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TMI Blog2025 (2) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... theatre owners. The impugned provision seeks to levy a cess on the ticket purchased by cinema viewers for the purpose of entertainment, and, therefore, it is clearly relatable to entertainment under Entry 62 of List II, VII Schedule to the Constitution of India. In the case of M/s. Vijayalakshmi Rice Mill [2006 (8) TMI 307 - SUPREME COURT], the Hon'ble Supreme Court, had an occasion to consider the term "Cess". In this case, a cess under the Andhra Pradesh Rural Development Act, 1986, which was in addition to the purchase of sales tax, was the subject matter of challenge. The contention was that the enactment does not fall in any of the entries in List II or List III of Schedule VII to the Constitution of India. The Supreme Court considered the question of whether the said impost was a fee or a tax. In that context, the Supreme Court elaborated on the term "Cess" and held that ordinarily, Cess is also a tax but is a special kind of tax. The Cess can also mean a tax levied for a special purpose or as an increment to the existing tax and, in given circumstances, a fee. In the case at hand, entertainment tax is already levied under the Act of 1961 and the Cess under Section 3C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the view taken by the learned Single Judge - Appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... udge heard these writ petitions together and dismissed the challenge by judgment dated 12 October 2015. The learned Single Judge held that the State of Kerala had the legislative competence to enact Section 3C of the Act of 1961, and the challenge was without merit. Being aggrieved, the Petitioners in W.P.(C) No. 4195 of 2013 have preferred this Appeal. 8. This Appeal was admitted on 21 October 2015, and by interim order, it was directed that no prosecution shall proceed in compliance with the Amendment Act, 2013. This interim order was modified by an order dated 6 January 2016, recording that the Court had not restricted the theatre owners from collecting the cess amount of Rs. 3/- and even the authorities from recovering the said amount from the concerned theatre owners. This order was challenged by the Petitioners in Special Leave to Appeal No. 12797 of 2016, and the Hon'ble Supreme Court disposed of the appeal with a direction to take up the pending writ appeal early. 9. When the present Appeal, along with W.A. Nos. 2311 of 2015 and 2661 of 2015 filed by the Petitioners/viewers had come up before the Division Bench on 27 June 2019; Appellant - film viewer in W.A. No. 2661 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this Appellant was not interested in prosecuting the appeal and that the order withdrawing the appeal need not be recalled. Another appeal filed by a film viewer, W.A. No. 2661 of 2015, was simplictor withdrawn by the Appellant on 20 January 2025. Thus, only Petitioner No. 1 - the Kerala Film Exhibitors Federation, and Petitioner No. 2 - a theatre owner, are prosecuting the challenge through this Appeal. 12. We have heard Mr. K. Ramakumar, learned Senior Advocate appearing for the Appellants, Mr. Sudhi Vasudevan, learned Senior Advocate appearing for Respondent No. 3 - Board, Mr. K. Gopalakrishna Kurup, learned Advocate General along with Ms. K. R. Deepa, learned Special Government Pleader for the State, and Mr. M. M. Monaye, learned counsel for Respondent No. 10. 13. Section 3C of the Act of 1961, which is the subject matter of challenge in this Appeal, reads as follows: "3C. Levy and collection of cess.-(1) There shall be levied and collected a cess for the purposes of the Kerala Cultural Activists' Welfare Fund constituted under the Kerala Cultural Activists' Welfare Fund Act, 2010 (6 of 2011) at such rate not exceeding three rupees on each admission to cinema, the pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' Welfare Fund Board. Other sections of the Act of 1961, which provide for composition and consolidated payment of tax, the manner of payment of tax, exemptions, etc., are not relevant to the present controversy. 14. The Cess collected under Section 3C of the Act of 1961 has to be remitted to the Fund constituted under the Kerala Cultural Activists' Welfare Fund Act, 2010 (Act of 2010). 