And for good reason. The state government has lost over Rs 19 crore after granting lucrative exemptions to a record 55 films in blatant violation of the conditions prescribed under the Bombay Entertainment Duty Act, 1923. The CAG has now passed severe strictures against the state government for these exemptions.

``The justification given by the government is not tenable as exemptions aggregating Rs 19.01 crore were granted despite non-fulfilment of the prescribed conditions,'' according to a report of the CAG.

Under the Bombay Entertainment Duty Act, the state government can exempt any entertainment or class of entertainments from liability of duty. The rules say that exemption can be granted for films, which have beenawarded the President's gold medal or on the recommendations made by an advisory committee appointed by the state government, provided is considers that the film fulfills criteria of educational, cultural or social purpose of a high order.

The producer of a film, which is granted exemption from payment of entertainment duty, is required to give a undertaking that he would pay the persons most responsible for the educational, cultural or social contribution of such film as nominated by the advisory committee, an amount equivalent to the amount of entertainment duty leviable on the exhibition of such film.

The producer is also required to submit a weekly return to the district collectors, specifying particulars of payments made to the nominated persons with a copy to the government. Further, any exemption from liability to pay entertainment duty granted for exhibition of any such film shall be withdrawn if the proprietor fails to comply with the undertaking.

However, a scrutiny of the recommendations madeby the advisory committee in these 55 tax exempted films between 1992-93 and 1996-97 revealed that in no case had the committee had nominated any person or persons responsible for the educational, cultural or social value of the film. As a result, essential requirements were not fulfilled.

The CAG pointed out that as the essential conditions subject to which exemptions from payment of entertainment duty were not fulfilled, all the exemption orders declaring the films as tax free were required to be withdrawn under the rules. However, no such action was taken by the government resulting in a loss of Rs 19.01 crore.

In its submissions before the CAG, the state government said that the prescribed condition of seeking opinion of the advisory committee had been deleted by an official resolution.

The CAG also criticised the government for its failure to levy a surcharge of Rs 66.74 lakh on Essel World. As per the April 15, 1993 notification, surcharge was leviable at the rate of five per cent of the rates ofadmission for amusement parks for the fourth and fifth year of operation. Subsequently, the levy was withdrawn from September 16, 1994. In respect of Essel World, which commenced on December 25, 1989, surcharge was not levied and collected on the collection of Rs 1334.83 lakh for periods between December 25, 1992 and September 15, 1994. While the government stated that surcharge was not leviable, the CAG rejected the reply, saying the Bombay Entertainment Duty (amendment), Act, which is deemed to have come into force from December 25, 1992, specifically provides for levy of surcharge at the rate of five per cent.