112 SUPREME COURT[2023]REPORTS3 S.C.R. 112 [2023] 3 S.C.R. A THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF GUJARAT THROUGH ITS PRESIDENT (Civil Appeal No. 13977 of 2015) B 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, C 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 – D 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 E 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 F

defeat the intention of the notification – Interpretation of – Discussed. Doctrines/Principles – Doctrine of ‘substantial compliance’ – Discussed. G 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 H 112 THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 113 GUJARAT THROUGH ITS PRESIDENT for calculating how the exemption limits (100% capital A 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 Bhad 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 C (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. D

(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 Ethe 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 F 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. G 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] H 114 SUPREME COURT REPORTS [2023] 3 S.C.R.

A 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 in case of ambiguity. [Para 16][125-F-G] B Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal [2010] 13 SCR 820: (2011) 1 SCC 236; Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company & Ors. [2018] 7 SCR 1191: (2018) 9 SCC 1 – followed. C 1.6 In the present case, the situation is peculiar, because the grant of exemption, and the terms of such relief (in terms of time, and monetary limits) are unambiguous. However, the procedure for calculation of the monetary limit is not prescribed at all. Therefore, the present case is not one of ambiguity, but instead, one of a clear gap, which if not construed appropriately, D would defeat the intention of the notification. It has often been held – in the context of rules of procedures that they are meant to facilitate, not supplant justice and the court must lean towards substantial justice when faced with a complaint of procedural law. [Para 17-20][125-D-E; 127-D-E] E Sangram Singh v. Election Tribunal, Kotah & Anr. [1955] 2 SCR 1; Ghanshyam Dass v. Dominion of India [1984] 3 SCR 229: (1984) 3 SCC 64; Sugandhi v. P. Rajkumar (2020) 10 SCC 706 – relied on.

1.7 A reasonable method of calculating benefit of tax F exemption, for the purpose of considering whether the 100% limit equivalent to capital expenditure was reached or not is to notionally determine the tax amounts payable during the relevant period, when the multiplexes enjoyed tax exemption. This is possible, having regard to the returns filed by them during the time when they sought and were granted exemption. The outer G limit (100% investment) is a discernible amount, which the units would be able to furnish, with appropriate proof in their books of accounts, and valuations furnished by them. Clearly enunciating this principle and applying to the facts of this case, the High Court followed a reasonable method which cannot be faulted. [Para H 22][128-C-E] STHE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 115 GUJARAT THROUGH ITS PRESIDENT Devi Multiplex & Anr. v. State Of Gujarat & Ors. (2015) A 9 SCC 132 : [2015] 6 SCR 1 – referred to. Case Law Reference [2015] 6 SCR 1 referred to Para 2 [2010] 13 SCR 820 followed Para 16 B [2018] 7 SCR 1191 followed Para 17 [1955] 2 SCR 1 relied on Para 18 [1984] 3 SCR 229 relied on Para 19 CIVIL APPELLATE JURISDICTION : Civil Appeal No.13977 C of 2015. From the Judgment and Order dated 26.06.2009 of the High Court of Gujarat at Ahmedabad in SCA No.5391 of 2004. S. K. Bagaria, Sr. Adv., Kumar Ajit Singh, Ms. Swati Ghildiyal, DMs. Devyani Bhatt, Advs. for the Appellants.

Maninder Singh, Sr. Adv., M/s Khaitan & Co., Shreeyas Lalit, Gunjan Sharma, Kumar Mihir, Arnav Kumar, Advs. for the Respondent. The Judgment of the Court was delivered by S. RAVINDRA BHAT, J. E 1. This appeal by State of Gujarat, complains of the grievance with respect to a part of the impugned judgment1. 2. This Court had occasion to deal with the substantial grievance of the present writ petitioner(s)/respondents, in a judgment reported in F Devi Multiplex & another v State of Gujarat and Others2. The issue which concerns this Court in the present proceedings, with 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 G had adjudicated upon the grievance of the multiplex owners, regarding denial of extension of the scheme. This court held that the denial of 1dated 26.06.2009 delivered by the Gujarat High Court in Special Civil Application No.5391 of 2004. 2(2015) 9 SCC 132 H 116 SUPREME COURT REPORTS [2023] 3 S.C.R. A 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 B 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 C announced a policy named New Package Scheme of Incentives for Tourism Projects, 1995-2000 (hereafter referred to as “the Scheme”) with a view to make available all fiscal and non-fiscal incentives, reliefs and concessions enjoyed by industries to “tourism” which was accorded the status of an industry, in D order to give a boost to tourism sector by attracting higher investment in the areas with tourism potential and to generate employment opportunities. Under Clause 2, the Scheme came into operation on 1-8-1995 and was to remain in force for a period of five years up to 31-7-2000. Under Clause 3, to be eligible, a new tourism unit ought to be registered after 1-8- E 1995. Clause 4.7 dealt with effective steps which such unit was expected to undertake. Under Clause 5, after taking initial effective steps a tourism unit could apply to the Director of Tourism for registration. All projects had to conform to the specifications and requirements spelt out in Appendix B which F appendix dealt with various categories of tourism units and Item 22 thereof pertained to “Entertainment Complexes” including multi-cinema theatre complexes or multiplexes. Clause 7 categorised tourism units in four categories, namely, Prestigious Tourism Units, Large-scale Tourism Units, Small-scale Tourism Units and Tiny Tourism Units with minimum fixed G capital investment of Rs 10 crores, 90 lakhs, 10 lakhs and less than 10 lakhs, respectively. Clause 8 dealt with incentives and stated that a tax holiday of 5-10 years would be available in respect of exemptions from (i) sales tax (ii) turnover tax

