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2015 (5) TMI 1021 - RAJASTHAN HIGH COURT

2015 (5) TMI 1021 - RAJASTHAN HIGH COURT - [2015] 83 VST 314 (Raj) - Eligibility for benefit of exemption notification dated March 26, 1999 - Demand of entertainment tax under the Rajasthan Entertainments and Advertisements Tax Act, 1957 - Assessee engaged in providing service of video game and other indoor game facility to its customers - Whether video games and video games parlors can be considered even otherwise to fall within the purview of "all kind of sports and games" to be eligible for b .....

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on, as the same have to be construed strictly and that in construing the exemption notification, question of equity does not arise. The exception or exemption provision must be construed strictly. Give it or does not give it at all. An exemption is a standalone process. Therefore, the assessee is not eligible for benefit of exemption notification. - Decided against the assessee - S. B. Sales Tax Revision Petition Nos. 123 to 140 of 2013, 24 to 41 of 2014 - Dated:- 1-5-2015 - Mohammad Rafiq, J. S .....

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e activity of providing for a charge, games and indoor sports activities at its outlet known as Fun City located at Third Floor, MGF Mall, 22 Godam Circle, Jaipur. A survey was conducted by the officers of Anti Evasion Wing of the Commercial Taxes Department at its premises on July 27, 2010. The cause and reason of the survey was the activities carried out by the petitioner-company in providing opportunity of gaming and playing sports to visiting customers, which attracts liability under the Raj .....

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enalty of ₹ 4,95,318, totalling to ₹ 8,01,600, came to be assessed. The assessment order accompanied with notice of demand was served upon the petitioner-company. Petitioner- company preferred appeal thereagainst before the Deputy Commissioner (Appeals-II), Commercial Taxes, Jaipur, who by order dated December 7, 2011 partly allowed the appeal and directed the assessing authority to bifurcate the revenues of petitioner-company into screen based and non-screen based video games and th .....

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l before the Rajasthan Tax Board. A counter appeal was also filed by the Revenue against part acceptance of appeal by the Deputy Commissioner (Appeals-II) setting aside the penalty. The learned Tax Board by the impugned judgment dated March 28, 2013 dismissed the appeals filed by both the sides. Aggrieved thereby, the assessee-company has approached this court in the present sales tax revision petitions. In the revision petition, the following questions of law arises for consideration of this co .....

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t any assessment within the prescribed limitation ? (4) Whether video games which are 'games' for all intents and purposes and also fall within the broader sense of the term, can be treated to be outside the definition of 'games' and hence denied the benefit of notification dated March 26, 1999 ? (5) Whether the benefits granted by a notification can be withdrawn by issuing a non-speaking and non-clarificatory clarification ?" In the course of arguments, however, learned cou .....

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Act. The learned appellate authority and the Tax Board failed to appreciate that separate assessment orders required separate show-cause notices and such assessment order in respect of different months could not be passed on single show-cause notice for the entire financial year. The notice of assessment was served in form O by merely indicating the description "notice for reassessment" in place of heading "notice for assessment". The proceedings of reassessment thus should .....

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y in view of concurrent findings. As such, the essential ingredients for levy of entertainment tax namely "payment of admission" is not attracted in respect of the petitioner's outlet. Shri Vaibhav Kasliwal, learned counsel for the petitioner further argued that the first appellate court and the Tax Board have erred in law in holding that the clarification dated October 23, 2004 specially excluded all video games and video parlours from the purview of the entry No. 6 of the notific .....

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on dated March 26, 1999. It is argued that the learned Tax Board has also failed to appreciate that clarification cannot be applied in supersession of the notification. In support of his argument, learned counsel has relied on the judgment of the Gujarat High Court in Inter Continental (India) v. Union of India [2002] 82 ECC 497 decided on February 20, 2002, which judgment was upheld by the Supreme Court by dismissing the Appeal (Civil) No. 6529 of 2002 filed thereagainst vide judgment dated Apr .....

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i-evasion Wing of the Department, it was found that the services provided by the petitioner would fall under the purview of "entertainment" and therefore would attract a tax levy under the Rajasthan Entertainments and Advertisements Tax Act, 1957. Since the petitioner failed to furnish any satisfactory reply to the notice, the assessing authority had rightly passed the assessment order and served a demand notice. It is argued that section 2(5) of the Act, which defines "entertainm .....

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er. The learned counsel for the Revenue placed reliance on judgment of the Supreme Court in Geeta Enterprises v. State of U. P. [1983] 4 SCC 202 and argued that video games are the latest addition to the concept of entertainment and video game parlors providing the said services fall within the domain of entertainment. Therefore, the present matters are squarely covered by this judgment of the Supreme Court. Reference in particular is made to the observations made by the Supreme Court in para 14 .....

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ctober 23, 2004 Clarification: Subject: Regarding levy of entertainment tax on video games and video game parlours. at S. No. 6 of the notification dated March 26, 1999 to say that video games and videos games parlors are not covered under entry No. 6 appended to the notification dated March 26, 1999 "all kinds of sports and games". Learned counsel in support of his arguments has relied on the judgment of the Bombay High Court in Ramesh Sippy v. State of Maharashtra AIR 1989 Bom. 250. .....

