1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.22 OF 2006 Swanston Multiplex Cinemas P.Ltd. .. Petitioner Vs. The State of Maharashtra & Ors. .. Respondents Mr.Virag Tulzapurkar, Sr. Advocate with Mr.V.B.Naik i/b Naik, Naik Iyer and Co. for the petitioner Mr.S.K.Nair, 'A' Panel Council for the State CORAM : J. N. PATEL & K.K. TATED, JJ. JUDGMENT RESERVED ON : 9TH SEPTEMBER, 2008 JUDGMENT PRONOUNCED ON : 21ST OCTOBER, 2008 ORAL JUDGMENT (PER J.N. PATEL, J) : 1. The petitioner seeks a Writ of Mandamus by way of an order and direction for setting aside the impugned notices and orders referred to in Exhibit A-1, Exhibit A-2 and Exhibit – M by declaring them as null and void. Further, they have sought declaration that the Circular 2 Exhibit – L is ultra virus the Bombay Entertainment Duty Act, 1983 and seek to quash and set aside the same or such portion thereof including clause 3.2 (e) and that the duty paid by the petitioner is correct amount of duty and the petitioner's liability to pay duty as per their claim specified in para F(c) should be held to be correct and form the correct basis for calculating Entertainment Duty payable by the petitioner along with other ancillary reliefs. 2. The petitioner is interalia engaged in the business of operating a multiplex theatre named as FAME ADLABS in the city of Mumbai at Andheri. It is the petitioner's contention that on the basis of the statements and objects of the Ordinance and on the basis of Section 3 13(a) of the Bombay Entertainment (Amendment) Act, 2001 (Mah II of 2002), the petitioner applied for exemption and setting up the multiplex for which the petitioner invested huge capital, time and efforts. On the assurance of the respondent nos.1, the petitioner went ahead and set up the multiplex on the clear understanding that the nature of exemption was retention benefit whereby the petitioner was entitled to collect the entertainment duty from the patrons and not to pay the same to the State during the exemption period and, therefore, according to the petitioner, respondent no.4 by virtue of the aforesaid incentive granted 3 to the proprietors of multiplex is estopped from demanding entertainment duty as set out in the impugned orders / impugned notices. 3. The State of Maharashtra has enacted the Bombay Entertainment Duty Act, 1923 (for short the said B.E.D.Act) whose object and purpose is to impose a duty in respect of admission to entertainment in the State of Bombay which has been amended from. time to time and the last been amended by the Maharashtra Act, 16 of 2006 which has come into effect on 04.05.2006. Section 3 of the said B.E.D. Act provides for Duty on payments for admission to entertainment which is fixed by the proprietor in so far as it relates to exhibition by cinematograph including video exhibition other than exhibition by means of any type of antenna or cable television within limits of the various corporations which have been prescribed in the table. Explanation - Clause (b) and clause (c) of section 3(1) of the said B.E.D. Act of 1923 came to be substituted by Act No.22 of 2003, dated 01.08.2003. Serial No. Area Rate of entertainment duty on payment for admission by the proprietor 1 Within the limits of Brihan Mumbai Municipal Corporation 45 percent 4 4. Therefore, the prevailing rate of entertainment duty on payment for admission fixed by the proprietor within the limits of Brihan Mumbai Municipal Corporation was specified as 45% by virtue of sub section 13(a) of section 3 which was added by Maharashtra Act 2 of 2002, s.3 wherein certain incentives were provided for proprietors of Multiplex Theatre Complex. 5. Sub clause (b) of section section (13) of section 3 provided for concession in duty as provided in clause (a) which was made available to the proprietors of Multiplex Theatre Complex and provides as under: (a) The petitioner in its 4th year from the date of commencement (hereinafter referred “DOC”) of operations of the Multiplex and is liable to pay 25% of the normal duty leviable. The entertainment duty is payable at the rate of 25% of the rate of duty leviable ( i.e.25% of 45%) as per the provisions of the Section 3 (13) (a) of the said B.E.D. Act. However, the rate of entertainment duty payable under the Act can be determined on the basis of “payment for admission”. The “payment for admission” is fixed 5 by the proprietor of the Multiplex Theatre. (b) Section 3(1)(c) of the said B.E.D.Act provides for the rate of entertainment duty on payment for admission which is fixed by the proprietor. On perusal of the table under section 3(1)(c), it is important to point out that the amount paid for admission to the Multiplex theatre is to be fixed by the proprietor of the Multiplex. For