STATE OF GUJARAT ETCversusHOTEL RATRANI THROUGH ITS PROPRIETOR SHRI KANJI VISHWRAM PATE, BHUJ (KUTCH) ETC.

A                          STATE OF GUJARAT ETC
                                          v.
      HOTEL RATRANI THROUGH ITS PROPRIETOR SHRI KANJI
             VISHWRAM PATE, BHUJ (KUTCH) ETC.

                               DECEMBER 10, 1996
B
                 (K. RAMASWAMY AND G.T. NANAVATI, JJ.]

          Gujarat Entertainment Tax Act, 1977.: Section 6-A

C       Entertainment t<IJt-i..evy on entertainment by Video Cassette Recorder
  or Player on Television or Videoscope in any place of entertainment or
  omnibus etc.-Validity of-Section 6-A held valid-It makes valid provision
  for the due collection of the entertainment tax when the proprietor of the
  video-recorder/video games entertains the persons admitted into the theatre
  or exhibits the video· recorder/video player in omnibus at the rates spedfied
D thereundei--lt is not beset with a11y arbitrariness in the exercise of the power.
        Gujarat Cinema (Regulatio11 & Exhibitio11 by Video) Rules, 1984 :
  Rules 13(2), 14(2) a11d 22-Validity of Rule 13(2) held ultra vires--Rule 22
  hefd void-Held: Rule 14(2) was incidental to a11d co11Seque11ce ofe11force-
E ment of regulation.
           Venkateshwara Theater v. State ofA.P. & Ors., [1993] 3 SCC 677,
    relied on.

          Ramesh Waman Roke & Ors. v. State of Maharashtra, AIR (1984)
F   Bom. 345, approved.

          CIVIL APPELLATE JURISDICTION : Civil Appeal No. 586 of
    1986 etc.

         From the Judgment and Order dated 1/4.3.85 of the Gujarat High
G   Court in S.C.A. No. 4459 of 1984.

         Yashank Adhyaru, Ms. Alka Agarwal, Ms. H. Wahi & J.M. and
    Associates, G.B. Sathe and D.M. Nargolkar for the Appellants.                     r
           Krishan Mahajan, P.H. Parekh, P.S. Rao, Ms. Deep Mala and S.C.
H Patel for the Respondents.
                                          820
                          STATE v. HOTELRATRANI                             821

I
          The following Order of the Court was delivered :                         A
          The main appeal by special leave arises from the judgment and order
    of the High Court of Gujarat, made on March 1/4, 1985 in Special Civil
    Application No. 4459/84 and batch. The other appeals relate to the
    decision of the Bombay High Court in Ramesh Waman Rake & Ors. v. State
    of Maharashtra AIR (1984) Born. 345. The Gujarat High Court has fol-           B
    lowed the decision of the Bombay High Court. In all the cases, the facts
    are not in dispute.

           The respective Legislatures brought Section 6-A in Bombay and the
    Gujarat Entertainment Tax Act, 1977 providing for levy and collection of C
    tax on entertainment by Video Cassette Recorder or Player on Television
    or Videoscope in any place of entertainment or omnibus etc. at the rates
    specified therein. The latter Act came into force w.e.f. June 14, 1984. The
    Government made Rules by name, Gujarat Cinema (Regulation & Exhibi-
    tion by Video) Rules, 1984 (for short, the 'Rules"). The Rules have come
    into force on the same date. The respondents filed the writ petitions D
    challenging the constitutionality of Section 6-A, Rules 13(1) and 19(ii) of
    the Rules. The High Court while upholding the constitutionality of the Act
    and the Rules held that the gross collection of the entertainment tax on
    the Video Recorder or Video Player on Television or Videoscope is
    arbitrary and violative of Article 14. It also held that the Rules are ultra E
    vires. Thus, these appeals by special leave.

