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PETITIONER: STATE OF MADHYA PRADESH AND ORS.

       Vs.

RESPONDENT: HOME DECORATORS AND FINANCE (PVT.) LTD. AND ANR.

DATE OF JUDGMENT03/05/1990

BENCH: SAWANT, P.B. BENCH: SAWANT, P.B. AHMADI, A.M. (J)

CITATION:  1990 AIR 1322            1990 SCR  (2)1000  1990 SCC  (3) 560        JT 1990 (2)   369  1990 SCALE  (1)136

ACT:     The (Madhya Pradesh) Entertainments Duty (And Advertise- ment  Tax)  Act. 1936. Organisation  of  entertainment  pro- grammes  under an ostensible savings scheme--Entry  open  to members of scheme on payment of non-refundable admission fee of  Rs.2  and  refundable  membership  subscription  of  Rs. 10--Membership  cards and money receipts collected from  the persons  at the time of entry to programme--No  performances staged  for members in future--Held issue of cards  amounted to sale of tickets and hence liable to entertainment duty.

HEADNOTE:     The respondents organised two music programmes by formu- lating an ostensible savings scheme under which the entry to the programme was open to persons on becoming members of the scheme  by paying an admission fee of Rs.2,  non-refundable, and  membership subscription of Rs. I0, refundable after  10 years.  The entry to the programme was strictly on the  pro- duction of invitation card as well as membership card.  Many persons paid the admission fee and the membership  subscrip- tion.  At  the time of giving entry to  the  programme,  the respondents  collected  the membership forms and  money  re- ceipts from the persons concerned as a result of which  they were  left neither with membership form nor with the  money- receipts.  Although  the promise was  that  such  programmes would be repeated for 10 years yet no such performances were arranged.  The  result was that members of the  public  were defrauded  of  their money and the State Government  of  its tax-revenue.     The Entertainment Tax Collector checked the receipts  of the respondent on both the dates of performances and accord- ingly  issued  notices  to them demanding the  tax  and  the duty-surcharge  thereon under the Madhya Pradesh  Entertain- ments Duty and Advertisement Tax Act, 1936.     The  respondents challenged the validity of the  notices by  filing a writ petition in the High Court  which  allowed the  petition  and quashed the notices by holding  that  the assessment  of  tax was arbitrary because (i) there  was  no allegation that the invitation cards were sold; and (ii) 1001 membership  subscription  of Rs. I0 was not  divided  by  10

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since the entertainment tax could be collected only on Re. 1 per  year  for the next 10 years. Hence this appeal  by  the State.     Allowing  the appeal and setting aside the  decision  of the High Court. this Court.     HELD:  The Scheme was not meant for promoting music.  It was  a pure business-preposition meant to collect money  and earn profits. and it was to be used as a device to evade the entertainment  duty. The receipts and the  invitation  cards were nothing but tickets for the show and only for one show, and  were collected at the door. Therefore. whatever be  the description given to the receipts or cards they were  liable to the entertainment duty. The impugned notices were proper- ly issued by the appellants. Since the High Court completely missed  the crucial point and, therefore,  mis-directed  it- self, it is not possible to accept its reasoning that Rs. 10 collected  by the respondents were the membership  subscrip- tion  or that tile duty could not have been collected  at  a time on Rs. 10. [1005E-F; 1003D]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1416  of 1975.     From  the  Judgment and Order dated 2.12.  1974  of  the Madhya Pradesh High Court in M.P. No. 565 of 1974. Sakesh Kumar and S.K. Agnihotri for the Appellants.     S.S.  Khanduja,  Y.P.  Dhingra and B.K.  Satija for  the Respondents. The Judgment of the Court was delivered by      SAWANT.  J.  This is an instance of how  a  resourceful mind  can find ingenious method to circumvent the  law.  The first  respondent  in  this case is the  Home  Decorators  & Finance  (P)  Ltd.  of which the second  respondent  is  the Managing Director. The appellant-Government collects  enter- tainment tax under the Entertainment Duty and  Advertisement Tax  Act, 1936 (hereinafter referred to as the  ’Act’)  from the organisers of the entertainment-programmes whenever  the entries  to such programmes are charged.  The  entertainment tax  is  recovered  at the rate of 36 per cent  of  the  fee charged. In order to evade this tax, the respondents evolved a stratagem and organised two 1002 performances called "Mahendar Kapoor Nite" in a local  audi- torium,  namely, Manas Bhawan Hall Wright Town Jabalpur,  on 7th and 8th July, 1974. Although the Articles and the  Memo- randum  of Association of the 1st Respondent did not  permit them to do so, with a view both to bring the said programmes within the scope of the Articles of Association and to evade the  payment of the tax, the respondents  issued  advertise- ments of the programmes in a local newspaper giving out that the programmes were being arranged to encourage savings. The scheme was that all those who wanted to attend the programme will become members of a group which they called "Nav Nirman Group"  by  paying an admission fee of Rs.2 which  was  non- refundable and a membership subscription of Rs. 10 which was refundable  after 10 years. The advertisements  also  stated that since there was an overwhelming demand, the performance would be staged on two dates, namely, the 7th and 8th  July, 1974 and that the membership forms would be available at the site  on the dates concerned and that the entry to the  pro- gramme would be strictly on the production of the invitation card as well as the membership card. It appears that on July 7, 1974 and July 8, 1974, as many as 3189 and 4649  gullible