(iii) electricity duty (iv) luxury tax, and (v) entertainment tax, H THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 117 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.] up to 100% of capital investment. In Clause 8.1 it was stated A that the quantum of incentives would not exceed 100% of eligible capital investment and it further stated the period of eligibility in respect of prestigious tourism units, large-scale tourism units, small-scale tourism units and tiny tourism units to be 10 years, 8 years, 6 years and 5 years, respectively. B Clause 9 dealt with composition of sanctioning authority whereunder State Level Committee was competent to issue eligibility certificate in respect of prestigious and large units while District Level Committee was to issue eligibility certificate for all small-scale and tiny tourism units. The procedure for registration of tourism units for incentives was C detailed in Clause 10.” 4. What is an issue in this case, is another part of the new Package Scheme i.e. proper manner of construing para 8 and 8.1 which, for the sake of convenience are produced below: “INCENTIVE D 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 E eligible areas. List of taxes 1. Exemption from Sales Tax.

2. Exemption from Turnover tax. 3. Exemption from Electricity Duty. F 4. Exemption from Luxury Tax. 5. Exemption from Entertainment Tax. Exemption from sales tax is available with the following conditions: G (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. H 118 SUPREME COURT REPORTS [2023] 3 S.C.R. A (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 incentives shall not exceed 100% of eligible B capital investment. If the limits of incentives expire before the eligible period, the unit cannot avail of any further benefit. The eligible units will be made available a tax holiday for the period mentioned against each category of tourism unit as tabulated below: C D 5. This Scheme was embodied in Exemption Notification dated 14.02.1997, the relevant portion of which reads as follows: E

“NOW, THEREFORE, in exercise of the powers conferred by Sub-Section (1) of Section-29 of the Gujarat Entertainments Tax Act, 1977 (Guj.16 of 1977), (hereinafter referred to as “the said Act”) and in supersession of Government Notification, Information, 133 Broadcasting and F Tourism Department No. (GHT.91.45) MNR-1391-285-E, dated 24th December, 1991 the Government of Gujarat hereby exempt wholly the tax on the entertainments which fulfils the criteria laid down in Appendix-B of the said resolution (hereinafter referred to as the eligible entertainment) during the eligible period or upto the period of expiry of the limits of G incentives, whichever is earlier, to the extent referred to in para 8.1 of the said resolution, subject to the following conditions:- …. H THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 119 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.] … A 15. The proprietor of a eligible entertainment shall be liable to pay tax as soon as the quantum of exemption availed of towards sales tax, turnover tax, electricity duty, luxury tax and entertainment tax equals the amount specified in the eligibility certificate issued by the Appropriate Authority or B on expiry of the time limit mentioned in the. said certificate, whichever is earlier.”

6. Neither the package nor the Scheme indicated the mechanism for calculating how the exemption limits (100% capital investment) was calculable. The rate of tax at the relevant time was 50% of the entrance C or ticket value. 7. The appellants’ contention was that the calculation of total exemption to be done based upon a notional exercise. Such determination was explained in the pleadings in the writ petition as follows: “In case of the new units which has invested an amount of D 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 E 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.50/- recovered by way of entertainment tax is required to be notionally adjusted against the F 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: G

“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 H 120 SUPREME COURT REPORTS [2023] 3 S.C.R. A Section 3 of the Act, clearly stipulates mention of price of ticket including entertainment tax under Column 2, which also goes to show that the entertainment tax is payable on the gross receipt and there is no question of notionally calculating the tax. The returns submitted by few members of Multiplex Association would show that they have been showing the B price of the ticket inclusive of tax and seeking exemption on the basis of the rate applicable by calculating tax on the receipt. Since beginning, the members of the Association have been filing monthly returns on the basis of tax calculated on the receipt made and the respondent authorities have been C accepting the same without any objection. In the case of M/s. lnox Multiplex, the Mamlatdar, Vadodara has passed an assessment order by calculating tax on the total receipt i.e. for example for the period between 19.09.2003 and 25.9.2003, the gross collection is Rs. 10,30,746/-. The Mamlatdar has assessed Rs.5,15,373/- as net tax payable at D

the rate of 50%. M/s. lnox Entertainment Limited, Vadodara was issued an ad hoc eligibility certificate for an amount of Rs.554.45 Lacs. For the purposes of calculating the amount of tax till the limit of Rs.554.45 Lacs, the Mamlatdar has considered 100% of the gross, collection i.e. on gross E collection of Rs.4,32,268/-, the Mamlatdar has assessed a tax on Rs.4,32,268/-.” The claim in the writ petition inter alia was as follows: “(B) The Hon’ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction F directing the Respondents to consider only the amount of entertainment tax payable notionally by the members of the Petitioner Association to the Respondent State as the capital value for the purpose of setting off the eligible capital investment of the members of the Petitioner Association as contemplated under the scheme contained in the Resolution G at Annexure-A hereto;” 9. The state’s contention, on the other hand was that since the appellant had the benefit of tax exemption, the element of tax had to be added to the actual amount collected. This was sought to be urged by the State in its counter affidavit in following terms: H THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 121 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.]

