Bombay High Court: In a writ petition challenging the constitutional validity of seventh proviso in Section 2(b) of the Maharashtra Entertainments Duty Act, 2014 (‘MED Act’), the Division Bench of M.S. Sonak and Jitendra Jain*, JJ., dismissed the petition and upheld the challenged provision to be intra vires and within State’s legislative competence. The Court opined that Entry 62, List II of the Seventh Schedule, deals with taxation on entertainment and matters incidental thereto. Thus, making of law for determining the measure of tax is a power within the competence of the State under Entry 62 List II of Seventh Schedule to the Constitution and therefore, the challenged amendment is not a colourable exercise of power by the State.
Furthermore, it was also emphasised by the Court, that merely changing the mode of sale from counter to online does not mean that selling tickets online constitutes a separate business activity. Further, splitting the transaction or styling it as a separate activity having no nexus or connection with payment for admission, or calling it by some other name, cannot be grounds to either strike down the levy or declare that it would not be attracted.
Background
The petitioners were association of Multiplex Theatres for screening movies, who had challenged the insertion of seventh proviso in Section 2(b) of the MED Act, as not only claiming it to be ultra vires but also contrary to the scheme of the MED Act. The said proviso states that the any convenience fee not exceeding Rs. 10 for online ticket booking shall not be included in the “payment of admission” while the one exceeding Rs. 10 would be included in “payment for admission” thereby, attracting entertainment duty.
The petitioners contended that the they were carrying on a separate business of online ticket booking, and the convenience fee charged for the same has nothing to do with payment for admission to entertainment.
It was also contended that since the transaction of providing convenience for booking tickets online is the subject matter of the Finance Act, 1994, which is occupied exclusively by Union List I of Schedule to the Constitution, the State cannot levy entertainment duty by the said proviso and under Article 246 of the Constitution read with Entry 62 of List II to the Schedule thereto.The State is empowered to levy tax on entertainment and receipt of convenience charges for online ticket booking does not fall within the term ‘entertainment’ and therefore the State is not competent to levy duty on the same.
Analysis, Law and Decision
The Court conducted an exhaustive analysis of the MED Act and observed that it was enacted under Article 246(3) read with Entry 62 (Tax on luxuries including tax on entertainment) of List II of the seventh schedule of the Constitution. The Court identified four essential ingredients for tax levy- first, the subject matter (entertainment), second, person liable (proprietor), third, rate or quantum and fourth, taxable event (payment for admission). The Court pointed out that the proviso which has been challenged did not create a new form of entertainment but merely modified the “measure of tax” by exempting convenience charges up to Rs. 10 while excluding the amount exceeding this threshold.
The Court emphasised on the fundamental difference between nature of tax and its measure, noting that the nature of the tax remained the same so only change in the basis of arriving at the quantum of duty i.e. measure of tax cannot be construed to mean that the Legislature intended to tax a new activity of booking tickets online under the MED Act, beyond the State’s legislative competence.
The Court pointed out that the fiscal legislation enjoys a presumption of constitutionality wherein, the challenger bears the burden of proof to demonstrate the transgression of constitutional principles. Applying the doctrine of pith and substance, the Court stated that the convenience fees bore a direct and reasonable nexus with entertainment as it effectively constitutes a part of the cost of enjoying entertainment and cannot artificially be separated from entertainment experience. The Court emphasised on the fact that without paying convenience fees individual cannot obtain tickets and consequently cannot access entertainment, making such fees a direct prerequisite for the entertainment experience rather than an unrelated service charge.
The Court noted that there was no assertion in the pleadings that the activity of selling tickets online is a distinct business activity of the theatre owners outside the activity of screening movies while the same has been raised as an issue during the arguments. Therefore, submissions based on separate business activity cannot be sustained.
Furthermore, the Court observed that “convenience fees” charged would squarely fall within Section 2(b) (iv) of the MED Act, which defined “payment of admission” was drafted in the widest form to give widest amplitude to the definition. Additionally, it was noted that the convenience fees satisfied all the statutory criteria as it constituted payments directly connected with entertainment and represented a necessary condition precedent for the attendance as without paying the convenience fee one cannot buy the online ticket and consequently would not be entitled entertainment.
The Court emphasised on the fact that merely changing the mode of sale of tickets from counter to online does not mean that selling online ticket would constitute a separate business activity, effectively dismantling the artificial difference between online and offline sale of tickets for tax purposes.
The Court pointed out that the Union taxes services, while the State taxes entertainment and applied the “aspect theory” and clarified that service tax under Finance Act, 1994 targets the activity rendering the services while entertainment duty taxes the “admission to entertainment”, with convenience fee serving as a measure of tax. A single transaction may involve two or more taxable events in different aspects. The Court also rejected the petitioners’ contention of colourable legislation stating that once the legislative competence is established, the legislature’s motive becomes irrelevant.
Based on these comprehensive observations, the Court held that the seventh proviso of the Section 2(b) of the MED Act is intra vires, constitutionally valid and within the State legislature competence under Entry 62 of List II of the Seventh Schedule of the Constitution. Additionally, the Court rejected all the constitutional challenges and dismissed the writ petition, specifically holding that the convenience fees exceeding Rs 10 per ticket would be treated as “payment for admission” and will be subjected to entertainment duty while amount up to Rs. 10 would remain excluded.
[FICCI v. State of Maharashtra, 2025 SCC OnLine Bom 2847, decided on: 6-8-2025]
*Judgement authored by- Justice Jitendra Jain
Advocates who appeared in this case:
Advocate for the Petitioners- Naresh Thacker, Chakrapani Misra, Sameer Bindra, Ananya Misra i/by Khaitan & Co; Rohan Rajadhyaksha, Rajendra Barot, Dhaval Vora, Dhirajkumar Totala, Tejas Raghav i/by AZB & Partners, Advocates
Advocate for the Respondents- Milind More, Addl. G. P.
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