15. The Fund constituted under the Act of 2010 provides relief to cultural activists, promotes their welfare and pays pensions to those who engage in various forms of arts, literature, and cultural activities in the State of Kerala. The definition of cultural activist under Section 2(d) of the Act of 2010, reproduced later, includes various artists engaged in the field of cinema, electronic media, drama, music, kathakali, ganamela, mimics, literature, painting, sculpture, folklore, ritual arts, semi classical arts, folk songs, makeup, percussion arts, magic, circus, margamkali, chavittu nadakam, cartoon, poetic story presentation. They include those who recite Holy Books, Bible recitation, Koran recitation and Mappilakalakal. All these include the ones engaged in stage decoration, light a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws with respect to any of the matters enumerated in List III - the Concurrent List, subject to the power of the Parliament. Subject to the above, the Legislature of any State has exclusive power to make laws with respect to any of the matters enumerated in List II - the State List. The various entries in the three Lists are "fields" of legislation. The entries in the Lists have to be interpreted liberally and not in a narrow or pedantic sense. A power to legislate as to the principal matter specifically mentioned in the Entry shall also include the legislation touching incidental and ancillary matters. 18. Though in the Counter filed by the State before the learned Single Judge, various entries in the List under Schedule VII to the Constitution of India are referred to, the learned Advocate General primarily has traced its legislative competence to enact Section 3C of the Act of 1961 to Entries 62 and 66 of List II, Schedule VII to the Constitution of India. Firstly, we take up the aspect of Entry 62, a tax on entertainment, of List II, VII Schedule to the Constitution of India. 19. Entry 62 of List II, VII Schedule to the Constitution of India relied upon by the State prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive-in Enterprises, the appeal before the Hon'ble Supreme Court arose from the decision of the Karnataka High Court striking down the provisions of the Karnataka Entertainments Tax Act, 1958, as beyond legislative competence. The State of Karnataka had levied entertainment tax for admission of cars in drive-in-theatres. The argument of the petitioners therein was that the State Legislature could levy an entertainment tax on human beings but not on inanimate objects. The Supreme Court invoked the doctrine of pith and substance to find out the real character of the levy. It was held that when the vires of enactment are impugned, the Court is required to ascertain the true nature and character of the enactment. The Court has to examine the whole enactment, its object, scope and effect of its provision. What is to be found out is the real nature of the levy, its pith and substance, and it is in this light that the competency of the State Legislature is to be adjudged. After expounding the concept of pith and substance, the Supreme Court, while examining Entry 62 of List II in Schedule VII to the Constitution of India, held that the incidence of the tax was on entertainment itself, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson entertained for which the State Government has levied entertainment tax on the person entertained. The real nature and character of the impugned levy is not on the admission of cars or motor vehicles, but the levy is on the person entertained who takes the car inside the theatre and watches the film while sitting in his car. We are, therefore, of the view that in pith and substance the levy is on the person who is entertained. Whatever be the nomenclature of levy, in substance, the levy under heading "admission of vehicle" is a levy on entertainment and not on admission of vehicle inside the drive-in-theatre. As long as in pith and substance the levy satisfies the character of levy, i.e. "entertainment," it is wholly immaterial in what name and form it is imposed. The word "entertainment" is wide enough to comprehend in it, the luxury or comfort with which a person entertains himself. Once it is found there is a nexus between the legislative competence and subject of taxation, the levy is justified and valid. We, therefore, find that the State Legislature was competent to enact sub clause (v) of Clause (i) of Section 2 of the Act. We accordingly hold that the impugned levy is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Koluthara Exports Ltd. would show that the case involved a compulsory extraction from the dealers' annual proceeds towards the welfare of fishermen. The present position is different. There is no compulsory extraction from any proceeds, only a cess on the tickets purchased by cinema viewers as a tax on entertainment. Therefore, the learned Single Judge rightly distinguished this decision and held that it does not apply to the case at hand. 23. Based on the decision of the learned Single Judge of this Court in the case of Padmanabhan, it was contended by the Appellants that the Act of 1961 defines the expression "admission fee," and the theatre owners cannot charge anything more than admission fee. It was submitted that without amending the definition of admission fee, no charge on the admission is sought to be levied through the impugned Cess. There cannot be contradictory statutory provisions. The decision in the case of Padmanabhan also cannot be of any assistance to the Appellants. The learned Single Judge was considering a limited question as to whether the amount received for advance