Madan B. Lokur, J.
1. The Petitioner is a restaurant (represented by its partner) on Asaf Ali Road, New Delhi. Apart from serving food items, the Petitioner holds floor shows in accordance with the terms of a license granted to it by the Delhi Police.
2. The Petitioner says that it charges its customers Rs.112/- as a cover charge/admission charge for watching the floor show. This amount is payable on entry into the restaurant by purchasing an admission ticket. Out of the amount payable by a customer, Rs.48/- is adjusted towards entertainment tax, which is deposited with the Respondents. The Petitioner's customers pay separately for the food and drinks consumed. The Petitioner says that it maintains regular books of account and pays the necessary sales tax and entertainment tax.
3. The Petitioner alleges that one day some persons posing as officers of the entertainment tax department wanted free entry to witness the floor show. The Manager of the restaurant asked them to produce their identity card, which they could not. Consequently, they were denied entry into the restaurant. The result of this action on behalf of the Petitioner was that a show cause notice dated 25th September 1997 was issued to the Petitioner by the entertainment tax department.
4. In the show cause notice dated 25th September 1997 it was alleged that on a field inspection, it was brought to the notice of the department that on 29th August 1997, 28 persons were found in the hall without any valid ticket and that only four valid tickets had been issued from the authenticated ticket booklet. Some of the patrons had informed the inspecting team that they had paid Rs.400/- for entry into the hall, even though the Petitioner was entitled to charge only Rs.112/-. It was also alleged that the Petitioner was not maintaining the appropriate entertainment tax register, which was not produced before the inspection team. The Petitioner was asked to show cause why action be not taken against it as per the provisions of law.
5. The Petitioner submitted its reply to the show cause notice dated 25th September 1997. The Petitioner of course denied the various allegations made in the show cause notice.
6. The reply given by the Petitioner was considered by the Respondents but was not found satisfactory. Consequently, the Petitioner was issued another show cause notice dated 16th March 1998. In the second show cause notice, it was alleged that several field inspections were conducted in the restaurant premises in December 1997. The inspecting teams had reported that the number of tickets issued by the Petitioner was far less than the number of persons present to watch the floor shows. The Petitioner was directed to explain why entertainment tax should not be levied on the basis of the field inspection reports on the best judgment of the Respondents in accordance with the provisions of the United Provinces Entertainment and Betting Tax Act, 1937, as extended to Delhi (hereinafter referred to as the Act).
7. On 16th April 1998, the Petitioner replied to the show cause notice denying the allegations made by the Respondents. According to the Petitioner, it had not violated any law as alleged.
8. On 4th June 1998 the Additional Entertainment Tax Officer passed an assessment/tax levy order. As per the assessment order, it was held that on an average the number of persons present and witnessing the floor shows was double the number of tickets issued. Moreover, the Petitioner was charging an amount of Rs.400/- per person for the floor show notwithstanding its contention that some extra amount was levied for snacks, cold drinks and the company of the artiste. Under these circumstances, it was held that on the basis of the data collected from the field inspection reports and on the best judgment of the Respondents, the Petitioner was liable to pay the requisite entertainment tax which came to Rs.34,69,338/- over and above the amount of entertainment tax already paid. The assessment order pertained to the financial year 1997-98.
9. Feeling aggrieved by the order dated 4th June 1998 passed by the Additional Entertainment Tax Officer, the Petitioner filed an appeal under the provisions of Section 10(2) of the Act. The appeal filed by the Petitioner came to be heard by the Lieutenant Governor who passed an order dated 16th December 1998 dismissing the appeal. It was held that the Petitioner was not declaring its entire proceeds and was avoiding payment of entertainment tax. Accordingly, the Lieutenant Governor upheld the assessment order dated 4th June 1998.
10. On the broad facts mentioned above, the Petitioner filed a writ petition under Article 226 of the Constitution challenging the assessment order dated 4th June 1998 as well as the appellate order dated 16th December 1998.
11. When the writ petition came up for admission on 6th February 2002, learned counsel for the Respondents undertook to place on record the inspection reports as well as the order by which the assessing officer was authorized to pass the assessment order under the Act. Thereafter, on 19th September 2002 learned counsel for the Respondents stated that the inspection reports as well as the order by which the assessing officer was authorized to pass the assessment order were not available and thereforee the Respondents were unable to comply with the order dated 6th February 2002. The writ petition was then admitted for final hearing.
