Supreme Court clarifies Entertainment Duty for Amusement Parks: State of Maharashtra vs. Pan India Paryatan Ltd. (2020)

Date of the Judgment: 18 February 2020

Citation: 2020 INSC 170

Judges: Deepak Gupta, J., Hemant Gupta, J.

Can amusement parks offering a variety of rides and games charge a lump sum amount for entry and be taxed at a concessional rate? The Supreme Court of India addressed this question in a dispute over the interpretation of the Bombay Entertainments Duty Act, 1923. The Court clarified the applicable entertainment duty rates for amusement parks, specifically addressing whether a lump sum payment for entry qualifies for a reduced tax rate. This judgment was delivered by a bench comprising Justice Deepak Gupta and Justice Hemant Gupta, with the majority opinion authored by Justice Hemant Gupta.

Case Background

Pan India Paryatan Limited operates an amusement park in Greater Bombay, which opened to the public on December 25, 1989. The park charged a single fee for admission and access to all its entertainment options. Initially, the amusement park sought confirmation from the authorities that a concessional rate of 3.75% would be applicable on the consolidated ticket. This was accepted by the Collector, Bombay Suburban District on 4th October, 1994. However, later, on January 7, 1995, the amusement park was informed that they would be required to pay duty at 7.5% instead of 3.75%. The amusement park challenged this demand, eventually leading to a writ petition after withdrawing the first one. The State sought to recover entertainment duty at 7.5% for the period from September 16, 1994, to December 24, 1994, and at 15% from December 25, 1994. The amusement park paid the duty under protest and filed a writ petition seeking a refund.

Timeline

Course of Proceedings

The amusement park initially approached the High Court of Judicature at Bombay challenging the demand for entertainment duty at 7.5% and 15%. The High Court considered the matter and framed the following questions:

• Rate of entertainment duty payable by the Petitioners for a period from 16th September, 1994 to 24th December, 1994.
• Rate of duty payable for the period commencing 25th December, 1994.
• Whether action of Respondents in seeking to recover duty payable during 25th December, 1989 to 23rd August, 1990 already adjusted against refund payable to Petitioners, is justified and valid in law. This question is raised by Writ Petition No. 2009 of 1998.

The High Court ruled in favor of the amusement park, interpreting the relevant sections of the Bombay Entertainments Duty Act, 1923 to mean that the amusement park was eligible for a concessional rate of duty. The State of Maharashtra appealed this decision to the Supreme Court of India.

Legal Framework

The case revolves around the interpretation of the Bombay Entertainments Duty Act, 1923. Key provisions include:

• Section 2(a-1): Defines “amusement park” as a place providing various amusements, including games or rides, on a permanent basis for a payment.
• Section 2(b): Defines “payment for admission” to include payments for access to different parts of an entertainment venue.
• Section 2(d): Defines “admission to an entertainment” to include admission to any place where the entertainment is held.
• Section 3(1): Specifies the duty on payments for admission to entertainment. It states that the entertainment duty in respect of an amusement park shall be 15 percent of the payment made for admission to the amusement park, including payment made for admission for games and rides, whether charged separately or not.
• Section 3(2): Addresses situations where payment for admission is a lump sum, such as a subscription or season ticket, and states that the entertainment duty shall be levied and paid on 50 percent of such lump sum at the rates specified in clause (b) of sub-section (1).
• Section 3(5)(a): Provides a special scheme for amusement parks, stating that for the first three years, no duty is payable; for the subsequent two years, duty is at 50% of the rate leviable under Section 3(1)(b) or 3(2); and from the sixth year onwards, the full duty is payable.
  
  It states:
  
  “Notwithstanding anything contained in sub-section (2) or in any other provisions of this Act but subject to the provisions of clause (b), on and with effect from the 25th December, 1989, there shall be levied, and paid by the proprietor to the State Government, the entertainments duty in respect of an amusement park in the following manner, namely :-
  (i) for the first three years from the date of commencement of the amusement park, no duty;
  (ii) for the subsequent two years, at the rate of fifty per cent of the rate of duty leviable under clause (b) of sub-section (1) or, as the case may be, sub-section (2) of section 3;
  (iii) from the sixth years, full amount of entertainments duty leviable at the rate of specified in clause (b) of sub-section (1) or, as the case may be, sub-section (2) of section 3.”

Arguments

Arguments by the State of Maharashtra:

• The State argued that Section 3(5)(a) of the Bombay Entertainments Duty Act, 1923, which starts with a non-obstante clause, clearly specifies the levy of entertainment duty for amusement parks.
• According to the State, Section 3(1) of the Act mandates a 15% entertainment duty on payments for admission to an amusement park.
• The State contended that Section 3(5)(a) outlines a specific manner of levy, which should be followed. While there is no dispute for the first three years, the duty for the subsequent two years should be 50% of the rate under Section 3(1)(b), i.e., 50% of 15%.
• The State also argued that Section 3(2) of the Act is applicable only to specific categories of visitors, such as those with subscriptions, season tickets, or rights to a series of entertainments, which does not apply to the amusement park.

