Holding

The penalty cannot be imposed at Rs.500 per viewer for the 1996 contravention; the maximum penalty permissible under the pre‑amended provision is Rs.500.

Summary

The appellant, an exhibitor of cinematograph films, was found to have admitted 878 school children without tickets and was penalised under Section 10 of the Rajasthan Entertainment and Advertisement Tax Act, 1957. The Assessing Officer imposed a penalty of Rs.500 per viewer, totalling Rs.4,39,000, in addition to a Rs.500 penalty under Section 10(3)(b). The appellant contended that the pre‑amended provision did not link penalty to the number of persons and that the 1998 amendment introducing a per‑person penalty could not be applied retrospectively. The Supreme Court held that the amendment was not retrospective and the earlier provision did not permit a per‑person penalty, limiting the maximum penalty to Rs.500. Consequently, the appeal was allowed and the excessive penalty was set aside.

Issues considered

Whether Section 10(3)(a) of the Rajasthan Entertainment and Advertisement Tax Act, 1957, as it stood in 1996, allows a penalty to be levied per person for admitting persons without tickets.
Whether the amendment to Section 10, effective 31 July 1998, which introduced a per‑person penalty, has retrospective effect on offences committed before that date.
Whether the quantum of penalty (Rs.500 per viewer) is unreasonable in view of the actual tax liability.

Legislation cited

Rajasthan Sales Tax Act, 1994s. 86

Subjects

penaltyentertainment taxticketingretrospective amendmentper person penaltystatutory interpretationRajasthan law

Judgment

)
MIS. JASWANT TALKIES A
V.
COMMERCIAL TAXES OFFICER, BHILWARA

NOVEMBER 12, 2007
B
[DR. ARIJIT PASAYAT AND D.K. JAIN,JJ.]

Rajasthan Entertainment and Advertisement Tax Act, 1957 (as
amended)-s. I 0-Exhibitor of cinematograph films admitting 878
viewers without valid ticket-Imposition ofpenalty of Rs. 5001- per c
viewer and in addition penalty ofRs.5001--Correctness of-Held: Not
correct-Under pre-amended s. I 0, contravention ofadmitting persons
without valid ticket had no nexus with the number ofpersons-Though
amended provision permits imposition ofpenalty per person but it has
no retrospective effect and is not clarificatory-lmposition ofpenalty D
of Rs.4,39,0001- at the rate of Rs.5001- per viewer unreasonable as
against the total cost of the tickets Rs.30061-.
Appellant is exhibitor of cinematograph films. Commercial Tax
Inspectors inspected appellant's cinema hall and found 878 school
children watching movie without tickets. It issued show cause notice E
to the appellant for commission of offence under section 6(1) and
(2) of the Rajasthan Entertainment and Advertisement Act, 1957 and
for imposition of penalty of Rs 500/- in respect of each viewer.
Appellant denied the imposition of penalty. Assessing Officer
imposed penalty at the rate of Rs.500/- per viewer and in addition F
>- penalty ofRs.500/- under section 10(3)(b) of the Act. Commissioner
(Appeals) upheld the penalty under section 10(3)(a), however he had
set aside the penalty under section 10(3)(b)(iii) of the Act. Aggrieved,
appellant filed appeal. It was contended that the total cost of the
tickets was Rs.3006/- and penalty of Rs.4,39,000/- at the rate of G
Rs.500/- per viewer was not justified. Taxation Board held that the
I'
..... penalty was not imposable at the rate of Rs.500/- per viewer and
the maximum penalty imposable was Rs.500/-. Respondent filed
revision petition. High Court upheld the penalty imposed by the
1075 H
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1076 SUPREME COURT REPORTS [2007] 11 S.C.R.

