# Sanjib Dhawan v. State of U.P. and others

- **Citation:** (2005) 2 ILRA 608
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2005-07-11
- **Case number:** Civil Misc. Writ Petition No. 374 of 1997
- **Bench:** R.K. Agrawal, Rajes Kumar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/sanjib-dhawan-v-state-of-u-p-and-others-40493
- **Pages:** 6

## Headnote

Rules
1951-
petitioner was granted licence for the
exhibition of feature film-benefit under
scheme dt. 21.7.86 denied-grant-in-aid
cancelled with retrospective effect-on
the ground of violation of terms by
petitioner-basis
of
allegation-single
report
of
Deputy
Commissioner
Entertainment Tax-held-the part benefits
which has been availed can not be
demanded.

Held: Para 7 and 8

In view of the aforesaid decision of the
Apex Court it is held that the grant-inaid to the petitioner can not be cancelled
with retrospective effect. It can be
cancelled with prospective effect and no
demand can be made for the earlier
period during which grant-in-aid has
been availed prior to the date of its
cancellation.

In the impugned order nature of the
violation has not been referred, in as
much as it has not been referred that the
irregularity of such nature which shows
that the petitioner was involved in
evasion in past also and in these
circumstances, we are of the opinion
that on the basis of one inspection, in
which some irregularity has been alleged
the amount of grant-in-aid, which has
been availed can not be demanded
retrospectively.
Case law discussed:
W.P. 297 of 1997
SLP No. 1543 of 1998 decided on 10.4.02

## Text

INDIAN LAW REPORTS ALLAHABAD SERIES [2005
608
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 11.07.2005

BEFORE
THE HON'BLE R.K. AGRAWAL, J.
THE HON'BLE RAJES KUMAR, J.

Civil Misc. Writ Petition No. 374 of 1997

Sanjib Dhawan

...Petitioner
Versus
State of U.P. and others ...Respondents

Counsel for the Petitioner:
Sri Govind Krishna

Counsel for the Respondents:
S.C.

U.P.
Cinematography
Rules
1951-
petitioner was granted licence for the
exhibition of feature film-benefit under
scheme dt. 21.7.86 denied-grant-in-aid
cancelled with retrospective effect-on
the ground of violation of terms by
petitioner-basis
of
allegation-single
report
of
Deputy
Commissioner
Entertainment Tax-held-the part benefits
which has been availed can not be
demanded.

Held: Para 7 and 8

In view of the aforesaid decision of the
Apex Court it is held that the grant-inaid to the petitioner can not be cancelled
with retrospective effect. It can be
cancelled with prospective effect and no
demand can be made for the earlier
period during which grant-in-aid has
been availed prior to the date of its
cancellation.

In the impugned order nature of the
violation has not been referred, in as
much as it has not been referred that the
irregularity of such nature which shows
that the petitioner was involved in
evasion in past also and in these
circumstances, we are of the opinion
that on the basis of one inspection, in
which some irregularity has been alleged
the amount of grant-in-aid, which has
been availed can not be demanded
retrospectively.
Case law discussed:
W.P. 297 of 1997
SLP No. 1543 of 1998 decided on 10.4.02

(Delivered by Hon'ble Rajes Kumar, J.)

1. In the present writ petition
petitioner has sought the following relief:

"i. To issue a writ order or
direction in the nature of certiorari
calling for the records of the case and
quash the impugned order dated 15.4.97
passed by the respondent no. 2 contained
in annexure '7' to the writ petition;

ii.
to issue a writ order or
direction in the nature of mandamus
directing the respondents not to realise
any amount on the basis of the
impugned order dated 15.4.1997 and
also not to give effect to the recovery
memo no.289 dt. 5.5.97 issued pursuant
to the order, aforesaid;

iii. to issue any other such order or
direction which may deems fit and
proper under the circumstances of the
case;

iv. award costs to the petitioner."

Brief facts of the case are as follows:

