# STATE OF M.P v. HOME DECORATORS

- **Citation:** [1990] 2 S.C.R. 1000
- **Court:** Supreme Court of India
- **Decided:** 1990-05-03
- **Case number:** Civjl Appeal No. 1416 of 1975
- **Bench:** B.C. Ray, A.M. Ahmadi, P.B. Sawant
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-m-p-v-home-decorators-10692
- **Pages:** 6

## Headnote

The (Madhya Pradesh) Entertainments Duty (And Advertisement
Tax) Act. 1936. Organisation of entertainment programmes under an
ostensible savings scheme-Entry open to members of scheme on
payment of non-refundable admission fee of Rs.2 and refundable mem-
;...
C bership subscription of Rs. JO-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.
........ _
' )
The respondents organised two music programmes by formulatD ing 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.IO, refundable after IO years. The entry to the
programme was strictly on the production of invitation card as well as
membership card. Many persons paid the admission fee and the mem- . '(
E bership subscription. At the time of giving entry to the programme, the 1
respondents collected the membership forms and money receipts 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
F public were defrauded of their money and the State Government of its +
tax-revenue.
The Entertainment Tax Collector checked the receipts of the
respondent on both the dates of performances and accordingly issued
notices to them demanding the tax and the duty-surcharge thereon
G under the Madhya Pradesh Entertainments Duty and Advertisement
Tax Act, I936.
The 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
H (i) there was no allegation that the invitation cards were sold; and (ii)
1000
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STATE OF M.P. v. HOME DECORATORS
1001
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membership subscription of Rs.10 was not divided by 10 since the
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entertainment tax could be collected only on Re.I per year for the next
10 years. Hence this appeal by the State.
Allowing the appeal and setting aside the decision of the High
Court .• this Court .•
-(
HELD: The Scheme was not meaut 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 aud the invitation cards were nothing but tickets for the show
-
I'-
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. Tbe impugned notices were properly
J.. issued by the appellants. Since the High Court completely missed the
crucial point and, therefore, mis-directed itself, it is not possibte to
accept its reasoning that Rs. IO collected by the respondents were the
membership subscription or that the duty could not have been coilected
at a time on Rs.JO. [JOOSE-F; 1003D]
.f..

