THE STATE OF GUJARAT & ORS. versus MULTIPLEX ASSN. OF GUJARAT THROUGH ITS PRESIDENT

Citation: [2023] 3 S.C.R. 112 · Decided: 02-02-2023 · Supreme Court of India · Bench: S. RAVINDRA BHAT · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2023] 3 S.C.R.
   [2023] 3 S.C.R. 112
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THE STATE OF GUJARAT & ORS.
v.
MULTIPLEX ASSN. OF GUJARAT THROUGH ITS PRESIDENT
(Civil Appeal No. 13977 of 2015)
FEBRUARY 02, 2023
[S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
Tax/Taxation – Scheme to boost tourism sector, granted tax
holiday for 5-10 years to entities (including multi-cinema theatre
complexes or multiplexes) in respect of exemption from sales tax,
turnover tax, electricity duty, luxury tax, and entertainment tax upto
100% capital investment – No discerning method or mechanism of
calculating exemption limits mentioned in scheme – Assessee
contended that it was based on notional exercise, revenue contended
that element of tax had to be added to actual amount collected –
Held: High Court had rightly considered the issue and developed a
reasonable workable method of notional calculation of quantified
limit – Since assessee was not collecting any amounts as tax, no
question of addition of further amount – Notional determination
based on actual ticket collection for relevant period to be used to
determine whether specified ceiling limit in scheme for exemption
was achieved.
Tax/Taxation – Tax exemption notification unambiguous w.r.t
grant of exemption, and the terms of such relief (in terms of time,
and monetary limits), but clear gap in the manner how tax exemption
limits can be discerned, which if not construed appropriately, would
defeat the intention of the notification – Interpretation of –
Discussed.
Doctrines/Principles – Doctrine of ‘substantial compliance’
– Discussed.
Interpretation of Statutes – Rules of procedure are meant to
facilitate and not supplant justice.
Dismissing the appeal, the Court
HELD: 1.1 Neither the package nor the scheme (as
embodied in the exemption notification) indicated the mechanism
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for calculating how the exemption limits (100% capital
investment) was calculable. The rate of tax at the relevant time
was 50% of the entrance or ticket value. The assessee contended
that calculation of total exemption was to be done based on a
notional exercise, while the state’s contention was that since the
assessee had the benefit of tax exemption, the element of tax
had to be added to the actual amount collected. [Para 6-7 and
9][119-C; 120-G-H]
1.2 The High Court held that as multiplexes which availed
of the exemption had in fact not collected amounts as tax, there
was no question of addition of any further amount but rather that
to reckon whether the ceiling limit in the scheme for exemption
(100% capital investment) was achieved, was to be done by
notional determination based on actual ticket collection for the
relevant period. [Para 10][122-B-C]
1.3 It is evident from the terms of the Scheme and
exemption notification that the exemption is fixed to limits i.e.
(1) a time limit and (2) quantification. The latter could be subject
to the first i.e., in the event, the amount reached the exemption
limit were achieved, before the expiry of the period in question
(5-10 years), no further exemption could be claimed. The state,
however, omitted to provide any mechanism to determine how
the exemption limits could be worked out for the purpose of
notional calculation of the quantified limit. This meant that a
reasonable workable method of calculation had to be applied. [Para
14][125-B-D]
1.4 The state’s contention is founded on the assumption
that the amount collected during the exemption period by the
multiplex owners, also included in element of tax. This
assumption is flawed because there could have been no collection
which amounted to tax. Furthermore, multiplex/theatre-owners
were under an obligation to file monthly returns in terms of the
enactment. This would have taken care of any allegation of abuse.
The state’s additional argument was that since the element of
tax was notionally included in the collections – by multiplexes, -
during the exempted period, a further amount equivalent to the
tax collectable had to be added. High Court rightly held that this
contention was illogical and unreasonable. [Para 15-16][125-D-
F]
THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF
GUJARAT THROUGH ITS PRESIDENT
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1.5 There is concededly, a gap in the manner how tax
exemption limits can be discerned. The law is now settled (by
two constitution bench decisions) that exemption notifications
have to be interpreted strictly, and against assessees 

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