the sake of convenience Table below Section 3(1)(c) is reproduced which is as under: Serial No. Area Rate of entertainment duty on payment for admission by the proprietor 1 Within the limits of Brihan Mumbai Municipal Corporation 45 percent 2 Within the limits of all other Municipal Corporations and Cantonments 40 percent As such, the rate of entertainment duty must be on the payment for admission fixed by the proprietor. Therefore, it is clear that the rate of entertainment duty can only be on net price after which the gross is arrived at. Further, Section 4 sets out the manner in 6 which the entertainment duty payable is to be levied. There is a clear break up between the entertainment duty which is calculated on the net price, and the gross. On plain reading of sub-section 2(a), it is clear that the gross comprises the payment for admission to the entertainment and payment on account of the duty. (c) Thus, under the various provisions mentioned above of the Act, the calculation of the entertainment duty collected and payable by the Multiplex Theatre Owners/Operators as per the Petitioner's method (which the petitioner says and submits is the correct method/basis) is as stated below: Suppose the net rate of ticket (Payment for Admission fixed by the Proprietor (A) Rs.100/- Entertainment Duty on the Net Rate @ 45% (B) Rs.45/- Total Ticket Price will be (A) + (B) Rs.145/- If the total Ticket Rate is Rs.100/- then the net rate will be Rs.68.97 and the duty @ 45% of the net rate will be Rs.31.03. The calculation is explained below in the case of net rate of 7 Rs.100/- and net rate of Rs.68.97 with the corresponding total price of Rs.145/- and Rs.100/-. Total Ticket Price Net Ticket Price (Payment for Admission) (i) Rs.145/- Rs.100/- (ii) Rs.100/- Rs.68.97 100 x 100 = 68.97 145 Hence, the Entertainment Duty leviable @ 45% on Rs.68.97 is Rs.31.03 68.97 x 45 = Rs.31.03 --------------- 100 This method of computation is as per the provisions of Section 3(13) (a) read with Section 4 of the said B.E.D. Act. Therefore, for the fourth and fifth year the Petitioner is liable to pay 25% of this collected 45% entertainment duty i.e. Rs.7.76 (11.25% of 68.97 OR 1/4th of 31.03) to the Government and remaining 75% of 45% i.e. Rs.23.27 is the Retention Benefit of the Multiplex Theatre Proprietor / 8 Operator. (d) .............. 6. Section 5 of the said B.E.D. Act of 1923 provides for punishment for non-compliance with section 4 which provides for method of levy and assessment of entertainment duty. Some of the relevant definitions are reproduced herein for the proper understanding and adjudication of the case. Section 2 is the definition clause and the relevant definitions are given in clause (f) and which reads as under: (f) “entertainment duty”, or “duty” in respect of entertainment means the entertainment duty levied under section 3 (f-a) “Multiplex Theatre Complex” means an entertainment-cum- cultural centre which provides,- (i)within the limits of Municipal Corporation of Brihan Mumbai not less than four theatres in a complex with minimum total seating capacity of 1250; and (ii)anywhere else in the State, not less than three theatres in a complex with minimum total seating capacity of 1000, and such other incidental and connected matters and facilities, and multi-entertainment activities and other facilities as 9 specified by Government in this behalf, by notification in the Official Gazette. 7. Bombay Entertainment Duty (Amendment) Act, 2001 (Mah. II of 2002), which is the statute on the basis of which Entertainment Duty is levied on the petitioner's Multiplex Complex known as FAME ADLABS (Multiplex) which levy and assessment is the subject matter of this petition. (i)The principle statute that governs Entertainment Duty in the State of Maharashtra is the Bombay Entertainment Duty Act, 1923 (BED Act). Section 3 of the said BED Act, inter alia, stipulates the rate of Entertainment Duty on payment for admission fixed by the Proprietor. The prescribed rate of Entertainment Duty on the payment for admission fixed by the Proprietor within the city limits of Brihanmumbai Municipal Corporation is 45% and for other Municipal Corporations and Cantonments the rate of Entertainment Duty is 40% and the other areas have a rate as prescribed under the aforesaid Section. 