12. We heard learned counsel for the parties on 22nd and 29th January 2003. When the matter was again taken up for hearing on 17th February 2003, we directed learned counsel for the Respondents to file an affidavit stating whether the information as required on 19th September 2002 was available or not. Learned counsel for the Respondents accordingly filed an additional affidavit dated 21st February 2003.
13. In the additional affidavit, it was stated that the Act was extended to Delhi by a Notification dated 1st April 1950 issued by the Government of India. By another Notification dated 1st June 1961, the Chief Commissioner of Delhi delegated his powers under Section 6(1) and Section 6(2) of the Act to the Commissioner of Entertainment Tax. A third Notification was issued by the Government of India on 10th May 1968 whereby the word 'Government' appearing in the Act was substituted by the word 'Administrator' of the Union Territory of Delhi. By a Notification dated 17th June 1988, powers conferred upon the Administrator (now the Lieutenant Governor) under Section 3(3), 4(2) and 8(1) of the Act were delegated to the Commissioner of Entertainment Tax.
14. It was further stated that on 31st January 1976 the Commissioner of Entertainment Tax issued executive instructions relating to the organizational set-up and the powers of the officers including the Entertainment Tax Officer and the Additional Entertainment Tax Officer. The power of collection and refund of entertainment tax was specifically given to the Additional Entertainment Tax Officer who was responsible for the implementation of the Act and the rules framed there under. By a Notification dated 27th December 1996, the Lieutenant Governor delegated the powers under Section 7 of the Act to the Entertainment Tax Officer and the Additional Entertainment Tax Officer.
15. It was stated in the additional affidavit that a cumulative reading of all the above Notifications makes it clear that the Additional Entertainment Tax Officer or the Entertainment Tax Officer has the power to levy entertainment tax and pass assessment orders and recover any outstanding dues from any assessed with regard to the same. It was submitted that consequently the order dated 4th June 1998 passed by the Additional Entertainment Tax Officer was validly made in exercise of statutory powers delegated to him by virtue of the Notifications mentioned above.
16. Along with the additional affidavit, the Respondents filed copies of the inspection reports prepared by the teams who conducted inspections in the premises of the Petitioner between 12th and 29th December 1997, on the basis of which the show cause notice was issued to the Petitioner.
17. The Petitioner filed a reply to the additional affidavit in which it was stated than on a perusal of the various Notifications annexed to the additional affidavit, it is clear that there is no specific Notification authorizing the Additional Entertainment Tax Officer to pass the assessment order impugned in the writ petition.
18. Further arguments in the case were heard on 3rd March 2003 when learned counsel for the parties concluded their submissions and judgment was reserved.
19. The provisions of the Act that are relevant and material for our consideration are reproduced below: -
'3. Tax on payment for admission to entertainment.
(1) There shall be levied and paid to the Central Government on all payments for admission to any entertainment a tax (hereinafter referred to as entertainment tax) at the following rates, namely -
Where the payment, excluding the amount of the tax:
Exceeds two annas but does not exceed three annas -- Three pice xxx xxx xxx Exceeds six rupees eight annas, but not exceed ten rupees -- Two rupees eight annas For every five rupees or part thereofin excess of the first ten rupees, inaddition to the payment on the first ten rupees -- One rupeefour annas (2) If in any entertainment to which admission is generally on payment, any person is admitted free of charge or an a concession rate, he would be liable to pay the same amount of entertainment tax as would be payable by him had be been admitted on full payment to the class to which he is entitled.
(3) Amount payable on lump subscriptions or contributions or on season tickets. Where the payment for admission to an entertainment is made by means of a lump sum paid as a subscription or contribution to any society, or for a season ticket or for the right of admission to a series of entertainments or to any entertainment during a certain period of time, or for any privilege, right, facility or thing combined with the right of admission to any entertainment or involving such right of admission without further payment or at a reduced charge, the entertainment tax shall be paid on the amount of the lump sum, but where the Chief Commissioner is of opinion that the payment of a lump sum or any payment for a ticket represents payment for other privileges, rights or purposes besides the admission to an entertainment, or covers admission to an entertainment during any period for which the tax has not been in operation, the tax shall be charged on such amount as appears to the Chief Commissioner to represent the right of admission to entertainment in respect of which the entertainment tax is payable.
