IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No. 9476 of 2009 and connected cases Date of Decision: January 3, 2011 DLF Golf Resorts Ltd. …Petitioner Versus State of Haryana and others …Respondents CORAM: HON’BLE MR. JUSTICE MUKUL MUDGAL, CHIEF JUSTICE. HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JASBIR SINGH Present: For the Petitioner(s) Shri Soli J. Sorabjee, Senior Advocate, with Shri Ashwani Chopra, Senior Advocate, with Shri Ashim Aggarwal, Advocate, Shri Ajay Aggarwal, Advocate, Shri Aashish Copra, Advocate, Ms. Rupa Pathania, Advocate, Shri Anil Divan, Senior Advocate, with Shri L.L. Bhushan, Advocate, Shri Anupam Bansal, Advocate, Ms. Swaty S. Malik, Advocate. Shri Arvind Nigam, Senior Advocate, with Shri Arun Monga, Advocate, Shri Tribhuvan Dahiya, Advocate, Shri Hemant Saini, Advocate, Ms. Munisha Gandhi, Advocate, Shri Avneesh Jhingan, Advocate. Shri D.S. Narula, Advocate. For the respondent(s) Shri H.S. Hooda, Advocate General, Haryana, with Shri Randhir Singh, Additional Advocate General, Haryana; and Shri Vinod S. Bhardwaj, Additional Advocate General, Haryana. C.W.P. No. 9476 of 2009 and connected cases 1. To be referred to the Reporters or not? Yes 2. Whether the judgment should be reported in the Digest? Yes M.M. KUMAR, J. 1. A Division Bench of this Court, of which one of us was a member (M.M. Kumar, J.), has made a reference in a bunch of petitions* to this Full Bench raising significant and common questions of law concerning validity of the levy of entertainment duty on Sports Clubs under the Punjab Entertainment Duty Act, 1955 (as applicable to Haryana) [for brevity, ‘the Act’] and the Punjab Entertainment Duty Rules, 1956 (as applicable to Haryana) [for brevity, ‘the Rules’]. It would be apposite to advert to the reference order dated 3.8.2009, which reads thus:- “ Challenge in this bunch of three petitions is to the levy of entertainment duty and its application to the Sports Clubs like the present petitioners who patronise the Sports of Golf. Learned senior counsel have, inter alia, submitted that Entry 62 of the State List in the 7th Schedule of the Constitution specifically omit the use of expression ‘Sport’, which authorises the State legislature to levy taxes on entertainments, amusements, betting and gambling. They have also drawn our attention to Entry 33, which in addition to other things used the expression ‘Sports’, ‘entertainments’ and ‘amusements’. They have also submitted that the intention of the framers of the Constitution is to restrict the power of legislation concerning imposition of tax, which has been saved by Entry 97 of the First List for framing of legislation by the Parliament. The necessary intendment by omission of 2 C.W.P. No. 9476 of 2009 and connected cases expression ‘sports’ from Entry 62, is leaving the subject of taxing sports to the Parliament under residuary entry 97 of the First List. They have also submitted that if clubs like the petitioners are taxed then educational institutions, universities and colleges where sport is played, would also be hit by the duty. Another argument raised is that in the Division Bench judgment of this Court in M/s Chrysalis International (P) Ltd. v. State of Haryana and others (C.W.P. No. 19345 of 2004, decided on 29.8.2008) the question of constitutional validity of the ‘Entertainment Duty’ was neither raised nor adjudicated and, therefore, the view of the Division Bench cannot be considered binding. It has also been submitted that the judgment of Hon’ble the Supreme Court in M/s Geeta Enterprises v. State of U.P., AIR 1983 SC 1098, which has been relied upon by the Division Bench of this Court in M/s Chrysalis International (P) Ltd. (supra) lays down four tests and the Division Bench of this Court has applied only the first test whereas a perusal of the judgment shows that all the four tests have to be satisfied before entertainment duty could be imposed. The submission made is that the Division Bench judgment would require another look. 3 C.W.P. No. 9476 of 2009 and connected cases On the other hand, Ms. Ritu Bahri, learned State counsel has placed reliance on the judgment of Hon’ble the Supreme Court in the case of Y.V. Srinivasamurthy v. State of Mysore, AIR 1959 SC 894 and argued that ‘cinema’ was included to be covered by Entry 62 and, therefore, ‘sports’ can also be included. During the course of arguments, on a specific reference being made by one of us (Jaswant Singh, J.) that he is member of three Golf Clubs and occasionally plays Golf, learned State counsel has expressed no objection to the hearing of the cases by this Bench nor learned counsel for the petitioners has raised any such objection. Heard. Admitted. Keeping in view the fact that imposition of entertainment duty