Holding

The power to vary the tax under Section 5(6) is not confined to the period of option; it may be exercised at any time when the enumerated events occur, rendering the post‑option demands valid.

Summary

The respondents, cinema theatres that had elected to pay entertainment tax on a slab basis under Section 5 of the Andhra Pradesh Entertainments Tax Act, 1939, were later issued demands for differential tax after the local area in which they were situated was upgraded during the period of option. The demands were raised after the option period had expired, and the respondents contended that such demands were invalid. The Supreme Court examined the phrase "during the period of option permitted under this section at any time" in Section 5(6) and held that it refers to the occurrence of the enumerated events, not to a temporal limitation on the authority’s power. Consequently, Rule 27(13) of the Andhra Pradesh Entertainments Tax Rules, which allows variation "at any time," was given its ordinary meaning. The Court set aside the High Court’s judgment and held that the demands were not invalid merely because they were issued after the option period. The appeals were allowed and the writ petitions dismissed.

Issues considered

Whether the prescribed authority can vary the entertainment tax after the period of option has expired.
Interpretation of the phrase "during the period of option permitted under this section at any time" in Section 5(6) of the Andhra Pradesh Entertainments Tax Act, 1939.
Whether Rule 27(13) of the Andhra Pradesh Entertainments Tax Rules, 1939 is consistent with the statutory interpretation of Section 5(6).

Subjects

entertainment taxslab systemtax variationperiod of optionlocal area upgradationstatutory interpretationrule vs actappellate jurisdiction

Judgment

[2008] 11 S.C.R. 864

~
A ENTERTAINMENT TAX OFFICER, HYDERABAD
v. '
MIS. GEETA ENTERPRISES
(Civil Appeal No. 4798 of 2008 etc.) r
r
AUGUST 4, 2008
8
[A.K. MATHUR AND AFTAB ALAM, JJ.] _...,

Andhra Pradesh Entertainments Tax Act, 1939 - s. 5 (6)
L
- Entertainment tax- Cinema Theatres opted to pay the tax ul
c s 5 - Variation of tax in view of upgradation of the local area
where they were situated - Demand raised for differential
amount after expiry of period of option - Validity of - Held:
The demands were not invalid only because they were raised
after expiry of the period of option - The authority can vary the
tax at any time if there is change in the circumstances caliing
D
for the variation during the period of option - Andhra Pradesh
Entertainments Tax Rules, 1939 - r 27 (13). ~

Respondents-Cinema theatres had opted to pay the
entertainment tax on slab basis u/s 5 of Andhra Pradesh
E Ente~inments Tax Act, 1939. During the period of option,
I
the local area where they were situated was upgraded. In
view of the upgradation, tax amount also varied. Pre-
scribed authority raised demand for the differential tax
amount. Respondents challenged the demand contend-
F ing that the demand was bad as it was raised after the
period of option was over. High Court allowed the writ y
petitions and held that power to vary the tax must be re-
stricted to the period of option. Hence the present appeals.
Allowing the appeals, the Court
G
HELD: 1.1 The impugned demands did not suffer
from any invalidity simply because those were raised af-
ter the period of option was over. [Para 12] [872 D-E] -;- ..
1.2 According to the High Court any revision of rates
H 864
ENTERTAINMENT TAX OFFICER, HYDERABAD v. 865
MIS. GEETA ENTERPRISES
'I
"'
under Section 5(6) of Andhra Pradesh Entertainments Tax A
Act, 1939 would be valid only in case any of the four even-
tualities as stipulated in sub-section (6) of Section 5 took
place during the period of permission granted under sec-
tion 5(1) and the prescribed authority passed the order
varying the fixed amount of tax also within that period. The B
'>' meaning put by the High Court on section 5(6) gives rise

• to some problem when one comes to Rule 27 (13) of Andhra
Pradesh Entertainments Tax Rules, 1939. Rule 27 (13) is
quite unambiguous and it only uses the expression "at any
•~I
time" and not "during the period of option permitted under c
this section". [Paras 9 and 1O] [871 A-B, 871 B-C]
1.3 The meaning put by the High Court on Section
5(6) of the Act is not acceptable. The expression "during
the period of option permitted under this section at any
time" does not refer to the power of the prescrJbed au- D
thority at all but it refers to the happening of the events
enumerated in the sub section that would form the basis
to vary the fixed amount of tax. Alternatively, the long ex-
pression "during the period of option permitted under this
section at any time" may be divided into two parts; the E
{ first part, "during the period of option permitted under this
I section" referring to any of the four events taking place
and the second part "at any time" referring to the pre-
scribed authority". Thus read, the meaning of Section 5(6)
becomes plain and clear and rule 27(13) .~gets back its F
... normal meaning, there being no need to give it any forced
restricted meaning. [Para 11] [871 F G H 872 B-C]
CJVILAPPELLATE JURISDICTION: Civil Appeal No. 4798
of 2008
G
From the final Judgment and Order dated 11.8.2005 of
the High Court of Judicature of Andhra Pradesh at Hyderabad
I
-,..
I -t in W.P. No. 17325 of 2004 & 12643 of 2005