10 (ii) The growth of Multiplex Theatres can be traced in an Ordinance dated 17th August, 2001 promulgated by the Government of Maharashtra being Ordinance No.24 of 2001 to commemorate the birth centenary of Chitrapati late Shri V. Shantaram (hereinafter referred to as Ordinance), a copy of which is annexed as Exhibit 'B', under which the Government sought to amend the BED Act. The statement and objects and reasons of the Ordinance which are as follows: (i) “As a result of the onslaught of Cable Television and advancement in the field of Information Technology, the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past. Public at large these days prefers to see movies at home. Keeping in view this scenario, a concept of complete family entertainment center, more popularly known as 'Multiplex Theatre Complex' has emerged. These Multiplex Theatre Complexes offer various entertainment facilities for the entire family under single 11 roof. However, those complexes are highly capital intensive, their gestation period is also quite longer, and therefore, need Government support and incentive in entertainment duty. (ii) The Government of Maharashtra, therefore, considers it necessary to encourage, by giving incentives for the construction of new cinema theatres and to ensure the healthy cultural development in the State of Maharashtra. (iii) Government has therefore, with a view to commemorate the birth centenary of Chitrapati late Shri V.Shantaram, decided to grant concession in entertainments duty to Multiplex Theatres Complexes to promote construction of new cinema houses in the State. 8. By the aforesaid Ordinance, the Government amended Section 3 of the BED Act and after sub-section (12) of Section 3 of the BED Act, introduced sub-section (13)(a). 12 9. The aforesaid Ordinance was promulgated into the Act, by virtue of which Section 3(13)(a) was added being The Bombay Entertainment Duty (Amendment) Act, 2001 (Mah.II of 2002), which reads as follows: (13)(a) “Notwithstanding anything contained in any other provisions of this Act but subject to the terms and conditions specified in clause (b), on and with effect from the date of coming into force of the Bombay Entertainment Duty (Amendment) Act, 2001 (Mah. II of 2002), there shall be levied and collected by the State Government from the proprietor of a Multiplex Theatre Complex the duty in respect of any such complex as follows, namely: (i)For the first three years from the date of commencement of the Multiplex Theatre Complex, no duty. (ii) For the subsequent two years, at the rate of 13 twenty-five percent of the rate of duty leviable under clause (b) and clause (c) of sub-section (1) or, as the case may be, for sub-section (3) (iii) From the sixth year, full amount of duty leviable at the rate specified in clause (b) and clause (c) of sub-section (1) or, as the case may be, sub-section (3) Provided that, the duty leviable shall also be subject to the provisions of sub-section (2), wherever applicable. (iv)Explanation: For the purposes of this sub- section,- (i) The date on which the Multiplex Theatre Complex is opened to the public for admission shall be deemed to be the date of commencement of the Multiplex Theatre Complex; (ii) The change in the management of Multiplex Theatre Complex, or the change in the name of the complex shall not be construed as a fresh 14 commencement of the Multiplex Theatre Complex. (b) The concession in duty as provided under clause (a) shall be available to the proprietor of the Multiplex Theatre Complex subject to following terms and conditions, namely:- (i) The proprietor shall not charge less payment for admission than the prevailing highest rate for admission at any given time, in any of the cinema theatres in the district in which the complex is situated, till the period of concession under clause (a) is over; (ii) one theatre n the complex shall be reserved for a total period of not less than one month, in a year, exclusively for Marathi Cinemas; (iii) The proprietor of a complex shall not levy the service charge, till the period of concession under clause (a) is over. After the concession period is over, the proprietor may levy service charges as specified in the second proviso to clause (b) of 15 section 2; (iv) The Multiplex Theatre Complex shall be continued continuously for ten years; (v) no facilities provided in the complex as specified in the notification issued under clause (f-a) of section 2, shall be discontinued or curtailed, without prior permission of the Government. (c) In case of violation of the condition (iv) or (v) of clause (b), the concession shall be liable to be withdrawn and the duty shall be levied and collected from the date of commencement of the Multiplex Theatre Complex, at the rate specified in clause (b) and clause © of sub-section (1) or, as the case may be, sub-section (3), along with the interest leviable at the rate specified in section 22. (d) If any existing cinema theatre is converted into Multiplex Theatre Complex, by not reducing its original seating capacity and by complying with the provisions of clause (f-a) of section 2, the converted theatre shall also be entitled to concession in the duty as specified in clause (a), 16 subject to the terms and conditions specified in clause (b). 