JUDGMENT

Petitioner has approached this Court, being aggrieved by the fact that the Secretary of the 1st respondent Panchayat had issued Ext.P2 demand, directing the petitioner to remit a sum of Rs.60,00,000/- (Rupees sixty lakhs only) towards the ‘arrears of entertainment tax’ payable by the petitioner.

2. Learned counsel appearing for the petitioner submits that the said demand is completely illegal and unsustainable in law. It s submitted that ,on the appeal filed by the petitioner before the Panchayat Committee, the annual entertainment tax payable by the petitioner, which was earlier fixed at Rs.13 lakhs, has been properly reduced to Rs.10 lakhs per annum. It is submitted that Ext.P2 is issued only on the premise that the prior sanction of the Government has not been obtained for such reduction. It is submitted that merely because prior sanction of the Government was not obtained for the reduction, the petitioner cannot be mulcted with the liability to pay entertainment tax at a rate higher than the rate applicable to the petitioner. It is submitted that the demand has now been raised on the basis of some audit objection and the petitioner was also not heard before issuing Ext.P2 demand.

3. Learned Standing counsel appearing for the 1st respondent panchayat submits that under Section 7A of the Kerala Local Authorities Entertainment Tax Act,1961(hereinafter referred to as ‘the Act’), the Panchayat has the power to exempt or grant any reduction of the amount of tax. It is submitted that the Panchayat could not have reduced the entertainment tax payable by the petitioner without prior sanction from the Government. It is submitted that the petitioner cannot be given the benefit of lower rate of tax as the decision taken by the then Panchayat Committee was clearly illegal. It is submitted that following the report of the Audit team, the Principal Secretary to Government had conducted an enquiry and had found that the objection raised by the Audit team is correct. Reference is made in this regard to Ext.R1(a).

4. Learned counsel appearing for the petitioner, in reply, submits that at no stage of the proceedings, has it been given any opportunity of hearing and even Ext.R1(a) was issued without affording any opportunity of hearing to the petitioner. It is submitted that the reduction of tax from Rs.13 lakhs to Rs.10 lakhs was clearly legal and the taking of sanction under Section 7A of the Act cannot be treated as a mandatory condition. It is submitted that such sanction can be obtained even ex-post facto and merely because sanction was not obtained, the petitioner cannot be mulcted with liability to pay tax which is not legally payable by him. It is submitted that the petitioner has moved the 2nd respondent through Ext.P3, seeking an adjudication in the matter and considering the fact that Exts.P2 and R1(a) were issued without affording an opportunity of hearing to the petitioner, there may be a direction to the 2nd respondent to adjudicate the issue after hearing the petitioner also.

5. Learned standing Counsel appearing for the 1st respondent panchayat submits that the panchayat will have no objection to the representation submitted by the petitioner before the 2nd respondent being considered in accordance with law provided an opportunity of hearing is also granted to the 1st respondent panchayat. It is also pointed out that to claim the reduction in the rate of tax, the petitioner will have to produce such documents as may be necessary to prove that they fall within ‘Category B’ under Section 3 of the Act.

6. Having heard the learned counsel appearing for the petitioner, learned Standing Counsel appearing for the Panchayat and the learned Government Pleader appearing for the 2nd respondent, the writ petition will stand disposed of, directing the 2nd respondent to take a decision on Ext.P3 representation submitted by the petitioner, after affording an opportunity of hearing to the petitioner and the 1st respondent. The petitioner