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persons respectively fell victims, and paid both the  admis- sion  fee  as well as the membership subscription.  The  re- spondents collected both the membership forms as well as the receipts  for payment from the said persons at the  time  of giving them the entry to the programme. The result was  that the persons concerned were left neither with the  membership form nor with the receipts for the money they had paid.     2.  Needless to say that although the promise  was  that such performances would be repeated for 10 years hence,  and the members concerned would have an entry to the  programmes on the basis of the membership cards, neither the membership cards  were issued, nor the admission fee or the  membership subscription were returned to the members, nor the  perform- ances were staged. In effect, the respondents made good with the  money they had collected ostensibly for promoting  sav- ings. Thus both the members of the public were defrauded  of their moneys as well the State Government of their  taxreve- nue.     3.  The District Excise Officer who was also the  Enter- tainment Tax Collector under the said Act, sensing the  ploy had,  however, taken precaution to check, on both  the  said dates, the receipts and the amounts received by the respond- ents  and had dexterously prepared a panchnama at the  spot. He  determined  the amount of tax recoverable  on  the  said collections, and issued to the respondents two separate 1003 notices  on  July 9, 1974 demanding the tax along  with  the dutysurcharge  thereon for the collections made on  7th  and 8th July, 1974 respectively. The total amount so demanded by both the notices was Rs.35,429.76.     4.  The  respondents challenged the notices  by  a  writ petition  under Article 226 of the Constitution  before  the High  Court.  The High Court by the impugned  decision  held that  the  assessment  of the tax made by  the  Officer  was arbitrary because, firstly, there was no allegation that the invitation cards which were issued were sold, and  secondly, the  subscription fee of Rs. 10 recovered from  each  member was not divided by 10 which it was necessary to do, for  the entertainment tax could be collected only on Re. 1 per  year for  the next 10 years. The High Court,  therefore,  allowed the  writ petition and quashed the notices. It also  appears that  the respondents had paid Rs.5,000 in part  payment  of the  amount  demanded  under the notices.  The  High  Court, therefore,  also directed the appellants to refund the  said amount as being "exacted" from the respondents.     5. We are afraid ,. the High Court completely missed the crucial  point  and,  therefore,  mis-directed  itself.  The admitted facts as stated above were that the respondents had collected  in  all Rs. 12 from each of the  members  out  of which Rs.2 were non-refundable being the so called admission fee  and  Rs. 10 were refundable only after  10  years.  The "members" were not issued the membership-cards nor were they left  either  with any trace of their  membership  forms  or receipts  for the payments they had made. Instead they  were handed  over entrance slips during interval which were  col- lected  at the door. The result was that even if  the  "mem- bers"  were  to  claim an entry for programmes,  if  any  in future,  they would not have been able to do so. As it  hap- pened  further, in fact, no programmes were ever  staged  at any  time thereafter. The so called ’Nav Nirman  Group"  did not have any legal existence. It was an amorphous body.  The rules  and  regulations  framed for the  said  body  further showed some interesting features as follows: "For the purpose of Prizes there shall be Five Sub-groups of one  lakh  members each. After every Sub-group of  one  lakh

