2017 (1) TMI 581 - HC - VAT and Sales Tax

Jurisdiction - the appellants have challenged the amendments made to the Act not on the ground that they are violative of the fundamental rights or other provisions of the Constitution, but singularly on the ground that those amendments have been made in excess of the powers available to the State Legislature under Entry 62 List II of VII Schedule of the Constitution of India - generic interpretation of the term Luxury - whether the amendments made to the Act have been enacted by the legislature within its competence and therefore, is intra vires of the Constitution of India? Held that - Legislation stems from the experience of the evils and should not, therefore, be impeded by the particular beliefs or opinion that certain classes of people would hold. The wisdom of legislature has to be respected as being for the good of the citizenry at large and not to the sentiments of a few. The power given under the Constitution to legislate is large and wide and must be construed as such - The duty of the court is only to interpret the provisions of the Constitution in a liberal spirit and to achieve the purposes and ideals set out in the Statute. As changes come in political and social life, the legislature is competent to adopt and evolve the Statutes in such a manner so as to answer such changes. Even though the powers granted do not change, the manner of its exercise would always depend upon the evolving socio- economic and political scenario but emotions, sentiments, unfounded suspicions, wild apprehensions and imaginary threats would obtain no place while assessing the validity of such legislation. We have no doubt that the legislature has taken into consideration various criterion like the experience over the time, the mischief that is sought to be redressed, the requirements that are sought to be achieved and the purpose for which a tax is imposed. The classification of such accommodation and amenities as luxury , if it costs Rupees one thousand or more per day, is, therefore, made by the legislature for constitutionally sound principles and cannot, therefore, be obtruded by this Court in exercise of its powers under Article 226 of the Constitution of India. The legislature must surely be given the credit of being aware of the developments on the subject from time to time and be credited with the capacity to control and exercise the purposes and requirements for which the power was committed to it under the Constitution. This is what is recognised as the doctrine of generic interpretation meaning the entitlement to execute the power, with respect to new developments of the same subject that arise from time to time, under the control of the Authority to which the power is vested. The impugned amendments to the Act have been enacted by the legislature within its competence and therefore, is intra vires of the Constitution of India - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Constitutionality of the amendments to the Kerala Tax on Luxuries Act, 1976.
2. Legislative competence of the State of Kerala under Entry 62 List II of VII Schedule of the Constitution of India.
3. Definition and scope of 'luxury' in the context of hospital services.
4. Rationality and purpose of the pecuniary threshold for luxury tax in hospitals.

Issue-wise Detailed Analysis:

1. Constitutionality of the amendments to the Kerala Tax on Luxuries Act, 1976:
The amendments brought by the Kerala Finance Act, 2008, included 'luxury' provided in hospitals within the ambit of the Kerala Tax on Luxuries Act, 1976. The petitioners, hospitals providing various treatments, challenged these amendments on the grounds that they were beyond the legislative power of the State of Kerala under Entry 62 List II of the VII Schedule of the Constitution of India. The learned Single Judge, after an elaborate consideration, dismissed the writ petitions, holding the amendments to be within the legislative competence of the State Legislature and intra vires the constitutional mandate. The appeals were heard in detail, and the court concurred with the findings of the learned Single Judge, stating that the amendments do not suffer from any constitutional infirmity.

2. Legislative competence of the State of Kerala under Entry 62 List II of VII Schedule of the Constitution of India:
The primary contention of the appellants was that the levy of luxury tax under Entry 62 List II of VII Schedule of the Constitution would be permissible only if 'luxury' is provided in the hospitals. They argued that since hospitals are places of healing and not luxury, the legislature exceeded its competence. The court noted that the Act was legislated by the Kerala Legislature under Entry 62 List II, which relates to 'taxes on luxuries, including taxation on entertainments, betting and gambling.' The court emphasized that the legislature is competent to legislate on luxuries, and the amendments were within this constitutional ambit.

3. Definition and scope of 'luxury' in the context of hospital services:
The Act defines 'luxury' as a 'commodity or service that ministers comfort or pleasure.' The court referred to the Supreme Court's interpretation in Abdul Kadir v. State of Kerala and Godfrey Phillips India Ltd. v. State of U.P., which defined luxury as an activity of enjoyment or indulgence beyond the necessary requirements of an average person. The court held that the amendments sought to tax the luxury of accommodation and amenities in hospitals, excluding essential services like food, medicine, and professional services. This classification was within the legislative competence and aligned with the definition of luxury.

4. Rationality and purpose of the pecuniary threshold for luxury tax in hospitals:
The appellants argued that the threshold of ?1,000 per day for classifying accommodation and amenities as luxury was irrational and meagre. The court examined this submission and noted that the legislature must be presumed to have considered all relevant social and economic parameters. The classification of accommodation and amenities costing ?1,000 or more per day as luxury was based on constitutionally sound principles. The court emphasized that the legislature legislates for the entire citizenry and not just a particular class, and its wisdom in setting such thresholds should be respected.

Conclusion:
The court held that the impugned amendments to the Kerala Tax on Luxuries Act, 1976, were enacted within the legislative competence of the State Legislature and were intra vires the Constitution of India. The writ appeals were dismissed, and no order as to costs was made.