reservation of seats is liable to be included in the price of tickets on which tax is lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved: "The word 'cess' is used in Ireland and is still in use in India although the word 'rate' has replaced it in England. It means a tax and is generally used when the levy is for some special administrative expense which the name (health cess, education cess, road cess, etc.) indicates. When levied as an increment to an existing tax, the name matters not, for, the validity of the cess must be judged of, in the same way as the validity of the tax to which it is an increment." The aforesaid observations have been referred to by the Constitution Bench decision of this Court in India Cement Ltd. and Others v. State of Tamil Nadu and Others [(1990) 1 SCC 12], vide para 19. 13. Hence ordinarily a cess is also a tax, but is a special kind of a tax. Generally tax raises revenue which can be used generally for any purpose by the State. For instance, the Income Tax or Excise Tax or Sales Tax are taxes which generate revenue which can be utilized by the Union or State Governments for any purpose, e.g. for payment of salary to the members of the armed forces or civil servants, police, etc. or for development programmes, etc. However, cess is a tax which generates revenue which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is levied, which is a special kind of tax. The levy of impugned Cess is traceable to Entry 62 of List II, VII Schedule to the Constitution of India. 27. The State has contended that its legislative competence can be traced to Entry 66, read with Entry 62 of List II of Schedule VII to the Constitution of India. Entry 66 reads as follows: "66. Fees in respect of any of the matters in the List, but not including fees taken in any court." Entry 66 of List II permits the levy of a fee in respect of any of the matters in the List, but it does not include the fees taken in the Court. The fee can be in respect of any of the matters in the List, which would include Entries 5, 33, and 62 of List II-the State List. The reliance placed by the State is more on Entry 66, read with Entry 62 of List II of the VII Schedule to the Constitution of India. 28. The main contention of the Appellants in this regard is that the impugned Cess cannot be justified as a fee under Entry 66 of List II of the VII Schedule to the Constitution of India, as there is no quid pro quo between the payment of Cess by cinema viewers and any corresponding benefits. There is no quid pro quo, and a direct nexus betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The distinction between a tax and a fee is that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege. The specific advantage is secondary to the primary motive of regulation in the public interest. If the revenue is for the general purpose of the State, the levy becomes a tax. The Supreme Court held that there is no generic difference between a tax and a fee, and both are compulsory exaction of money by public authorities. The legal position is also that there need not be any direct relation to the actual service rendered. It is sufficient if there is a reasonable relationship between the levy of fees and the services rendered. Establishing that those who pay the fee receive a direct or special benefit or advantage is not necessary. If the one who is liable to pay the fees receives a general benefit, the element of quid pro quo is satisfied. Thus, the contention of the Appellants that there must be a direct nexus between the fee levied and the benefits rendered is incorrect. Services rendered are not a condition precedent nor confined to the contributors alone. A broad co-relation is all that is required. 31. At this stage, a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity performed by a cultural activist and recognized as such by the respective Academy or Organisations or trade or such other Body or Association approved by Government for the purposes of this Act, in which the activist is a member." Thus, cultural activist means the one performing activities recognised by the respective Academy or Organisation or Trade or such other Body or Association approved by the Government for the purposes of the Act of 2010, in which the activist is a member. The Act of 2010 also recognizes art institutions such as, Chalachithra Academy, Folklore Academy, Kalamandalam, Lalithakala Academy, Nadaka Academy, and Sahithya Academy. Thus, the State has included all those within the ambit of Section 2(d) of the Act of 2010 engaged in artistic expression and those instrumental in bringing about a culture of appreciation for arts in the State. 