While clarifying that the activity of selling tickets online does not constitute a separate business activity unrelated to the activity of showing movies in theatres, the Bombay High Court has explained that the payment of “convenience fees” cannot be detached from the buying of a ticket online for attending the entertainment. The Court therefore ruled that making payment of convenience fees is an inextricable part of buying the ticket online for entertainment, and the composite price paid does go a long way in enhancing the experience of the entertainment, i.e., watching the film or gaining seamless admission to the place of entertainment.
The Court went on to clarify that splitting the transaction or styling it as a separate activity having no nexus or connection with payment for admission, cannot be grounds to either strike down the levy of entertainment tax or declare that it would not be attracted. Therefore, the Court held that the “convenience fees” charged would squarely fall within section 2(b)(iv) of the Maharashtra Entertainments Duty Act (MED), which defines ‘payment of admission’ and which forms the measure of tax on which rate of duty is to be paid u/s 3 of the MED Act.
Referring to Article 246 of the Constitution, the Court highlighted that the Legislature can impose a tax on entertainment on the person providing entertainment as indeed on the person receiving entertainment. Essentially, those who receive entertainment are exigible to tax, and those who provide it are similarly not immune to the taxing net. Further, the Court explained that since the convenience fee is charged for booking the ticket online, which is for entry to entertainment, the convenience fees have a direct nexus with the concept of entertainment. Since payment for admission is a measure of the levy, it is a matter of legislative policy and convenience as to what amount and rate of duty should be charged.
Since the State is competent to enact the impugned proviso, as the payment of convenience fees has a direct link to entertainment activities and, therefore, it serves as a valid basis for levying entertainment duty, the Court essentially affirmed that the State has the legislative competency to enact the impugned proviso under Entry 62 of List II of the Seventh Schedule to the Constitution of India.
The Division Bench comprising Justice M S Sonak and Justice Jitendra Jain observed that the seventh proviso in Section 2(b) of the MED does not levy duty on the activity of selling tickets online by treating it as a separate and distinct form of entertainment, and what is sought to be taxed is the form of entertainment and admission thereto, which features a movie/film, as the petitioners are engaged in the business of featuring movies/films, which is the subject matter of the tax or duty. Therefore, the Bench clarified that amendments in the measure of tax cannot be construed to mean that the Legislature is seeking to tax a new activity under the MED Act.
The Bench observed that the MED Act has been incorporated to impose duty in respect of admission to entertainment in the State of Bombay, and Section 1(2) thereof provides that it extends to the whole of the State of Maharashtra. Upon analysing its scheme, the Bench found that the scheme satisfies that the subject matter of the MED Act is ‘entertainment’; that the person liable to pay duty is the ‘proprietor’; that the amount of duty specified u/s 3 is to be calculated on payment for admission fixed by the proprietor known as the measure of tax; and that the taxable event is payment for admission to the entertainment.
Speaking for the Bench, Justice Jain applied the principle of “pith and substance” under the Finance Act, 1994, to state that 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, and both are separate and distinct. Thus, the Bench explained that 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.
The observation came while answering the petitions by an Association of Multiplex Theatres, challenging the insertion of the seventh proviso in Section 2(b) of the MED by the Maharashtra Act No. XLII of 2014, whereby the State of Maharashtra has sought to recover the entertainment duty on the additional convenience fees charged by the multiplexes for booking online tickets, by treating the same as ‘payment of admission’, as no such fees were charged by the multiplexes in case of offline bookings. Therefore, by way of a consolidated invoice giving a break-up of the cost of the ticket and convenience charges for online ticket booking, the petitioners alleged that the addition of the impugned proviso is not only ultra vires but also contrary to the scheme of the MED Act.
The matter travels back to August 19, 2015, where the Co-ordinate Bench of this Court had directed the online movie ticket service providers to provide all information, including copies of the agreement received by them on the sale of tickets online, directly to the State Authorities. Even though later on September 02, 2015, an interim relief was granted restraining the State/ Respondent Tax Authorities from recovering duty from the service providers, it was clarified that the respondents were not precluded from recovering entertainment duty from the cinema owners, and the matter was then listed for final hearing.
Case Relied On:
Express Hotels Private Limited vs State of Gujarat – AIR 1989 SC 1949
Vasant Madhav Patwardhan v. State of Maharashtra – 2000 SCC OnLine Bom 244
The State of Karnataka vs M/S. Drive-In Enterprises – 2001 (4) SCC 60
Venkateshwara Theatre vs. State of Andhra Pradesh – (1993) 3 SCC 677
The State of Kerala vs Asianet Satellite Communications Ltd.& Ors – 2025 SCC OnLine SC 1225
Mineral Area Development Authority and Anr. vs. Steel Authority of India and Anr – (2014) 10 SCC 1
Cases Distinguished:
Tata Sky Limited vs. State of Madhya Pradesh and Ors – (2013) 4 SCC 656
PVR Ltd. vs. Commercial Tax Officer – 2020 SCC OnLine Mad 27257
Ramanlal B Jariwala vs Dist. Magistrate, Surat – 1990 SCC OnLine Guj 135
Royal Western India Turf Club Ltd. vs. State of Maharashtra and Ors – 2022 SCC OnLine Bom 1456
Dwarka Prasad vs. Dwarka Das Saraf – (1976) 1 SCC 128
Mangala Waman Karandikar vs. Prakash Damodar Ranade – (2023) 6 SCC 139
Ambalal Sarabhai Enterprises Ltd. vs Amrit Lal – (2001) 8 SCC 397
Thomas T. V. vs Joint Secretary and Ors – 2020 SCC OnLine Ker. 434
Appearances:
Advocates Naresh Thacker, Chakrapani Misra, Sameer Bindra, Ananya Misra, Rohan Rajadhyaksha, Rajendra Barot, Dhaval Vora, Dhirajkumar Totala, and Tejas Raghav, for the Petitioners
Additional G.P. Milind More, for the Respondents