2003 (5) TMI 499 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity of the Karnataka Tax on Luxuries (Hotels, Lodging houses and Marriage Halls) Act, 1979, as amended by the Karnataka Act 6 of 1995.
2. Definition and scope of "luxury" and "charges for marriage hall" u/s 2(4B) and 2(1A) of the Act.
3. Legislative competence and constitutional limitations on taxation laws.
4. Reasonableness and arbitrariness of the tax imposition on marriage halls.

Summary:

1. Constitutional Validity of the Act:
The appellants challenged the constitutional validity of the Karnataka Tax on Luxuries (Hotels, Lodging houses and Marriage Halls) Act, 1979, as amended by the Karnataka Act 6 of 1995. They argued that marriage halls are a necessity and not a luxury, and thus should not be taxed. The court upheld the constitutional validity of the Act, referencing the Supreme Court's decision in Express Hotels (P) Ltd. v. State of Gujarat [1989] 74 STC 157, which supported the broad interpretation of "luxuries" under entry 62 of List II, State List of the Seventh Schedule to the Constitution of India.

2. Definition and Scope of "Luxury" and "Charges for Marriage Hall":
The court examined the definitions provided in the Act. "Luxuries" u/s 2(4B) are defined as commodities or services ministering to enjoyment, comfort, or pleasure extraordinary to necessities of life. "Charges for marriage hall" u/s 2(1A) include charges for air-conditioning, chairs, utensils, vessels, shamiana, electricity, water, fuel, interior or exterior decoration, and the like, but exclude charges for food and drinks. The court found that the legislative intent behind these definitions was clear and upheld the inclusion of such charges within the scope of luxury tax.

3. Legislative Competence and Constitutional Limitations:
The court reiterated that the power to tax is an incident of sovereignty, subject to constitutional limitations such as Article 265, which mandates that no tax shall be levied or collected except by authority of law. The court referenced several Supreme Court decisions, including Kunnathat Thathunni Moopil Nair v. State of Kerala AIR 1961 SC 552 and State of Kerala v. Haji K. Kutty Naha AIR 1969 SC 378, to emphasize that taxation laws must not contravene fundamental rights or other constitutional provisions.

4. Reasonableness and Arbitrariness of Tax Imposition:
The appellants argued that the tax imposition was irrational and arbitrary, particularly the exemption limit of Rs. 5,000 per day. The court found no merit in this contention, stating that the classification made by the State Legislature was based on an intelligible differentia with a rational nexus to the object sought to be achieved by the Act. The court also dismissed the argument that charges for electricity, water, and fuel should not be taxed if used for food and drink preparation, noting that the levy of tax u/s 3-C is on the "charges on luxury provided in a marriage hall."

Conclusion:
The court concluded that the Karnataka State Legislature did not exceed its law-making power or contravene any constitutional provisions in enacting the impugned Amendment Act. The constitutional validity of the legislation was upheld, and the writ appeals were dismissed with no order as to costs.