Case Note & Summary
The Supreme Court heard appeals by special leave filed by the State of Gujarat against the judgment of the Gujarat High Court dated March 1/4, 1985 in Special Civil Application No.4459/84 and batch. The High Court had upheld the constitutionality of the Gujarat Entertainments Tax Act, 1977 and the Gujarat Cinema (Regulation & Exhibition by Video) Rules, 1984 but struck down the levy of entertainment tax on gross collections from video cassette recorder or player exhibitions as arbitrary under Article 14 and held the Rules ultra vires. The other connected appeals related to the Bombay High Court decision in Ramesh Waman Roke v. State of Maharashtra, AIR 1984 Bom.345, which had been followed by the Gujarat High Court. The dispute arose after the Gujarat legislature inserted Section 6-A into the Gujarat Entertainments Tax Act, 1977, providing for levy and collection of entertainment tax on video exhibitions in places of entertainment or omnibuses at rates based on population. The Rules framed under the Act came into force on June 14, 1984. The respondents, including Hotel Ratrani through its proprietor, challenged the constitutionality of Section 6-A and Rules 13(1) and 19(ii). The High Court held that the gross collection system was arbitrary because video exhibition did not involve regular admission or fixed number of shows, and that the rules were ultra vires. Before the Supreme Court, the respondents' counsel contended that Section 3 of the Act envisaged tax on payment for admission, and since a video recorder or player did not entertain a person on admission, it was not an entertainment tax. They further argued that the composition at flat rate was not available due to lack of regular intake or shows, making the rule arbitrary. The Supreme Court rejected these contentions. It relied on Venkateshwara Theater v. State of A.P., (1993) 3 SCC 677, where it was held that entertainment tax could be levied either on payment for admission or on gross collection capacity per show, and the legislature had the discretion to choose the mode under Entry 62 List II. The Court observed that playing a video recorder or player on charging admission rates or during an omnibus journey constituted entertainment on admission. It also held that the presumptive provision of three shows per day was rebuttable, and the proprietor had the option to inform the prescribed officer of the actual number of entertainments. The flat rate composition based on population was not arbitrary. Consequently, the Court found no merit in the challenge and upheld the constitutional validity of the levy. The available text ends before the formal final order, but the reasoning indicated that the appeals would be allowed. [Note: formal order not included in excerpt]
Headnote
A) Constitutional Law - Entertainment Tax - Legislative Competence - Gujarat Entertainments Tax Act, 1977, Section 6-A - Tax on entertainment can be levied either on payment for admission or on gross collection capacity per show; legislature has discretion to select the mode under Entry 62 List II; gross collection levy for video exhibitions does not alter the nature of tax and is not violative of Article 14 - Held that High Court erred in holding gross collection levy arbitrary (Paras 16-17, 29-30). B) Taxation - Entertainment Tax - Definition of Admission - Gujarat Entertainments Tax Act, 1977, Sections 3 and 6-A - Video cassette recorder or player shown on payment of admission charges or in an omnibus during journey constitutes an entertainment on admission; contention that it does not entertain a person on admission rejected - Held that such exhibition is taxable as entertainment (Paras 16-17). C) Taxation - Entertainment Tax - Composition and Presumptive Provision - Gujarat Entertainments Tax Act, 1977, Section 6-A(2), (3) - Presumption of at least three entertainments per day is rebuttable; proprietor has option to inform prescribed officer of actual number; flat rate composition based on population is not arbitrary - Held that impugned provisions provide adequate flexibility and are not arbitrary (Paras 16-17).
Issue of Consideration
Whether levy of entertainment tax on gross collection for video cassette recorder/player exhibitions under Section 6-A of Gujarat Entertainments Tax Act, 1977 is arbitrary and violative of Article 14; whether Rules 13(1) and 19(ii) of Gujarat Cinema (Regulation & Exhibition by Video) Rules, 1984 are ultra vires; whether video exhibition amounts to admission to an entertainment
Law Points
- Entertainment tax may be levied either on payment for admission or on gross collection capacity per show
- legislature has discretion to choose mode of levy under Entry 62 List II
- classification based on population and type of area for tax rates is not arbitrary under Article 14
- presumption of minimum number of shows per day is rebuttable and not arbitrary
- video exhibition on payment of admission or in omnibus constitutes taxable entertainment