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x chargeable under the said Act, which includes musical program, drama, songs and dances, puppet shows, kavi sammelan and mushairas, all kinds of sports and games, dungals, wrestling including free style wrestling and physical exercises, qawwali,mela and various items of entertainment, flower show, circus and magic show. In continuation with the aforesaid notification, a clarification was also issued by the State Government on October 23, 2004 regarding "all kinds of games and sports" .....

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ntertainment tax chargeable under the Rajasthan Entertainments and Advertisements Tax Act, 1957. It has been brought into the notice of the Government that there is some confusion regarding whether entry No. 6 of the above notification also includes video games and video game parlours making them eligible for benefit of exemption. In this regard it is clarified that, 'video games and video game parlours' are not covered under the above mentioned entry No. 6 appended to Notification No. F .....

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quot; as in the opinion of the State Government this has become necessary because there was some confusion whether the said entry would also include video games and video games parlors making them eligible for benefit of exemption. The Tax Board has rightly held that a scrutiny of general meaning of the words, games and sports, reveals that in collective psyche of masses they are considered as, and in common parlance, called tournaments, matches, events, etc., of such activities as cricket, socc .....

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n the controversial 'issue about which of the two shall prevail, the notification dated March 26, 1999 or the clarification dated October 23, 2004'. There appears to be no ambiguity in respect of the meaning and intent of the notification dated March 26, 1999 and the clarification dated October 23, 2004 issued in this regard, because the impugned clarification is just and explanation and is coherent and at tandem with inherent nature of the notification dated March 26, 1999. A scrutiny o .....

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usical programmes, songs and dances, dramas, puppet shows, all kinds of sports and games, circus, magic shows, quawali, mela and its various items, flower shows, kavi sammelans and mushairas, dungals including wrestling'. This list does not allow room for addition of other entertainments in it. There is not much scope for reading between the lines in the construct of the entry No. 6 of aforesaid notification, which only mentions the wording: all kinds of sports and games. In such a scenario, .....

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ame and other indoor game facility to its customers and for that purpose it issues a "fun city card" to its customers on payment, which is then further recharged on the wishes and requirement of the customers. The Supreme Court in Geeta Enterprises [1983] 4 SCC 202 has held that videos games are the latest addition to the concept of entertainment and video game parlors providing the said services fall within the domain of entertainment. Consequently, entertainment tax shall be charged .....

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that entertainment tax was leviable on video games. The High Court has very carefully analysed sub-section (3) of section 2 of the Act and the import of the word 'entertainment' and observes as follows: 'The context in which the word "includes" has been used in the definition clauses of the Act does not indicate that the Legislature intended to put a restriction or a limitation on words like "entertainment" or "admission to an entertainment" or "pay .....

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re the video machines are installed may be free but payment is admittedly made if one wants to play the game. The money charged for use of the video machine is an admission to entertainment and the payment made by the person who uses the machine is the payment for admission. In any case it is a payment connected with entertainment which a person is required to make as a condition of attending the entertainment.'" As to the competence of the Legislature in the matter of clarification for .....

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undamental principle underlying the doctrine of classification. The power of the Legislature to classify is of wide range and flexibility so that it can adjust its taxation in all proper and reasonable ways. The Legislature which is competent to levy a tax must inevitably be given full freedom to determine which articles should be taxed, in what manner and at what rate. In tax matters, the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it .....

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gard to the plurality of criteria which have to go into the fiscal success of the measure. (See [1979] 1 SCR 845; AIR 1979 SC 321 (Avinder Singh v. State of Punjab))". The judgment of the Supreme Court in Inter Continental [2002] 82 ECC 497 relied by learned counsel for the petitioner examined the question whether the end-use verification of the products is necessary for availing of the benefit of concessional rate of duty. That judgment has no bearing on the controversy involved in the pre .....

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relying upon supposed intention of the exempting authority. Furthermore, it is well established that in a taxing statute the meaning of a particular word as accepted by the trade and its popular meaning should be preferred and should commend to the authority because it is the condition of the article at the time of importing which is material for the purpose of classification as to under what head duty will be leviable and whether it would be exempt wholly or partly . . ." Another judgement .....

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se of Sedco For ex International Drill Inc v. Commissioner of Income-tax, Dehradun [2005] 279 ITR 310 (SC); [2005] 12 SCC 717, the Supreme Court observed in para 17 as follows (para 18, page 318 in 279 ITR): "As was affirmed by this court in Goslino Mario [2000] 241 ITR 314 (Gauhati), a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also: Reliance .....

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. P., AIR 1981 SC 1274, 1282, para 24. 2Shyam Sunder v. Ram Kumar [2001] 8 SCC 24 (para 44); Brij Mohan Das Laxman Das v. Commissioner of Income-tax [1997] 223 ITR 825 (SC) and Commissioner of Income-tax v. Podar Cement Pvt. Ltd. [1997] 226 ITR 625 (SC). law it is not presumed to be retrospective irrespective of the fact that the phrases used are 'it is declared' or 'for the removal of doubts'." It is trite that benefit of exemption in a notification or circular or a statuto .....

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ty or doubt regarding interpretation of ordinary tax statute, the relevant provision has to be construed in favour of assessee. If however, there be any doubt about interpretation of any provision or notification granting exemption/incentive, the benefit thereof has to go to the Revenue. A Constitution Bench of the Supreme Court in Commissioner of Central Excise v. Hari Chand Shri Gopal [2011] 6 GSTR 369 (SC); [2011] 1 SCC 236, while revisiting previous judgments on the subject, held that a prov .....

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