2015 (11) TMI 354 - HC - VAT and Sales Tax

Challenge to section 3C read with section 2(5B) of the Karnataka Tax on Luxuries Act, 1979 (KTL) as ultra vires entry 62 of List II of the Seventh Schedule to the Constitution - Inclusion of only those halls that are used for the purpose of marriages, receptions or matter related thereto - whether the amenities provided by the BIEC which organizes business functions or exhibitions is chargeable to luxury tax and whether it falls within the expanded definition of marriage hall under amended section 2(5B) - Held that - In an unreported decision of this court, Magaji s case 2003 (5) TMI 499 - KARNATAKA HIGH COURT was impliedly overruled. But, the fact remains that charging rent above ₹ 5,000 for marriage hall and similar activities and functions forms the basis and appears to be reasonable classification so far as charging for luxury provided similar to several other hotels, holiday resorts and clubs where luxury tax is being charged. Under the expanded definition of the amended section, the exhibitions so held with the amenities/facilities provided also has to be treated as extra comforts and when the rental is above ₹ 5,000 for providing luxuries to be charged though it is sought to be argued by the petitioner s counsel that, what is provided under section 3C of the Act is only to attract charges on luxuries provided in marriage hall. - Though the petitioner had been exempted from paying tax on the ground that there is no provision provided under the charging section 3C, the petitioner cannot seek the aid and assistance of the Division Bench judgment rendered during January 2011 as the ratio laid down therein on January 22, 2011 (Indian Machine Tool Manufacturers Association v. State of Karnataka 2011 (1) TMI 1253 - KARNATAKA HIGH COURT is nullified by way of amendment which came into effect from April 1, 2012 and by virtue of the same, the exhibition halls also come within the definition of section 2(5B) of the Act and as such, exigible to luxury tax. - Decided against assessee.

Summary

Issues Involved:

1. Whether the Bangalore International Exhibition Centre (BIEC) falls within the definition of "marriage hall" under the Karnataka Tax on Luxuries Act, 1979.
2. Whether the petitioner is liable to pay luxury tax under the amended provisions of the Act from April 1, 2012.
3. The applicability of the Division Bench judgment in W. P. No. 27454-56/2009 in light of the amendment to section 2(5B) of the Act.
4. The validity of the assessment order and demand notice issued by the fifth respondent.

Detailed Analysis:

1. Definition of "Marriage Hall":
The petitioner, an industry association, contended that its premises at BIEC, used for industrial exhibitions and conferences, should not be classified as a "marriage hall" under the Karnataka Tax on Luxuries Act, 1979. The fifth respondent argued that under the amended section 2(5B) effective from April 1, 2012, "marriage hall" includes buildings or parts thereof used for official, social, or business functions, thus encompassing BIEC.

2. Liability to Pay Luxury Tax:
The petitioner challenged the liability to pay luxury tax, asserting that the primary function of BIEC is to promote trade and commerce, not to provide accommodation for marriages or receptions. The respondents maintained that the expanded definition of "marriage hall" under the amended Act includes facilities provided for various functions, including exhibitions, making BIEC liable for luxury tax.

3. Applicability of Division Bench Judgment:
The petitioner referenced a prior Division Bench judgment (W. P. No. 27454-56/2009) that exempted BIEC from luxury tax, arguing that this judgment should still apply. However, the respondents countered that the amendment to section 2(5B) of the Act, effective from April 1, 2012, nullifies the prior judgment by expanding the definition to include exhibition halls.

4. Validity of Assessment Order and Demand Notice:
The fifth respondent issued an assessment order and demand notice for luxury tax for the period from April 1, 2012, to November 26, 2012. The petitioner argued that this was unjustified based on the previous court ruling. The court noted that the amendment to section 2(5B) effectively overruled the earlier judgment, making the assessment order valid. The court also mentioned that the petitioner could seek rectification of any arithmetical errors in the tax calculation from the fifth respondent.

Conclusion:
The court concluded that the expanded definition of "marriage hall" under the amended section 2(5B) includes facilities like BIEC, making it liable for luxury tax. The prior Division Bench judgment does not apply post-amendment. The assessment order and demand notice issued by the fifth respondent are valid, though the petitioner can request corrections for any calculation errors. The petitions were disposed of accordingly.