Mr.Haja Nazirudeen, learned Special Government Pleader(Taxes) appearing for the Revenue is not in a position to say whetherthe appeal preferred by the petitioner has been disposed of or not.11. Under such circumstances, suffice it to pass thefollowing order:(i)The order of the learned Single Judge dated 15.10.1998 madein W.P.No.15868 of 1990 is set aside;(ii)the second respondent has power to pass the order ofreassessment under Section 7-B of the Act under the factsand circumstances of the case; https://hcservices.ecourts.gov.in/hcservices/ (iii)as to the quantum of the tax payable by the petitioner,the petitioner is at liberty to submit a copy of the appealgrounds within thirty days from the date of receipt ofcopy of this order, of course raising additional grounds,if they are so advised, and the appellate authority shall,after hearing the petitioner, dispose of the appealpreferred by the petitioner against the impugned order dated27.7.1987 within ninety days from the date of filing of theappeal grounds; and(iv)if the petitioner is still aggrieved by any such order tobe passed by the appellate authority, the petitioner is atliberty to work out their rights in the manner known to law.This writ appeal is allowed with the above directions. Nocosts. Sd/Asst. Registrar/true copy/Sub Asst.RegistrarsasiTo:1. The Secretary to Government Home (Cinema) Department State of Tamilnadu Chennai-9.2. The Deputy Commercial Tax Officer Thirumangalam Madurai District.1 C.C. to Special Government Pleader, SR.No.213681 C.C. to Mr. A. Jenasenan, Advocate Sr. No. 21352.VRK [CO]RR 30/04/2007Writ Appeal No.878 of 2000