“5.5 In view of the aforesaid, it is respectfully submitted that A section 3 envisages the rate of tax which is to be levied on the payment for admission to the entertainment. There is a 50% tax slab for the city 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 B Rs.100/- towards the payment for admission to entertainment only. To illustrate: Payment of admission to entertainment = Rs.200/-C 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 D 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 E 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 F notification for the purpose of availing of the tax exemption, they cannot now back out under the guise that what the entertainment units are charging towards entertainment tax cannot be recovered by the State Government. It is respectfully stated that any breach of any condition or non-compliance of any of the provisions of the statute, notifications and G circulars would result in termination of exemption granted. At the cost of repetition, I say that to illustrate if Rs.100/- is charged for admission, then it has to be treated as a payment for admission to entertainment excluding tax. When the rate of tax is 50%, it has got to be notionally added to the basic H 122 SUPREME COURT REPORTS [2023] 3 S.C.R. A net ticket rate of Rs.100/ and it is that net ticket rate of Rs.100/ - which would be benefit availed of and would be liable to be adjusted in terms of the notifications and Government resolutions.”

10. The High Court agreed with the petitioners’ contention and held that as multiplexes which availed of the exemption, had in fact not B collected amounts as tax, there were no question of addition of any further amount but rather that to reckon whether the 100% capital investment (the ceiling limit in the Scheme for exemption) was achieved was to be done by notional determination based upon the actual ticket collection for the relevant period. The finding of the High Court in this C regard pertinently are as follows:

“Clause 8 of the Scheme declares that “tax holiday of 5 to 1 O years” will .be’ available in respect of various taxes including “exemption from entertainment upto 100% of capital investment. The said clause provides that the assessee viz .. D the proprietor of an entertainment complex is exempted from paying the tax, payable by him under the Act, till tax is 100% sef off against the 100% value of the eligible capital investment made by the proprietor. The question which has arisen in the present petition is how the amount of “tax” should be determined for set off against the available tax incentives E i.e. 100% of the eligible capital investments. The issue has arisen in context of the legal provision of the Gujarat Entertainment Tax Act. Section 3 of the Act is held to be a charging Section. It is held that liability for payment of duty is imposed upon the proprietor and not upon the visitors of F the theater. The proprietor does not act as an agent of the Government’ for collection of duty. The entertainment duty is a payment which the proprietor is required 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” G

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 H payable thereon. THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 123 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.] The entertainment tax being a taxing measure, and Section A 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 B 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, calculated on this amount C i.e. Rs.100/- which would be at 50% payment for admission received from the viewers.

Under the incentive, there is no special method of calculation of the tax liability prescribed as a condition of exemption for the purpose of setting off such tax liability D against the incentive limit. This method is prescribed for the first time by the impugned Circulars in November/December, 2000.” The final directions in this regard are as follows: “111. In view of the above discussion, we are of the view that E the respondent-State is not justified in considering the entire amount of the value of the ticket as the capital value for the purpose of setting off the eligible capital investment of the members of the petitioner Association. We are also of the view that the amount collected by the members of the petitioner F Association while permitting. the viewers to the Multiplex Theaters also includes an element of tax and hence, the applicable rate of tax so collected by the members of the petitioner Association are only required to be set off against the eligible investment under the Scheme. The entire amount of the value of the ticket cannot be considered as the capital G value for the purpose of setting off the eligible capital investment. We are also of the view that the members who have not commenced their project within the stipulated time limit i.e. on or before 30.11.2002 as envisaged under the subsequent Resolution dated 28.06.2000 by virtue of which those cases have been considered as pipeline cases are not H 124 SUPREME COURT REPORTS [2023] 3 S.C.R.

A entitled to the benefit under the Scheme and there is no infirmity in the order passed by the respondent authorities while rejecting their representation for extension of time. We are also of the view that the members who are entitled to the benefit of the Scheme are entitled to claim only the amount of capital investment made by them within the stipulated time limit i.e. B 30.11.2002. If any expenditure incurred by them subsequent to this time limit or investment made by them in such eligible project after 30.11.2002 cannot be considered as an eligible investment. The respondent authorities are, therefore, directed to give effect to this judgment and order and decide each C case as per the directions issued here in this judgment and raise the demand against the petitioners. The demand so raised will have to be paid by the members 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 D 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 E 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 F 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 of determining the exemption units. G 13. Mr. Maninder Singh, learned counsel for the respondent(s)/ multiplex owners on the other hand urged that in the absence of any mechanism to determine the limit of exemption i.e. equivalent to 100% of the capital investment: which is an objective determinable fact, - having regard to the books of accounts and the documents available with the H multiplex owners, a feasible and reasonable method had to be taken into THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 125 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.]

account. The only feasible method therefore was to notionally determine A (only for the purpose of grant of exemption) by considering whether the 100% exemption limit was achieved by a particular multiplex, the amount which could have been collected during the relevant period having regard to the aggregate actual collection during the entire period. Analysis and conclusions B 14. It is evident from the terms of the Scheme and the exemption notification which gave effect to it, fixed to limits i.e. (1) a time limit and (2) quantification of the exemption. 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 Cfurther 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.

