TaxTMI 
TaxTMI 
2025 (8) TMI 486
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....ultiplex Theatres in Writ Petition No. 1813 of 2016, have sought the following reliefs: - "a) to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction to quash and set aside the impugned Amendment and the impugned Circulars, annexed hereto as Exhibits F, G and H; b) to issue a declaratory writ declaring that the impugned Amendment only has prospective effect from 29/12/2014 and does not operate in a retrospective manner; c) to issue a declaratory writ declaring that in view of the impugned Amendment, respondents No. 1 did not have the power to levy and collect Entertainment duty on the Convenience Fee till 29/12/2024, for providing the facility of online booking of tickets." 2. The petitioners in Writ Petition No. 1689 of 2015, seek precisely the following reliefs: - "(a) For an order to declare that the Impugned Amendment Act is not applicable to the transaction fees/service charge/ convenience fees charged by the online booking service providers including the 1st petitioner; (b) In the alternative to the above prayer, for an appropriate writ, order and declaration to quash....
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....y Cricket Matches, Amusement Park, etc. It is observed that the service providers authorized by the proprietors are charging exorbitant amount per ticket as internet handling fee or convenience charge for online ticket booking service, which resulted in undue financial exploitation of persons admitted to such entertainments. In order to curb this exploitation, the Government of Maharashtra has decided to levy entertainment duty on the amounts charged towards service charges by the proprietors themselves or through service providers which exceeds rupees ten or any such amount as may be specified by the State Government, from time to time, by notification in the Official Gazette, per ticket as internet handling fee or convenience charge for online ticket booking services for all entertainments, which will result into restricting the amount of service charges for online ticket services. It is, therefore, expedient to amend section 2 of the Maharashtra Entertainments Duty Act (I of 1923) suitably." 5. By order dated 21 July 2015 in Writ Petition No. 1813 of 2016 in paragraph No. 3, the Co-ordinate Bench had directed the cinema owners as well as service providers to provide ....
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....n directed to provide all information, including copies of agreements, amounts received by them on sale of tickets, etc., to the State Government. On 2 September 2015, Rule was granted in Writ Petition No. 1689 of 2015 and interim relief restraining respondents from recovering duty from the service providers was passed. However, it was clarified that this would not preclude the respondents from making recovery of entertainment duty from the cinema owners, subject to the rights contended in Writ Petition 1813/2016. Thereafter, the matter has now been listed before this Bench for final hearing. 10. The petitioner No. 1 in Writ Petition No. 1813 of 2016 is an Association of Multiplex Theatres in which there is more than one screen for exhibiting a movie/film. To watch a movie, a person must buy a ticket, which entitles him to watch the film. Before the advent of internet technology, a person who wished to watch a movie had to go to the theatre and buy a ticket. However, with rapid advancement in technology, the theatre owner invested in technology so that a person who wished to buy a ticket to entertain himself by watching a film/movie, did not need to be physically present at the ....
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.... and therefore the State is not competent to levy duty on the same. Therefore, the impugned provision is ultra vires. 12. Mr. Thacker further submitted that the members of the petitioners have started a separate line of business activity, which is selling tickets online, and, therefore, it does not fall within the definition of "entertainment" as defined by Section 2 (a) of the MED Act. He further submitted that by insertion of the impugned proviso in the definition of "payment of admission", the measure of tax is sought to be amended without there being an amendment in the charging Section, i.e. Section 3 of the MED Act and the impugned proviso seeks to tax new activity through the definition of "payment of admission". He further submitted that by a deeming fiction, the scope of the main Section 2 (b) of the MED Act cannot be enlarged, and the function of the proviso is to exclude something which is in the main provision and not to introduce a new levy on such activity. He, therefore, submitted that the impugned amendment seeking to amend the definition of "payment of admission" is bad in law and ultra vires. 13. Mr. Thacker submitted that charging "convenience fees" is not ....
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.... (1961) 43 ITR 352. 16. Mr. Thacker further relied upon the decision of the Delhi High Court in the case of Fashion Design Council of India vs. Govt. of NCT of Delhi and Another (2025) 138 GSTR 34, and submitted that even before the Delhi High Court the activity of fashion show was sought to be taxed under the Delhi Entertainment and Betting Tax Act by introducing an Explanation with retrospective effect which was held to be unconstitutional without changes in the definition of entertainment, charging and machinery provisions. 17. Mr. Thacker, learned counsel for the petitioners submitted that the impugned proviso is violative of Articles 14 and 300A of the Constitution of India and further is beyond legislative competence as mandated by Article 246(3) of the Constitution of India since the activity sought to be taxed does not constitute "entertainment" and no study has been done or any representation sought from the petitioners before introducing the impugned proviso and there is no basis for excluding sum up to Rs. 10/- from payment of admission in case of online ticket booking and to include more than Rs. 10/- with respect to the said activity and therefore is arbitrary an....