A Assessing Officer. Hence, the present appeal.
Allowing the appeal, the Court
HELD: 1.1. Section 10 of the Rajasthan Entertainment and
Advertisement Tax Act, 1957 has been amended w.e.f. 31st July,
B 1998. The amended provision permits imposition of penalty per
person. Section 10(3)(b) contemplates two types of penalties. The
first relates to cases covered by clause (a) and sub-clauses (i) and
(ii) of Clause (b). The second relates to sub-clause (iii) of Clause (b)
of Sub-Section 3 of Section 10. The case at hand relates to clause
C (a) of sub-section (3) of Section 10. If the position was clear as
contended by the State that the penalty is to be at the rate of Rs.
500/- per person, there was no reason for the amendment which
specifically provided for imposition of penalty per person.
[Para 7] [1082-A, B, CJ
D 1.2. It is also irrational that as against a tax liability of Rs.
3006/-, penalty of Rs.4,39,000/- was to be imposed. Though in all
cases quantum would not be a relevant factor, but on analyzing the
scheme of the Statute it is clear that the stress is on the
contravention. The contravention essentially is of admitting persons
E without valid ticket and at the relevant point of time, had no nexus
with the number of persons. To make the provision stringent the shift
has been made to per person. But the amendment has no
retrospective effect and is not clarificatory in nature. Therefore, the
view of High Court is not correct. The conclusion of the Taxation
F Board that the penalty was not imposable at the rate of Rs.500/- per
viewer and the maximum penalty imposable was Rs.500/-, was the
correct view. [Paras 9 and 10) [1084-C, D, E]
Maharana Talkies, Bhilwara v. State of Rajasthan and Ors.,
G (2004) 1 STT 237 (Raj.HC) and State ofRajasthan and Ors. v. RTT
and Ors., (2003) WLC (Raj), referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5161 of
2007.

H
From the final Judgment and Order dated 3.3.2006 of the High Court
1
M/S.JASWANTTALKIESv. COMMERCIAL TAXES 1077
OFFICER,BHIL WARA [PASA YAT,J.]
of Judicature for Rajasthan at Jodhpur in S.B. Civil (Sales Tax) Revision A
No. 173 of 2000.
Dr. Manish Singhvi and P.V. Yogeswaran for the Appellant.
Aruneshwar Gupta, A.AG., Naveen Kumar Singh, Mukul Sood and
Shashwat Gupta for the Respondent. B