4. Manner of admission and payment.
(1) Save as otherwise provided by this Act, no person, other than a person who has some duty to perform in connection with the entertainment or a duty imposed upon him by law, shall be admitted to any entertainment, except with a ticket stamped with an impressed, embossed, engraved or adhesive stamp (not used before) issued by the Central Government for the purposes of revenue and denoting that the proper entertainment tax payable under section 3 has been paid.
(2) Consolidated payment by proprietor of entertainment. Government may, on the application of a proprietor of any entertainment in respect of which the entertainment tax is payable under section 3, allow the proprietor, on such conditions as Government may prescribe, to pay the amount of the tax due -
(a) by a consolidated payment of a percentage to be fixed by the Government of the gross sum received by the proprietor on account of payments for admission to the entertainment and on account of the tax;
(b) in accordance with returns of the payments for admission to the entertainment and on account of the tax;
(c) in accordance with results recorded by any mechanical contrivance which automatically registers the number of persons admitted.
(3) xxx xxx xxx
5. Penalty for non-payment of tax.
(1) No person liable to pay entertainment tax shall enter or obtain admission to an entertainment without payment of the tax livable under section 3.
(2) Any person who enters or obtains admission to an entertainment in contravention of the provision of sub-section (1) shall, on conviction before a Magistrate, be liable to pay a fine not exceeding two hundred rupees and shall in addition be liable to pay the tax which would have been paid by him.
(3) If any person liable to pay entertainment tax is admitted to a place of entertainment without payment of the tax livable under section 3, the proprietor of the entertainment to which such person is admitted shall, on conviction before a Magistrate, be liable in respect of every such contravention to a fine not exceeding Rs.500.
6. Exemptions.
(1) The entertainment tax shall not be charged on payments for admission to any entertainment where Government are satisfied -
(a) that the whole of the takings thereof are devoted to philanthropic, religious or charitable purposes without any charge on the takings for any expenses of the entertainment; or
(b) that the entertainment is of a wholly educational character (any question on that point to be determined in the case of difference by Government in the Department of Education); or
(c) that the entertainment is provided for partly educational or partly scientific purposes by a society not conducted or established for profit; or
(d) that the entertainment is provided by a society which is established solely for the purpose of promoting the interest of the industry or agriculture, or the manufacturing industry, or some branch thereof, or the public health, and which is not conducted for profit, and consists solely of an exhibition of the products of the industry, or branch thereof, for promoting the interest of which the society exists or of materials, machinery, appliances, or foot-stuffs, used in the production of those products, or of articles which are of material interest in connection with the questions relating to the public health, as the case may be.
(2) Refunds in certain circumstances. Where Government are satisfied that the whole of the net proceeds of an entertainment are devoted to philanthropic, religious or charitable purposes, and that in calculating the net, proceeds not more than twenty-five per cent, of the gross proceeds have been deducted on account of the expenses of the entertainments, they shall repay to the proprietor the amount of the entertainment tax paid in respect of the entertainment.
(3) Government may, by general or special order, exempt any entertainment or class of entertainment from liability to the entertainment tax.
7. Recoveries.
Any sum due on account of the entertainment tax shall be recoverable by Government as an arrear of land revenue.
8. Inspection.
(1) Any officer authorized by the Government for the purpose may enter any place of entertainment while the entertainment is proceeding, and any place ordinarily used as place of entertainment, at any reasonable times, with a view to seeing whether provisions of this chapter or any rules made there under are being complied with.
(2) If any person prevents or obstructs the entry of any officer so authorized, he shall, in addition to any other punishment to which he is liable under any law for the time being in force, be liable on conviction before a Magistrate to a fine not exceeding two hundred rupees.
(3) Every officer authorised under this section shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code.
10. Powers of Chief Commissioner to delegate certain powers.
(1) The Chief Commissioner may, by notification, delegate all or any of its powers under this chapter, except those conferred upon it by section 9 and by this section, to any person or to any authority subordinate to him.
(2) Any person considering himself aggrieved by an order passed by such person or authority in virtue of the power delegated under sub-section (1) may appeal to the Chief Commissioner whose decision in the matter shall be final.'