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members  there  shall be total 4280 prizes divided  into  20 half-yearly  draws and valuing total amount of  Rs.5  lakhs. The  date of the First Draw will be announced through  News- papers. Every member, irrespective of whether he has received any 1004 prize(s)  or  not  shall be entitled to the  refund  of  his deposit of Rs. 10 after the maturity of the duration of  the group, i.e., 10 years, along with a bonus of Rs.2 on surren- der  of the official Receipt-cum-Membership Evidence  issued by  the  Company. Duration of the Group shall  be  commenced from the date of the 1st Draw. x         x         x         x         x         x  For the purposes of Bumper Draw there shall be 50 SubGroups of  10,000 continued members each and after every such  sub- group there shall carry various valuable prizes to the  tune of  about  Rs.2,50,000. Members of  incomplete  subgroup  of 10,000  continued members shall be given an extra  bonus  of Rs.25  in the shape of articles, the list of which shall  be declared nearing maturity of the Group, instead of  partici- pating in Bumper Draw. X                   X                  X                   X X              X Every  member will be issued a receipt while being  admitted as  a  member and the number of such receipt  shall  be  his membership  Number also. No separate pass book will  be  is- sued.  The  receipt  itself shall be treated  as  final  and conclusive evidence of membership. X              X             X              X              X X After  the completion of 1st sub-group one lakh members  the First Draw shall be conducted, but in case total  membership of  the  sub-group does not attain the target  necessary  to form  the sub-group before date of the draw (which shall  be announced through Newspapers) then the remaining  membership number  of the sub-group shall be treated as  the  Company’s membership  numbers and any prize/benefit  accruing  through these  numbers  as  a result of the draw  shall  remain  the Company’s  property. The Company may allot  such  membership numbers subsequently to the new applicants for the remaining period  with  the subsequent benefits only.  The  same  rule shall apply to every further sub-group of one lakh members. X              X             X              X              X X 1005 Membership of the Group for 10 years and cannot be cancelled or  withdrawn  by the member before maturity of  the  Group. Prizes  and Film Star show are added incentive and not  Part of  the  Scheme  and are not binding on  the  Company  under circumstance-beyond control. X                   X                  X                   X X              X The management may change any article of the declared  prize looking to the time and circumstances prevailing at the time of the particular draw. X              X             X              X              X X The  management  of the Company reserves the right  to  add, alter, or amend the rules and regulations as and when neces- sary  for the efficient and proper conduCt of the  group  as well as in compliance with the Government rules and  regula- tions  which may come in force hereafter and the same  shall be binding on all the members." It  will be apparent from the Scheme that it was  not  meant for  promoting  music. It was  a  pure  business-preposition

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meant  to collect money and earn profits, and it was  to  be used  as a device to evade the entertainment duty.  The  re- ceipts and/or the invitation cards were nothing but  tickets for  the show and only for one show, and were  collected  at the door. In the circumstances, whatever be the  description given  to the receipts/cards they were liable to the  enter- tainment duty. The impugned notices were, therefore, proper- ly  issued by the appellants. We are, therefore,  unable  to accept the reasoning of the High Court that Rs. 10 collected by the respondents were the membership subscription or  that the duty could not have been collected at a time on Rs. 10.     6. Hence, we allow the appeal and set aside the impugned decision with costs. T.N.A.                                                Appeal allowed. 1006