is likely to affect the larger public interest and the Division Bench judgment in the case of M/s Chrysalis International (P) Ltd. (supra) would require a re-look, we are of the considered view that the matter requires consideration at length by a larger Bench. The constitutional validity of various provisions of the Punjab Entertainment Duty Act, 1955 (as applicable to Haryana) and the rules framed thereunder has also been challenged. Accordingly, we direct that the papers be placed before Hon’ble the Chief Justice for constituting a larger Bench. In the meanwhile, the interim arrangement made by 4 C.W.P. No. 9476 of 2009 and connected cases order dated 30.5.2009 shall continue and the aforesaid order is made absolute.” 2. A perusal of the aforesaid reference order shows that following substantive questions of law would arise for determination by the Full Bench:- (A) Whether exclusion of ‘sport’ as a subject from taxing Entry 62, and inclusion of the same in non-taxing Entry 33 of the State List of the Seventh Schedule of the Constitution is intentional so as to deprive the State Legislature their competence to tax ‘sport’ and leave that competence to Parliament under the residuary Entry 97 of the Union List? (B) Whether the Division Bench judgment of this Court in M/s Chrysalis International Pvt. Ltd. v. State of Haryana, 2008 (4) PLR 323, has been correctly decided by applying the law laid by Hon’ble the Supreme Court in M/s Geeta Enterprises v. State of U.P., (1983) 4 SCC 202. The question is ‘does the Homer nod’? FACTS: 3. In order to put the controversy in its proper perspective leading to the legal issues carved out in the preceding para, it would be necessary to notice the facts in brief, which for the sake of illustrative convenience are taken from C.W.P. No. 9476 of 2009 (DLF Golf Resorts Ltd. v. State of Haryana and others). The petitioner therein, which is a registered company, is managing and running a club in Gurgaon. The club is owned by DLF Commercial Developers Ltd., which has an independent identity being incorporated under the Companies Act, 1956. It has been claimed that apart from other activities it provides facilities for playing the sport of Golf to its 5 C.W.P. No. 9476 of 2009 and connected cases members on payment of membership fee and other charges. The petitioner has claimed that the club is not open to general public and its activities are private in nature. There are no exhibition matches to entertain viewers nor general public are allowed entry on payment of fee. Once the club is not rendering any entertainment, it is not subject to levy of ‘entertainment duty’ under the provisions of the Act or the Rules. In support of their claim reliance has been placed on the view taken by the respondents in Memo. No. 718/T-1, Chandigarh, dated 16.5.1991 in the case of Meadows Golf and Country Club, Gurgaon, clarifying that under Sections 2(d) and 2(e)(iii) of the Act only that entertainment which is either performed for others and is shown to others would attract levy of entertainment duty and no duty is payable by the clubs where members of the club play Golf to entertain themselves (P-2). On the basis of that communication the petitioner claimed that they did not collect any fee or pay any duty under the Act and/or the Rules. Even the respondents did not ever raised demand for entertainment duty from the petitioner for the last over 18 years. However, on 31.3.2009, Memo. dated 16.5.1991 has been withdrawn with retrospective effect (P-3). On 27.1.2009, the officer of the State issued notices in Form PED-4 as prescribed under Rule 17 of the Rules in respect of Assessment Years 2004-05, 2005-06, 2006-07 and 2007-08. They have been asked to appear before the competent officer to answer the allegation that they have not been correctly paying the amount of entertainment duty. They have been called upon to explain cases of free, surreptitious, unauthorised and concessional entries (P-4). Eventually, their reply has been rejected and they have been held liable to pay entertainment duty in respect of the Assessment Years 2004-05, 2005-06, 2006-07 and 2007- 6 C.W.P. No. 9476 of 2009 and connected cases 08 and the amount has been assessed. These orders further provide that penal action would be initiated separately (P-5). Consequently, fresh demand notices dated 26.5.2009, under Form PED-7 have been issued under Rule 18 of the Rules demanding the duty as per assessment (P-6). The petitioners have sent replies stating that by virtue of Rule 18 of the Rules, notice of demand must have given a clear period of thirty days from the date of its receipt. Therefore, it has been urged that the notices were illegal. They further submitted that the matter was subjudice and, therefore, it must await the disposal of various petitions. 