2001 (3) TMI 871 - SC - VAT and Sales Tax

Whether the State Legislature is competent to enact law to levy tax under entry 62 of List II of the Seventh Schedule on admission of cars/motor vehicles inside the drive-in-theatre? Held that - Appeal allowed. In pith and substance the levy is on the person who is entertained. 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 valid. Thus the High Court fell in serious error in holding that sub-clause (v) of clause (i) of section 2 of the Act is ultra vires entry 62 of List II of the Seventh Schedule.

Issues Involved:
1. Competence of the State Legislature to levy tax on the admission of motor vehicles into a drive-in-theatre.
2. Violation of constitutional rights under Articles 14 and 19.
3. Interpretation of "entertainment" under the Karnataka Entertainments Tax Act, 1958.
4. Validity of the amendment to Section 2(i) of the Karnataka Entertainments Tax Act, 1958.

Issue-wise Detailed Analysis:

1. Competence of the State Legislature to levy tax on the admission of motor vehicles into a drive-in-theatre:

The primary issue in this case was whether the State Legislature had the authority to levy a tax on the admission of motor vehicles into a drive-in-theatre under Entry 62 of List II of the Seventh Schedule to the Constitution of India. The Karnataka High Court initially ruled that the State Legislature lacked the competence to impose such a tax, as the tax should be levied on the person entertained, not on inanimate objects like motor vehicles. The Supreme Court, however, held that the levy on the admission of motor vehicles into a drive-in-theatre was, in pith and substance, a tax on the person entertained. The Court emphasized that the comfort and luxury provided by viewing a film from within a vehicle constituted a different quality of entertainment, justifying the additional tax. Therefore, the State Legislature was competent to enact sub-clause (v) of clause (i) of section 2 of the Act.

2. Violation of constitutional rights under Articles 14 and 19:

The petitioner argued that the amendment violated their constitutional rights under Article 14 (right to equality) and Article 19 (right to carry on trade or profession). The Karnataka High Court dismissed these claims, stating that the petitioner, as an entertainer, was not the aggrieved party since the tax was levied on the person entertained. The Supreme Court did not find any merit in the argument that the amendment violated Articles 14 and 19, as the tax was deemed to be on the person entertained and not on the petitioner directly.

3. Interpretation of "entertainment" under the Karnataka Entertainments Tax Act, 1958:

The term "entertainment" was central to the case, with the petitioner arguing that motor vehicles could not be considered as persons entertained. The Karnataka High Court initially agreed, noting that entertainment tax should be levied on human beings, not on vehicles. However, the Supreme Court overturned this interpretation, stating that the person entertained includes the comfort and luxury of viewing a film from within a vehicle, which falls under the broad definition of "entertainment." The Court held that the quality of entertainment provided by viewing a film from a vehicle justified the additional tax, thus validating the amendment.

4. Validity of the amendment to Section 2(i) of the Karnataka Entertainments Tax Act, 1958:

The amendment to Section 2(i) included sub-clause (v), which imposed a tax on the admission of motor vehicles into a drive-in-theatre. The Karnataka High Court initially struck down this amendment, declaring it ultra vires and beyond the legislative competence of the State Legislature. The Supreme Court, however, upheld the validity of the amendment, stating that the real nature and character of the levy were on the person entertained, not on the vehicle itself. The Court emphasized that the tax was justified as it was levied on the additional comfort and luxury provided by viewing a film from within a vehicle.

Conclusion:

The Supreme Court allowed the appeal, setting aside the judgment of the Karnataka High Court and upholding the validity of sub-clause (v) of clause (i) of section 2 of the Karnataka Entertainments Tax Act, 1958. The Court ruled that the State Legislature was competent to impose the tax, as it was, in essence, a tax on the person entertained, considering the additional comfort and luxury provided by viewing a film from within a vehicle. The appeal was allowed with no order as to costs.

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