           In Venkateshwara Theater v. State of A.P. & Ors., [1993] 3 SCC 677,
    this Court considered the constitutionality of Sections 4, 4-A and 5 of the
    AP. Entertainment Tax Act, 1939 providing for levy and collection of
    entertainment tax on the gross collection in Cinema theater. It was held in    F
    paragraph 16 that entertainment tax that would be collected over and
    above the average occupancy rate would constitute the profit of the
    proprietor. In the circumstances, it cannot be said that the adoption of the
    system of consolidated levy in Section 4(1), as amended by Act 24 of 1984,
    alters the nature of tax and it ceases to be a tax on entertainment.           G
          In paragraph 17, on the gross collections, it was held thus :

            "It has been urged that since both the modes of levy of tax were
            prevalent prior to the enactment of Act 24 of 1984, an option
            should have been given to the proprietor of a cinema theatre to H
    822                  SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.

A           choose between either of the two modes and that under the
            impugned provisions the choice is confined to two modes of
            assessment under the same system of consolidated levy based on
            the gross collection capacity per show, one on the basis of gross
            collection capacity per show under Section 4(1) and other on the
            basis of gross collection capacity per show for a prescribed num-
B           ber, of shows per week under Section 5. We find no substance in
            this contention. Once it is held that tax on entertainment could be
            levied by either of the two modes, viz., per payment for admission
            or gross collection capacity per show, it is for the Legislature to
            decide the particular modes or modes of levy to be adopted and
c           whether a choice should be available to the proprietor of the
            cinema theatre in this regard. The Legislature does not transgress
            the limits of its legislative power conferred on it under Entry 62
            of List II if it decides that consolidated levy on the basis of gross
            collection capacity per show shall be the only mode for levy of tax
            on entert~inments.n
D
          In paragraph 29 and 30, it was held thus :

            "29. In the instant case, we find that the Legislature has prescribed
            different rates of tax by classifying theaters into different classes,
E           namely, air-conditioned, air-cooled, ordinary (other than air-con-
            ditioned and air-cooled), permanent and semi-permanent and
            touring and temporary. The theaters have further been categorised
            on the basis of the type of the local area in which they are situated.
            It cannot, therefore, be said there has been no attempt on the part
F           of the Legislature to classify the cinema theatres taking into con-
            sideration the differentiating circumstances for the purpose of
            imposition of tax. The grievance of the appellants is that the
            classification is not perfect. What they want is that there should
            have been further classification amongst the theatres falling in the
            same class on the basis of the location of the theatre in each local
G           area. We do not think that such a contention is well founded.

            30. In relation to cinema theatres it can be said that the attendance
            in the various cinema theatres within a local area would not be
            uniform and would depend on factors which may vary from time
H           to time. But this does not mean that cinema theatres in a particular
                          STATE v. HOTELRATRANI                              823

            category of local area will always be at a disadvantage so as to be A
            prejudicially affected by a uniform rate as compared to cinema
            theatres having a better location in the same local area. It is,
•           therefore, not possible to accept the contention that the impugned
            provisions are violative of the right to equality guaranteed under
            Article 14 of the Constitution on the basis that unequals are being
                                                                                B
            treated equally."

          Thus this Court had upheld the power of the Legislature to levy gross
    collections on the entertainment tax. Section 6-A reads as under :

            "6-A(l) There shall be levied and paid to the State Government a        c
            tax on an entertainment by video cassette recorder or video cas-
            sette player on television or videoscope calculated at the following
            rates, namely :-

            (a) in any place of entertainment other than that mentioned in
            clause (b)                                                              D

            (I) within the limits of a local area, the population of which as
            ascertained at the last preceding census and notified by the State
            Government in the official gazette after such census is more than
            1,00,000, two rupees per seat in such place of entertainment.           E
            (II) within the limits of a local area, the population of which was
            ascertained at the last preceding census and notified by the State
            Government in the official gazette after such census is more than
            50,000 but not more than 1,00,000, one rupee per seat in such place
            of entertainment.                                                       F

            (III) in any other area, seventy paise per seat in such place of
            entertainment.