15. The state’s contention is founded on the assumption that the D amount collected during the exemption period by the multiplex owners, also included in element of tax. This assumption, in the opinion of this court 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 E 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. 16. As the High Court concluded- and in the opinion of this Court Fcorrectly so, this contention was bereft of any logic and was plainly unreasonable. There is concededly, a gap in the manner how tax exemption limits can be discerned. 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 Gopal3. The G 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 3 2011 (1) SCC 236 H 126 SUPREME COURT REPORTS [2023] 3 S.C.R.

A 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, B 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 C essence or substance of the notification granting exemption.” 17. This was followed, later, in another five judge bench decision (Commissioner of Customs (Import), Mumbai vs. Dilip Kumar and Company & Ors4). In the present case, the situation is peculiar, because the grant of exemption, and the terms of such relief (in terms of time, D and monetary limits) are unambiguous. However, the procedure for calculation of the monetary limit is not prescribed at all. Therefore, the present case is not one of ambiguity, but instead, one of a clear gap, which if not construed appropriately, would defeat the intention of the notification. 18. It has often been held – in the context of rules of procedures E that they are meant to facilitate, not supplant justice. In Sangram Singh v. Election Tribunal, Kotah & Anr5 this court stated:

“16. ...It is procedure, something designed to facilitate justice and further its ends: not a penal enactment for punishment and penalties; not a thing designed to trip people up. Too F technical a construction of Sections that leaves no room for reasonable elasticity of interpretation should therefore be guarded against (provided always that justice is done to both sides) lest the very means designed for the furtherance of justice be used to frustrate it.” G 19. Again, in Ghanshyam Dass v. Dominion of India6 the court elaborated upon the idea and intent of “adjective law” in dealing with Section 80 of the Civil Procedure Code: 4 2018 (9) SCC 1 5 (1955) 2 SCR 1 H 6 (1984) 3 SCC 46 THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 127 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.] “12. In the ultimate analysis, the question as to whether a A notice Under Section 80 of the Code is valid or not is a question of judicial construction. The Privy Council and this Court have applied the Rule of strict compliance in dealing with the question of identity of the person who issues the notice with the person who brings the suit. This Court has however B

adopted the Rule of substantial compliance in dealing with the requirement that there must be identity between the cause of action and the reliefs claimed in the notice as well as in the plaint. As already stated, the Court has held that notice under this Section should be held to be sufficient if it substantially fulfils its object of informing the parties concerned of the C nature of the suit to be filed. On this principle, it has been held that though the terms of the Section have to be strictly complied with, that does not mean that the notice should be scrutinized in a pedantic manner divorced from common sense. The point to be considered is whether the notice gives sufficient D information as to the nature of the claim such as would the recipient to avert the litigation.” 20. Sugandhi v. P. Rajkumar7 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 thetheory of Esubstantial 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 F 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 G 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 or inconsequent aspects which cannot be described as the “essence” or the 7 (2020) 10 SCC 706 H 128 SUPREME COURT REPORTS [2023] 3 S.C.R. A “substance” of the requirements. Like the concept of “reasonableness”, the acceptance or otherwise of a plea of “substantial compliance” depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the Rule or the B

Regulation. Such a defence cannot be pleased if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which C the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means “actual compliance in respect to the substance essential to every reasonable objective of the statute” and the Court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the D reasonable objectives for which it was passed.

33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption Clause that are important. Substantial compliance with an E enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been F found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either G unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. 34. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases H and quite often, the critical question to be examined is whether THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 129 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.]

the requirements relate to the “substance” or “essence” of A the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the “essence” of the thing to be done but are given with a view to the orderly conduct of business, they may be B fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance with those factors which are considered as essential.” 22. A reasonable method of calculating benefit of tax exemption, for the purpose of considering (whether the 100% limit equivalent to C capital expenditure) was reached or not is to notionally determine the tax amounts payable during the relevant period, when the multiplexes enjoyed tax exemption. This is possible, having regard to the returns filed by them during the time when they sought and were granted exemption. The outer limit (100% investment) is a discernible amount, D which the units would be able to furnish, with appropriate proof in their books of accounts, and valuations furnished by them. Clearly enunciating this principle and applying to the facts of this case, High Court has followed a reasonable method which cannot, in this court’s opinion, be faulted. 23. For the above reasons, this court holds that there is no merit in Ethis appeal. It is accordingly dismissed. No costs.