..
'
i
The Judgment of the Court was delivered by
DR. ARIJIT PASAVAT, J. 1. Leave granted.
2. Challenge in this appeal is to the order passed by a learned Single
Judge of the Rajasthan High Court at Jodhpur, allowing the revision filed
c
by the respondent. The said revision petition was filed under Section 86
of the Rajasthan Sales Tax Act, 1994 (in short the 'Act').
3. Factual position which is almost undisputed is as follows:
D
.>--
The appellant is an exhibitor of cinematograph films. On 3.2.1996
cinema hall of the appellant was inspected by the Commercial 11ax
Inspectors. At that time a movie "Alladdin" was being shown in the
morning show. At the time of inspection, 878 viewers were found watching
the movie without tickets. It was found that the daily collection register
maintained by the appellant was not properly maintained. The inspectors E
put their signatures after drawing a line in the register so that no entry can
be made thereafter. Alleging that the appellant admitted 878 viewers
without tickets, a show cause notice was issued under Section 10 of the
Rajasthan Entertainment and Advertisement Tax Act, 1957 (in short the
'Entertainment Act') prima facie being of the view that offence under F
>-- Sections 6(1) and 6(2) of the Entertainment Act has been committed. The
appellant submitted its reply and stated that girl students of a school had
gone to watch the movie which was meant for children and in any event
there was no scope for imposition of penalty of Rs.500/- in respect of
each viewer. The Commercial Tax Officer, Bhilwara was of the view that G
I
.!'>
penalty at the rate of Rs.500/- per viewer was to be imposed and in
--1,
addition penalty of. Rs.500/- under Section 10(3)(b) was also to be
imposed. The officer was of the view that mere fact that children of Malnla
Aashram were being shown the picture and the tickets were to be handed
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1078 SUPREME COURT REPORTS (2007] 11 S.C.R.
t
{
A over to the school authorities after counting the number of children was
not relevant.
The inspection was done at 10.00 a.m. when the school children
had just entered the hall and, therefore, even before the show started the
B inspection was done. The order of assessment was challenged before the
Commissioner (Appeals). The said authority fo\lild that all the tickets were
with the Manager of the Cinema, but since each viewer did not possess
a ticket there was contravention. Therefore, penalty under Section 10(3Xa)
of the Entertainment. Act was upheld while setting aside the penalty
C imposed under Section 10(3XbXiii).
The appellant preferred an appeal against the said order before the
Rajasthan Taxation Board, Ajmer (in short the 'Taxation Board'). Before
the Taxation Board, it was contended that the total cost of the tickets
was Rs.3006/- and penalty of Rs.4,39,000/- at the rate of Rs.500/- per
D viewer was unconscionable. The Taxation Board found that the penalty
that was imposed was not imposable at the rate ofRs.500/- per viewer
and the maxin1um penalty imposable was Rs.500/-.
Revenue filed a revision petition as noted above and by the impugned
order penalty imposed by the Assessing Officer was restored.
E
4. In support of the appeal, learned counsel for the appellant
submitted that the High Court has relied on a decision of its own Court
in Maharana Talkies, Bhilwara v. State ofRajasthan and Ors., (2004)
1 SIT 237 (Raj.HC) ignoring the view expressed in State ofRajasthan
F and Ors. v. RTT and Ors., (2003) WLC (Raj.) 306 which held that no
penalty can be levied per person. The High Court also, it is pointed out,
held in that case that the subsequent amendment was not clarificatory.
5. Learned counsel for the State on the other hand supported the
order.
G
6. The legislative history of the statutory provision needs to be noted.
Section 10 of the Rajasthan Entertainment and Advertisement·
Act, 1957 existing pre-1982
H 10. Offence and penalties. - (1) Notwithstanding anything
t
M/S. JASWANT TALKIES v. COMMERCIAL TAXES 1079
OFFICER,BHILWARA[PASAYAT,J.]
contained in any law for the time being in force, a ticket for A
admission to an entertainment shall not be resold for profit by the
holder thereof.
(2) Whoever re-sells any ticket for admission in contravention to
the provisions of sub-section ( 1) shall, on conviction before a B
Magistrate, be liable to pay fine which may extend to two hundred
rupees.
(3)(a) The proprietor of any entertainment or any person employed
by him in any place of entertainment, who admits any person to
any place of entertainment in contravention of the provisions of sub- C
section (1) or sub-section (2) of Section 6, or
(b) The proprietor of an entertainment who -
(i) fails to pay the tax due from him under this Act within the
prescribed time, or D
(Ii) fraudulently evades the payment of tax due from him under
this Act,
(Iii) contravenes any of the provisions of this Act or the rules framed
thereunder for which no other penalty has been provided under E
this Act.
shall be liable to pay by .way of penalty, in addition to the a111ount
of tax payable by him a sum not exceeding Rs.500/-.
Section 10 of the Rajasthan Entertainment and Advertisement F
Act, 1957 from 1982
10. Offence and penalties. - (1) Notwithstanding anything
contained in any law for the time being in force, a ticket for
admission to an entertainment shall not be resold for profit by the
holder thereof. G
(2) Whoever re-sells any ticket for admission in contravention to
the provisions of sub-section (1) shall, on conviction before a
Magistrate, be liable to pay fine which may extend to two
hundred rupees.
H
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1080 SUPREME COURT REPORTS (2007] 11 S.C.R.
-(

A (3)(a) The proprietor of an entertainment or any person employed
by him in any place of entertainment, who admits any person to
any place of entertainment in contravention of the provisions of sub-
section (1) or sub-section (2) of Section 6, or
(b) The proprietor of an entertainment who -
B ..,..
(i) fails to pay the tax due from him under this Act within the J
prescribed time, or
(ii) fraudulently evades the payment of tax due from him under
this Act, or
c {iii) contravenes any of the provisions of this Act or the rules
framed thereunder for which no other penalty has been
provided under this Act.
shall be liable to pay by way of penalty -
D (i) in respect of cases referred to in clause (a) and sub-clauses ....(
I

