AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (7) TMI 1012
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.... respect to the method of calculation or the method of determining the exemption limits under the scheme, extended by the State, to multiplexes, who had put up capital infrastructure. These incentives were by way of tax exemptions for a specified period. On the previous occasion, this court had adjudicated upon the grievance of the multiplex owners, regarding denial of extension of the scheme. This court held that the denial of extension (two years, which was sought by the multiplex owners) was in the circumstances, unjustified and had invoked the doctrine of promissory estoppel. 3. For the sake of convenience, the court can do know better than extract para 2 of the judgment in Devi Multiplex(supra) which broadly outlines the incentive scheme, contained in the exemption notification issued by the State on 20.12.1995. The relevant part of the judgment is extracted below: "2. Since Civil Appeal No. 6478 of 2009 was taken as the lead matter, facts relating thereto are dealt with in detail hereafter. On 20-12-1995 the Government of Gujarat announced a policy named New Package Scheme of Incentives for Tourism Projects, 1995-2000 (hereafter referred to as "the Scheme") with a....
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....h, for the sake of convenience are produced below: "INCENTIVE A tax holiday of 5-10 years will be available to new units and expansion of existing units ( as per condition set out earlier) in respect of the following taxes, and upto 100% of capital investment. The tax Holiday will be available to units conforming to the list in Appendix B and falling within the eligible areas. List of taxes 1. Exemption from Sales Tax. 2. Exemption from Turnover tax. 3. Exemption from Electricity Duty. 4. Exemption from Luxury Tax. 5. Exemption from Entertainment Tax. Exemption from sales tax is available with the following conditions: (a) Exemption towards taxes on raw materials, processing materials, consumable stores, packing materials are not available. (b) Only those goods which are sold at the first stage of sale by eligible unit will attract sales tax exemption. (c) No exemption is available on purchases of any goods such as building materials, equipments or any other goods to be purchased for setting up of tourism project. 8.1 Period of Eligibility\ The quantum of in....
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....invested an amount of Rs. 10 crores towards eligible capital investment. This amount of eligible capital investment is required to be adjusted against the amount of Tax exemption available under the present scheme/policy. If this unit is charging an amount of Rs. 100/- by way of admission fee to the multiplex theatre; and the amount of entertainment tax which it is liable to pay to the Government is Rs.50/-. This would mean that the owner of the unit is entitled to retain Rs. 50/- to enable him to defray the expenditure incurred by him for providing the facilities in the unit. The amount of Rs. 5O/- recovered by way of entertainment tax is required to be notionally adjusted against the amount of eligible capital investment till the amount of Rs. 10 crores gets exhausted or till the expiry of a period of ten years whichever is earlier." 8. The same contention was urged before the High Court which recorded as under: "57. Mr. Nanavati further contended that even on merits, the impugned Circulars deserve to be quashed and set aside. Form 17 which is the form of register of tickets not being complementary tickets, issued when tax is payable under Section 3 of the Act, clearl....
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....ty having population of more than one lakh and 45% for the city having population less than one lakh. It is stated that all the entertainment units are charging Rs.100/- towards the payment for admission to entertainment only. To illustrate: Payment of admission to entertainment =Rs.200/- less 50% of tax (as per S.3(i) =Rs.100/- Total chargeable amount = Rs.100/- Hence, If the payment for admission to entertainment is less 50% of tax is deducted, the net chargeable amount comes to Rs.100/- (which, in the present case, is not collected by virtue of the provisions of the Act, tourism policy 1995- 2000, and notification)." ..... "5.10 It is respectfully stated that if any entertainment unit is desirous of availing any benefit of the policy and notifications then in that case, the entertainment units will have to fall in line with the requirements provided in the said policy and notifications. The entertainment units will have to strictly adhere to the conditions mentioned in the notification and once having accepted the terms and conditions of the said notification for the purpose of availing of the tax exemption, they cannot no....
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.... to make as a condition for enabling visitors to attend or continue to attend the entertainment. Section 3 which levies fax provides for levy on "gross" payment received from consumer as is clear from the words of Section*3 and also as Interpreted in 1971 (1) SCC 471. The assessable value for determination of the tax liability is the payment received, irrespective of the break up of this amount, charged for admission to entertainment and tax payable thereon. The entertainment tax being a taxing measure, and Section 3 being a charging section, it has to be strictly construed and, therefore, liability to pay tax cannot be enlarged beyond what is provided in the Act. The multiplex cinemas in the ticket issued show that nothing' is received in the name of or on account of entertainment tax from the viewers. Therefore, in case of multiplex cinemas, the amount would be taxed under Section 3. In the tickets issued, payment of admission is shown as admission to entertainment, tax is shown as*"O", service charges shown as "0" and total amount recoverable by and payable to the proprietor is Rs.100/*, Tax liability has to be, therefore, calcula....
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.... of the Association within six weeks from thereof." 11. Mr. S.K. Bagaria, learned Senior Advocate for the State of Gujarat argued that a conjoint reading of Sections 3 and 29 of the Gujarat Entertainment Tax Act, 1977 clarifies that eligible units were granted exemption from payment of tax and that owners were required to charge only amounts towards payment for admission to entertainment which meant that no tax was actually collected. Therefore, if any unit or multiplex collected tax which it did not pass on to the state, that would not only be contrary to the public interest but would amount to unjust enrichment. 12. It was submitted that the impugned judgment is in error in not appreciating that under Section 29 any entertainment or class of entertainment can be fully and partially exempted from payment of tax and that tax exemptions are given for a particular period, and multiplex and theaters' owners were not allowed to collect taxes. The inclusion of element of tax, meant that they were allowed to retain such amounts. Therefore, the state was justified in urging the method of calculation whereby the tax element was added to the amount already collected, for the purpose o....
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....iscerned. Undoubtedly, the law is now settled that exemption notifications have to be interpreted strictly, and against assesses in case of ambiguity. This rule was stated in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal 2011 (1) SCC 236. The Constitution Bench, in that case, held that: "The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, thought at times, some latitude can be shown, if there is failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption." 17. This was followed, later, in another f....
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....mon sense. The point to be considered is whether the notice gives sufficient information as to the nature of the claim such as would the recipient to avert the litigation." 20. Sugandhi v. P. Rajkumar (2020) 10 SCC 706 also leaned in favour of substantial justice when it had to deal with complaint of breach of procedural law. 21. Harichand Srigopal (supra) also propounded the theory of substantial compliance, with provisions, while interpreting an exemption notification: "31. Of course, some of the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A distinction between the provisions of a statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in there nature, on the other, must be kept clearly distinguished... Doctrine of substantial compliance and "intended use" 32. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor ....