Bombay High Court Upholds Levy Of Entertainment Duty On Convenience Fees
The Bombay High Court upheld the constitutional validity of a 2014 amendment to the Maharashtra Entertainments Duty Act, 1923which empowers the State to levy entertainment duty on “convenience fees” exceeding ₹10 charged by cinema owners or online ticketing platforms for facilitating the online purchase of movie tickets.
The Division Bench of Justice M.S. Sonak and Justice Jitendra Jain ruled, “Making payment of convenience fees is an inextricable part of buying the ticket online for entertainment. The composite price paid does go a long way in enhancing the experience of the entertainment, i.e., watching the film or gaining seamless admission to the place of entertainment. Splitting the transaction or styling it as a separate activity having no nexus or connection with payment for admission, or calling it by some other name, cannot be grounds to either strike down the levy or declare that it would not be attracted. Therefore, in our view, the “convenience fees” charged would squarely fall within section 2(b)(iv) which defines “payment of admission” and which forms the measure of tax on which rate of duty is to be paid under Section 3 of the MED Act.“
The Court added, “merely changing the mode of sale from counter to online does not mean that selling tickets online constitutes a separate business activity. From this perspective, there is a clear connection between convenience fees and the cost of purchasing a ticket to enter the theatre, especially when tickets are booked online. Therefore, it satisfies the precondition under Section 2(b)(iv) for considering it as a payment for admission.”
Background
The petitions challenged the seventh proviso inserted into Section 2(b) of the Act by Maharashtra Act XLII of 2014. This proviso exempted online booking charges up to ₹10 per ticket from the definition of “payment for admission” but stipulated that any amount beyond ₹10 would be included in that definition, thereby attracting entertainment duty.
The petitioners contended that convenience fees are charged for a separate service, distinct from the entertainment itself. They argued that online ticketing is an independent business activity already taxed under the Finance Act, 1994and therefore outside the scope of the State’s powers under Entry 62 of List II of the Seventh Schedule to the Constitution. They alleged that the provision was arbitrary, violative of Articles 14 and 300A, and amounted to a colourable exercise of power. Further, they claimed there was no assessment or collection mechanism for such a levy and that convenience fees could not be equated with admission charges, as they were optional and not a condition for entry. It was also argued that the amendment altered the tax base without amending the charging section, something that could not validly be done through a proviso.
The State defended the amendment, submitting that Entry 62 of List II clearly authorised it to tax entertainment in all its forms, and that the broad wording of Sections 2(a) and 2(b)(iv) of the MED Act encompassed any payment connected with entertainment. It maintained that convenience fees, being part of the cost of accessing entertainment, were within the Act’s ambit, and that the amendment merely adjusted the measure of tax without introducing any new levy.
Finding
The Bench agreed with the State’s submissions, holding that the character of the levy remains unchanged by the rate imposed or by the measure of tax and that the method of recovery cannot influence its character.
Applying the pith and substance doctrine, the Court concluded that the levy was squarely within the State’s legislative competence under Entry 62 of List II. Addressing concerns about overlap with Union taxation on services, the Court clarified that merely because charges for online booking are included in the tax measure does not imply that the State has encroached upon the Union List.
The Court further rejected the argument that the law was colourable, noting that “Once the impugned proviso is held to be constitutionally valid and has a direct nexus with the subject matter of tax, the legislature should be given a free hand to determine the measure of tax.”
Consequently, the Court dismissed both petitions and held the impugned proviso inserted by Maharashtra Act XLII of 2014 amending the Maharashtra Entertainment Duty Act to be intra vires and not unconstitutional or beyond the State’s legislative competence.
Cause Title: FICCI-Multiplex Association of India & Anr. v. State of Maharashtra & Ors., [2025:BHC-OS:12860-DB]
Appearances:
Petitioners: Advocates Naresh Thackeray, Chakrapani Misra, Sameer Bindra, and Ananya Misra, Instructed by Khaitan & Co., Advocates Rohan Rajadhyaksha, Razandra Barot, Dhaval Vora, Dhirajkumar Totalaa Tejas Raghav, Instructed by Azb & Partners.
Respondents: Additional Government Pleader Milind More