Madhya Pradesh & Ors Vs. Home Decorators and
Finance (Pvt.) Ltd. & Anr  INSC 186 (3 May 1990)
P.B. Sawant, P.B. Ahmadi, A.M. (J)
1990 AIR 1322 1990 SCR (2)1000 1990 SCC (3) 560 JT 1990 (2) 369 1990 SCALE
(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.
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.
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.
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 since the entertainment tax could be collected only on
Re. 1 per year for the next 10 years. Hence this appeal by the State.
the appeal and setting aside the decision of the High Court. this Court.
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]
APPELLATE JURISDICTION: Civil Appeal No. 1416 of 1975.
the Judgment and Order dated 2.12. 1974 of the Madhya Pradesh High Court in
M.P. No. 565 of 1974.
Kumar and S.K. Agnihotri for the Appellants.
Y.P. Dhingra and B.K. Satija for the Respondents.
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 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
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.
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.
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.
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.
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:
the purpose of Prizes there shall be Five Sub-groups of one lakh members each. After
every Sub-group of one lakh members there shall be total 4280 prizes divided
into 20 half-yearly draws and valuing total amount of Rs.5 lakhs.
date of the First Draw will be announced through News- papers.
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
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.
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 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.
Hence, we allow the appeal and set aside the impugned decision with costs.