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....for online booking. 21. Mr. Thacker argued that the Maharashtra Act No. XLII of 2014 introduced the impugned seventh proviso to Section 2(b) of the said Act. This was a definition clause and an amendment to the definition clause can never affect the charging section, i.e. Section 3 of the said Act. In any event, Mr. Thacker submitted that the purpose of a proviso is to carve out an exception from the main provision and a proviso cannot be used to enlarge the enacting clause or the main provision. He therefore submitted that by relying upon the impugned proviso, no entertainment duty could be levied on the charges or convenience fee for online ticket booking. He relied on the following judgments:- (1) Haryana Land Development Bank Vs. Employees Union (2004) 1 SCC 574; (2) Shah Bhojraj Kuverji Oil Mills Vs Subhash Chandra Yograj Sinha 1961 SCC OnLine SC 60; (3) Dwarka Prasad Vs. Dwarka Das Saraf (1976) 1 SCC 128. (4) Mangala Waman Karandikar Vs Prakash Damodar Ranade (2023) 6 SCC 139; (5) Ambalal Sarabhai Enterprises Ltd. Vs. Amrit Lal & Co. (2001) 8 SCC 397; and (6) Thomas T. V. Vs. Joint Secretary and others 2020 SCC OnLine K....
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....23, in support of his submission. 25. Mr. Rajadhyaksha further submitted that the activity of the petitioners is rendering of service which is covered by Entry 92-C of List I, as it existed at the relevant time, and the power to tax such service is with the Union of India and not with the State. Therefore, the State is incompetent to levy tax on this activity. 26. Mr. Rajadhyaksha further placing reliance on the decision of the Supreme Court in the case of N.D.P, Namboodripad vs. Union of India (2007) 4 SCC 502 submitted that the definition under Section 2 (b) of the MED Act is exhaustive and since "convenience fee" is not a condition for attending the entertainment, same cannot be brought to tax by amending the definition of "payment for admission". He placed strong reliance on the decision of the Madras High Court in the case of PVR Ltd. Vs. C.T.O. in support of his submission. 27. He further relied upon the decision of the Gujarat High Court in the case of Ramanlal B. Jariwala vs. District Magistrate, Surat (supra) where charges for providing lift facility were held not to be exigible to entertainment duty. Similarly, he relied upon the decision of this Court in the cas....
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....s no question of levying any entertainment duty on online booking charges separately levied by the petitioners. 31. For all the above reasons, Mr. Rajadhyaksha submitted that the impugned amendment be struck down and, in any event, it be declared that the petitioners were not liable to pay any entertainment duty under the said Act. Submissions of the Respondent-State:- 32. Mr. More, learned counsel for the respondents, defended the challenge to the impugned proviso by submitting that under Schedule Seventh, List II, Entry 62, the State has the power to levy entertainment tax. He submitted that by applying the principle of "pith and substance", the activity of online ticket booking is exigible to entertainment tax under the said entry. He relied upon the decision in the case of The State Of Karnataka vs M/S. Drive-In Enterprises 2001 (4) SCC 60 and Federation Of Hotel & Restaurant vs Union Of India & Ors AIR 1990 Supreme Court 1637. 33. He submitted that the term 'convenience fees' effectively constitutes part of the cost of enjoying entertainment, and therefore, it is, in essence, a component of admission for entertainment and consequently subject to duty. Mr. M....
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....and Restaurant vs. Union of India (supra) to submit that in case of overlapping fields, entries in the Seventh Schedule should be so interpreted to avoid conflict. He submitted that under the Finance Act, 1994, what is sought to be taxed is the activity of rendering services of online booking, whereas under Entry 62 of List II of the Seventh Schedule, what is sought to be taxed is entertainment, and the impugned proviso is a measure of tax to compute the duty. Changes are made in the 'measure of tax' to determine the entertainment duty, which is within the legislative competence of the State. 38. Mr. More, distinguished the decision of the Madras High Court in the case of PVR Limited (supra) by submitting that it was a case where the challenge was to an assessment order and the vires of the provision was not challenged before the Hon'ble Madras High Court. He further submitted that the online booking charges constitute a condition for buying the ticket to an entertainment and the provisions of the MED Act are different than the provisions of the Tamil Nadu Entertainment Duty Act. He, therefore, submitted that the decision of PVR Limited (supra) does not apply to the facts of the....
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.... excessive charges through levies is not covered by Entry 62 of List II. 42. Mr. Rajadhyaksha relied on paragraph 13 of the decision of the Supreme Court in the case of Drive-In Enterprises (supra). He submitted that the issue of entertainment must be examined when a person is inside the place of entertainment. He submitted that the activity of online ticket booking is outside the place of entertainment and therefore, the State does not have the power to levy entertainment duty on this transaction. 43. Mr. Rajadhyaksha also placed reliance on paragraph 26 of the decision of the Supreme Court in the case of Federation of Hotel and Restaurant Association of India Vs. Union of India (supra) and prayed for a declaration of the proviso being ultra vires Article 246(3) of the Constitution of India. He, however, submitted that uniformity would apply to a class of persons inside the venue of entertainment. Therefore, the test of uniformity must be satisfied, which in the instant case is not, and thus, even on this count, also the impugned proviso is invalid. Analysis & Conclusions 44. At the outset, we wish to state that insofar as petitioners in Writ Petition No. 1689 of 2015 ....
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....ur decision on the challenge to the vires by the petitioners in Writ Petition No. 1813 of 2016 is complete and the petitioners or their members take no further advantage of the circumstance arising out of their suppression of material particulars or deficient pleadings in their petition. 48. Before we delve into the reasoning, it is apt to reproduce the relevant provisions of the MED Act, which are as under:- "2 Definition - In this Act, unless there is anything repugnant in the subject or context - (a-1) to (a-3) ........ (a) "entertainment" includes any exhibition performance, amusement, game or sport to which persons are admitted for payment, or, in the case of television exhibition with the aid of any type of antenna with a cable network attached to it or cable television or Direct-to-Home (DTH) Broadcasting Service, for which persons are required to make payment by way of contribution or subscription or installation and connection charges or any other charges collected in any manner whatsoever but does not include magic show and temporary amusement including games and rides. ..................... (b) "payment of admission" in rel....
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....r any other apparatus for securing transmission through the cable network of cable television attached to it, for its members, or for workers or customers or for himself or themselves, as the case may be, shall be deemed to be the payment made under this sub-clause for the television exhibition with the aid of any type of antenna with cable network attached to it or cable television : Provided that, where regular tickets are not issued by the proprietor for admission to a video exhibition and the amount charged to a person admitted to the exhibition is inclusive of the price for any eatables or beverages or both, then seventy-five per cent., of such amount shall be deemed to be payment for such admission : Provided further that, [subject to the provisions of sub-section (13) of section 3] any payment not exceeding [seven rupees in case of ordinary and air-cooled cinemas and nine rupees in case of air-conditioned cinemas] per proprietor towards service charges separately and the proprietor shows to the satisfaction of the prescribed officer as defined in the rules made under this Act that the amount of such service charges is spent by him towards maintenance and pr....
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....f this Act. Provided also that, the proprietor shall be allowed to set off the amount spent in a financial year in excess of the amount collected as service charges in that financial year towards maintenance and for providing facilities and safety measures as provided in the second proviso, against the amount of the service charges which will be collected during the next four financial years immediately following the financial year in which the excess amount is spent: Provided also that, any payment not exceeding (one rupee) per ticket if charged by the proprietor of a touring cinema towards service charges, separately and the proprietor of such touring cinema shows to the satisfaction of the prescribed officer (as defined in the rules made under this Act), that such payment made is spent by him during the license period towards maintenance and providing facilities and safety measures in such touring cinema, as specified by the State Government (by notification in the Official Gazette issued in this behalf), in addition to those required under the provisions Ben of the "Bombay Cinemas (Regulation) Act, 1953 and the Maharashtra Cinemas (Regulation) Rules, 1966, or ....
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..... ............. (d) "admission to an entertainment", includes admission to any place in which the entertainment is held [or any place where from the entertainment is provided by means of cable connection from any type of antenna with a cable network attached to it or cable television 13[for Direct-to-Home (DTH) Broadcasting service ; (d-1) to (d-2)...................... (e) "complimentary ticket", means a ticket or pass for admission to an entertainment free of any payment or at reduced rate of payment for such admission; (e-e) "dance bar" means and includes any bar or permit-room where along with serving liquor, for entertainment, any type of dance is also performed to the tune of any type of music; (e-el) "Direct-to-Home (DTH) Broadcasting service" means a system of distribution of multi channel television programmes in Ku Band by using a Satellite system, by providing television signals direct to the subscriber's premises without passing through an intermediary such as cable operator; .................. (f) "entertainment duty", or "duty" in respect of any entertainment means the entertainment duty levied un....
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....ion to entertainment in the State of Bombay and Section 1(2) provides that it extends to the whole of the State of Maharashtra. 52. Section 2 defines various terms for the purposes of the Act. Section 2(a) defines "entertainment" to include any exhibition, performance, amusement, game or sport to which persons are admitted for payment .......for which persons are required to make payment by way of contribution or subscription or installation and connection charges or any other charges collected, in any manner whatsoever, but does not include magic show and temporary amusement. 53. Section 2(b) defines "payment of admission" in relation to the levy of entertainment duty to include items specified therein and clause (iv) provides for any payment, by whatever name called for any purpose whatsoever, connected with an entertainment, which a person is required to make, in any form as a condition of attending, or continuing to attend the entertainment, either in addition to the payment, if any, for admission to the entertainment or without any such payment for admission. 54. Explanation to Section 2(b) provides that payments made for purchase of any type of antenna or any other a....
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....tion 3(3) of the Act provides for an optional method of determining the duty based on certain percentage of the gross collection capacity or houseful tax capacity which in turn is defined on notional basis. 57. Section 3(17) of the MED Act provides for fixed sum of entertainment duty to be paid in advance per month with respect to discotheques in Five Star Hotels and at places other than Five Star Hotels. 58. Section 4(1) of the MED Act provides that no person shall be admitted to any entertainment (except with a valid printed ticket or a complimentary ticket). Section 4(2) provides for consolidated payment of a percentage to be fixed by the State Government of the gross sum received by the proprietor on account of payments for admission to the entertainment and on account of the duty or in accordance with the returns of the payments for admission to the entertainment and on account of the duty. 59. Section 4B deals with the assessment of entertainment duty based on the returns required to be filed by the proprietor. Section 6 deals with the exemption provided by the State Government if the entertainment is for charitable or educational purposes. Section 7 empowers the Sta....
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....Kalyana Mandap Association vs. Union of India (2004) 267 ITR 9 held that the fact that service tax is levied as a percentage of gross charges for catering does not change or affect the legislative competence of Parliament. 65. The entire basis of the petitioners in Writ Petition No. 1813 of 2016, namely the Multiplex Association, is founded on oral arguments before the bar that the activity of selling tickets online constitutes a separate business activity, unrelated to the activity of showing movies in theatres. There is no assertion in the petition that the activity of selling tickets online is a distinct business activity of the theatre owners outside the activity of screening movies. There are no pleadings or, in any event, serious or proper pleadings to sustain this superstructure sought to be projected during oral arguments. 66. On a query being raised, the learned counsel was unable to show any averment in the petition to this effect but made a feeble attempt by bringing to our notice paragraph 7(f) of the petition wherein it is stated that the convenience fee is an independent and distinct fee for facilitating online booking of tickets and the same is optional. In our....
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.... 70. The contention of the petitioners that the measure of tax as defined in Section 2(b) is amended but not the charging Section 3, and therefore, the impugned proviso is bad in law, also cannot be accepted. If the contention of the petitioners' submission is accepted, then the definition clause would become redundant since for every change in the definition section, corresponding changes will have to be made in Section 3. For e.g., if the definition of cable television is amended in the definition section, then, according to the petitioners, since the "cable television" phrase is used in Section 3, corresponding changes should be made in Section 3 also. In our view, this would not be a correct proposition since the definition section itself is meant for interpreting the words used in the whole of the Act unless the context otherwise requires, and in the present case before us, no such case is made out for giving a different meaning than contained in the definition section. 71. The Hon'ble Supreme Court, in the case of Bhagwati Developers (P) Ltd. vs. Peerless General Finance & Investment Co. Ltd. (2013) 9 SCC 584, observed in paragraph 30 that "when the word 'securities' has ....
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....e would not be entitled to entertainment, nor would the theatre owner permit such an individual to enter. Therefore, if a person pays for the convenience of booking a ticket online, which entitles him to enter the entertainment premises to enjoy the film, then, in our view, paying the convenience fees is a necessary condition for attending and entertaining oneself at the theatre. 75. Section 2(b)(iv) expressly provides that such an extra payment is either in addition to the payment for admission or without any such payment for admission. Therefore, Section 2(b)(iv) which is a "measure of tax", since duty is calculated on payment of admission, contemplates that in addition to the primary price paid for the ticket, the "convenience fees" paid at the time of buying the ticket online, entitles the individual to attend the entertainment and would be treated as payment for admission. 76. In our view, the payment of "convenience fees" cannot be detached from the buying of a ticket online for attending the entertainment. Making payment of convenience fees is an inextricable part of buying the ticket online for entertainment. The composite price paid does go a long way in enhancing th....
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....Tax Act, 1937, read with Section 4(1) of the same Act, concluded that such payments would indeed amount to "payment for admission" for entertainment. 80. The Hon'ble Supreme Court held that such payment was a condition for attending or continuing to attend the entertainment. Though it may be for taking tea or dinner for a minimum charge, but since it is connected with entertainment and as the person is making payment as a condition for attending or continuing to attend the entertainment, it would attract the definition for "payment of admission" under Section 2(6) of the said Act. In our view, the ratio of this decision squarely applies to the facts of the case before us, and more forcefully because in the instant case before us, the convenience fee is paid for booking the ticket online, which would permit the individual to attend the entertainment. Even the cinema owners issued one consolidated invoice for the ticket cost and convenience fees. The said invoice was produced before us by the learned counsel for the petitioners. However, we must add that this composite invoice is not the basis for our reasoning. Even a separate invoice would perhaps not have altered the real natur....
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....h online ticket booking is based on the assumption that online ticket booking constitutes a separate business activity, which we have already observed above is incorrect. In any case, by applying the principle of "pith and substance," under the Finance Act, 1994, the activity of rendering a service is a taxable entry. Conversely, under the MED Act, duty is levied on admission to entertainment, and for calculating the duty, one of the measures of tax to be included is the amount charged as convenience fees. Thus, both are separate and distinct. The activity of rendering a service is taxed by the Centre, while the entertainment activity is taxed by the State, and the impugned proviso seeks to amend the measure of tax used for calculating the duty. Therefore, the petitioners' argument on this point cannot be accepted. 85. Section 2(b) contains various provisos. The second proviso provides that if payment does not exceed the amount specified therein as the service charges specified for the nature of services offered therein, then such service charges shall not be included in the payment for admission. This itself indicates that if any activity is directly connected with entertainmen....
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....onvenience fees for online ticket booking to watch a movie or film would constitute payment of admission. 89. Mr. Thacker, learned counsel for the petitioners in Writ Petition No. 1813 of 2016, relied upon Rule 7 of the Bombay Entertainment Duty Rules, 1958, to contend that the duty is to be levied only on the price of the ticket. In our view, this contention cannot be accepted. Rule 7 merely specifies what must be printed on the ticket and how many parts the ticket should have. It does not determine the measure or levy of the entertainment duty. The measure and levy of the duty are to be determined by reading Section 3 and Section 2(b) of the MED Act. When read in this manner, the convenience fee is a payment for admission under Section 2(b)(iv), read together with Section 2(a) and Section 3(1) of the MED Act. Any other interpretation would render the said three Sections redundant, and the Rules cannot be interpreted in a manner that makes these provisions meaningless. Section 2(b)(iv) explicitly states that the payment can be either in addition to, or separate from, the payment for admission. Moreover, this interpretation cannot be accepted because, as per Section 2(b) (viii),....
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....scal legislation is an experiment in achieving certain desired ends, and the trial-and-error method is inherent in every such experiment. The law is very clear that Legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrine or straitjacket formula and this is particularly true in the case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the Legislature. Every legislation, particularly in economic matters, cannot provide for all possible situations or anticipate all possible abuses. 94. As held in R.K. Garg Vs. Union of India (1982) 133 ITR 239 (SC), every legislation particularly in economic matters is essentially empiric and it is based on experimentation. There may be crudities, inequities and even possibilities of abuse but on that account alone it cannot be struck down as invalid. These can always be set right by the Legislature by passing amendments. The court must therefore adjudge the constitutionality of such legislation by the generality of its provisions. La....
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....esume its constitutionality, and the burden lies heavily on those who challenge the constitutional validity. The basic principles governing legislative power in the context of the present case can be culled out from the dicta of the Supreme Court in Hoechst Pharmaceuticals Ltd. v. State of Bihar (1983) 4 SCC 45 and in the decision of the Constitution Bench in State of W.B. v. Kesoram Industries Ltd. (2004) 10 SCC 201. 98. The main Article in the Constitution of India dealing with legislative power is Article 246. Article 246 of the Constitution of India separates the legislative fields between Parliament and the Legislature of any State. Parliament can exclusively make laws with respect to any of the matters enumerated in List I - Union List in the Seventh Schedule to the Constitution under Article 246(1). Subject to power of the Parliament, the Legislature of any State can make laws under Article 246(2) with respect to any of the matters enumerated in List III - the Concurrent List. Subject to the above, the legislature of any State has exclusive power under Article 246(3) of the Constitution of India to make laws with respect to any of the matters enumerated in List II - State....
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....the taxing event and is distinct from it. The Legislature has the discretion in structuring a fiscal levy to devise a suitable measure of tax, so long as the measure chosen by the Legislature is not entirely alien to the nature of the levy, so as to change the fundamental nature of the levy. The standard adopted as a basis for assessment may shed light on the nature of the levy, but is not conclusive in defining it. When a statutory measure for assessing tax is considered, it need not align exactly with the specific details of the levy itself; instead, a broad-based standard of reference can be employed for determining the measure of the levy. Any statutory standard that maintains a connection to the essential character of the levy can be regarded as a valid foundation for tax assessment. In the present case, payment of convenience fees has a clear and direct link to entertainment activities and, therefore, it serves as a valid basis for levying entertainment duty. 104. Mr. More is justified in placing reliance on the decision of this Court in the case of Vasant Madhav Patwardhan (supra) for justifying the State competency to enact the impugned proviso. The Co-ordinate Bench has....
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....-in theatre especially when it is argued that cars/motor vehicles are not the persons entertained. Section 3 which is the charging provision, provides for levy of tax on each payment of admission. Thus, under the Act, the State is competent to levy tax on each admission inside the Drive in Theatre. The challenge to the levy is on the ground that the vehicle is not a person entertained and, therefore, the levy is ultra vires. It cannot be disputed that the car or motor vehicle does not go inside the drive-in theatre of its own. It is driven inside the theatre by the person entertained. In other words, the person entertained is admitted inside the drive-in theatre along with the car/motor vehicle. Thereafter, the person entertained while sitting in his car inside the auditorium views the film exhibited therein. This shows that the person entertained is admitted inside the drive-in theatre along with the car/motor vehicle. This further shows that the person entertained carries his car inside the drive-in theatre in order to have better quality of entertainment. The quality of entertainment also depends on with what comfort the person entertained has viewed the cinema films. Thus, the ....
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....s being calculated based on the gross collection capacity per show, estimated from the total potential payments for admissions if all seats are occupied at the maximum rate. This approach does not change the character of the tax or its subject, which remains a tax on entertainment. The original method of levy, based on actual payments, has been replaced by a more practical method. However, adopting this new system does not alter the nature of the tax; it remains a tax on entertainment. Applying the ruling of this decision to our case and as previously analysed, the payment of convenience fees is a levy on entertainment, as seen from a combined reading of the Scheme of the Act. 108. We also draw support for our above analysis on the competency of the State to make the impugned amendment by relying upon the decision of the Supreme Court in the case of State of Kerala vs. Asianet Satellite (supra). In this case also, an argument was raised that since the activity of broadcasting is subject matter of service tax, it cannot be subjected to entertainment duty under the Entertainment Duty Act. The Hon'ble Supreme Court by applying the principle of pith and substance upheld the power co....
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....ing between two entries, the doctrine of pith and substance is applied to find out the true character of the enactment and the entry within which it would fall. The doctrine of pith and substance, in short, means, if an enactment substantially falls within the powers expressly conferred by the Constitution upon the legislature which enacted it, the same cannot be held to be invalid merely because it incidentally encroaches on matters assigned to another legislature. Also, in a situation where there is overlapping, the said doctrine has to be applied to determine to which entry, a piece of legislation could be related to by examining the true character of the enactment or a provision thereof. Due regard must be had to the enactment as a whole and to its scope and objects. It is said that the question of invasion into another legislative territory has to be determined by substance and not by degree. According to the pith and substance doctrine, if a law is in its pith and substance within the competence of the Legislature which has made it, it will not be invalid because it incidentally touches upon the subject lying within the competence of another Legislature. 8.2.4 The Pr....
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....to the power to legislate on specified subjects and the other, relating to the power to tax. Thus, the entries on levy of taxes are specifically mentioned. Therefore, as such, there cannot be a conflict of taxation power of the Union and the State. Thus, in substance the taxing power can be derived only from a specific taxing entry in an appropriate List. Such a power has to be determined by the nature of the tax and not the measure or machinery set up by the statute. In Hoechst Pharmaceuticals, it has been categorically held that taxation is considered as a distinct matter for purposes of legislative competence. 8.2.12 In paragraph 51 of MPV Sundararamier, it was observed as under: "51. In List I Entries 1 to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament. An examination of these two groups of entries shows that while the main subject of legislation figures in the first group, a tax in relation thereto is separately mentioned in the second. Thus, Entry 22 in List I is "Railways", and Entry 89 is "Terminal taxes on goods or passengers, carried by ra....
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.... 11.10 Thereafter, in Federation of Hotel & Restaurant Association of India, the Constitution Bench of this Court had to decide the constitutional validity of the Expenditure Tax Act, 1987 (Central Act 35 of 1987) which envisaged a tax at 10 per cent ad valorem on "chargeable expenditure" incurred in the class of hotels wherein "room charges" for any unit of residential accommodation were Rs. 400 per day or more per individual. The Union sought to sustain the legislative competence to enact the impugned law under Article 248 read with Entry 97 - List I. 11.12 ................ "141. As held in Goodricke Group Ltd. [1995 Supp (1) SCC 707] which we have held as correctly decided, this Court has noted the principle of law well established by several decisions that the measure of tax is not determinative of its essential character. The same transaction may involve two or more taxable events in its different aspects. Merely because the aspects overlap, such overlapping does not detract from the distinctiveness of the aspects. In our opinion, there is no question of conflict solely on account of two aspects of the same transaction being utilised by two legislatures for two....