(i) and (iii) of clause (b) in addition to the amount oftax payable
by him, a sum not exceeding Rs.500/- and l
~
(ii) in respect of cases referred to in sub-clause (ii) of clause
E (b) in addition to the amount of tax payable by him a sum not
exceeding rupees five hundred or double the amount of tax
evaded whichever is higher.
(4) The prescribed authority not below the rank of an Assistant
Commercial Taxes Officer may, after affording a reasonable
F opportunity of being heard to the person affected, impose the A..
penalty mentioned in sub-section (3).
(5) The person affected may, within one month of the
communication of the order directing payment of any sum by way
G
of penalty under sub-section (3) appeal to the prescribed authority. r
Amended Section 10 of the Rajas than Entertainment and 'I
>-
Advertisement Act, 1957 with effect from 31. 7.1998
10. Offence and penalties (1) Notwithstanding anything contained
in any law for the time being in force a ticket for admission to an
H
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I
M/S. JASWANT TALKIES v. COMMERCIAL TAXES 1081
OFFICER,BHILWARA [PASAYAT,J.]
entertain..11ent shall not be resold for profit by the holder thereof. A
(2) Whoever re-sells any ticket for admission in contravention to
the provisions of sub-section ( 1) shall, on conviction before a
Magistrate, be liable to pay fine which may extend to two hundred
rupees.
-+ B
(3)(a) The proprietor of an entertainment or any person employed
by him in any place of entertainment, who admits any person to
any place of entertainment in contravention of the provisions of sub-
section (1) or subsection (2) of Section 6, or
(b) the proprietor of an entertainment who -
c
(i) fails to pay the tax due from him under this Act within the
prescribed time, or
(ii) fraudulently evades the payment of tax due from him under this
> Act, or D

(iii) contravenes any of the provisions of this Act or the rules framed
thereunder for which no other penalty has been provided under
this Act shall be liable to pay by way of penalty-
(i) in respect of cases referred to in clause (a) and sub-clause E
(1) of clause (b) regarding entertainment tax, in addition to the
amount of tax payable by him, a sum not exceeding Rs.
100/- per person;
(ii) in respect of cases referred to in sub-clause (1) of clause F
(b) regarding advertisement tax and in respect of cases referred
to in sub-clause (iii) of clause (b) in addition to the amount of
I
tax payable by him, a sum not exceeding Rs.500 and
(iii) in respect of cases referred to in sub-clause (ii) of clause
... _,,,_
(b) in addition to the amount of tax payable by him a sum not G
exceeding Rupees five hundred or double the amount of tax
evaded whichever is higher.
(4) The prescribed authority not below the rank of an Assistant
Commercial Taxes Officer may, after affording a reasonable
H
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1082 SUPREME COURT REPORTS [2007] 11 S.C.R.

A opportunity of being heard to the person affected, impose the
penalty mentioned in sub-section (3).

7. It is to be noted that Section 10 of the Entertainment Act has
been amended w.e.f. 31st July, 1998. The amended provision permits
B imposition of penalty per person. Section 10(3)(b) contemplates two types
of penalties. The first relates to cases covered by clause (a) and sub-
clauses (i) and (iii) of Clause (b). The second relates to sub-clause (ii) of
Clause (b) of Sub-Section 3 of Section 10. The case at hand relates to
clause (a) of sub-section (3) of Section 10. If the position was clear as
C contended by learned counsel for the State that the penalty is to be at
the rate of Rs.500/- per pe_rson, there was no reason for the amendment
which· specifically provided for imposition of penalty per person.
8. The Statement of Objects and Reasons for the amendment also
throw considerable light on this position. The same reads as follows:
D B. Amendment in the Rajasthan Entertainment and Advertisements
Tax Act, 1957
Certain amendments in the Rajasthan Entertainment and
Advertisements Tax Act, 1957 have been considered necessary
E and were under consideration for quite some time past.
Owing to repeal of the Rajasthan Sales Tax Act, 1954 and coming
into force of new Act of 1994, definition of the term 'Sales Tax
Act', and due to proposed induction of certain new provisions in
the 'Act of 1957', definitions of the terms 'appellate authority', Tax
F Board' and Tribunal' are proposed to be inserted vide clause 9 of
the Bill.
To provide for limitation for assessments, new section 5BB, to
ensure effective recovery of the out-standing entertainment tax by
G providing special mode of recovery, substitution of section 9, to
enable payment of outstanding dues in installments, new section
5BB, to enable the Commis_sioner to reduce or waive interest and
penalty under the Act in case of genuine hardship, new section 9C
are proposed to be inserted, substituted or inserted, as the case I l

