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CASE NO.: Appeal (civil) 4319  of  1991

PETITIONER: THE STATE OF KARNATAKA & ORS.                                                     APPELLANTS

       Vs.

RESPONDENT: M/S. DRIVE-IN ENTERPRISES                                                        RESPONDENT

DATE OF JUDGMENT:       13/03/2001

BENCH: V.N. Khare & Ruma Pal

JUDGMENT:

V.N.KHARE, J.: L...I...T.......T.......T.......T.......T.......T.......T..J

   This  appeal  is  directed against the judgment  of  the Karnataka  High  Court passed in the writ petition filed  by the  respondent herein whereby sub-clause (v) of Clause  (i) of  Section  2  of  the   Karnataka  Entertainment  Tax  Act (hereinafter  referred  to as the Act) was struck down  as being  beyond  the  legislative   competence  of  the  State Legislature.

   The  respondent herein, is the owner and proprietor of a Drive-in- Theatre in the outskirts of Bangalore city wherein cinema  films  are  exhibited.   It   is  alleged  that  the Drive-in-Theatre  is distinct and separate in its  character from  other cinema houses or theatres.  The  Drive-in-Cinema is   defined   under  Rule   111-A  of   Karnataka   Cinemas (Regulation)  Rules  1971 (hereinafter referred to  as  the Rules)  framed  in exercise of the powers conferred on  the State  Government  under  Regulation  22  of  the  Karnataka Cinemas (Regulation) Act, 1964.  The definition of Drive-in- Cinema runs as under :

     Drive-in-Cinema  means  a cinema with  an  open-air theatre  premises into which admission may be given normally to  persons  desiring  to view the cinema while  sitting  in motor  cars.  However, where an auditorium is also  provided in  a drive- in-cinema premises, persons other than  those desiring  to view the cinema while sitting in motor cars can also be admitted.  Such drive-in-cinemas may have a capacity to accommodate not more than one thousand cars.

   The Drive-in-Theatre of the respondent with which we are concerned  here  is a cinema with an  open-air-theatre  into which admissions are given to persons desiring to see cinema while  sitting in their motor cars taken inside the theatre. The  Drive-in-Theatre  has also an auditorium wherein  other persons  who  are  without  cars, view  the  film  exhibited therein  either  standing or sitting.  The persons  who  are admitted  to  view the film exhibited in the auditorium  are required  to  pay Rs.3/- for admission therein.  It  is  not

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disputed  that the State Government has levied entertainment tax  on  such  admission  and the same  is  being  realised. However,  if  any person desires to take his car inside  the theatre with a view to see the exhibition of the films while sitting in his car in the auditorium, he is further required to   pay  a  sum  of  Rs.2/-   to  the  proprietor  of   the Drive-in-Theatre.    The  appellant-State  in  addition   to charging entertainment tax on the persons being entertained, levied  entertainment  tax on admission of cars  inside  the theatre.  This levy was challenged by the proprietors of the Drive-in-Theatres  by  means  of writ petitions  before  the Karnataka  High Court which were allowed and levy was struck down by a single Judge of the High Court.  The said judgment was  affirmed  by  a Division Bench of that Court.   It  was held,  that the levy being not on a person entertained (i.e. Car/Motor  vehicle),  the same was ultra vires.   After  the aforesaid  decision,  the Karnataka Legislature amended  the Act  by Act No.3 of 1985.  By the said amendment, sub clause (v)  was  added to Clause (i) of Section 2 of the said  Act. Simultaneously,  Sections  4A  and 6 of the  Act  were  also amended.   After  the  aforesaid amendments,  the  appellant herein,  again levied entertainment tax on admission of cars into  Drive-in- Theatre.  This levy was again challenged  by means  of  a petition under Article 226 of the  Constitution and  the said writ petition was allowed, and as stated above , the High Court struck down sub-clause (v) to Clause (i) of Section 2 of the Act.