20. Learned counsel for the Petitioner made four submissions before us. It was firstly contended that the words 'levied and paid' as used in Section 3 of the Act do not include assessment. In other words, there is no provision in the Act for passing an assessment order. It was then submitted in the alternative that no procedure has been laid down for making an assessment. Thirdly, it was submitted that there is no power vested in the Respondents to pass an assessment order since no such power has been delegated to any of the officers under the provisions of Section 3 of the Act. In this context, reference was drawn to the order dated 6th February, 2002 as well as the order dated 19th September, 2002 passed by this Court. It was also submitted in this context that the additional affidavit filed on behalf of the Respondents does not throw any further light on this issue. The final contention of learned counsel was that the assessment order was not sustainable on merits.
21. In so far as the first contention of learned counsel is concerned, it has to be rejected in view of at least two decisions of the Supreme Court to the effect that levy includes assessment.
22. In Assistant Collector of Central Excise, Calcutta Division vs . National Tobacco Co. of India Ltd., : 1978(2)ELT416(SC) , the Supreme Court while considering the provisions of the Central Excises and Salt Act, 1940 held in paragraph 19 of the Report as follows:-
'The term 'levy' appears to us to be wider in its import than the term 'assessment'. It may include both 'imposition' of a tax as well as assessment. The term 'imposition' is generally used for the levy of a tax or duty by legislative provisions indicating the subject-matter of the tax and the rates at which it has to be taxed. The term 'assessment', on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate 'levy' with an 'assessment' as well as with the collection of a tax when it held that 'when the payment of tax is enforced, there is a levy'. We think that, although the connotation of the term 'levy' seems wider than that of 'assessment', which it includes, yet, it does not seem to us to extend to 'collection'.'
23. Similarly, in M/s Ujagar Prints & Ors. (II) vs . Union of India & Ors., : [1989]179ITR317a(SC) , the Supreme Court held, while considering the provisions of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, while relying upon National Tobacco Co., that the term 'levy' is an expression of wide import and it includes both imposition of a tax as well as its quantification and assessment.
24. As regards the second contention, learned counsel for the Petitioner very fairly brought to our notice the decision of the Supreme Court in State of Orissa vs . Ravi Talkies, : AIR1999SC835 pertaining to the Orissa Entertainment Tax Act, 1946. In that case, a similar contention was accepted by the High Court, but the Supreme Court upset the decision of the High Court on appeal by negativing the contention. Learned counsel, however, sought to distinguish Ravi Talkies in view of the following conclusions of the Supreme Court in paragraph 8 of the Report:
'The Act makes provision for collection of the tax through stamp on the ticket sold by the proprietor of any entertainment for admission to the entertainment and in case where it is not collected by stamp it has to be paid on the basis of the number of admissions and for that purpose provisions are contained in the Rules for maintaining proper Registers and for filing of returns and payment of tax as per returns and attaching the receipt with the returns. In the event of failure on the part of the proprietor to pay the tax which is payable by him provision is made in Section 14 for taking action to impose a penalty for such default and under Section 14. The power to take action under Section 14 was conferred on the Commercial tax Officer. An appeal lay against the order passed by such officer to the Assistant Commissioner of Tax and further revision lay to the Commissioner. In view of the aforementioned provisions contained in the Act and the Rules we are unable to agree with the High Court that neither the Act or the Rules contained a procedure regarding assessment of tax.'
25. The submission of learned counsel for Petitioner was that the provisions of law referred to by the Supreme Court in the above passage are missing in the Act that we are concerned with.
26. By itself, the Act does not provide for the exact procedure for assessment of entertainment tax. The Act has to be read along with the rules framed there under, namely, the Delhi Entertainment Tax Rules, 1950 (for short the Rules). Together, they lay down the procedure for the levy and collection of entertainment tax. Section 4(1) of the Act read with Rules 3 to 12 concerns itself with payment of tax by means of affixation of adhesive stamps on the ticket for admission to the entertainment. Section 4(2) of the Act read with Rules 16 to 21 relates to payment of tax otherwise than by affixation of stamps. This may be on the basis of a percentage of the gross sum received by the proprietor on account of payments for admission to the entertainment [Section 4(2)(a)], or in accordance with returns of the payments for admission to the entertainment [Section 4(2)(b)] or in accordance with the results recorded by a mechanical contrivance which automatically records the number of persons admitted [Section4 (2)(c)]. In the event of payment by filing of a return, the proprietor has to submit the return to the prescribed officer in Form D.E.T. 2 showing the number of tickets issued on each date, the gross amount of receipts from the sale of tickets and the amount of tax collected. [Rule 18 of the Rules]. Section 5(3) of the Act provides for imposition of a penalty for non-payment of tax and Section 7 provides for recovery of unpaid tax as an arrear of land revenue. There is a provision for filing an appeal [Section 10(2)] a remedy availed of by the Petitioner. Adequate provisions have, thereforee, been made under the Act and the Rules for the levy, assessment and collection of entertainment tax.
