2009 (8) TMI 1112 - HC - VAT and Sales Tax

Constitutional validity of the provisions introduced to the Kerala Tax on Luxuries Act, 1976 by the Finance Act, 2006 with effect from April 1, 2006, authorising levy of luxury tax at the rate of ₹ 5 per connection per month to be collected and remitted by every cable TV operator from the person enjoying the connection challenged Held that - It is the settled position that so long as the levy of tax is constitutional, the court has no authority to go into the reasonableness of the levy or justification of the same which are purely matters of legislative policy. Further, cable TV subscribers as a whole or any substantial number have not approached this court raising objection against the levy which means that there is general acceptability of the tax liability by those who are liable under the Act. We, therefore, find no merit in the challenge raised by the individual subscriber against the levy of luxury tax on cable TV subscriber who enjoys the luxury. Those who have access to only programmes from Doordarshan channels are not comparable to other class of cable TV subscribers who get access to large number of other channels and entertainment programmes. So much so, we do not find any substance in the allegation of discrimination pertaining to exclusion of subscribers who have taken only cable connection giving Doordarshan channels only. This contention also, therefore, fails and is rejected. The right to collect tax unlike in other statutes is not left to the discretion of the cable TV operators, but the statute makes it their duty to collect and remit the same to the Government. Thus the constitutional validity of the legislation upheld.

Issues Involved:
1. Constitutional validity of the luxury tax provisions introduced by the Finance Act, 2006.
2. Legislative competence of the State Legislature under entry 62 of List II of the Seventh Schedule to the Constitution of India.
3. Conflict between State-imposed luxury tax and Central-imposed service tax.
4. Alleged discrimination under Article 14 of the Constitution.
5. Definition and inclusion of "cable operator" under section 2(h) of the Act.

Detailed Analysis:

1. Constitutional Validity of the Luxury Tax Provisions:
The petitioners challenged the constitutional validity of the provisions introduced to the Kerala Tax on Luxuries Act, 1976, by the Finance Act, 2006, which authorized the levy of luxury tax at the rate of Rs. 5 per connection per month to be collected and remitted by every cable TV operator. The court upheld the constitutional validity of the legislation, stating that the luxury tax is a valid exercise of the State's legislative power under entry 62 of List II of the Seventh Schedule to the Constitution of India.

2. Legislative Competence:
The petitioners contended that the State Legislature had no authority to introduce the tax on cable TV operators or their subscribers under entry 62 of List II of the Seventh Schedule to the Constitution of India. They relied on the Supreme Court decision in Godfrey Phillips India Ltd. v. State of U.P., which defined "luxuries" as activities of enjoyment or indulgence beyond the necessary requirements of an average member of society. The court found that a cable TV connection is a luxury as it provides access to pay-channel programs, movies, and other entertainment not available on Doordarshan channels, thus falling within the legislative competence of the State Legislature under entry 62 of List II.

3. Conflict with Central Service Tax:
The petitioners argued that the field was occupied by Central legislation, as cable TV operators are required to pay service tax under the Finance Act, 1994. They contended that once service tax is levied on cable services, the State has no authority to levy luxury tax on the same services. The court rejected this contention, stating that the luxury tax is payable by the subscriber and not the service provider. The court cited the Supreme Court decision in Bharat Sanchar Nigam Ltd. v. Union of India, which held that composite transactions could involve liability for both service tax and sales tax. Therefore, the State's levy of luxury tax on subscribers enjoying cable TV services is valid.

4. Alleged Discrimination under Article 14:
The petitioners claimed discrimination under Article 14 of the Constitution, as the charging section 4 exempts connections provided by cable operators distributing only Doordarshan channels. The court found no merit in this contention, stating that Doordarshan channels offer limited entertainment programs compared to the variety provided by cable TV operators. The court held that subscribers to Doordarshan channels are not comparable to those enjoying a broader range of entertainment through cable TV, thus justifying the exemption.

5. Definition and Inclusion of "Cable Operator":
The petitioners argued that the definition of "proprietor" under section 2(h) of the Act was not amended to include cable network operators, making the levy impermissible. The court rejected this argument, stating that even without inclusion under section 2(h), cable TV operators are mandated to recover and remit the tax under section 4(2)(d) of the Act. The court emphasized that the statute imposes a duty on cable TV operators to collect and remit the tax, leaving no discretion to them.

Conclusion:
The court upheld the constitutional validity of the luxury tax provisions and rejected all contentions raised by the petitioners. The court directed that no penalty be levied if the petitioners file returns and remit the arrears of luxury tax within one month from the date of receipt of the judgment.

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