2. Petitioner being encouraged by
the incentive scheme dated 21.7.1986
issued by the State of U.P. submitted an
application
before
the
Licensing
Authority under Rule 3 (1) of the U.P.
Cinematography Rules, 1951 for raising a
permanent construction of a cinema
2 All] Sanjib Dhawan V. State of U.P. and others 609
building under the name and style of
Bhagwan Talkies, Katra, Shahjahanpur.
The
licensing
authority
after
due
consideration accorded the permission for
raising the construction of permanent
cinema
hall.
After
completion
of
construction of the permanent cinema
building
petitioner
submitted
an
application for grant of licence for the
exhibition of feature films under the
scheme before the respondent no. 2, who
after inspection of cinema premises has
directed the petitioner to exhibit the
feature films w.e.f. 18.3.1989 and also
accorded the benefit provided under the
scheme dated 21.7.1986. Under the
scheme dated 21.07.1986 the petitioner
was entitled to recover the entertainment
tax but was not liable to pay and
entertainment tax for the period of two
years. In the third year, the petitioner was
required to deposit only 25% of the
entertainment tax collected from the
viewers at the time of charging admission
fee and the remaining 75% benefit under
the grant-in-aid scheme. Similarly for the
fifty year, the petitioner was required to
deposit only 50% of the total tax collected
and the remaining amount was in the
nature of aid given to the petitioner in the
grant-in-aid scheme Instead of making
any payment in cash towards aid, under
the grant-in-aid to the State Government
entitled
the
entitled
the
owner
to
appropriate 100% collected by him for the
first two years aid similarly to the extent
of 75% in third year and to the extent of
50% each for fourth and fifth year. The
petitioner after accordingly, availed the
benefit of grant-in-aid scheme w.e.f.
18.03.1989, the date on which the
petitioner has been accorded permission
to avail the benefit. It appears that on
08.01.1993 the petitioner has sold the
cinema building by executing a sale deed
to the respondent no. 3 w.e.f. 08.01.1993.
Respondent no. 3 carried on the business
of exhibiting the feature films on the said
building.

3. On 13.07.1995 a show cause
notice was issued by the respondent no. 2
alleging therein that the petitioner has
violated the terms and conditions of the
agreement already accorded in his favour
on 19.03.1989 and as such he was
directed to deposit the entertainment tax
amounting to Rs.12,29,618.88p. The
petitioner in compliance to the aforesaid
show cause notice filed detailed reply
stating therein that there was no bar in
selling the cinema premises in favour of
the respondent no. 3, who has also agreed
to bear all the consequences with regard
to the exhibition of the feature films by
executing an indemnity bond. It appears
that the respondent no. 2, instead of
deciding the issue, referred the matter to
the respondent no. 1 vide order dated
13.07.1995 and thereafter, respondent no.
1 after considering the entire facts and
circumstances arrived at a conclusion that
the petitioner is not required to deposit the
aforesaid amount since has not violated
any
of
the
terms
and
conditions
mentioned
in
the
agreement
dated
11.03.1989 and accordingly, passed an
order to the effect that the petitioner was
not liable to pay the entertainment tax.
After the aforesaid order, the respondent
no. 2 passed an order on 15.04.1997
directing the petitioner to deposit a sum of
Rs.19,01,527.40p. including the interest
@ 10%. The aforesaid amount has been
demanded on the ground that at the time
of inspection dated 06.06.1993 made by
the Commissioner, Entertainment Tax
certain irregularities were found and on
the basis of which a sum of Rs.1,250/-
towards tax was assessed and Rs.2000/-
INDIAN LAW REPORTS ALLAHABAD SERIES [2005
610
was levied towards penalty, which has
also been deposited on 29.03.1994 vide
challan no. 2, which establishes that ate
the time of inspection dated 06.06.1993
irregularities relating to the tax evasion
was found. It has been accordingly,
inferred that in view of the irregularities
relating to the evasion there was a
violation
of
the
agreement
and
accordingly, decision has been taken to
revoke the grant-in-aid. Respondent no. 2
accordingly,
demanded
a
sum
of
Rs.12,29,639.12p. which relates to the
grant-in-aid during the period 19.03.1989
to 18.03.1994 and the interest @ 18%
from the year 1993-94 to 1996-97
Rs.6,71,888.28p.
and
accordingly,
a
direction was issued to deposit a sum of
Rs.19,01,527.40p. In the present writ
petitioner was challenged the aforesaid
order dated 15.04.1997. Counter and
rejoinder affidavits have been exchanged.

Heard learned counsel for the parties.

4. Learned counsel for the petitioner
submitted that benefit which has been
availed under the grant-in-aid scheme
vide Government Order dated 21.07.1986
can not be demanded. He submitted that
for the alleged irregularities the grant-inaid can be revoked prospectively, but no
demand can be raised for the earlier
period during which benefit has been
availed. He submitted that the grant-in-aid
can only be cancelled w.e.f. 15.4.1997
and the demand for the remaining period
can not be made. In support of his
contention he relied upon the Division
Bench decision this Court in Writ
Petition No. 297 of 1997, Neelam
Talkies,
Jalalabad,
district
Shahjahanpur Vs. District Magistrate
and submitted that Civil Appeal No. 1543
of 1998 against the said order has been
dismissed
by
the
Apex
Court
on
10.04.2002. Learned Standing Counsel
submitted that under the scheme once it is
found that terms and conditions have been
violated, the benefit given under the
scheme can be revoked retrospectively
from the date of its grant and the benefit
availed
under
the
scheme
can
be
demanded, which has been done in the
present case by the impugned order. He
further submitted that in clause 2 of the
agreement it was specifically mentioned
that the petitioner would follow the
conditions and in case if it is not being
done, the District Magistrate would
immediately cancel the grant-in-aid and
under the said agreement it is also
declared by the petitioner that he and his
heirs would be bound with the conditions
and abide with the orders and conditions
and he would be responsible for the
deposit of amount at the normal rate. He
submitted that in view of aforesaid
averments made in the agreement he is
liable to pay the entire amount of grantin-aid which he has availed since
inception, in as much as he has violated
the terms and conditions.