27. As regards the precise method of making an assessment, we can do no better than quote the Supreme Court from its decision in Ravi Talkies. It is said in paragraph 8 of the Report:
'... it may be pointed out that in the case Assistant Collector of Central Excise, Calcutta Division v. National Tobacco Co. of India Ltd., : 1978(2)ELT416(SC) (supra) this Court, while rejecting that the Central Excise Rules, 1944 neither specify the kind of notice which should precede assessment nor lay down the need to pass an assessment order, has said (at p. 2570 of AIR):
'All we can say is that rules of natural justice have to be observed for, as was held by this Court in KTM Nair v. State of Kerala : [1961]3SCR77 , the assessment of a tax on person or property is at least of a quasi-judicial character.'
28. It was not the case of the Petitioner that it was not accorded a proper hearing either at the stage of assessment or at the appellate stage. Nor was it the case of the Petitioner that the principles of natural justice were not fully complied with.
29. Consequently, in view of the law on the subject having been laid down by the Supreme Court in Ravi Talkies, we have no hesitation in rejecting the submission of learned counsel for the Petitioner.
30. The third contention urged by learned counsel is quite formidable mainly because the Respondents have been unable to show if any person has been authorized to pass an assessment order under the Act. It is hard to believe, but it does appear that the Respondents have appointed someone as an Additional Entertainment Tax Officer without investing him with any power to make an assessment order. When the writ petition came up for hearing on 6th February 2002, the Respondents were asked to place on record the order 'by which the Assessing Officer was authorized to pass the assessment orders under the United Provinces Entertainment and Betting Tax Act, 1937'. Thereafter, on 19th September 2002, learned counsel for the Respondents stated that 'the order by which the assessing officer was authorized to pass the assessment order under the 1937 Act are not available with the respondent and, thereforee, they are not in a position to comply with the order dated 6 February 2002'.
31. During the final hearing of the writ petition, we were of the view that the statement made by learned counsel may have a serious impact on the functioning of the Entertainment Tax department. Consequently, on 17th February 2003 we required an affidavit to be filed by a senior officer of the Respondents giving the factual position. The additional affidavit filed by the Respondents pursuant to our order does not improve the case of the Respondents. Nothing has been placed on record to show that the Additional Entertainment Tax Officer was authorized or empowered to make the impugned assessment order. The only power delegated to the Commissioner of Entertainment Tax is to grant exemptions under the provisions of Section 6 [vide Notification dated 1st June 1961]; to accept entertainment tax payable on lump subscriptions, contributions or on season tickets, to accept consolidated payment of entertainment tax and to inspect premises used as a place of entertainment [vide Notification dated 17th June 1988] and recovery of tax as an arrear of land revenue [vide Notification dated 27th December 1996]. From these Notifications, it is not possible for us to read any power or authorization (cumulatively or otherwise) in favor of the Additional Entertainment Tax Officer to pass the assessment order which he did.
32. We are not inclined to set aside the impugned assessment order on merits, as indeed that is not within the scope of our power of judicial review. However, it does appear to us that on the basis of inspections carried out over a period of 14 days, the assessing officer could not reasonably have concluded that the Petitioner restaurant has no business other than to have a floor show in its restaurant for every day of the year and throughout the working hours of the restaurant. This was not even the allegation made against the Petitioner, nor is this borne out from the inspection reports filed by the Respondents along with the additional affidavit. The best judgment assessment suffers from an inherent irrationality not supported by the admitted facts on record and so cannot be sustained. We feel that the appropriate direction to be given under these circumstances would be to remand the matter to the assessing officer for passing a fresh assessment order after considering the entire facts of the case. However, since on the basis of the material placed on record by the Respondents, we have come to the conclusion that there was no officer authorized to pass an assessment order, we refrain from issuing any such direction.
33. Consequently, we quash the impugned assessment order dated 4th June 1998 passed by the Additional Entertainment Tax Officer as having been made without any authority of law. The subsequent proceedings emanating from the impugned assessment order would also stand quashed as a result thereof.
34. The writ petition is allowed but there will be no order as to costs.