Divya Pandey Appeal dismissed. F G H

112 SUPREME COURT[2023]REPORTS3 S.C.R. 112 [2023] 3 S.C.R. A THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF GUJARAT THROUGH ITS PRESIDENT (Civil Appeal No. 13977 of 2015) B 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, C 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 – D 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 E 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 F

defeat the intention of the notification – Interpretation of – Discussed. Doctrines/Principles – Doctrine of ‘substantial compliance’ – Discussed. G 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 H 112 THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 113 GUJARAT THROUGH ITS PRESIDENT for calculating how the exemption limits (100% capital A 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 Bhad 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 C (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. D

(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 Ethe 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 F 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. G 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] H 114 SUPREME COURT REPORTS [2023] 3 S.C.R.

A 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 in case of ambiguity. [Para 16][125-F-G] B Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal [2010] 13 SCR 820: (2011) 1 SCC 236; Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company & Ors. [2018] 7 SCR 1191: (2018) 9 SCC 1 – followed. C 1.6 In the present case, the situation is peculiar, because the grant of exemption, and the terms of such relief (in terms of time, and monetary limits) are unambiguous. However, the procedure for calculation of the monetary limit is not prescribed at all. Therefore, the present case is not one of ambiguity, but instead, one of a clear gap, which if not construed appropriately, D would defeat the intention of the notification. It has often been held – in the context of rules of procedures that they are meant to facilitate, not supplant justice and the court must lean towards substantial justice when faced with a complaint of procedural law. [Para 17-20][125-D-E; 127-D-E] E Sangram Singh v. Election Tribunal, Kotah & Anr. [1955] 2 SCR 1; Ghanshyam Dass v. Dominion of India [1984] 3 SCR 229: (1984) 3 SCC 64; Sugandhi v. P. Rajkumar (2020) 10 SCC 706 – relied on.

1.7 A reasonable method of calculating benefit of tax F exemption, for the purpose of considering whether the 100% limit equivalent to capital expenditure was reached or not is to notionally determine the tax amounts payable during the relevant period, when the multiplexes enjoyed tax exemption. This is possible, having regard to the returns filed by them during the time when they sought and were granted exemption. The outer G limit (100% investment) is a discernible amount, which the units would be able to furnish, with appropriate proof in their books of accounts, and valuations furnished by them. Clearly enunciating this principle and applying to the facts of this case, the High Court followed a reasonable method which cannot be faulted. [Para H 22][128-C-E] STHE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 115 GUJARAT THROUGH ITS PRESIDENT Devi Multiplex & Anr. v. State Of Gujarat & Ors. (2015) A 9 SCC 132 : [2015] 6 SCR 1 – referred to. Case Law Reference [2015] 6 SCR 1 referred to Para 2 [2010] 13 SCR 820 followed Para 16 B [2018] 7 SCR 1191 followed Para 17 [1955] 2 SCR 1 relied on Para 18 [1984] 3 SCR 229 relied on Para 19 CIVIL APPELLATE JURISDICTION : Civil Appeal No.13977 C of 2015. From the Judgment and Order dated 26.06.2009 of the High Court of Gujarat at Ahmedabad in SCA No.5391 of 2004. S. K. Bagaria, Sr. Adv., Kumar Ajit Singh, Ms. Swati Ghildiyal, DMs. Devyani Bhatt, Advs. for the Appellants.

Maninder Singh, Sr. Adv., M/s Khaitan & Co., Shreeyas Lalit, Gunjan Sharma, Kumar Mihir, Arnav Kumar, Advs. for the Respondent. The Judgment of the Court was delivered by S. RAVINDRA BHAT, J. E 1. This appeal by State of Gujarat, complains of the grievance with respect to a part of the impugned judgment1. 2. This Court had occasion to deal with the substantial grievance of the present writ petitioner(s)/respondents, in a judgment reported in F Devi Multiplex & another v State of Gujarat and Others2. The issue which concerns this Court in the present proceedings, with 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 G had adjudicated upon the grievance of the multiplex owners, regarding denial of extension of the scheme. This court held that the denial of 1dated 26.06.2009 delivered by the Gujarat High Court in Special Civil Application No.5391 of 2004. 2(2015) 9 SCC 132 H 116 SUPREME COURT REPORTS [2023] 3 S.C.R. A 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 B 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 C announced a policy named New Package Scheme of Incentives for Tourism Projects, 1995-2000 (hereafter referred to as “the Scheme”) with a view to make available all fiscal and non-fiscal incentives, reliefs and concessions enjoyed by industries to “tourism” which was accorded the status of an industry, in D order to give a boost to tourism sector by attracting higher investment in the areas with tourism potential and to generate employment opportunities. Under Clause 2, the Scheme came into operation on 1-8-1995 and was to remain in force for a period of five years up to 31-7-2000. Under Clause 3, to be eligible, a new tourism unit ought to be registered after 1-8- E 1995. Clause 4.7 dealt with effective steps which such unit was expected to undertake. Under Clause 5, after taking initial effective steps a tourism unit could apply to the Director of Tourism for registration. All projects had to conform to the specifications and requirements spelt out in Appendix B which F appendix dealt with various categories of tourism units and Item 22 thereof pertained to “Entertainment Complexes” including multi-cinema theatre complexes or multiplexes. Clause 7 categorised tourism units in four categories, namely, Prestigious Tourism Units, Large-scale Tourism Units, Small-scale Tourism Units and Tiny Tourism Units with minimum fixed G capital investment of Rs 10 crores, 90 lakhs, 10 lakhs and less than 10 lakhs, respectively. Clause 8 dealt with incentives and stated that a tax holiday of 5-10 years would be available in respect of exemptions from (i) sales tax (ii) turnover tax