5. Having heard learned counsel for
the parties, we are of the view that the
agreement dated 13.03.1989, allowed the
petitioner to avail the grant-in-aid can
only be cancelled prospectively on the
violation of the terms and conditions from
the
date
of
the
order
and
not
retrospectively.
Before
the
Division
Bench in Writ Petition No. 297 of 1997,
Neelam
Talkies
Jalalabad,
district
Shahjahanpur Vs. District Magistrate
similar controversy arose wherein on the
violation of the terms and conditions the
authority concerned has demanded the
entire amount availed towards grant-inaid under the scheme dated 21.07.1986
2 All] Sanjib Dhawan V. State of U.P. and others 611
from the date of inception vide order
dated 21.01.1992. On the consideration of
argument of the parties and the entire
facts and circumstances, the Division
Bench held as follows:

"We see force in this submission of
counsel for the petitioner. Unless there is
a clear provision that in the event of any
condition of the grant-in-aid scheme
being violated, the recipient of the
benefit would be liable to surrender the
entire benefit, we are of the view that the
respondent could not have legally called
upon the petitioner to deposit the entire
amount equal to the benefit including
that which he availed under the scheme
for the period, anterior to the date of the
order when benefit under the scheme
was specifically taken away. To make the
impugned order legally enforceable,
there must have been a clear provision
that in the event of violation of any
condition of the grant-in-aid scheme, the
respondent would be entitled to reopen
the matter of tax, which in the case of
the petitioner would be assumed to have
been deposited in view of Rule 24 (1) and
to create a demand of the full amount of
tax right from the first day when benefit
under the grant-in-aid was granted.
There is no such provision under the Act
or the Rules nor on the reasonable
interpretation of the scheme, can there
be one.

No finding has been recorded by the
respondent that the petitioner has been
violating the grant-in-aid scheme right
from the inception and that violation
discovered on 22.4.1991 when surprise
check was carried out at 2.35 p.m. on the
cinema premises, was not the first and
the only one. Also there is no finding
that on earlier occasions, the petitioner
was found to have been seriously
involved in tax evasion. In the absence of
such findings, the question is whether it
will be reasonable to hold that the
petitioner is liable to pay tax at the full
rate of entire period, covered by the
scheme simply on the ground of the
discovery of violation of a condition of
the scheme on a single date viz.
22.4.1991, when surprise check was
made on the cinema premises. In the
absence of any finding as aforesaid, it
will be reasonable to infer that the
petitioner
had
abided
by
all
the
conditions
of
the
scheme
before
22.4.1991 i.e. during the major period
covered by the scheme. There being no
serious violation of any condition of the
scheme prior to 22.4.1991, we are of the
view that it will not be equitable, fair and
just to hold that the petitioner is liable to
pay the entire amount equal to the
benefit taken under the scheme. We
make it clear so that we may not be
misunderstood,
that
we
are
not
expressing any final opinion on the
question whether or not in the event of
the discovery of any condition of the
scheme being violated, the proprietor of
a cinema hall could be called upon to
refund the entire benefit, taken under
the scheme. What we hold is that on the
facts and in the circumstances of the
case,
the
impugned
order
of
the
respondent calling upon the petitioner to
deposit tax at the full rate right from the
first day of the period covered by the
scheme, is not sustainable. A single
inspection/surprise
check
furnishing
sufficient clue of tax evasion or of any
other serious violation of a condition of
the scheme in the past we well though
carried out at the fag-end of the period
covered by the scheme may be sufficient
to take away the benefit of the entire
INDIAN LAW REPORTS ALLAHABAD SERIES [2005
612
period covered by the scheme. But in the
instant case, the record does not point
out the past history of the petitioner and
the tax evasion on the part of the
petitioner as discovered on 22.4.1991
does not warrant a conclusion that the
petitioner was liable to pay tax at the full
rate of the entire period, covered by the
scheme. Each case will depend on its
own facts and circumstances. The case
at hand does not induce us to accept the
contention of the respondent.

