1990 (1) TMI 319 - HC - Indian Laws

Summary

Issues Involved:
1. Constitutionality of Section 4-B of the Karnataka Entertainment Tax Act, 1958.
2. Whether Section 4-B is a charging provision.
3. Procedural safeguards under Section 4-B.
4. Arbitrary nature of flat rate tax under Section 4-B.
5. Relation of the levy to Entry 62 of List II of the VII Schedule to the Constitution.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 4-B of the Karnataka Entertainment Tax Act, 1958:
The respondents, who are licensees under the Cinematographs Act to conduct video shows, challenged the constitutional validity of Section 4-B of the Act. They argued that the provision is unconstitutional on various grounds, including it not being a charging provision, lacking procedural safeguards, being arbitrary, and not relating to Entry 62 of List II of the VII Schedule to the Constitution.

2. Whether Section 4-B is a Charging Provision:
The court analyzed the components of a charging provision, which include the taxable event, the person on whom the levy is imposed, the rate of tax, and the measure or value to which the rate is applied. It concluded that Section 4-B meets all these criteria: the exhibition of video shows is the taxable event, the proprietors or exhibitors are obliged to pay the tax, the rate is Rs. 2,500 per month, and the measure is the operation of the video parlour. Thus, Section 4-B is indeed a charging provision.

3. Procedural Safeguards under Section 4-B:
The respondents contended that Section 4-B lacks procedural safeguards such as assessment and appeal. The court held that since the levy is a fixed amount, there is no need for assessment or appeal procedures. The simplicity of the provision makes additional procedural safeguards unnecessary. The court referenced previous rulings, noting that the absence of a corrective mechanism does not render a provision unconstitutional if the scheme of the enactment and the purpose of the provision justify it.

4. Arbitrary Nature of Flat Rate Tax under Section 4-B:
The respondents argued that the flat rate of Rs. 2,500 per month is arbitrary and violates Articles 14 and 19(1)(g) of the Constitution. The court examined precedents, including Moopil Nair's case, and concluded that a flat rate is not per se discriminatory. The classification of all video parlours into one category was deemed reasonable, and the absence of further classification based on factors like location or population does not make the levy arbitrary. The court also noted that the flat rate simplifies tax collection and reduces administrative burdens.

5. Relation of the Levy to Entry 62 of List II of the VII Schedule to the Constitution:
The respondents contended that the levy is not related to Entry 62, which pertains to taxes on entertainment. The court determined that the levy under Section 4-B is a measure for taxing the activity of showing video shows, which falls within the scope of entertainment. The measure of Rs. 2,500 per parlour per month is a reasonable basis for the tax and is related to the power to tax entertainment.

Conclusion:
The court set aside the order of the learned single Judge and dismissed the writ petitions, upholding the constitutionality and validity of Section 4-B of the Karnataka Entertainment Tax Act, 1958. The court found that the provision is a valid charging section, does not require additional procedural safeguards, is not arbitrary, and is related to the power to tax entertainment as per Entry 62 of List II of the VII Schedule to the Constitution.