H
may be,.vide clauses 12, 13 or 14 of the Bill respectively.
M/S.JASWANTTALKIESv. COMMERCIAL TAXES 1083
OFFICER, BHILWARA [PASAYAT,J.]
Moreover to make the penalty provision more practicable, section A
10 (3) (b) is proposed to be substituted vide clause 15 of the Bill.

Besides above, to provide for statutory remedy of first appeal, new
section 13-A, to provide for appeal against order of appellate
authority, new section 13-B, to provide for revision to tribunal, new
section 13-C provide for powers of revision to Commissioner in B
case of an order passed by the prescribed authority being
erroneous or prejudicial to the interest of State revenue, new
section 13D, and to provide for rectification of mistakes apparent
from the record, new section 13-E; are proposed to be inserted
vide clause 19 of the Bill. C
Some of the consequential or minor amendments are also proposed
in various sections of the Act of 1957 vide clauses 10, 11, 17, 20
and 21 of the Bill.
Extract of the Rajasthan Finance Bill, 1998 Relevant portion: D

15. Amendment of Section 10, Rajasthan Act No. 24of1956:
In section 10 of the principal Act, -
(a) for existing clause (b) of sub-section (3 ), the following clause E
shall be substituted, namely:
"(b) the proprietor of any entertainment who -

(i) fails to pay the tax due from him under this Act within the
prescribed time, or F
(ii) fraudulently evades the payment of tax due from him under
this Act, or
(iii) contravenes any of the provisions of this Act or the rules
framed thereunder, for which no other penalty has been G
provided under this Act, shall be liable to pay by way of
penalty:
_ (i) in respect of cases referred to in clause (a) and sub-clause
(i) of clause (b) regarding entertainment tax, in addition to the
H
1084 SUPREME COURT REPORTS [2007] 11 S.C.R.

A amount of tax payable by him, a sum not exceeding Rs.
100/- per person.
(ii) in respect of cases referred to in sub clause (i) of clause
(b) regarding advertisement tax and in respect of cases referred
to in sub-clause (iii) of c~use (b), in addition to the amount of
B tax payable by him, a sum not exceeding Rs.500 and
(iii) in respect of cases referred to in sub clause (ii) of clause
(b) in addition to the amount of tax payable by him a sum not
exceeding Rupees five hundred or double the amount of tax
c evaded whichever is higher."
(b) sub-section (5) shalf be deleted.
9. It is also irrational that as against a tax liability of Rs.3006/-,
penalty ofRs.4,39,000/- was to be imposed. Though in all cases quantum
D would not be a relevant factor, but on analyzing the scheme of the Statute
it is clear that the stress is on the contravention. The contravention -'..
essentially is of admitting persons without valid ticket and at the relevant
point ohime, had no nexus with the number of persons. To make the
provision stringent the shift has been made to per person. But the
E amendment has no retrospective effect and as noted above is not
clari:ficatory.
10. As noted above, the amendment does not appear to be
clarificatory in nature as contended by learned counsel for the respondent-
State. The view of the High Court therefore is not correct. The conclusion
F · of the Taxation Board was the correct view.
11. The appeal deserves to be allowed which we direct. There shall
be no order as to costs.
N.J. Appeal allowed.