(iii) electricity duty (iv) luxury tax, and (v) entertainment tax, H THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 117 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.] up to 100% of capital investment. In Clause 8.1 it was stated A that the quantum of incentives would not exceed 100% of eligible capital investment and it further stated the period of eligibility in respect of prestigious tourism units, large-scale tourism units, small-scale tourism units and tiny tourism units to be 10 years, 8 years, 6 years and 5 years, respectively. B Clause 9 dealt with composition of sanctioning authority whereunder State Level Committee was competent to issue eligibility certificate in respect of prestigious and large units while District Level Committee was to issue eligibility certificate for all small-scale and tiny tourism units. The procedure for registration of tourism units for incentives was C detailed in Clause 10.” 4. What is an issue in this case, is another part of the new Package Scheme i.e. proper manner of construing para 8 and 8.1 which, for the sake of convenience are produced below: “INCENTIVE D 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 E eligible areas. List of taxes 1. Exemption from Sales Tax.

2. Exemption from Turnover tax. 3. Exemption from Electricity Duty. F 4. Exemption from Luxury Tax. 5. Exemption from Entertainment Tax. Exemption from sales tax is available with the following conditions: G (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. H 118 SUPREME COURT REPORTS [2023] 3 S.C.R. A (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 incentives shall not exceed 100% of eligible B capital investment. If the limits of incentives expire before the eligible period, the unit cannot avail of any further benefit. The eligible units will be made available a tax holiday for the period mentioned against each category of tourism unit as tabulated below: C D 5. This Scheme was embodied in Exemption Notification dated 14.02.1997, the relevant portion of which reads as follows: E

“NOW, THEREFORE, in exercise of the powers conferred by Sub-Section (1) of Section-29 of the Gujarat Entertainments Tax Act, 1977 (Guj.16 of 1977), (hereinafter referred to as “the said Act”) and in supersession of Government Notification, Information, 133 Broadcasting and F Tourism Department No. (GHT.91.45) MNR-1391-285-E, dated 24th December, 1991 the Government of Gujarat hereby exempt wholly the tax on the entertainments which fulfils the criteria laid down in Appendix-B of the said resolution (hereinafter referred to as the eligible entertainment) during the eligible period or upto the period of expiry of the limits of G incentives, whichever is earlier, to the extent referred to in para 8.1 of the said resolution, subject to the following conditions:- …. H THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 119 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.] … A 15. The proprietor of a eligible entertainment shall be liable to pay tax as soon as the quantum of exemption availed of towards sales tax, turnover tax, electricity duty, luxury tax and entertainment tax equals the amount specified in the eligibility certificate issued by the Appropriate Authority or B on expiry of the time limit mentioned in the. said certificate, whichever is earlier.”

6. Neither the package nor the Scheme indicated the mechanism for calculating how the exemption limits (100% capital investment) was calculable. The rate of tax at the relevant time was 50% of the entrance C or ticket value. 7. The appellants’ contention was that the calculation of total exemption to be done based upon a notional exercise. Such determination was explained in the pleadings in the writ petition as follows: “In case of the new units which has invested an amount of D 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 E 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.50/- recovered by way of entertainment tax is required to be notionally adjusted against the F 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: G

“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 H 120 SUPREME COURT REPORTS [2023] 3 S.C.R. A Section 3 of the Act, clearly stipulates mention of price of ticket including entertainment tax under Column 2, which also goes to show that the entertainment tax is payable on the gross receipt and there is no question of notionally calculating the tax. The returns submitted by few members of Multiplex Association would show that they have been showing the B price of the ticket inclusive of tax and seeking exemption on the basis of the rate applicable by calculating tax on the receipt. Since beginning, the members of the Association have been filing monthly returns on the basis of tax calculated on the receipt made and the respondent authorities have been C accepting the same without any objection. In the case of M/s. lnox Multiplex, the Mamlatdar, Vadodara has passed an assessment order by calculating tax on the total receipt i.e. for example for the period between 19.09.2003 and 25.9.2003, the gross collection is Rs. 10,30,746/-. The Mamlatdar has assessed Rs.5,15,373/- as net tax payable at D

the rate of 50%. M/s. lnox Entertainment Limited, Vadodara was issued an ad hoc eligibility certificate for an amount of Rs.554.45 Lacs. For the purposes of calculating the amount of tax till the limit of Rs.554.45 Lacs, the Mamlatdar has considered 100% of the gross, collection i.e. on gross E collection of Rs.4,32,268/-, the Mamlatdar has assessed a tax on Rs.4,32,268/-.” The claim in the writ petition inter alia was as follows: “(B) The Hon’ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction F directing the Respondents to consider only the amount of entertainment tax payable notionally by the members of the Petitioner Association to the Respondent State as the capital value for the purpose of setting off the eligible capital investment of the members of the Petitioner Association as contemplated under the scheme contained in the Resolution G at Annexure-A hereto;” 9. The state’s contention, on the other hand was that since the appellant had the benefit of tax exemption, the element of tax had to be added to the actual amount collected. This was sought to be urged by the State in its counter affidavit in following terms: H THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 121 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.]