The
order
dated
25.7.1987
(Annexure '2' to the writ petition)
granting benefit under the grant-in-aid
scheme simply provides that the District
Magistrate would be entitled to cancel
the order granting benefit under the
scheme upon the discovery of any
condition of the scheme being violated
and in that event, the tax would be
realized in the manner as if there is no
grant-in-aid scheme at all. The order
dated 27.1.1992 does not clothe the
District Magistrate with the power to
realize tax at the full rate right from the
first day, when the benefit under the
grant-in-aid scheme was granted.

It is submitted by the learned
Standing Counsel that while availing
benefit under the grant-in-aid scheme,
the
petitioner
himself
gave
an
undertaking in Form-I appended to the
grant-in-aid scheme, para 6 of which
clearly shows that the petitioner had
given an undertaking that in the even of
any condition of the scheme being
violated, the District Magistrate would be
entitled to cancel the order of grant-inaid and that in that even the tax would
be released from him in the same
manner as if there was no such scheme
at all. It is not disputed that the
petitioner had given an undertaking as
envisaged by para 6 of Form-I (PraroopI), appended to the grant-in-aid scheme.
But the question is whether para 6 of
Form-I could be construed in such a
fasion as to cloth the District Magistrate
with the power to retrieve the entire
benefit from the petitioner, taken under
the scheme. In our view, the scheme
deserves
to
be
interpreted
in
a
reasonable, just and fair manner. Unless
the scheme itself indicates, it will be
wholly arbitrary to construed the scheme
in the manner that immediately upon the
discovery of any term of the scheme
being violated howsoever trivial that may
be the District Magistrate would be
entitled to retrieve the entire amount
equal to the benefit given to the
petitioner under the scheme.

In this case, the contention of the
respondent can be rejected for the simple
reason besides other reasons that para 6
of Form-I appended to the scheme does
not support his contention that the
petitioner had given an undertaking to
deposit the entire tax collected under the
scheme immediately upon the discovery
of any term of the scheme being
violated."

In Special Appeal No. 1543 of 1998
against the aforesaid order, Apex Court
held as follows:

"We have heard learned counsel for
the appellant and sent eh relevant
provisions. We are of the view that the
High Court is right in the view it has
taken. If the intention was to require the
assessee to pay tax at the normal rate
even for the period during which the
grant-in-aid had not been cancelled, that
provision should have expressly stated
2 All] Hansnath V. Asstt. Director of Consolidation, Deoria and others 613
so. As it reads, it cannot be held to have
any retrospective operation.

The appeal is dismissed.

No order as to costs."

6. Apex court has categorically held
that if the intention was to require the
assessee to pay the tax at normal rate even
for the period during which the grant-inaid, had not been cancelled that provision
should have expressly stated so, and as it
reads it can not be held to be any
retrospective operation.

7. In view of the aforesaid decision
of the Apex Court it is held that the grantin-aid to the petitioner can not be
cancelled with retrospective effect. It can
be cancelled with prospective effect and
no demand can be made for the earlier
period during which grant-in-aid has been
availed
prior
to
the
date
of
its
cancellation.

8. Perusal of the impugned order
shows that only one inspection by the
Deputy Commissioner Entertainment Tax
has been made basis for arriving to he
conclusion that the petitioner has violated
the
terms
and
conditions
of
the
agreement. It has been stated that on the
alleged discrepancies a sum of Rs.1,200/-
has been assessed and Rs.2,000/- has been
imposed
towards
penalty.
In
the
impugned order nature of the violation
has not been referred, in as much as it has
not been referred that the irregularity of
such nature which shows that the
petitioner was involved in evasion in past
also and in these circumstances, we are of
the opinion that on the basis of one
inspection, in which some irregularity has
been alleged the amount of grant-in-aid,
which has been availed can not be
demanded retrospectively.

9. For the aforesaid reasons demand
raised by the impugned order is not
sustainable and liable to be quashed.

10. In the result, writ petition is
allowed. Order dated 15.04.1997 is
quashed. There shall be no order as costs.

 Petition Allowed.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 19.07.2005

BEFORE
THE HON'BLE KRISHNA MURARI, J.

Civil Misc. Writ Petition No. 2738 of 1982

Hansnath

...Petitioner
Versus
Asstt. Director of Consolidation, Deoria
and others

 ...Respondents

Counsel for the Petitioner:
Sri A.S. Rai

Counsel for the Respondents:
Sri H.S.N. Tripathi
S.C.

Under U.P. Consolidation of Holding
Rules, 1956, Rule 26 (2)-Oral evidencerecorded in the presence and supervision
of the Presiding officer-but not signedwhether such oral testimony in absence
of the signatures of Consolidation officer
is bad? Held-"No"-no such provision
prescribed
under
the
rule-except
recording the Oral evidence in presence
and
personal
direction
on
superintendence.

Held: Para 6

Thus
the
Consolidation
Officer
is
required to hear the parties, frame issue,