WITH
H
866 SUPREME COURT REPORTS [2008] 11 S.C.R.
~
~
/\ C.A. Nos. 4799 & 4800 of 2008 ...
11·

June Chaudhary and Anoop G Choudhary, Manoj Saxena,
Rajneesh Kumar Singh, Rahul Shukla and T.V. George for the
Appellant.

B V. Bhaskar Reddy, S. Udaya Kumar Sagar, Bina
Madhavan, Venayagam (for Mis. Lawyer's Knit & Co.}, V. Sridhar '"'f
Reddy and V.N. Raghupathy for the Respondenf.
J
The Judgment of the Court was delivered by
'\-
c AFTAB ALAM, J. 1. Heard counsel for the parties.
2. Leave granted. I-

3. All the three appeals arise from same or similar sets of
facts and involve a cemmon questioi:i of law. Hence, all the three
appeals were taken up together and are being disposed of by
0
this judgment. The dispute relates to demands raised by the
prescribed authority in terms of Section 5(6) of the Andhra
Pradesh Entertainments Tax Act, 1939 as the provision was in
existence at the material time (Section 5 now stands deleted
by Act 32 of 2005 with effect from 4.6.2005). The Prescribed
E Authority raised the impugned demands in view of the fact that
the local authorities within which the respondents' cinema the-
atres were situate were upgraded during the period the three
respondents had the permission to pay their taxes following the
slab system as provided under section 5 of the Act. The de-
F mands were, of course, rajsed long after the period for which
permission was granted was over. The controversy in regard to .-Y

the legal validity of the demands turns on an interpretation of
the expression "during the period of option permitted under this
Section at any time" occurring in sub-section (6) of Section 5
G arid the expressior. "at any time" used in sub-rule (13) of Rule
27 of the Andhra Pradesh Entertainment Tax R·ules, 1939. The
Andhra Pradesh High Court has interpreted the aforesaid ex-
pressions in a certain way and. if that interpretation is correct
the conclusion arrived at by the High Court that the demands
H were invalid and unenforceable is perfectly unexceptionable.
ENTERTAINMENT TAX OFFICER, HYDERABAD v. 867
M/S. GEETA ENTERPRISES [AFTAB ALAM, J.]

But the question is whether the High Court's interpretation of A
those expressions is correct and sound.
4. Here, we may advert to the basic facts which are very
brief and undisputed. All the three respondents are engaged in
the business of exhibiting films having taken out requisite li-
censes under the Andhra Pradesh Cinematographic Act and 8
theAndhra Pradesh Entertainments Ta:X:Act, 1939. The cinema
theatres of M/s. Geeta Enterprises and Mis. Sreedevi 70 MM
(respondents in SLP(C) No.9512/06 and SLP(C) No.11420/
06 respectively) are situate in Chandan Nagar, Serilingampally.
For financial years 2001-02 and 2002-03 both the respondents C
paid entertainment tax on slab basis in terms of Section 5 of
the Act (as it was in existence at that time) by making applica-
tions in Form Ill and obtaining their respective permits in Form
IV. Serilingampally, where the two theaters are situate, used to
be a Grade Ill Municipality but by a ~overnment Notification is- D
sued on 19.5.2001 ~t was upgraded as a selection grade mu-
nicipality with effect from 18.5.2000, that is to say, during the
period the two respondents were granted permission to pay
their taxes on the basis of the slab system. Here, it may be noted.
that in terms of the table that was part of Section 5, cinema E
theatres situate in a selection grade municipality attracted a
higher rate of tax than the one situate in a grade Ill municipality.
Notwithstanding the upgradation of the local autho_rity within
which the two cinema theatres were situate the appellants went
on making weekly payments of the tax amounts as shown in F
their respective permits, at the rate relating to a grade Ill mu-
nicipality. The Prescribed Authority issued notices dated
31.8.2004 to the two appellants raising demands of the differ-
ential tax amounting to Rs.10, 19,875/- in case of M/s. Geeta
Enterprises and Rs.11,85,863/- in case of Mis. Sreedevi 70 G
MM for the period of 18.5.2001 to 31.3.2002. The prescribed
authority issued another notice dated 1.6.2005 making a de-
mand of Rs.3,91,377/- against M/s. Geeta Enterprises for the
period 4.4.2002 to 27.6.2002:' against M/s. Sreedevi 70 MM a
similar demand of Rs.95,820/- was made on the basis of a re-
H
868 SUPREME COURT REPORTS [2008] 11 S.C.R. ...
~
A vised Form IV for the year 2002-2003 vide order dated
30.5.2005. M/s. Kumari Talkies, the respondent in SLP (C)
No.21778/2006 was given a similar demand for the differential
amount of tax by the prescribed authority on the ground that
during the period of option the population of Kaikalur Gram
B Panchayat, in Krishna district, where the respondent's cinema
theatre was situate had increased and had gone over 15,000.
5. All the three respondents challenged the demands raised
against them by the prescribed authority before the Andhra '>-
r
Pradesh High Court. The High Court allowed the writ petitions
c filed by the three respondents and quashed the impugned de-
mands relying upon its earlier decision di;)ted 25.6.1992 in Ml ....
<~