4. In their written statements the respondents have taken the stand that the petitioner has been admitting the general public as members on payment of membership fee although on monthly, yearly or lump sum basis which is in addition to other charges like cart fee, caddie fee, green fee and subscription money. Such members visit the club premises, play Golf and are entertained; and the whole activity is covered by the exclusive definition of the expression ‘entertainment’ as used in Section 2(d) of the Act. According to the respondents a Division Bench of this Court in the case of M/s Chrysalis International (P) Ltd. (supra) or in Wet-N-Wild Resort v. State of Haryana (CWP No. 443 of 2005, decided on 29.8.2008), has held that the activities of Bowling Alley, Video Games, Billiards, Pool Table and Swimming Pool though restricted to members who have paid the subscription either in lump sum or on monthly or yearly basis, provide amusement to them and, therefore, satisfy test No. 4 laid down by Hon’ble the Supreme Court in the case of M/s Geeta Enterprises (supra). Therefore, the demand of duty from the petitioner is wholly sustainable in the eyes of law. 7 C.W.P. No. 9476 of 2009 and connected cases 5. The written statement further highlights that order dated 9.4.2009 passed by the Entertainment Tax Officer, Gurgaon, raising demand from the petitioner was subject matter of challenge in CWP No. 6957 of 2009 and the same was dismissed on 7.5.2009 by following the judgments of the Division Bench rendered in the cases of M/s Chrysalis International (P) Ltd. (supra) and Wet-N-Wild Resort (supra). Accordingly, there is an outstanding demand approximately to the tune of Rs. 9.80 crores in respect of the Assessment Years 2003-04, 2004-05, 2006-07 and 2007-08. Another issue raised by the respondents is that a statutory remedy of appeal under Section 11-A and revision under Section 12 of the Act have not been availed and the writ petition would not be competent without availing such alternative remedies. The respondents has also taken the stand that there is no lack of legislative competence and the State legislature is fully competent by virtue of Entry 62, List-II of the Seventh Schedule. The communication dated 16.5.1991, rendered in the case of Meadows Golf and Country Club, Gurgaon, was against the statutory provisions and has been rightly withdrawn by them on 31.3.2009 (P-2 Colly), especially when that communication was examined in the light of the Division Bench judgment rendered in the case of M/s Chrysalis International Pvt. Ltd. (supra). The respondents have taken support of Entry 62, List-II of the Seventh Schedule under which the Act has been enforced by the State of Punjab and has later been adopted by the State of Haryana. 6. On the basis of the judgments of Hon’ble the Supreme Court rendered in the cases of R.K. Garg v. Union of India, (1981) 4 SCC 675 and Government of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720, it has been 8 C.W.P. No. 9476 of 2009 and connected cases pleaded that greater latitude is given to the legislature by the Court in respect of fiscal or taxing statute or economic measures. The further pleaded case of the respondents is that a Constitution Bench of Hon’ble the Supreme Court in the case of Y.V. Sirinivasamurthy v. State of Mysore, AIR 1959 SC 894, while dealing with a challenge to the validity of the Mysore Cinematograph Show Act, 1951, considered the scope of Entry 62 List II, which deals with ‘taxes on luxuries’ including taxes on entertainments, amusements, betting and gambling corresponding to Entry 50, List-II of the Seventh Schedule of Government of India Act, 1935. The Constitution Bench has held that the words ‘entertainments’ and ‘amusements’ are wide enough to include theatres, dramatic performances, cinemas, sport and the like and it is complete answer to the case set up by the petitioner. Therefore, the force of the Act and the Rules framed thereunder has no basis as the State legislature is fully competent to frame taxing laws on ‘sports’ as well and that the writ petition is liable to be dismissed. The other factual position concerning raising of demand has been admitted. 