            (b) in any omnibus which is used to the State exclusively as contract
            carriage having provision for entertainment by video cassette re-
                                                                                    G
            corder or video cassette player on television or videoscope, two
•
~           rupees per seat in the omnibus.

            (2) For the purpose of levy of tax under this section, it shall be
            presumed that                                                           H
    824                SUPREME COURT RJ;:PORTS [1996] SUPP. 9 S.C.R.

A         (a) in the case of a place of entertainment falling under clause (a)    \,
          of sub-section (1), a proprietor provides at least three entertain-
          ments on every day, and

          (b) in the case of any omnibus falling under clause (b) of sub-sec-
          tion (I), a proprietor provides at least one entertainment on every
B         day;

          unless the proprietor otherwise informs the prescribed officer at
          such time and in such manner as may be prescribed.

          3(a) Notwithstanding anything contained in clause (a) of sub-sec.
c         (!), every proprietor to whom any of the provisions of that clause
          apply shall have an option of payment of tax at the rates specified
          in clause (d) to be exercised as provided in clause (b) within ninety
          days from the date of the commencement of the Gujarat Enter-
          tainments Tax (Amendment) Act, 1984 and any person who be-
D         comes such proprietor after that date may exercise such option
          within sixty days from such date.

          (b) A proprietor desiring to exercise an option referred to in clause
          (a) shall make an application to the prescribed officer in such form
          as may be prescribed, to permit him to make in lieu of amount of
E         tax payable by him under clause (a) of sub-section (I), payment of
          tax at the rates specified in clause (d).

          (c) On an application under clause (b), the prescribed officer may
          grant such permission and thereupon subject to clause (e) the
          payment of tax shall be made accordingly.
F
          (d) where a proprietor has been permitted to pay tax under clause
          (c) he shall be liable to pay monthly at the following rates, namely


G         In the case of a place of entertainment within the local limits of a
          local area referred to -

          (1) in sub clause (I) of clause (a) of sub-section (1) -

          (i) five rupees per seat per day where the proprietor has declared
H         that he holds not more than three entertainments per day; at)d
                  STATE~     HOTELRATRANI                            825

-   (ii) six rupees per seat per day where the proprietor has declared A
    that he holds more than three entertainments per day;

    (2) in sub-clause (II) of clause (a) of sub-section (1)

    (i) three rupees per seat per day where the proprietor has declared
    that he holds not more than three entertainments per day; and           B

    (ii) four rupees per seat per day where the proprietor has declared
    that he holds more than three entertainments per day,

    (e) A proprietor who has opted for payment of tax under clause          C
    (a), may at any time but not before the expiry of a period of twelve
    months, by a notice in such form as may be prescribed, addressed
    to the prescribed officer, revoke his option from the commence-
    ment of any month following that in which the notice is given.

    (4) For the purpose of levy of tax under sub-section (1) every D
    proprietor shall furnish such returns to the prescribed officer in
    such manner or such period and before such date as may be
    prescribed.

    (5) Save as otherwise provided in sub-sections (1) to (4), the          E
    provisions of ihis Act (except sections 3, 4 and 6) and the rules
    made thereunder shall, so far as may be, apply in relation to the
    tax leviable under sub-section (1) as they apply in relation to the
    tax Jeviable under sections 3 and 4;

        Rules 13 and 19 of the Gujarat Cinemas (Regulations of Ex-          F
    hibition by Video) Rules, 1984 are also impugned here. They are
    also reproduced herein below :-

    13. Power to refuse licence: (1) The Licensing authority shall have
    absolute discretion to refuse a licence if the video cinema is likely   G
    to cause obstruction, inconvenience, annoyance, risk danger or
    damage to the residents or passers by in the vicinity of the cinema.

    (2) The licensing authority shall refuse a licence if the distanc~
    between the existing permanent semi-permanent or touring cinema
    and the video cinema is Jess than 150 metres.                      .H
    826                   SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.