Arguments by Pan India Paryatan Limited (Amusement Park):

• The amusement park argued that a collective reading of the definition of “amusement park” and Section 3(2) of the Act suggests that when a lump sum amount is charged for admission to a series of entertainments, the duty should be 50% of the rate under Section 3(1)(b).
• They contended that since they charge a lump sum amount for admission to all rides and games, Section 3(2) applies, making the duty half of 15%, i.e., 7.5%.
• The amusement park argued that Section 3(5)(a) provides a tax holiday, and for the fourth and fifth years, the duty should be 50% of the rate under Section 3(2), i.e., 3.75%.
• They also argued that the proviso to Section 3(1)(b) indicates that 15% tax is applicable when charges for games and rides are separate, while a lump sum charge should attract a 7.5% duty under Section 3(2).

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. What is the rate of entertainment duty payable by the amusement park for the period from 16th September, 1994 to 24th December, 1994?
2. What is the rate of duty payable for the period commencing 25th December, 1994?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Court considered the following legal provisions:

• Section 2(a-1) of the Bombay Entertainments Duty Act, 1923: Defines “amusement park”.
• Section 2(b) of the Bombay Entertainments Duty Act, 1923: Defines “payment for admission”.
• Section 2(d) of the Bombay Entertainments Duty Act, 1923: Defines “admission to an entertainment”.
• Section 3(1) of the Bombay Entertainments Duty Act, 1923: Deals with duty on payments for admission to entertainment.
• Section 3(2) of the Bombay Entertainments Duty Act, 1923: Deals with duty on lump sum payments for admission.
• Section 3(5)(a) of the Bombay Entertainments Duty Act, 1923: Deals with duty on amusement parks.

The Court did not rely on any case laws or books in this judgment.

Judgment

How each authority was viewed by the Court?

• The Court interpreted Section 2(a-1) of the Bombay Entertainments Duty Act, 1923 to understand the nature of an amusement park.
• The Court interpreted Section 2(b) of the Bombay Entertainments Duty Act, 1923 to understand what constitutes payment for admission.
• The Court interpreted Section 2(d) of the Bombay Entertainments Duty Act, 1923 to understand what constitutes admission to an entertainment.
• The Court held that Section 3(1) of the Bombay Entertainments Duty Act, 1923 is applicable to all amusement parks.
• The Court held that Section 3(2) of the Bombay Entertainments Duty Act, 1923 is applicable only to specific categories of visitors and not to the amusement park.
• The Court held that Section 3(5)(a) of the Bombay Entertainments Duty Act, 1923 has an overriding effect over Section 3(1)(b) and Section 3(2) for amusement parks.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the specific language of the Bombay Entertainments Duty Act, 1923, particularly the non-obstante clause in Section 3(5)(a). The Court emphasized that Section 3(5)(a) provides a special scheme for amusement parks, which overrides the general provisions of Section 3(1)(b) and Section 3(2). The Court also focused on the specific categories mentioned in Section 3(2), concluding that the amusement park did not fall under any of them. The Court reasoned that the amusement park’s interpretation, which sought to combine the benefits of Section 3(2) and Section 3(5)(a), was not supported by the plain reading of the statute. The Court also highlighted that the term “series of entertainments” in Section 3(2) refers to multiple-day events, not a single-day entry to an amusement park.

Fact:Law

The Court rejected the amusement park’s argument that a lump sum payment for admission to all rides and games should be treated as admission to a series of entertainments under Section 3(2). The Court stated that “The series of entertainments as contemplated by Section 3(2) of the Act does not mean that on a single day ticket for one entry, it can be treated to be a series of entertainments.”

The court also clarified that “Once an admission ticket is granted, it is not in terms of Section 3(2) of the Act but only in terms of Section 3(1)(b) of the Act.”

The Court further stated that “The argument is preposterous as the writ petitioners are firstly claiming the benefit under Section 3(2) of the Act and then under Section 3(5)(a) of the Act. The amusement parks would be entitled to only one benefit either under Section 3(2) or under Section 3(5)(a) of the Act.”

Key Takeaways

• Amusement parks are liable to pay entertainment duty as per Section 3(5)(a) read with Section 3(1)(b) of the Bombay Entertainments Duty Act, 1923.
• A lump sum payment for admission to an amusement park does not qualify for a concessional rate under Section 3(2) of the Act unless it falls under the specific categories mentioned therein.
• The term “series of entertainments” under Section 3(2) refers to multiple-day events, not a single-day entry to an amusement park.
• Section 3(5)(a) has an overriding effect over Section 3(1)(b) and Section 3(2) for amusement parks.

Directions

The Supreme Court set aside the order passed by the High Court and allowed the appeals filed by the State of Maharashtra.

Development of Law

The ratio decidendi of this case is that amusement parks are not entitled to a concessional rate of entertainment duty under Section 3(2) of the Bombay Entertainments Duty Act, 1923, unless they fall under the specific categories mentioned therein. The Supreme Court clarified that Section 3(5)(a) has an overriding effect and the duty should be levied as per Section 3(1)(b). This judgment clarifies the interpretation of the Bombay Entertainments Duty Act, 1923, regarding the levy of entertainment duty on amusement parks and settles the position that a single day ticket cannot be considered as a series of entertainments.

Conclusion

The Supreme Court’s judgment in The State of Maharashtra & Ors. vs. Pan India Paryatan Limited & Anr. clarifies that amusement parks cannot claim a concessional rate of entertainment duty under Section 3(2) of the Bombay Entertainments Duty Act, 1923, for a lump sum payment for admission. The Court held that the duty should be levied as per Section 3(5)(a) read with Section 3(1)(b) of the Act. This decision provides a clear interpretation of the relevant provisions of the Act and settles the dispute regarding the applicable rate of entertainment duty for amusement parks.