2022 (7) TMI 1595 - HC - Indian Laws

Entertainment tax on mobile charges at racecourse not valid under law; tax must be statutory, not by executive order

The Royal Western India Turf Club Ltd., N.H.S. Mani of Mumbai Indian Inhabitant Versus The State of Maharashtra, The Secretary, Revenue and Forest Department, Mr. Madhav Kale, The Collector of Mumbai, The Collector of Pune, The Administrator and Commissioner, Mumbai.

The HC held that the levy of entertainment tax on mobile phone charges collected from patrons entering the race course was not a payment for admission to ... Levy of entertainment tax on mobile phone charges collected by petitioner from patrons of races who wanted to carry mobile phone inside the race course during the races - payment was a condition of attending or continuing to attend the entertainment - levy of entertainment duty under G.R. dated 27.12.2001 would be violative of Article 265 of Constitution of India or not - HELD THAT:- On the scheme of the relevant provisions of the Act, conclusion can be arrived that charging of the amount per person who carried the mobile phone into the race course is not payment received for admission to any entertainment. Support for this view also found in Markand Saroop Aggarwal & Ors. Vs. M.M. Bajaj & Anr. [1978 (9) TMI 192 - SUPREME COURT]. On the submissions of petitioner that levy of duty by a G.R. is violative of Article 265 of the Constitution of India, it is settled law as held by the Apex Court in Co-operative Sugars (Chittur) Ltd. V/s. State of Tamil Nadu [1993 (4) TMI 270 - SUPREME COURT] that tax can be levied only by a statutory provision and not a Government order. On this ground also the demand of levy has to go. The respondents is directed to refund the amount deposited by petitioner during the pendency of the petition towards this entertainment duty levied on mobile phones for the period 21st January 2001 to 31st January 2002 together with interest thereon at 6% p.a. (as per Rule 5 of Bombay Entertainment Duty Rules 1958) within eight weeks of receiving an application for refund from petitioner. The refund will be of all amounts paid by petitioner under every head and interest will be payable on all amounts including interest that petitioner has paid since it is concluded that no entertainment duty was payable at all by petitioner. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED Whether the payment charged for carrying mobile phones inside the race course constitutes a 'payment connected with an entertainment' under the Bombay Entertainments Duty Act, 1923. Whether such payment is a mandatory condition for attending or continuing to attend the entertainment (horse races) as required under the Act. Whether the levy of entertainment duty by a Government Resolution (G.R.) without statutory backing violates Article 265 of the Constitution of India. Whether retrospective levy of entertainment duty for the period prior to the date of the Government Resolution is permissible under the Constitution. Whether the petitioner is liable to pay entertainment tax on the mobile phone charges collected from patrons attending the races. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether payment for carrying mobile phones inside the race course is a 'payment connected with an entertainment' under the Bombay Entertainments Duty Act, 1923. Legal Framework and Definitions: Section 2(a) defines 'entertainment' as any exhibition, performance, amusement, game, or sport to which persons are admitted for payment. Section 2(b)(iv) defines 'payment for admission' to include any payment connected with an entertainment which a person is required to make as a condition of attending or continuing to attend the entertainment, either in addition to or without payment for admission. Section 3(1)(a) imposes entertainment duty on all payments for admission to any entertainment. Court's Interpretation and Reasoning: The Court emphasized that the payment must be integrally connected with the entertainment itself and must be a condition precedent to attend or continue attending the entertainment. The charge for carrying mobile phones is not uniformly charged from all attendees but only from those who choose to carry mobile phones. Patrons who do not carry mobile phones pay only the entrance fee and can still attend the races. The Court found it difficult to conceive how carrying a mobile phone inside the race course constitutes an entertainment or is connected with the entertainment of horse racing. The charge is for convenience or facility, not for admission to the entertainment. Key Evidence and Findings: The petitioner's admission fees are separate and mandatory for all attendees. The mobile phone charge is optional and only applies to those who choose to carry phones. There is no exhibition, amusement, or sport associated with the use or carrying of mobile phones inside the race course. Treatment of Competing Arguments: The State argued that since carrying mobile phones required payment, it constituted a payment connected with entertainment under the Act. The Court rejected this, holding that the payment must be mandatory and uniformly applicable to all attendees to qualify. Conclusion: The payment for carrying mobile phones is not a 'payment connected with an entertainment' as defined under the Act and hence not subject to entertainment duty. Issue 2: Whether such payment is a mandatory condition for attending or continuing to attend the entertainment. Legal Framework: Section 2(b)(iv) requires that the payment must be a condition of attending or continuing to attend the entertainment. Court's Reasoning: The Court held that since attendees can enter and enjoy the races without carrying a mobile phone and without paying the mobile phone charge, the payment is not a mandatory condition. It is an optional additional charge for a facility and not a prerequisite for admission or attendance. Supporting Precedents: Ramanlal B. Jariwala v. District Magistrate, Surat: Payment for use of lift in a cinema theatre was held not to be a payment for admission to entertainment since it was optional and not mandatory for attending the show. PVR Ltd. v. Commercial Tax Officer: Online booking charges were held not to be subject to entertainment tax as they were optional and not mandatory for entry. Conclusion: The mobile phone charge is not a mandatory condition for attendance and therefore does not qualify as a 'payment for admission' under the Act. Issue 3: Whether levy of entertainment duty by Government Resolution violates Article 265 of the Constitution of India. Legal Framework: Article 265 mandates that no tax shall be levied or collected except by authority of law. Court's Reasoning: The Court relied on settled law that a Government Resolution or executive order cannot substitute for a statutory provision to levy tax. Taxation must be authorized by a statute passed by the legislature. The Government Resolution dated 27.12.2001 directing levy of entertainment duty on mobile phone charges lacked statutory authority. Conclusion: The levy of entertainment duty by Government Resolution without statutory backing violates Article 265 and is therefore invalid. Issue 4: Whether retrospective levy of entertainment duty for the period prior to the date of the Government Resolution is permissible. Court's Reasoning: The Court noted that the Government Resolution was dated 27.12.2001 but sought to levy duty from 21.01.2001, i.e., retrospectively. Retrospective taxation is impermissible absent express statutory authority. Moreover, the retrospective demand was arbitrary and unfair as the petitioner was unable to pass on the tax to patrons for that period, resulting in unjust enrichment to the State. Conclusion: The retrospective levy of entertainment duty from a date prior to the Government Resolution is invalid and cannot be sustained. Issue 5: Whether the petitioner is liable to pay entertainment tax on mobile phone charges collected from patrons attending the races. Court's Reasoning: Since the mobile phone charge does not constitute a payment for admission to entertainment, and is not a mandatory condition for attendance, the petitioner is not liable to pay entertainment tax on such charges. The Court also rejected reliance on the Delhi High Court decision which held to the contrary, stating disagreement with that view. Application of Law to Facts: Mobile phone charges are optional and not uniformly charged. The charge is not for admission to the entertainment but for carrying a mobile phone. The levy by Government Resolution is without statutory authority and hence invalid. Conclusion: No entertainment tax is payable on mobile phone charges collected by the petitioner. Additional Directions: The amount of entertainment duty deposited by the petitioner for the period 21.01.2001 to 31.01.2002 shall be refunded with interest at 6% per annum. The refund application shall be made to the Secretary, Revenue Department, Government of Maharashtra, who shall ensure compliance.