Case: Sri Srinivasa Theatre  Vs. Government Of Tamil Nadu

These appeals are preferred by the writ petitioners in a batch of writ petitions which were dismissed by a Division Bench of the Madras High Court by its common judgment and order dated October 8, 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 of 1992 arising from Writ Petition No. 8748 of 1989 (filed by Raja Theatre, represented by its licensee - Parasuram Petty village,Nadu Entertainments 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 Cinemas (Regulation) Act, 1955 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 cinemathe 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 show to the Government. With a view to simplify the collection of tax, section5-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 filed. But inasmuch as no cinema theatre can expect to have its full capacity filled for each show on each day of the month, 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 tickets 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 their correctness. However, this method was not made applicable to the entire State. The theatres situated within the Municipal Corporations of Madras, Madurai, Coimbatore and the special grade municipalities continued to be governed by the original system 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 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 per cent. to 40 per cent. At the same time, all the theatres situated within the radius of five kilometres 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 kilometre "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 of 1989 is situated in village Parasuram Petty and was governed by composition system but since it falls within five kilometre belt abutting Madurai Corporation area, it is brought over to admission system. This change is brought about by substitutions of sub-section (1) of section 5-A, and in particular, by virtue of the two provisions appended to sub-section 5-A (1). However, the temporary (tourist) and open-air theatres even though located in the belt are excluded from thisimpugned the validity of section 5-A (1) on several grounds all of which have been negative by the High Court.

Court's reasoning:
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 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 reference, - were adopted. It is not a question of power but one of 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 admissions system was to continue in force not only in the corporation areas but also in five kilometres radius (belt) abutting each of thoseargument 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 sections 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 of 1983 and 48 of 1986 certain local areas governed by sections 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 the legitimate expectation of the persons affected thereby. We may in this connection refer to the decision of the House of Lords in Council of Civil Service Unions v. Minister for the Civil Services 1985 AC 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 unionsation was taken away in so far as the employees of G.C.H.Q. are concerned. The unions questioned the same. It was held by the House of Lords that though the unions had a legitimate expectation that before barring them from unionisation they would be consulted, the security considerations, put forward by the Government, override the right of the petitioners to prior consultation.We are also impressed by the argument that the impugned changeover amounts to unreasonable restriction upon the petitioners fundamental right to trade. Whichever the system, the exhibitors 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 so way differently situated than the theatres located within the corporation areas. It may also be noted that all that 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.