33. It is for the benefit of these Cultural Activists that Section 3 of the Act of 2010 constitutes the Kerala Cultural Activists' Welfare Fund Scheme. Section 3(2) provides the sources to be credited to the Fund under the Schemes. These include contributions made to the Fund, specified under Section 6 of the Act; grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und continuously for at least one year, (h) for payment of financial assistance to the family on the death of a member, (i) for the payment of loans or advances and scholarship for educational purposes to the children of members, who had remitted contribution to the Fund for a period of five years, (j) for providing loans or advances or maintenance fund to members for the promotion of cultural activity, (k) for implementing any other purposes as may be specified in the Scheme, (5) xxxxx (6) xxxxx (7) xxxxx" Thus, this Kerala Cultural Activists' Welfare Fund, managed by the Board, is used for welfare schemes, including pensions for cultural activists aged sixty and above, family pensions, financial aid for medical treatment, disability benefits, maternity assistance, marriage assistance, death benefits, educational loans for members' children, and loans for cultural activities. The conditions for these payments are specified in the Scheme, which has to be presented before the Legislative Assembly for approval. 34. Now, we turn to the aspect of co-relation between the impugned Cess levied on entertainment and the utilisation of the Fund. The Hon'ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of films is inherently linked to the overall artistic environment in society. Art forms are interlinked and share the same artistic ethos. A thriving artistic community in society will result in better-quality cinema. The impugned levy on cinema viewers which supports cultural activists across different disciplines enriches the culture of arts in the State. This, in turn, will boost artistic expression in all forms, including cinema, benefitting the cinema viewers by enhancing the quality of entertainment. Thus, the welfare of cultural activists for which impost is being levied by way of Cess has a connection with the benefit received by the cinema viewers in the form of better entertainment. As stated earlier, the legal position is that it is not necessary to establish a direct benefit, but a general benefit is sufficient to establish a correlation. This test is satisfied in the present case. 37. Therefore, we hold that the impugned Cess can be traced to the legislative power of the State Government to Entries 62 and 66 of List II, Schedule VII to the Constitution of India, and the levy of this Cess is relatable to the benefits received by the cinema viewers on whom the Cess is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacted the Central Act of 1981 to provide for the welfare of a certain class of cine-workers. Section 3 of the Act of 1981 constitutes a fund called the "Cine-Workers Welfare Fund", whose contributions are through such amounts as the Central Government may provide. The other sources are any grants made to the Fund by the Central Government, any donations received and income from investment of the amounts in the Fund. Section 4 lays down the measures and facilities, which according to the Central Government, are necessary to promote the welfare of cine workers, such as defraying the cost of such welfare measures or facilities, providing assistance in the form of grants or loans, sanctioning money in aid of any scheme, etc. This Fund under the Central Act is for certain cine - workers who are defined under Section 2(b) of the Act of 1981. Section 2(b) defines cine - workers as follows: "(b) "Cine-worker" means an individual- (i) who has been employed, directly or through any contractor or in any other manner, in or in connection with the production of not less than five feature films to work as an artist (including actor, musician or dancer) or to do any work, skilled, unskilled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down their businesses. The learned Senior Advocate for Respondent No. 3 - the Board submitted that the Appellant-Federation cannot be considered an aggrieved party, as the Cess is collected not from the theatre owners but from the viewers. The Board also contended that the Appellant-Federation, not a registered body, cannot maintain a petition on behalf of its members, especially since the List has not been provided, nor have such members paid the requisite court fee. We find no merit in the contentions of the Appellants. The Cess impugned is to be collected by the local authority. The proceeds of the Cess have to be remitted by the local authority to the account of the Kerala Cultural Activists' Welfare Fund Board. There is no role for the theatre owners, and the levy does not fall on them. No data has been provided to demonstrate how this levy amount per ticket has affected the functioning of the theatre owners' business. This argument is not supported by adequate pleadings and cannot be accepted.
43. As a result of this discussion, there is no merit in the challenge. There is no error in the view taken by the learned Single Judge.
44. The Appeal is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X
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