“5.5 In view of the aforesaid, it is respectfully submitted that A section 3 envisages the rate of tax which is to be levied on the payment for admission to the entertainment. There is a 50% tax slab for the city 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 B Rs.100/- towards the payment for admission to entertainment only. To illustrate: Payment of admission to entertainment = Rs.200/-C 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 D 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 E 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 F notification for the purpose of availing of the tax exemption, they cannot now back out under the guise that what the entertainment units are charging towards entertainment tax cannot be recovered by the State Government. It is respectfully stated that any breach of any condition or non-compliance of any of the provisions of the statute, notifications and G circulars would result in termination of exemption granted. At the cost of repetition, I say that to illustrate if Rs.100/- is charged for admission, then it has to be treated as a payment for admission to entertainment excluding tax. When the rate of tax is 50%, it has got to be notionally added to the basic H 122 SUPREME COURT REPORTS [2023] 3 S.C.R. A net ticket rate of Rs.100/ and it is that net ticket rate of Rs.100/ - which would be benefit availed of and would be liable to be adjusted in terms of the notifications and Government resolutions.”

10. The High Court agreed with the petitioners’ contention and held that as multiplexes which availed of the exemption, had in fact not B collected amounts as tax, there were no question of addition of any further amount but rather that to reckon whether the 100% capital investment (the ceiling limit in the Scheme for exemption) was achieved was to be done by notional determination based upon the actual ticket collection for the relevant period. The finding of the High Court in this C regard pertinently are as follows:

“Clause 8 of the Scheme declares that “tax holiday of 5 to 1 O years” will .be’ available in respect of various taxes including “exemption from entertainment upto 100% of capital investment. The said clause provides that the assessee viz .. D the proprietor of an entertainment complex is exempted from paying the tax, payable by him under the Act, till tax is 100% sef off against the 100% value of the eligible capital investment made by the proprietor. The question which has arisen in the present petition is how the amount of “tax” should be determined for set off against the available tax incentives E i.e. 100% of the eligible capital investments. The issue has arisen in context of the legal provision of the Gujarat Entertainment Tax Act. Section 3 of the Act is held to be a charging Section. It is held that liability for payment of duty is imposed upon the proprietor and not upon the visitors of F the theater. The proprietor does not act as an agent of the Government’ for collection of duty. The entertainment duty is a payment which the proprietor is required 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” G

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 H payable thereon. THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 123 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.] The entertainment tax being a taxing measure, and Section A 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 B 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, calculated on this amount C i.e. Rs.100/- which would be at 50% payment for admission received from the viewers.

Under the incentive, there is no special method of calculation of the tax liability prescribed as a condition of exemption for the purpose of setting off such tax liability D against the incentive limit. This method is prescribed for the first time by the impugned Circulars in November/December, 2000.” The final directions in this regard are as follows: “111. In view of the above discussion, we are of the view that E the respondent-State is not justified in considering the entire amount of the value of the ticket as the capital value for the purpose of setting off the eligible capital investment of the members of the petitioner Association. We are also of the view that the amount collected by the members of the petitioner F Association while permitting. the viewers to the Multiplex Theaters also includes an element of tax and hence, the applicable rate of tax so collected by the members of the petitioner Association are only required to be set off against the eligible investment under the Scheme. The entire amount of the value of the ticket cannot be considered as the capital G value for the purpose of setting off the eligible capital investment. We are also of the view that the members who have not commenced their project within the stipulated time limit i.e. on or before 30.11.2002 as envisaged under the subsequent Resolution dated 28.06.2000 by virtue of which those cases have been considered as pipeline cases are not H 124 SUPREME COURT REPORTS [2023] 3 S.C.R.

A entitled to the benefit under the Scheme and there is no infirmity in the order passed by the respondent authorities while rejecting their representation for extension of time. We are also of the view that the members who are entitled to the benefit of the Scheme are entitled to claim only the amount of capital investment made by them within the stipulated time limit i.e. B 30.11.2002. If any expenditure incurred by them subsequent to this time limit or investment made by them in such eligible project after 30.11.2002 cannot be considered as an eligible investment. The respondent authorities are, therefore, directed to give effect to this judgment and order and decide each C case as per the directions issued here in this judgment and raise the demand against the petitioners. The demand so raised will have to be paid by the members 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 D 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 E 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 F 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 of determining the exemption units. G 13. Mr. Maninder Singh, learned counsel for the respondent(s)/ multiplex owners on the other hand urged that in the absence of any mechanism to determine the limit of exemption i.e. equivalent to 100% of the capital investment: which is an objective determinable fact, - having regard to the books of accounts and the documents available with the H multiplex owners, a feasible and reasonable method had to be taken into THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 125 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.]

account. The only feasible method therefore was to notionally determine A (only for the purpose of grant of exemption) by considering whether the 100% exemption limit was achieved by a particular multiplex, the amount which could have been collected during the relevant period having regard to the aggregate actual collection during the entire period. Analysis and conclusions B 14. It is evident from the terms of the Scheme and the exemption notification which gave effect to it, fixed to limits i.e. (1) a time limit and (2) quantification of the exemption. 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 Cfurther 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.