## Text

A
STATE OF MADHYA PRADESH AND ORS.
HOME DECORATORS AND ~ANCE (PVT.) LTD. AND ANR. \__
MAY 3, 1990
B
[B.C. RAY, A.M. AHMADI AND P.B. SAWANT, JJ.]
The (Madhya Pradesh) Entertainments Duty (And Advertisement
Tax) Act. 1936. Organisation of entertainment programmes under an
ostensible savings scheme-Entry open to members of scheme on
payment of non-refundable admission fee of Rs.2 and refundable mem-
;...
C bership subscription of Rs. JO-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.
........ _
' )
The respondents organised two music programmes by formulatD ing 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.IO, refundable after IO years. The entry to the
programme was strictly on the production of invitation card as well as
membership card. Many persons paid the admission fee and the mem- . '(
E bership subscription. At the time of giving entry to the programme, the 1
respondents collected the membership forms and money receipts 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
F public were defrauded of their money and the State Government of its +
tax-revenue.
The Entertainment Tax Collector checked the receipts of the
respondent on both the dates of performances and accordingly issued
notices to them demanding the tax and the duty-surcharge thereon
G under the Madhya Pradesh Entertainments Duty and Advertisement
Tax Act, I936.
The 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
H (i) there was no allegation that the invitation cards were sold; and (ii)
1000
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STATE OF M.P. v. HOME DECORATORS
1001
J
membership subscription of Rs.10 was not divided by 10 since the
A
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entertainment tax could be collected only on Re.I per year for the next
10 years. Hence this appeal by the State.
Allowing the appeal and setting aside the decision of the High
Court .• this Court .•
-(
HELD: The Scheme was not meaut 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 aud the invitation cards were nothing but tickets for the show
-
I'-
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. Tbe impugned notices were properly
J.. issued by the appellants. Since the High Court completely missed the
crucial point and, therefore, mis-directed itself, it is not possibte to
accept its reasoning that Rs. IO collected by the respondents were the
membership subscription or that the duty could not have been coilected
at a time on Rs.JO. [JOOSE-F; 1003D]
.f..
CIVIL APPELLATE JURISDICTION: Civjl Appeal No. 1416
of 1975.
From the Judgment and Order dated 2.12.1974 of the Madhya
Pradesh High Court in M.P. No. 565 of 1974.
Sakesh Kumar and S.K. Agnihotri for the Appellants.
S.S. Khanduja, Y.P. Dhingra and B.K. Satija for the
Respondents.
The Judgment of the Court was delivered by
SAW ANT, 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 entertainment 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
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1002
SUPREME COURT REPORTS
[1990] 2 S.C.R.
performances called "Mahendar Kapoor Nite" in a local auditorium, \
namely, Manas Bhawan Hall Wright Town Jabalpur, on 7th and 8th
1.:.-
July, 1974. Although the Articles and the Memorandum of Association of the !st 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 advertisements 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 perfo'rmance 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 programme 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 admission fee as well as the
membership subscription. The respondents 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
E . form nor with the receipts for the money they had paid.
2. 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 performances were staged. In effect, the respondents made good with the money they had collected ostensibly for
promoting savings. Thus both the members of the public were
defrauded of their moneys as well the State Government of their taxrevenue.
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3. The District Excise Officer who was also the Entertainment
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 respondents and had dexteriously prepared a
panchnama at the spot. He determined the amount of tax recoverable
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on the said collections, and issued to the respondents two separate
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STATE OF M.P. v. HOME DECORATORS [SAWANT, J.[
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.
4. The respond~nts challenged the notices by a writ petition
under Article 226 of th!' 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. l 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.
5. We 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.
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The "members" were not issued the membership-cards nor were they
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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 collected at the door. The result was that
even if the "members" were to claim an entry for programmes, if any
in future, they would not have been able to do so. As it happened
further, in fact, no programmes were ever staged at any time thereF
after. 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:
"For the purpose of Prizes there shall be Five Sub-groups of
one lakh members each. After every Sub-group of one lakh
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members there shall be total 4280 prizes divided into 20
half-yearly draws and valuing total amount of.Rs.5 lakhs.
The date of the First Draw will be announced ·through
Newspapers.
Every member, irrespective of whether he has received any
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SUPREME COURT REPORTS
[1990) 2 S.C.R.
prize(s) or not shall be entitled to the refund of his deposit
of Rs.IO-after the maturity of the duration of the group,
i.e., 10 years, along with a bonus of Rs.2 on surrender of
the official Receipt-cum-Membership Evidence issued by
the Company. Duration of the Group shall be commenced
from the date of the Isl Draw.
x
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xx~
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 sub-
~ •.
group 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
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participating 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
issued. The receipt itself shall be treated as final and cone-
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lusive evidence of membership.
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After the completion of Isl 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 subse-
. quent benefits only. The same rule shall apply to every
further sub-group of one lakh members.
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STATE OF M.P. v. HOME DECORATORS !SAWANT,. J.!
1005
Membership of the Group for 10 years and cannot be
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cancelled or withdrawn by the member before maturity of
the Group. Prizes and Film Star show are added incentive
and not Pare.of the Scheme and are not binding ~n the
Company under circumstance-beyond control.
x
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The management may change any article of the declared
prize looking to the time and circumstanl;;es prevailing at
the time of the particular draw.
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The management of the Company reserves the right to add,
alter, or amend the rules and regulations as and when
necessary for the efficient and proper conduct of the group
as well as in compliance with the Government rules and
regulations 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 receipts 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 entertainment duty. The
impugned notices were, therefore, properly 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.
6. Hence, we allow the appeal and set aside the impugned-decision with costs.
T.N.A.
Appeal allowed.
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