Learned  counsel  appearing  for the appellant  urged  that insertion  of  sub-clause (v) of Clause (i) of Section 2  of the  Act  is  a  valid piece of legislation  and  after  its insertion  and amendment of Section 6 and Section 4A of  the Act,  the appellant-State was competent to levy and  realise the  entertainment  tax  on   the  admission  of  cars/motor vehicles  inside  the  Drive- in-Theatre.   Learned  counsel urged  that in pith and substance, the levy is on the person entertained  and not on the admission of cars/motor vehicles inside  the  Drive-in-Theatre.  It was also urged  that  the State Legislature is fully competent to impose such a levy.

   Learned  counsel  for the respondent, inter alia,  urged that the Drive- in-Theatre is a different category of cinema unlike  cinema houses or theatres, that, the special feature of  the Drive-in-Theatre is that, a person can view the film exhibited  therein  while  sitting  in his  car,  that,  the admission  of  cars/motor vehicles into Drive-in theatre  is incidental  and  part of concept of Drive-in-Theatre,  that, the  film  that is shown in Drive- in- Theatre is  like  any other  film  shown  in cinema houses, and  that,  the  State Legislature  is  not competent to levy entertainment tax  on admission  of  motor vehicles inside the  Drive-in  theatre. Learned  counsel  further argued that the incidence  of  tax being  on  the  entertainment,   the  State  Legislature  is competent  to  enact  law  imposing   tax  only  on   person entertained.   In nut-shell, the argument is that the  State Legislature  can levy entertainment tax on human beings  and not  on any inanimate object.  According to learned counsel, since  the  vehicle is not a person entertained,  the  State Legislature   is  not  competent  to   enact  law  to   levy entertainment  tax  on the admission of cars/motor  vehicles inside the Drive-in-Theatre.

   On  the  arguments  of learned counsel of  parties,  the question  arises  as  to whether the  State  Legislature  is competent to enact law to levy tax under Entry 62 of List II

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of  Seventh  Schedule  on admission of  cars/motor  vehicles inside the Drive-in-Theatre.

   Where  as in the present case, the vires of an enactment is  impugned on the ground that the State Legislature  lacks power to enact such an enactment, what the Court is required to  ascertain  is the true nature and character of  such  an enactment  with  reference  to  the   power  of  the   State Legislature  to enact such a law.  While adjudging the vires of  such  an  enactment, the Court must  examine  the  whole enactment,  its object, scope and effects of its  provision. If on such adjudication it is found that the enactment falls substantially on a matter assigned to the State Legislature, in  that  event such an enactment must be held to  be  valid even  though nomenclature of such an enactment shows that it is beyond the competence of the State Legislature.  In other words,  when  a levy is challenged, its validity has  to  be adjudged  with  reference  to the competency  of  the  State Legislature  to  enact such a law, and while  adjudging  the matter  what  is  required  to  be found  out  is  the  real character and nature of levy.  In sum and substance, what is to  be  found out is the real nature of levy, its  pith  and substance  and  it  is in this light the competency  of  the State  Legislature is to be adjudged.  The doctrine of  pith and substance means that if an enactment substantially falls within  the  powers expressly conferred by the  Constitution upon  the  Legislature, it cannot be held to be ultra  vires merely  because  its nomenclature shows that  it  encroaches upon  matters  assigned to another heading  of  legislation. The nomenclature of a levy is not conclusive for determining its  true character and nature.  It is no longer res integra that the nomenclature of a levy is not a true test of nature of  a  levy.  In Goodyear India Ltd.  & Ors.  v.   State  of Haryana  &  Anr.   1990 (2) SCC p.71, it was held  that  the nomenclature of an Act is not conclusive and for determining the  true  character  and nature of a particular  levy  with reference  to the legislative competence of Legislature, the Court  will look into pith and substance of the legislation. In  M/s.  R.R.  Engineering Co.  v.  Zila Parishad, Bareilly &  Anr.  1980 (3) SCC p.330 the question arose as to whether the  Zila Parishad can levy tax on calling or property.  The argument  was that the levy is tax on income, therefore,  it is ultra vires.  However this Court held thus :

   The  fact that the tax on circumstances and property is often levied on calling or property is not conclusive of the nature  of  the tax;  it is only as a matter of  convenience that  income  is  adopted  as a  yardstick  or  measure  for assessing  the  tax.  The measure of the tax is not  a  true test  of  the nature of the tax.  Considering the  pith  and substance  of the tax, it falls in the category of a tax  on a mans financial position, his status taken as a whole and includes  what may not be properly comprised under the  term property  and  at  the  same  time  ought  not  to  escape assessment.