10. Pursuant to the Act, the Government issued a Resolution on 4th January, 2003 (hereinafter referred to as the said GR). The said GR set out the manner in which an Applicant would become entitled to exemption from payment of Entertainment Duty and the procedure the Applicant needed to follow in respect thereof for the grant of the conditional Letter of Intent and the Eligibility Certificate. It is important to point out Clause 5 (E) (i) of the said GR which set out that the Applicant would be eligible to get exemption from paying Entertainment Tax. For the sake of convenience reproduced herein below is Clause 5(E) (i) of the said GR. The Applicant will be eligible to get the exemption from paying entire Entertainment Tax for the period of first three initial years from the date of commencement of the complex, whereas he will be admissible for exemption from paying 75 percent of the Entertainment Tax due for the further two years. The Applicant must pay the Entertainment Tax at the prescribed rate from the sixth year”. 17 Exhibit “C” to the Petition is a copy of the Government Resolution dated 4th January, 2003 being Resolution No.ENT-1099/ Pra.Kra.76/T-1. 11. It is important to mention that in order for an Applicant to be eligible for exemption from payment of Entertainment Duty on the basis of the Act read with the said GR, all Applicants were required to submit applications to Respondent No.3 from 17th August, 2001 to 16th August, 2002 to be considered for such exemption. In the light of Section 3(13)(a) of the said B.E.D. Act, read with Para 5 – E(i) of the said GR, the nature of exemption/concession granted to an Applicant is from payment of Entertainment Duty to the Government, while the petitioner is permitted to collect Entertainment Duty from the patrons and exempted from payment of the same. As such, for the first three years an Applicant is exempted from paying the entire Entertainment Tax and for the next two years from paying 75% of the Entertainment Duty. In the light of the aforesaid it is reasonable to state that the concession / exemption granted under Section 3(13) (a) of the said B.E.D. Act and para 5(E) (i) of the said GR to the Applicant, in whose favour the eligibility certificates are granted / issued under the , is in the nature of the exemption from payment of Entertainment duty by the 18 Multiplex Theatre Proprietor/operator, (the State Government is not to collect from such Proprietor / Operator, duty for three years and collect duty at 25% of the rate of of Entertainment Duty leviable for the subsequent two years). It is the case of the petitioner that he received its Conditional Letter of Indent dated 16th April, 2002 and the Eligibility Certificate received on 7th June 2002 and became eligible for the concession/exemption provided under Section 3(13)(a) of the said B.E.D. read with para 5(E)(i), of the said GR. 12. On 21st September, 2000 the Government passed a Resolution bearing No.ENT-1099/P.K.215/t-1 (hereinafter referred to as “Printing Resolution”) copy of which is annexed as Exhibit “D” whereunder it has stipulated the manner in which Cinema tickets must be printed which is relevant to point out in view of the impugned notices/impugned orders. The Printing Resolution sets out that the Cinema ticket must reflect the following: (i) Net rate of the ticket (ii) Amount of Entertainment Tax (iii)Service charge, if any (iv) The aggregate price of the ticket 19 13. It is the case of the petitioner that there are no guidelines for pricing of the cinema ticket rates except under Section 3(13)(b)(i) of the Act under which it is prescribed that the proprietor of a Multiplex Theatre Complex shall not charge less payment for admission than the prevailing highest rate of admission at any given time, in any of the Cinema Theatres in the District in which the Complex is situate, till the concession period is over. The fact that there are no guidelines for the pricing of the cinema tickets and that the same can be fixed by the Proprietor is also evidenced on a perusal of the table set out under Section 3(c) of the said B.E.D. Act which clearly provides that the payment for admission is to be fixed by the Proprietor. 14. It is the case of the petitioner that the petitioner is in its 4th year of operations of the Multiplex and liable to pay 25% of the normal rate of Entertainment Duty leviable from 7th June, 2005. The entertainment duty is payable at the rate of 25% of the rate of duty leviable (i.e.25% of 45%) as per the provisions of the Section 3(13)(a)(ii) of the said B.E.D. Act. The rate of entertainment duty payable under the Act can be determined on the basis of “payment for admission” fixed by the proprietor. 