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IN THE HIGH COURT OF BOMBAY
C.S. Dharmadhikari V.S. Kotwal, JJ.
Ramesh Sippy others.... Petitioners.
Versus
State of Maharashtra .... Respondent.
O.S. Writ Petition No. 451 of 1984, with A.S.W.P. Nos. 1836 of 1984 and 2115 of 1984, decided on 22-9-88.
Advocates appeared :
Aspi Chinoy, N.H. Seervai and S.M. Kapadia i/b. Harilal Thakar Co., for petitioners.
Miss P.D. Anklesaria, G.P, for respondents.
Video game, Tax at fixed rate on video games on basis of per machine per month-Situation of video parlours whether within Bombay or outside. Held, levy of tax in lumpsum valid.
It is by now well settled that in the matter of taxing statute the legislature enjoys a larger discretion in the matter of classification so long as it adheres to the fundamental principle underlying the doctrine of classification. The power of the legislature to classify is of wide range and flexibility so that it can adjust its taxation in all proper and reasonable ways. The legislature which is competent to levy a tax must inevitably be given full freedom to determine which articles should be taxed, in what manner and at what rate. In tax matters, the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably. It is equally well settled that the micro classification will not vitiate the tax. Only because the tax is levied at a conveniently flat rate having regard to the various circumstances or as an easy means of collection and a variety of other pragmatic variables, to call it invalid, is an absurdity, especially because in fiscal matters large liberality must be extended to the Government having regard to the plurality of criteria which have to go into the fiscal success of the measures.
It may be stated at the outset that the reasonableness of the tax is not challenged nor it is alleged that the tax imposed is exhorbitant or ex-proprietary or confiscatory. In the present case mathematical precision is impossible. It would also be impossible for the State to keep watch on all the machines. To say the least for imposition of a tax it is not the mathematical precision which is relevant nor it could be the basis. The micro classification is also not contemplated nor possible. The tax contemplated by the Act is not a tax on ownership of machine or its possession. In the normal circumstances, when a video game machine is installed in a video parlour, it could safely be in ferried that it is used as a course of entertainment. Therefore, in substance it is a tax on act of entertainment. This is clear from the fact that a lumpsum tax is fixed irrespective of capacity of a machine. Tax does not vary with the cost of the machine or its make. Machine is chosen as a mere criteria for the purpose of calculation. Incidence of tax is not on the machine but is on the act of entertainment. From the defimition of video game parlours it is clear that it is a place of entertainment where persons are required to make a payment for the purpose of working a machine installed therein which operates electronically, or mechanically or electro mechanically. Therefore the machines installed in the video game parlours are part and parcel of the act of entertainment. Since any other mode of imposition of tax was either impossible or impracticable, legislature has chosen to impose a tax in lumpsum at a flat rate.
In Greater Bombay video game parlours have increased from 119 in January, 1984 to 174 in June 1984. Since Bombay is a commercial town and its population is larger than elsewhere in Maharashtra, video game parlours in Bombay are making more profits than the video game parlours else where. Therefore since the takings in Bombay from the video game parlours are larger, a fiat rate of duty at the rate of Rs. 500/-per month per machine is charged whereas having regard to the takings in places other than Bombay a fiat rate of only Rs. 200/-per month per machine is charged. Thus a reasonable classification is made in that behalf.
2. The petitioners are proprietors of video game parlours at Bombay and Sangli. The said parlours have number of mechanical, electro mechanical and electronic games. It is the case of petitioners that video games were introduced for the first time in the year 1980. At that time the said games were a great novelty and attracted considerable public interest, as a consequence of which the taking from operation of the said machines were quite higher. However, thereafter public interest in the said games has declined sharply, with a corresponding marked decline in the profits. It is then contended by them that the actual taking in the case of a particular shop and for a particular machine would vary greatly, depending upon the number of factors such as, the area or locality in which the games parlour is located, whether the machine in question is a new one or an absolute one, whether the machine is in perfect operational order on all working days or not and also whether the supply of electric power is regularly available on all working days. A shop in a busy locality would have taking on higher level than a shop located in a small mofussil town. The working of the machine also depends upon the repair facilities and availability of necessary spare parts etc. Some machines, such as, foot ball machines which are purely mechanical, can be operated on a coin of only 25 paise. On the other hand flipper pin ball machines which are be question is a electro-mechanical can be operated on a coin of 50 paise. Similarly wall machine which are also electro-mechanical machines can be operated on a coin of 50 paise. As against these, electronic flipper pin ball machines and electronic wall machines can be operated on a payment of Rs. 1/- at a time. There are some expensive and elaborate video game which can be operated on a payment of only Rs. 2/- at a time. Therefore the amount of revenue yielded would be wholly dependent upon the type of machine and the amount of money which is required to play it each time. Therefore the petitioners have given gross collections from the machines. It is also contended by them that the said games are games of skill.
3. On the basis of the above averments the petitioners have challenged the provisions of the Bombay Entertainment Duty Act, 1923 as amended by Act No. 7 of 1987. According to the petitioners an entertainment duty or a tax could be levied on an act of entertainment only. If a tax is not levied on an act of entertainment but on carrying on a business or calling of entertainment, it will fall under Entry No. 60 of List II of VII Schedule to the Constitution and therefore, will be hit by Article 276 of the Constitution of India. If it is a tax levied on the equipment of the entertainment, then it will be ultra vires being beyond the Legislative competence. It is not covered by Entry No. 62 of List II of the Seventh Schedule. According to the petitioners by Bombay Entertainment Duty Act, 1923, as amended by Act No. 7 of 1987, a duty or a tax is being imposed on the machine itself which is an equipment of entertainment and not on the act of entertainment. The tax levied is also hypothetical and notional, since it has no nexus with the act of entertainment as such. In support of these contentions Shri Chinoy and Shri Kapadia learned Counsel appearing for the petitioners, have placed strong reliance upon the decision of the Supreme Court in A.I.R. 1959 S.C. 582 (Western India Theatres Ltd. v. Cantonment Board Poona, Cantonment)1, A.I.R. 1980 Bom. 358 (Rajab Mahal Co-op. Housing Society v. State of Maharashtra and others)2, and a decision of the Division Bench of this Court in Writ Petition Nos. 38 and 240 of 1984 (Ramesh Waman Toke v. State of Maharashtra and others)3, decided on 28th February, 1984 by Chandurkar, C.
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