    (emphasis supplied)

   In Kerala State Electricity Board vs.  Indian Alluminium Co.  1976 (1) SCC p.466, it was held thus:

   For deciding under which entry a particular legislation falls the theory of ’pith and substance has been evolved by the  courts.   If in pith and substance a legislation  falls within  one  list  or  the other but  some  portion  of  the

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subject-matter  of  that legislation  incidentally  trenches upon and might come to fall under another list, the Act as a whole  would  be  valid   notwithstanding  such   incidental trenching.

   In  Governor General in Council vs.  Province of  Madras AIR  1945  P.C.  p.98, the question arose as to whether  the levy  was sales tax or excise duty.  In that connection  the Privy Council held :

   Its  real  nature, its pith and substance is that  it imposes  a  tax  on the sale of goods.   No  other  succinct description could be given of it except that it is a tax on the  sale of goods.  It is in fact a tax which according to the  ordinary  canons  of  interpretation  appears  to  fall precisely  within Entry No.48 of the Provincial  Legislative List.

   In Leventhal & Ors.  v.  David Jones Ltd.  AIR 1930 P.C. p.129,  the question arose as to whether the Legislature can impose  Bridge tax when the power to Legislate was really in respect  of tax on land.  The levy of Bridge tax was  held valid  under legislative power of tax on land.  It was  held as thus:

   The appellants contention that though directly imposed by  the  legislature, the bridge tax is not a land tax,  was supported  by argument founded in particular on two manifest facts.   The  bridge tax does not extend to  land  generally throughout New South Wales, but to a limited area comprising the  City  of Sydney and certain specified shires,  and  the purpose  of  the  tax is not that of  providing  the  public revenue  for  the  common  purposes  of  the  State  but  of providing  funds for a particular scheme of betterment.   No authority  was  vouched for the proposition that  an  impost laid by statute upon property within a defined area, or upon specified  classes of property, or upon specified classes of persons,  is not within the true significance of the term  a tax.   Nor  so far as appears has it even been  successfully contended  that  revenue  raised by  statutory  imposts  for specific  purposes is not taxation. supplied) (emphasis  In@@                                                IIIIIIIII Raza  Buland  Sugar  Co.  v.  Rampur Municipality  AIR  1962 Allahabad  p.82, which was subsequently approved in 1965 (1) SCR  p.970,  the question arose as to whether the  Municipal Board  can levy water tax when the power to legislate was in respect  of the land and building.  The High Court held that in  pith and substance water tax is not on water but it is a levy on land and building.

   We  are in full agreement with the aforestated statement of  law and are of the view that it is not the  nomenclature of  the  levy which is decisive of the matter, but its  real nature and character for determining the competency on power of  State Legislature to enact law imposing levy.  It is  in the  light  of  the  aforesaid statement of  law,  we  would examine the validity of levy challenged in the present case. Before  we  deal with the question in hand, we  would  first examine the provisions of the Act.  Section 2 (a) of the Act defines  admission.   Admission includes admission as  a spectator  or as one of the audiences, and admission for the purpose  of  amusement by taking part in  an  entertainment. Clause   (b)   of  Section  2  defines  admission   to   an entertainment  which  includes  admission to any  place  in which  an  entertainment is held.  Clause (cb)  of  Section2

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defines cinema theatre means any place of entertainment in which  cinematography  shows are held to which  persons  are admitted  for  payment.  Clause (e) of Section 2 of the  Act defines   entertainment  which  means  a  horse  race   or cinematography  shows including exhibition of video films to which persons are admitted on payment.

   Section 2 (i) defines payment for admission which runs as  under:  i) any payment made by a person who having  been admitted  to  one  part  of  a  place  of  entertainment  is subsequently  admitted to another part thereof for admission to  which  a  payment  involving a tax or a  higher  tax  is required.

ii)          xxx   xxx  iii)        xxx    xxx  iv)          xxx    xxx

   v) any payment for admission of a motor vehicle into the auditorium of a cinema known as drive- in-theatre.