20 15. It is the case of the petitioner that from 7th June 2005, the petitioner has duly made payment of the entire Entertainment Duty to respondent No.3 in accordance with the Act read with the G.R.s issued pursuant thereto. 16. On 1st June, 2005, the petitioner addressed a letter to the Principal Secretary, Revenue Department of Respondent No.1. In the aforesaid letter, the petitioner informed the principal Secretary of respondent no.1 that the Multiplex became eligible for exemption from payment of Entertainment Duty from 7th June, 2002. Further, the petitioner submitted that they were in the Fourth year from the Date of Commencement and were by virtue of Section 3(13)(a)(ii) of the said B.E.D. Act read with paragraph 5(E)(I) of the said GR, eligible to pay 25% of the amount of Entertainment Duty with effect from 7th June, 2005. Further, in the said letter, the petitioner also pointed out that it had come to the petitioner's knowledge that Adlabs Films Limited had made payment of Entertainment Duty for the IMAX-ADLABS Multiplex Theatre at Wadala under protest. This payment was also in respect of Entertainment Duty payable in the Fourth year of exemption. In the light of the aforesaid, the petitioner set out the duty payable in the Fourth year of exemption on the basis of Section 3(13)(a)(ii) of the 21 said B.E.D. Act read with Clause 5(E)(i) of the said GR. Exhibit “E” to the petition is a copy of the said letter. 17. On 18th August, 2005 the respondent no.1 addressed a Notice to the petitioner calling upon the petitioner to remain present on 23rd August, 2005 before the Principal Revenue Secretary for the purposes of discussing the 25% Entertainment Duty payable by the petitioner in its Fourth year. Exhibit “F” to the petition is a copy of the said Notice. 18. Pursuant to the said Notice, on 23rd August, 2005, the petitioner's representatives along with the representatives, of another Multiplex Theatre known as IMAX-ADLABS, who were also issued a Notice, attended the office of the Principal Secretary of Respondent No.1. The Principal Revenue Secretary of Respondent No.1 contended that the exemption by virtue of the Act was not in the nature of a retention benefit and that the Entertainment Duty computed by the Additional Collector (MSD) was proper. In response to this contention, the representatives of the petitioner and IMAX-ADLABS contended that the nature of exemption under the Act and the said GR was in the nature of a retention benefit. However, the Revenue Secretary did not accept this contention of the petitioner's representatives and IMAX- 22 ADLABS representatives and asked the representatives to bring the aforesaid to the notice of the Multiplex Association and its Members, It is important to point out that in the meeting, the Revenue Secretary asked the representatives of the petitioner and IMAX-ADLABS as to why the Association was not present, to which the representatives of the petitioner and IMAX-ADLABS contended that no Notices have been issued of the aforesaid meeting to the Multiplex Association i.e. MAI. Exhibit “G” to the petition is a copy of the Minutes which have been made available by respondent No.1 to the petitioner under a letter dated 21st September, 2005 and Exhibit “G-1” to the petition is the copy of the said letter. 19. On 5th December, 2005, the petitioner received a Notice No.1 from respondent No.4 calling upon the petitioner to make a payment of Rs.1,16,95,846/- being Exhibit “A-1” to the petition. In response to the aforesaid Notice of respondent no.4, the petitioner addressed a letter dated 10th December, 2005 to respondent no.4 in which the petitioner contended the following: (i) First, the petitioner was unclear as to how respondent no.4 had arrived at the Duty of Rs.1,16,95,846/-. It was also unclear how the 24% interest was being levied. 23 (ii) Secondly, the petitioner contended that respondent No.4, in arriving at the aforesaid duty, had levied the full Entertainment Duty at the rate of 45% without considering the exemption available to the petitioner from paying 75% of the Entertainment Duty; (iii) The petitioner further stated that the actual number of tickets for Screen I was 49139 and not 65245 and the actual number of tickets in Screen 5 was 56005 and 58005. As such, the petitioner indicated to respondent no.4 that (even on that count) there was an error in calculation. Furthermore, the petitioner contended that 24% interest under Section 9B levied by respondent no.4 would come into play only after the expiry of the 30 day period as contemplated under Section 9B of the Act and as such the petitioner