7. It is significant to highlight that entertainment duty in the instant case is not on any particular sport or even on sports but it is on ‘sports clubs’. The activities of sports clubs are ordinarily expanded to mean more ancillary activities than confining itself to sports. During the course of arguments rules and regulations of DLF Golf and Country Club were shown to us (Mark ‘A’). A random look at these rules and regulations would show that there is no condition that a person or a corporate body seeking membership of the club must be a Golf lover or a Golf player. Membership has been offered to corporate members, individual members, resident and non-resident Indians and 9 C.W.P. No. 9476 of 2009 and connected cases even the foreign nationals. Apart from playing the game of Golf, these clubs have a regular bar and provision for breakfast, lunch and dinner. These clubs permits celebration of birthdays, anniversary, New Year parties etc. for its members. These activities are not confined to members alone but even the family/friends of the members are permitted to join for consideration. Therefore, on fact it may not be possible to conclude that the whole activities of these clubs are wholly confined to ‘sports’. 8. It is further significant to notice that arguments in these petitions before the Full Bench have continued on various dates. However, the State of Haryana amidst the arguments has issued a notification dated 17.9.2010 exercising the power of exemption under sub-section (3) of Section 11 of the Act and has consequently exempted them from payment of entertainment duty on admission fee. The exemption has been confined to those persons playing sports in registered clubs having sports activities as an item in their Memorandum of Association. We, therefore, pointed out to the learned counsel that the question which survives is concerning the payment of arrears of entertainment duty only up to 17.9.2010. They have submitted that the question of legislative competence of State Legislature and consequently correctness of Division Bench judgment would still survive. 9. Mr. Soli Sorabjee, learned senior counsel appearing for the petitioner has led the arguments and has raised some fundamental issues before us which we proceed to notice. The first argument raised by the learned senior counsel is that the State legislature completely lacks legislative competence to tax ‘sports’ because taxing Entry 62 of the State List of Seventh Schedule does not expressly include the subject of ‘sports’. According to the learned counsel the intention of the founding fathers is clear from a close 10 C.W.P. No. 9476 of 2009 and connected cases scrutiny of Entry 33 of the State List which confers legislative competence on the State Legislature to frame law for regulating ‘theatres’, ‘dramatic performances’ and ‘cinemas’ subject to the provisions of Entry 60 of List-I; sports, entertainments and amusements in contra-distinction confer competence on State Legislature to tax ‘sports’ because the subject of sports has been deliberately excluded from Entry 62. Mr. Sorabjee has referred to other taxing entries 52 to 66, which confer competence on the State legislature to frame law concerning imposition of tax on various subjects. According to the learned counsel there has to be express power conferred on the State legislature for acquiring competence to tax particular subject and it cannot be assumed by implication. It has been emphasised that the tax by State legislature could be levied on luxury, entertainment, amusement, betting and gambling but no tax could be imposed on ‘sports’ as there is intentional and pointed omission of expression ‘sports’ from Entry 62 of List II. It has, therefore, been urged that subject of ‘sports’ for the purposes of levying of tax has been reserved for Parliament to frame law under the residuary Entry 97 of List-I of the Seventh Schedule. 10. Mr. Sorabjee has then referred to para 3 of the Constitution Bench judgment of Hon’ble the Supreme Court in the case of Y.V. Srinivasamurthy (supra) and argued that these lines alone would not lead to an interpretation that the expression ‘sports’ stood included in entertainment or that these lines could confer legislative competence on the State legislature. Learned counsel has submitted that the judgments should not be read like statutes because it would lead to undesirable and un-warranted consequences. Mr. Sorabjee has also contended that in the case of Y.V. Srinivasamurthy (supra) the counsel 11 C.W.P. No. 9476 of 2009 and connected cases for that petitioner had agreed to the legal proposition and it was not a contested matter but based on a concession on a legal issue. 