   (emphasis supplied)

   Section   3  is  a   charging  section.   The   relevant provisions  run  as  under  :   3.   Tax  on  payments  for admission  to  entertainments.   (1) There shall be  levied and  paid  to  the  State Government on  each  payments  for admission (excluding the amount of tax) to an entertainment, [other  than  the  entertainment referred to  in  sub-clause (iii)  of clause (e) of Section 2), entertainment tax at  70 per cent of such payment].

   (2)  Notwithstanding anything contained in sub-  section (1)  there shall be levied and paid to the State  Government (except  as  otherwise  expressly provided in this  Act)  on every  complimentary  ticket issued by the proprietor of  an entertainment,  the  entertainments tax at  the  appropriate rate  specified  in  sub-section  (1)  in  respect  of  such entertainment,  as  if  full  payment   had  been  made  for admission  to  the entertainment according to the  class  of seat  or  accommodation which the holder of such  ticket  is entitled to occupy or use;  and for the purpose of this Act, the  holder  of  such ticket shall be deemed  to  have  been admitted on payment.

   Sub-Section (1) of Section 6 runs as under:  6.  Manner of  payment  of tax.   (1) [Save as otherwise  provided  in Section  4-A or 4-B, the entertainments tax shall be  levied in  respect of each payment for admission or each admission] on  a complimentary ticket and shall be calculated and  paid on the number of admissions.

   Entry  62  of List II of Seventh Schedule  empowers  the State  Legislature  to levy tax on luxuries,  entertainment, amusements, betting and gambling.  Under Entry 62, the State Legislature  is  competent  to  enact law  to  levy  tax  on luxuries  and  entertainment.   The incidence of tax  is  on entertainment.   Since entertainment necessarily implies the persons  entertained, therefore, the incidence of tax is  on the  person entertained.  Coming to the question whether the State  Legislature is competent to levy tax on admission  of cars/motor  vehicles inside the Drive-in-Theatre  especially when  it  is  argued that cars/motor vehicles  are  not  the persons entertained.  Section 3 which is charging provision,

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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 quality of entertainment  obtained by  a  person sitting in his car would be different  from  a squatter  viewing the film show.  The levy on  entertainment varies  with  the  quality of comfort with  which  a  person enjoys  the  entertainment inside the Drive-in-Theatre.   In the  present  case,  a person sitting in his  car  or  motor vehicle   has  luxury  of  viewing   cinema  films  in   the auditorium.   It is the variation in the comfort offered  to the  person  entertained for which the State Government  has levied  entertainment  tax on the person  entertained.   The real  nature  and character of impugned levy is not  on  the admission  of cars or motor vehicles, but the levy is on the person  entertained who takes the car inside the theatre and watches  the  film  while  sitting  in  his  car.   We  are, therefore,  of the view that in pith and substance the  levy is  on  the  person  who is entertained.   Whatever  be  the nomenclature  of levy, in substance, the levy under  heading admission of vehicle is a levy on entertainment and not on admission  of vehicle inside the Drive-in-Theatre.  As  long as in pith and substance the levy satisfies the character of levy, i.e.  entertainment, it is wholly immaterial in what name  and  form it is imposed.  The word entertainment  is wide  enough to comprehend in it, the luxury or comfort with which  a person entertains himself.  Once it is found  there is a nexus between the legislative competence and subject of taxation,  the levy is justified and valid.  We,  therefore, find  that  the  State Legislature was  competent  to  enact sub-clause  (v)  of clause (i) of Section 2 of the Act.   We accordingly hold that the impugned levy is valid.

   For  the aforesaid reasons, we are of the view that  the High Court fell in serious error in holding that sub- clause (v)  of  clause (i) of Section 2 of the Act is  ultra  vires Entry 62 of List II of Seventh Schedule.  Consequently, this appeal deserves to be allowed.  The judgment under appeal is set  aside.   The writ petition shall stand dismissed.   The appeal is allowed.  There shall be no order as to costs.