2016 (7) TMI 367 - HC - VAT and Sales Tax

Levy of luxury tax - whether the exhibition halls come within the definition Section 2(5-B) of the Karnataka Tax on Luxuries Act, 1979 - The premises consist of three exhibition halls, four AC conference halls of different dimensions with flexible seating arrangements in the halls, classroom, theatre and roundtable, auditorium seating four conference halls, CCTV link between four conference halls, green room and video conferencing facilities. The appellant has described the nature of activities with details, it discloses that the premises includes exhibition halls, convention centre and the events conducted by them and also stated that they provide exhibition halls, conference centre/ convention centre along with helipad area to the exhibitors for conducting exhibitions. Further, the photographs produced in the case which are not in dispute and the write up shows that the exhibition and conferences facilities at the appellant s premises are the first of its kind in India which offer services and amenities of the highest quality at par with international standards. Held that - With the facilities the appellant has already hosted an exhibition of over 1,10,000 sq.mt. of exhibit area. It has been able to cater to over 20,000 business visitors per day on several exhibition days. In this background, the argument of the learned counsel for the appellant that the word accommodation as mentioned in the other provisions which is consecutively missing in Section 3, the accommodation provided by the appellant cannot be levied with tax is without any substance Once the premises of the appellant falls within the definition of marriage hall and charges levy is more than ₹ 5,000/-, Section 3-C is attracted and luxury tax is leviable. Realising this fact, the appellant had approached the Government with a request to exempt from payment of tax. The power under Section - 2A could be exercised by the Government to exempt tax only when act is applicable. If the Act itself is not applicable, the question of exempting the appellant from payment of tax does not arise. In that view of the matter, viewed from many angle, as rightly held by the learned Single Judge, the appellant contention that the demand of tax is ultra vires and Act is not applicable to them is without any substance. - Decided against the petitioner.

Issues Involved:

1. Whether the exhibition halls fall within the definition of "Marriage Hall" under Section 2(5-B) of the Karnataka Tax on Luxuries Act, 1979.
2. Whether the levy of luxury tax on the exhibition halls is constitutionally valid.
3. Whether the amendment to Section 2(5-B) of the Act affects the appellant's liability to pay luxury tax.
4. Whether the appellant is liable to pay luxury tax from 01.04.2012 to 27.11.2012.
5. Whether Section 3-C of the Act is ultra vires the Constitution.

Detailed Analysis:

1. Definition of "Marriage Hall":

The appellant, an Industry Association promoting the machine tool industry, was served with a notice to register under the Karnataka Tax on Luxuries Act and pay luxury tax for the period 2007-08. The Assistant Commissioner of Commercial Taxes claimed that the activities conducted by the appellant fell within the purview of Section 3-C of the Act, read with the definition of "Marriage Hall" under Section 2(5-B) of the Act. The appellant disputed this claim, arguing that their premises were used for industrial exhibitions and not for marriages or receptions. The Division Bench of the Court had previously ruled that the appellant's premises did not fall under the definition of "Marriage Hall" as it was used for showcasing industrial machinery, not for marriage-related activities.

2. Constitutional Validity of Levying Luxury Tax:

The appellant argued that the levy of luxury tax under Section 3-C of the Act is attracted only on the charges for luxury provided in a marriage hall. They contended that mere rental of an empty hall cannot be considered as providing luxury and thus does not attract any charge under the Act. They further argued that if the definition of luxury and the provisions contained under Section 3-C of the Act are interpreted as suggested by the respondents, the said provision is unconstitutional, arbitrary, and liable to be quashed.

3. Impact of Amendment to Section 2(5-B):

The Karnataka Legislature amended Section 2(5-B) of the Act with effect from 01.04.2012, expanding the definition of "Marriage Hall" to include premises used for organizing official, social, or business functions. The appellant argued that despite this amendment, neither the definition of "luxuries" nor the charging provision under Section 3-C was amended, making the levy of tax on their premises ultra vires. The respondents contended that the appellant's premises now fell within the amended definition of "Marriage Hall" and thus were liable for luxury tax.

4. Liability to Pay Luxury Tax from 01.04.2012 to 27.11.2012:

The appellant sought exemption from the application of the Act, and the Government of Karnataka issued a notification exempting tax payable on charges for luxury provided in a marriage hall for organizing industrial exhibitions with immediate effect from 27.11.2012. The question was whether the appellant was liable to pay luxury tax for the period from 01.04.2012 to 27.11.2012. The Court held that the exemption notification was prospective, and thus, the appellant was liable to pay luxury tax for the said period.

5. Ultra Vires Argument of Section 3-C:

The appellant argued that Section 3-C of the Act is ultra vires the Constitution as it does not set out the luxury provided in the marriage hall, unlike the definitions dealing with hotels, clubs, and hospitals. The Court referred to the judgment of the Apex Court in the Express Hotels case, which held that the concept of "luxuries" in Entry 62, List II of the Constitution encompasses all manifestations of extravagance or indulgence, not limited to goods and articles. The Court concluded that the legislative competence extends to all matters with respect to the field or topic of legislation, and the measure of tax is a matter of legislative policy.

Conclusion:

The Court dismissed the writ appeals, holding that the appellant's premises fell within the definition of "Marriage Hall" as amended, and the levy of luxury tax was valid. The appellant was liable to pay luxury tax for the period from 01.04.2012 to 27.11.2012, and the provisions of the Act were not ultra vires the Constitution.

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