SRINIVASA THEATRE Vs. COMMERCIAL TAX OFFICER

JUDGEMENT

(1.) This writ petition is filed praying for the issue of Writ of Mandamus declaring that Section 5(3) (b) of the A.P. Entertainments Tax Act as stood in 1977-78 does not prohibit downward revision of entertainment tax consequent upon the reduction of gross collection capacity and consequently to quash the order of the Commissioner of Commercial Taxes dated 31-5-1984 confirming the order of the 3rd Respondent dated 21-2-1984.

(2.) The petitioner, a partnership firm was carrying on the business of exhibition of films in its theatre at Gollalamamidada village, having population below 15,000. For the period from 4-10-1977 to 3-10-1978, the petitioner entered into an agreement with the 1st Respondent for payment of Entertainment Tax of Rs. 94,490-84 under Sec. 5 of the A.P. Entertainments Tax Act (hereinafter referred to as the Act), which shall be payable in weekly instalments. It is stated that the Exhibitors situated in areas having population less than 25,000 are liable to pay tax under Sec.4-C at a percentage of notional gross collection capacity for every show screened irrespective of actual number of tickets sold. In lieu of the tax payable under Sec. 4-C, it was provided for payment of compounded tax under Sec. 5 of the Act, by agreement irrespective of the actual number of shows screened. According to the petitioner, before entering into the agreement for the period from 4-10-1977 to 3-10-1978, it applied for reduction in the number of seats to the licensing authority under the A.P. Cinemas (Regulation) Act, 1955 (for short the Cinemas Act') read with the Rules made thereunder. The reduction in number of seats, will reduce the notional gross collection capacity and consequently the tax payable thereon for the purpose of Sections 4-C and 5 of the Act. The licensing authority passed orders reducing the number of seats, which was received by the petitioner on 1-11-1977, which was passed pursuant to an appellate order of the Government dated 22-10-1977. According to the petitioner, it had reduced the seating accommodation with effect from 1-11-1977 Before entering into agreement or 1-10-1977, the petitioner did not apply in the Form-III B as required under Rule 33(7) and it has only intimated to the Entertainment Tax Officer its willingness to renew the agreement entered into According to the petitioner, the provision of the Act do not contemplate renewal of the agreement but after the expiry of every agreement, fresh agreement has to be entered into depending upon the number of shows screened in the previous year as on the date of application and the status of the local authority; Thus, the agreement entered into on 1-10-1977 with effect from 4-10-1977 to 3-10-1978 is not valid in law. As the petitioner had entered into an agreement with reference to the seating capacity of 917 agreeing to pay Rs. 94,491.00 for the entire year, it approached the 1st Respondent to determine the tax liability as per the seats determined by the licensing authority. Accordingly, on 1-11-1977 the Petitioner entered into another agreement with the 1st Respondent for the period from 7-11-1977 to 6-11-1978. As per the said agreement, the tax liability of the petitioner is determined at Rs. 63,848.00. In effect, the agreement dated 1-10-1977 was superseded by the fresh agreement dated 1-114977. The fresh agreement was not a substitute for the un-expired portion but it was an agreement superseding the earlier agreement effective for full year from 7-11-1977 to 6-11-1978. The petitioner had also paid the tax as determined under the said agreement. While so, the 3rd respondent herein, purporting to exercise the revisional powers under Rule 49 of the A.P. Entertainments Tax Rules (hereinafter referred to as Rules), proposed to revise the proceedings and the agreement dated 1-11-1977 and accordingly issued a show-cause notice dated 26-8-1983, calling upon the petitioner to file its objections. Thereafter the petitioner filed its objections on 29-11-1983, objecting to the proposed revision. The 3rd respondent, however, passed orders on 24-2-1984, rejecting the objections of the petitioner and revising the proceedings and the agreement dated 1-11-1977 and directed the petitioner to pay the differential amount of tax, basing on the agreement dated 1-10-1977 for the period from 4-10-1977 to 3-10-1978. Aggrieved by the said order of revision, the Petitioner preferred appeal to the 4th Respondent. The 4th Respondent also rejected the contentions of the petitioner and confirmed the order of revision. Aggrieved by the said action, the petitioner is before this Court.

(3.) The learned Counsel for the petitioner contended that under the provisions of the Act or the Rules, there is no prohibition for downward revision of seating capacity and consequently the downward revision of gross collection capacity, so as to reduce the liability of the petitioner under the provisions of the Act is proper and just. It is stated that the petitioner has informed the 1st respondent before entering into the agreement on 1-10-1977 that its application for reduction of seating capacity is pending before the licensing authority. As soon as the licensing authority passed orders reducing the seating capacity from 917 to 632, the petitioner has approached the 1st respondent and the 1st respondent accepted the request of the petitioner and accordingly proceedings were issued and a fresh agreement was entered into between the petitioner and the 1st respondent, re- fixing the gross collection capacity as well as the tax liability for the fresh period, which is effective from 7-11-1977 to. 6-11-1978 and accordingly the Petitioner paid the tax. After more than 6 years, the 3rd respondent initiated the proceedings to revise the proceedings of the 1st respondent. According to the learned Counsel the said proposed action is illegal and without jurisdiction, apart from being barred by limitation. The contention of the learned Counsel for the petitioner is that there is no prohibition for downward revision of the Entertainment Tax consequent on the reduction in the seating capacity and reduction in the gross collection capacity of the theatre. When once there is no prohibition under the provisions of the Act or the Rules thereunder, the action of the 1st respondent is perfectly correct and valid and there is no illegality warranting revision of the said order. In any case, it is contended that as fresh agreement was entered in pursuance of the proceedings of the 1st Respondent and accordingly paid the tax, the revisionary action initiated by the 3rd respondent, after more than a period of six years, is clearly barred by limitation. Even though, no time limit was fixed under the said Rule, still the revisional powers have to be exercised within a reasonable time and in any manner the period of six years could not be considered as reasonable period for exercising the revisional jurisdiction.