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.... In interpreting expressions in the Legislative Lists of the Seventh Schedule of the Constitution, a wide meaning should be given to the entries. ii. In the scheme of the Lists in the Seventh Schedule, there exists a clear distinction between the general subjects of legislation and heads of taxation. They are separately enumerated. iii. As the fields of taxation are to be found clearly enumerated in Lists I and II, there can be no overlapping in law. There may be overlapping in fact, but there can be no overlapping in law. iv. In the first instance, the pith and substance or true nature and character of the legislation must be determined with reference to the legislative subject matter and the charging section; v. The measure of tax is not a true test of the nature of tax; vi. The same transaction may involve two or more taxable events in its different aspects. Merely because the aspects overlap, such overlapping does not detract from the distinctiveness of the aspects. 11.28 To determine whether there are different aspects to the activity conducted by the assessees herein which is sought to be taxed by the Union under the Finan....
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....mount being included under Section 2(b)(iv) of the MED Act. The matter of levying tax relates to entertainment, and the basis of the duty is a certain rate applied to the payment of admission. It is this measure that has a direct connection with entertainment, which is sought to be amended by granting an exemption up to Rs. 10/-. Therefore, in our opinion, the State has the authority to enact the impugned proviso under Entry 62, List II of the Seventh Schedule to the Constitution. 114. The idea of uniform charges is not supported by any of the provisions of the Act. In any case, individuals booking tickets online form a distinct category, and therefore, the principle of uniformity is satisfied concerning this category. When a theatre owner decides how much to charge for a ticket, he considers all the costs he is required to incur for showing the film, which includes the cost of technology for online ticket booking. However, it is difficult to determine the exact amount spent on technology per ticket. Therefore, by the impugned proviso, the legislature, in its wisdom, has estimated Rs. 10/- per ticket for this and excluded the said amount from the definition of "payment of admiss....
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....between the measure and tax has to be determined by the courts on a case-to-case basis. While doing so, the Court will bear in mind the fundamental principle that the legislature possesses a broad discretion in matters of fiscal levies. 312. The measure for taxing land may bear a reasonable relationship to the actual or potential productivity of land. Measures such as annual value or market value provide a proximate basis to measure the income derived from land. If the State Legislature utilises the income derived from the land as a measure to quantify a tax on land, it does not trench upon the legislative domain of Union to tax income. The income merely serves as the measure to calculate the levy of taxes on land. 364. In view of the above discussion, we conclude that mineral value or mineral produce could be used as a measure of the tax on land under List II Entry 49. The fact that List II Entry 50 pertains to taxes on mineral rights would not preclude the State Legislature to use the measure of mineral value or mineral produce under List II Entry 49. The State Legislature has legislative discretion to determine the appropriate measure for the purposes of quanti....
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....tter of tax, the legislature should be given a free hand to determine the measure of tax. The SOR states explicitly that the amendment is sought to be made in Section 2(b) of the MED Act, which defines "payment of admission." In any event, by making it difficult for the proprietors to charge an additional amount for admission to a place of entertainment by simply styling such a charge as a convenience fee, if the legislature felt that the tendency of overcharging might incidentally be curbed, such an expression in the SOR does not spell out any colourable exercise. 120. In K. C. Gajapati Narayan Deo vs. State of Orissa (1953) 2 to SCC 178, the Hon'ble Apex Court held that the doctrine of colourable legislation does not involve any question of bona fides or mala fides on the part of the legislature. The whole doctrine resolves itself into the question of the competency of a particular legislature to enact a particular law. If the legislature is competent to pass a particular law, the motives which impelled it to act are irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at all. 121. His Lordship Krishna Iyer (J), in R.S Jo....
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....II of Seventh Schedule to the Constitution. 124. Therefore, in the light of the above decisions, we do not approve the submission made by the learned counsel appearing in Writ Petition No. 1689 of 2015 that the impugned proviso is a colourable exercise of power by merely relying upon certain sentences of Statement of Objects and Reasons since we have upheld the competency of the State to enact the impugned proviso. 125. Insofar as the challenge to the two Circulars dated 31 January 2015 (Exhibit 'G') and 27 February 2015 (Exhibit 'H') is concerned, no arguments were advanced by the petitioners on this prayer. However, on a perusal of the impugned Circulars, it only seeks to call for details pursuant to the impugned amendment and since we have upheld the impugned proviso, in our view, no fault can be found in the issuance of the impugned Circulars. 126. We now propose to deal with the case laws cited by the learned counsel Mr. Thacker for the petitioners in Writ Petition No. 1813 of 2016. 127. Tata Sky Limited Vs. State of Madhya Pradesh and Ors. (2013) 4 SCC 656. In our view, this decision is distinguishable on facts and not applicable to the case of the petitioners.....