s. Swami Theatre, Sanathnagar vs. Deputy Commercial Tax
Officer, Santhnagar: W. P. Nos.8432/88 and 14970/89.
6. Here, it will be useful to take a look at the relevant statu-
D
tory provisions before going to the High Court decision in the
case of Swamy Theatre (supra). Section 5 of the Act gave the
option to the theatre's .proprietor to pay entertainment tax on
slab basis. The pro\(isio;n allowed for payment of a fixed weekly
amount as tax, determined on the basis of_ such factors as the
E statusof the local authority within which the cinema theatre was
situated and the facility of air-conditioning or air cooling, if any,
provided in the theatre etc. Sub-section (6) of the section em-
powered the prescribed authority to vary the fixed amount of tax
on the happening on any of the four events enumerated in the
F sub-section. Section 5(6), when it was on the statute book, was
as follows:
"(6). It shall be lawful for the prescribed authority to vary
the amount of tax payable by the proprietor under sub-
section (1) during the period of option permitted under
G
this section at any time -
(a) where the amount of tax payable under sub-section
(1) has been modified by law; or
.., ~

(b) if there is an increase in the gross collection capacity
H
ENTERTAINMENT TAX OFFICER, HYDERABAD v. 869
M/S. GEETA ENTERPRISES [AFTAB ALAM, J.]

per show in respect of the place of entertainment by A
virtue of an upward revision of the rate of payment
for admission therein or of the seating capacity or
accommodation thereof; or
(c) where the local area in respect of which permission,
is granted is upgraded; or B
(d) if it is found for any reason that the amount of tax has
been fixed lower than the correct amount."
(emphasis added)
c
7. The other relevant provision in this regard was Rule 27
of the A. P. Entertainments Tax Rules that dealt with the details
concerning payment of entertainment tax on slab basis. Sub-
rule (13) of Rule 27 provided as follows:
"(13). The Entertainments Tax Officer may revise the D
amount of tax payable by the proprietor under sub-section
(1) of Section 5 of the Act at any time if there is an increase
in the gross collection capacity per show in respect of the
place of entertainment by virtue of upward revision of the
rate or the rates of payment for admission therein or of the E
seating capacity or accommodation thereof or where the
local area, in respect of which permission is granted is
upgraded or if it is found for any reason that the amount
of tax has been fixed lower than the correct amount."
(emphasis added) F
8. In view of the provisions in the Act and the Rules it was
contended on behalf of the respondents that the prescribed
authority undoubtedly had the power to vary the amount of tax
fixed under section 5 but the power could only be exercised G
during the period for which the permission was allowed. It was
pointed out that in the three cases the impugned demands were
raised, admittedly, long after the period for which the permis-
sion was allowed was over. The impugned demands were, there-
fore, bad, invalid and unenforceable. The High Court, relying H
870 SUPREME COURT REPORTS [2008] 11 S.C.R.