A           19. Access to inspecting officers. The licensee shall give free access
            to the video cinema at all hours to -
                                                                                     -
            (i) the licensing authority or any officer nominated by the licensing
            authority under the Act and the Rules and for checking that the
            provisions of the Act and the Rules are being complied with;
B
            (ii) any Police Officer who is required by a general or special order
            of the licensing authority of the District Superintendent of Police
            or the Commissioner of Police, as the case may be."

          Shri Krishan Mahajan, learned counsel appearing for the respon-
C dents, contends that Section 3 of the Act envisages levy of the tax on
    payment for admission to entertainments on every payment for admission
    to an entertainment other than the payment for admission referred to in
    clause (b), a tax at the following rates specified therein. The Video Re-
    corder or a Player when exhibited entertains the customer; it does not
D   entertain a person on admission. For admission, therefore, it is not an
    entertainment tax. Accordingly it cannot be levied. We find no force in the
    contention. It is an admitted position that they entertain the persons on
    playing the Video Recorder or Video Games on admission or in the
    omnibus, as enacted under the Act. Thereby, obviously on charging the
E   admission rates or while operating the omnibus during journey, the Video
    Recorder or Video Player has been exhibited for entertaining travelling
    passengers. Thus it is an admission to entertain the person on payment. It
    is then contended that the composition was not available to them at flat
    rate because there is no regular intake of the persons or of number of
    shows. Accordingly, the rule is arbitrary. We find no force in the conten-
F   tion.

          It is seen that the Rule envisages imposition of the levy of the tax on
    the basis of the population of the place of exhibition. If it is a place where
    the population is one lakh and more @ Rs. 2 per seat and if the population
    is between one lakh and 50,000, @ Re. 1 per seat and in other places at
G   Re. 0.75 per seat. It is for the licensee to specify to the authorities, how
    many persons are entertained. As far as the gross collections are con-
    cerned, it c.innot be investigated to recall by a rule as to how many of them
    in each show are admitted. Sub-section 3(2) provides that for the purpose
    of levy of tax under this section, it shall be presumed that in the case of a
H   place of entertainment falling under clause (a) of sub-section (1), a
                          STATE v. HOTELRATRANI                            827

-   proprietor provides at least three entertainments on every day and in the A
    case of any omnibus falling under clause (b) of sub-section (1), a proprietor
    provides at least one entertainment on every day. It is only a presumptive
;   evidence since in the absence of definite information, Rule-making
    authority leaves it to the licensee to establish by making application as to
    how many persons he has been entertaining, unless the proprietor other- B
    wise informs the prescribed officer at such time and in such manner as may
    be prescribed. Therefore, the proprietor or the licensee has been given
    option to inform the prescribed authority at such time and in such manner,
    as the case may be, as per the rules. Sub-section 3( d) postulates that where
    a proprietor has been permitted to pay tax undt<_r clause (c), he shall be
    liable to pay monthly at the rates specified thereunder. Clause (e) shows C
    that a proprietor who has opted for payment of tax under clause (a), may
    at any time but not before the expiry of a period of 12 months, by a notice
    in such form as may be prescribed, addressed to the prescribed officer,
    revoke his option from the commencement of any month following that in
    which the notice is given.                                                    D
          Thus it could be seen that he has been given an option for payment
    of the entertainment tax in the manner laid down in Clause (b). Under
    Clause 3( a), he is required to make an application as provided under clause
    (e). Thus considered, it is a valid rule for the due collection of the
    entertainment tax when the proprietor of the video-recorder/video games E
    entertains the persons admitted into the theater or exhibits the video
    recorder/video player in omnibus at the rates specified thereunder. Thus
    the Rule is valid and is not beset with any arbitrariness in the exercise of
    the power. Accordingly, we uphold Section 6-A and affirm the findings of
    the High Court declaring Rule 13(2) to be ultra vires. Rule 22 is void. Rule
    14(2) is incidental to .and consequence of enforcement of regulation.        F
         The appeals are accordingly allowed, the writ petitions stand dis-
    missed. No costs.

    T.N.A.                                                   Appeals allowed.




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