11. Another submission made by the learned counsel is that on a true construction of various provisions of the Act, no levy of tax would be attracted which could be realised from the petitioner. In that regard, reference has been made to definitions of expression ‘admission to an entertainment’ [S. 2(a)], ‘entertainment’ [S. 2(b)], ‘payment for admission’ [S. 2(e)] and ‘ticket’ [S. 2 (i)], read with Section 3 and it has been submitted that when a member enters the portals of a Golf Club then he does not make any payment for entertainment. Such a member simply goes to the club to play his game of Golf. It is maintained that under Section 4 a lump sum payment which is made by a member of the club is not correct. It is not comparable to what a person pays to view a video show. According to the learned counsel Section 2(i) defines the expression ‘ticket’. It shows that on entry to an entertainment a ticket is issued like entry to cinema or one day cricket match. However, in a club such as the petitioner’s no such thing happens. A specific reference has also been made to Section 3A to submit that a proprietor of a video set exhibiting shows on payment is also under obligation to pay entertainment duty because it is exhibited to public on payment against a ticket. Mr. Sorabjee has also placed heavy reliance on the circular dated 16.5.1991 issued by the respondent State contemplating that no tax is leviable on the Golf clubs or such other sports clubs. The circular has taken the view that Section 2(d) and 2(e)(iii) of the Act does not confine the expression ‘entertainment’ and under those provisions the levy of entertainment duty would be attracted if there is any performance of entertainment for others and shown to others. Once the members of the club come for playing a game of Golf to entertain 12 C.W.P. No. 9476 of 2009 and connected cases themselves, no entertainment duty would be attracted. Mr. Sorabjee has also placed reliance on the provisions of Section 10 of the Act and argued that no person on payment is permitted to enter to any entertainment without a duly stamped ticket issued by the Government for the purposes of revenue denoting that entertainment duty has been paid. Referring to Rule 9 of the Rules, learned counsel has drawn our attention to the form of the ticket in ‘Form PED-I’ and argued that the admission to entertainment has to be by issuance of ticket which is duly stamped by the Government whereas in the present case neither issuance of a ticket nor any payment of duty thereon is involved. 12. Learned counsel has further elaborated his submission by urging that in order to have amusement and entertainment there have to be viewers who would be entertained and such a situation would arise if the members are playing a match to which general public is invited to view the same on payment. Learned counsel has pointed out that without payment to view the match there cannot be entertainment and in the absence of entertainment there cannot be any tax by virtue of Entry 62 of List II. Therefore, no entertainment duty would be payable and the same cannot be realised. In that regard learned counsel has placed reliance on the last few lines of para 13 of the judgment delivered by a Division Bench of this Court in the case of M/s Chrysalis International Pvt. Ltd. (supra), although the judgment is apparently against the assessee like the petitioner. The submission in nutshell is that levy of entertainment duty from a member of the club would not be workable as it would necessarily imply that the duty can be levied only on the viewer who is admitted to entertainment like an entry to a Cricket match where the tickets are sold and the viewers are permitted entry to watch the sport event, which would 13 C.W.P. No. 9476 of 2009 and connected cases be true even in respect of any other type of amusement and entertainment. 13. Mr. Sorabjee has then argued that the judgment of the Constitution Bench of Hon’ble the Supreme Court rendered in the case of M/s Geeta Enterprises (supra) would not be attracted to the facts of the present case because in that case the owners of the Video Parlour who charged fee for playing video games, were to be taxed and levy of such tax on the players of the games was upheld. According to the learned counsel, the Division Bench in M/s Chrysalis International Pvt. Ltd. (supra) did not correctly apply the ratio of the judgment of Hon’ble the Supreme Court in M/s Geeta Enterprises’s case (supra). Firstly, the judgment in M/s Geeta Enterprises (supra) proceeded entirely on a different plane, secondly assuming the judgment is applicable then four tests laid down in para 12 thereof have to apply cumulatively. It is laid down in the case of M/s Geeta Enterprises (supra) that a video parlour show must pass the said tests to come within the ambit of the provisions of the charging section. Learned counsel has submitted that the Division Bench has taken incorrect view by opining that if one of the four tests is satisfied then levy of tax on sports would be attracted. 14. Mr. Sorabjee has also placed reliance on the Rules of the DLF Club which show that it is not a place for public entertainment where people are invited to an entertainment which is conceptually incorporated in the Act. Learned counsel has referred to Rule 6 of the Club and argued that a sum of ` 4,00,000/- for four years