A upon an earlier decision in Swamy Theatre upheld the respon-
dents' contentions, set aside the impugned demands and al-
lowed the writ petitions filed by the respondents.
9. In the case of Swamy Theatre, a Division Bench of the
AP.High Court earlier held that the expression "during the pe-
B riod of option permitted under this section at any time" imposed
a limitation on the exercise of the power by the prescribed au-
thority to vary the amount of tax fixed under section 5(1) of the
Act. The Division Bench held as follows:

c "A reading of sub-section (6) of Section 5, which confers
power on the prescribed authority to vary the amount of
tax, in our opinion, clearly shows that the power to vary
·must be restricted to the period of option. The period
during which the power to vary the amount of tax is the
"period of option". The language employed is specific and
D
admits of no ambiguity. The jurisdiction facts conferring
power to vary the amount of tax as laid down in sub-section
(6) are: (1) Increase in the gross collection capacity per
show because of upward revision of the rate of payment
for admission; (2) Increase in the seating capacity or
E accommodation; (3) Up gradation of the local area where
the theatre is situate; and (4) If a lower rate of tax was
fixed due fo any other reason. If the above said jurisdiction
facts are present, the openfog words of section 6, namely,
"it shall be lawful for the prescribed authority to vary the
F amount of tax payable by the proprietor under sub-section
.(1) during.the period of option permitted under this section
at any time" come into operation. The words "at any time"
signify the limitation of time aspect confining the same to
the 'period of option. In other words, the period of option
G qualifies the time factor inferable from the words "at any
time"."
Thus, according to the High Court, the expression "during _,
the period of option permitted under this section at any time"
referred to the power of the prescribed authority to vary the
H
ENTERTAINMENT TAX OFFICER, HYDERABAD v. 871
M/S. _GEETA ENTERPRISES [AFTAB ALAM, J.]
'I
amount of tax fixed under section 5(1 ). Hence, any revision of A
rates under section 5(6) would be valid only in case any of the
four eventualities as stipulated in sub-section (6) of Section 5
took place during the period of permission granted under sec-
tion 5(1) and the prescribed authority passed the order varying
the fixed amount of tax also within that period. B
)"
10. The meaning put by the High Court on section 5(6)
gave rise to some problem when one came to rule 27 (13). As
noted above rule 27 (13) is quite unambiguous and it only uses
the expression "at any time" and not "during the period of option
permitted under this section". The High Court tried to overcome c
the problem by reading the rule subject to its interpretation of
section 5(6). The High Court observed:
"The question is: Whether the words "at any time" occurring
in sub-rule (13) confer power on the authority to revise the
D
tax without regard to the period of limitation? Our answer
is in the negative. When once the section specifically
curtails the power of the authority to vary the tax only
during the period of option, it cannot be accepted that a
rule can confer on the authority the power to vary the tax
without regard to the period of option. The words "at any E
time" occurring in sub-rule (13) of Rule 27 must, therefore,
be interpreted as limiting the power to vary the tax "during
the period of option". The words "during the period of
option" occurring in sub-section (6) must be read into sub-
rule (13). Otherwise, it will be ultra vires the section." F
':f
11. We are unable to agree to the meaning put by the High
Court on Section 5(6) of the Act. In our view, the expression
"during the period of option permitted under this section at any
time" does not refer to the power of the prescribed authority at
G
all but it refers to the happening of the events enumerated in the
sub section that would form the basis to vary the fixed amount
of tax. To make our meaning clear we may read sub-section
"' (6), insofar as relevant for the present, in the following way:
"Where, at any time during the period of option permitted under
H
872 SUPREME COURT REPORTS [2008] 11 S.C.R.

A this section, the local area in respect of which permission is
granted is upgraded, it shall b~ lawful for the prescribed author-
ity to vary the amount of tax payable by the proprietor under
sub-section". Alternatively, the long expression "during the pe-
riod of option permitted under this section at any time" may be
B divided into two parts; the first part, "during the period of option
permitted under this section" referring to any of the four events '"(
taking place and the second part "at any time" referring to the
prescribed authority". Thus read the meaning of Section 5(6)
becomes plain and clear and rule 27(13) gets back_its normal
c meaning, there being no need to give it any forced restricted
meaning.
12. In view of the discussions made above, we find and
hold that the decision of the A.P. High Court in the case of Swamy
Theatre did not lay down the correct law. The orders passed by
D the High Court in the writ petitions filed by the three respon-
dents relying upon the decision in Swamy Theatre are accord-
ingly set aside and if is held that the impugned demands did
not suffer from any invalidity simply because those were raised
after the period of option was over. All the writ petitions filed by
E the respondents in the High Court stand dismissed. In the re-
sult, the appeals are allowed.
13. It may, however, be made clear that this judgment finds
and holds that the impugned demands did not suffer from inval-
idity because those were raised after the period of option was
F over. In case the respondents have any other grievances against
the impugned demands it will be open to them to seek their
remedies, if any is available, under the provisions of the Act.
K.K.T. Appeals allowed.