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....D Act, which are not present in the Tamil Nadu Entertainment Duty Act. The decision of the Supreme Court in the case of Markand Saroop Aggarwal and Ors. v. M.M. Bajaj and Anr. (supra), which interpreted a similar provision and specifically the phrase "condition," was not brought to the notice of the Hon'ble Madras High Court. Thirdly, in our view, on a conjoint reading of Section 4 with Section 2(b), payment of a convenience fee for buying a ticket online is a condition for attending the entertainment. To this extent, we respectfully disagree with the decision of the Madras High Court. 129. The fact that the SLP against the Madras High Court decision was dismissed in limine does not constitute any merger. It is a settled position that a mere dismissal of an SLP by the Hon'ble Supreme Court would not amount to a precedent under Article 141 of the Constitution of India. This position of the effect of the dismissal of an SLP has been reiterated by the latest decision of the Supreme Court in the case of State of U.P. vs. Virendra Bahadur Katheria& Ors. 2024 SCC OnLine SC 1712 in paragraphs 42 and 43. 130. Therefore, for all the above reasons, the decision relied upon by the le....
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....amount paid in lieu of advertisement by deeming it to be payment for admission. The Delhi High Court held that the amount was paid for business promotion event and not for entertainment and therefore struck down the Explanation. Under the MED Act, sponsorship amount is included explicitly by way of sub-clause (viii) to Section 2(b) of the Act and not by way of Explanation. Furthermore, in the facts before us, we are concerned with convenience fees paid for buying a ticket online for watching a movie/film which as observed above is directly covered by the definition of payment of admission under Section 2(b)(iv) of the MED Act and no new form of entertainment is introduced. Therefore, the facts before the Delhi High Court being different than the facts of the present case, the said decision cannot be of any assistance. 134. The Delhi High Court also held that there is no amendment to the charging provision or any mechanism to collect such levy and therefore quashed the amendment. In the present case before us, no new form of entertainment is sought to be taxed, but the impugned proviso seeks to change the measure of tax and therefore, even on this count, the decision of the De....
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....tax and subject matter of levy. Therefore, the test sought to be canvassed by the petitioners as absent, in our view, squarely gets satisfied in the present case before us. 137. Mr. Thacker also relied upon the decisions in the case of Dwarka Prasad v. Dwarka Das Saraf (supra), Mangala Woman Karandikar vs. Prakash Damodar Ranade (supra), Ambalal Sarabhai Enterprises Ltd. vs. Amrit Lal & Co. (supra) and Thomas T.V. vs. Jt. Secretary (supra) and contended that the proviso cannot be used to enlarge the enacting clause. In our view, the said decisions are not applicable to the facts of the present case as observed by us above since the proviso is not enlarging the enacting clause, but the proviso seeks to exclude online booking charges up to Rs. 10/- and to include any sum above Rs. 10/- as payment for admission. In the absence of the proviso, the whole of the amount would have been included under Section 2(b)(iv) which defines "payment of admission". Therefore, these decisions are not applicable to the facts of the present case. 138. Lastly, Mr. Thacker relied upon the decision in the case of CIT Vs. B.C. Srinivasa Setty (1981) 2 SCC 460 and Fashion Design Council of India (supr....
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.... and anything above that would be treated as payment for admission. 141. In Bhaiji vs. Sub Divisional Officer, Thandla (2003) 1 SCC 692, the Hon'ble Supreme Court observed as under :- "Reference to the Statement of Objects and Reasons is permissible for understanding the background, the antecedent state of affairs, the surrounding circumstances in relation to the statute and the evil which the statute sought to remedy. The weight of judicial authority leans in favour of the view that Statement of Objects and Reasons cannot be utilized for the purpose of restricting and controlling the plain meaning of the language employed by the legislature in drafting a statute and excluding from its operation such transactions which it plainly covers." 142. This position is reiterated by the Supreme Court in Om Prakash Aggarwal and Ors. vs. Vishan Dayal, Rajpoot and Ors. (2019) 14 SCC 526, where the Supreme Court has reiterated that Statement of Objects and Reasons cannot be utilised for purpose of restricting and controlling the plain meaning of language employed by the Legislature in drafting a statute. 143. In our view, the Statement of Objects and Reasons, when it states th....
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....cision to the facts of the present case. We have already observed that online ticket booking charges would squarely fall within Section 2(b)(iv) of the MED Act and Section 2(b) provides a measure of tax for the purposes of applying the rate of duty specified in Section 3. The online ticket booking charges, in our view, would squarely fall within the provisions of Section 2(b)(iv) and therefore, there is no justification in submitting that the State Legislature does not have the competence to insert the impugned proviso. 147. Reliance is placed on paragraph 13 in the case of Drive-In Enterprises (supra) by Mr. Rajadhyaksha for submitting that uniformity has to be within the place of entertainment and when a person sits in his motor car and watches the film, he has a higher level of comfort for enjoying the entertainment. In our view, this distinction is without any basis and in any case is not applicable to the facts of our case. In our case, the online ticket booking charges are directly connected with buying a ticket for entertainment without which a person cannot enter the theatre. The distinction sought to be made within the entertainment area and outside the entertainment....