15. The state’s contention is founded on the assumption that the D amount collected during the exemption period by the multiplex owners, also included in element of tax. This assumption, in the opinion of this court 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 E 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. 16. As the High Court concluded- and in the opinion of this Court Fcorrectly so, this contention was bereft of any logic and was plainly unreasonable. There is concededly, a gap in the manner how tax exemption limits can be discerned. 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 Gopal3. The G 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 3 2011 (1) SCC 236 H 126 SUPREME COURT REPORTS [2023] 3 S.C.R.

A 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, B 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 C essence or substance of the notification granting exemption.” 17. This was followed, later, in another five judge bench decision (Commissioner of Customs (Import), Mumbai vs. Dilip Kumar and Company & Ors4). In the present case, the situation is peculiar, because the grant of exemption, and the terms of such relief (in terms of time, D and monetary limits) are unambiguous. However, the procedure for calculation of the monetary limit is not prescribed at all. Therefore, the present case is not one of ambiguity, but instead, one of a clear gap, which if not construed appropriately, would defeat the intention of the notification. 18. It has often been held – in the context of rules of procedures E that they are meant to facilitate, not supplant justice. In Sangram Singh v. Election Tribunal, Kotah & Anr5 this court stated:

“16. ...It is procedure, something designed to facilitate justice and further its ends: not a penal enactment for punishment and penalties; not a thing designed to trip people up. Too F technical a construction of Sections that leaves no room for reasonable elasticity of interpretation should therefore be guarded against (provided always that justice is done to both sides) lest the very means designed for the furtherance of justice be used to frustrate it.” G 19. Again, in Ghanshyam Dass v. Dominion of India6 the court elaborated upon the idea and intent of “adjective law” in dealing with Section 80 of the Civil Procedure Code: 4 2018 (9) SCC 1 5 (1955) 2 SCR 1 H 6 (1984) 3 SCC 46 THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 127 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.] “12. In the ultimate analysis, the question as to whether a A notice Under Section 80 of the Code is valid or not is a question of judicial construction. The Privy Council and this Court have applied the Rule of strict compliance in dealing with the question of identity of the person who issues the notice with the person who brings the suit. This Court has however B

adopted the Rule of substantial compliance in dealing with the requirement that there must be identity between the cause of action and the reliefs claimed in the notice as well as in the plaint. As already stated, the Court has held that notice under this Section should be held to be sufficient if it substantially fulfils its object of informing the parties concerned of the C nature of the suit to be filed. On this principle, it has been held that though the terms of the Section have to be strictly complied with, that does not mean that the notice should be scrutinized in a pedantic manner divorced from common sense. The point to be considered is whether the notice gives sufficient D information as to the nature of the claim such as would the recipient to avert the litigation.” 20. Sugandhi v. P. Rajkumar7 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 thetheory of Esubstantial 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 F 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 G 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 or inconsequent aspects which cannot be described as the “essence” or the 7 (2020) 10 SCC 706 H 128 SUPREME COURT REPORTS [2023] 3 S.C.R. A “substance” of the requirements. Like the concept of “reasonableness”, the acceptance or otherwise of a plea of “substantial compliance” depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the Rule or the B

Regulation. Such a defence cannot be pleased if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which C the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means “actual compliance in respect to the substance essential to every reasonable objective of the statute” and the Court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the D reasonable objectives for which it was passed.

33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption Clause that are important. Substantial compliance with an E enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been F found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either G unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. 34. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases H and quite often, the critical question to be examined is whether THE STATE OF GUJARAT & ORS. v. MULTIPLEX ASSN. OF 129 GUJARAT THROUGH ITS PRESIDENT [S. RAVINDRA BHAT, J.]

the requirements relate to the “substance” or “essence” of A the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the “essence” of the thing to be done but are given with a view to the orderly conduct of business, they may be B fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance with those factors which are considered as essential.” 22. A reasonable method of calculating benefit of tax exemption, for the purpose of considering (whether the 100% limit equivalent to C capital expenditure) was reached or not is to notionally determine the tax amounts payable during the relevant period, when the multiplexes enjoyed tax exemption. This is possible, having regard to the returns filed by them during the time when they sought and were granted exemption. The outer limit (100% investment) is a discernible amount, D which the units would be able to furnish, with appropriate proof in their books of accounts, and valuations furnished by them. Clearly enunciating this principle and applying to the facts of this case, High Court has followed a reasonable method which cannot, in this court’s opinion, be faulted. 23. For the above reasons, this court holds that there is no merit in Ethis appeal. It is accordingly dismissed. No costs.

Divya Pandey Appeal dismissed. F G H