2020 (6) TMI 358 - HC - VAT and Sales Tax

Principles of Natural Justice - demand of Luxury Tax - petitioner was not served with the order of the appellate court despite the fact that he had approached the office of the 2nd respondent to ascertain the fate of the appeal - HELD THAT - Since, there is no repealment of Act 23 of 1999 introduced Section 5A for charging of a luxury tax on the building having a specified plinth area or more with effect from on or after 1st April 1999, the action of the respondents in charging the tax and raising the demand cannot be said to be without jurisdiction or lack of competency. There is no justification warranting any interference under Article 226 of the Constitution of India to bring the case within the realm of jurisdiction - petition dismissed.

Summary

Issues:
1. Assessment of luxury tax on a residential building under Section 5A of the Kerala Building Tax Act, 1979.
2. Validity of the luxury tax demand notice and assessment order.
3. Applicability of Section 5A post the amendment of the Constitution.
4. Interpretation of legislative powers regarding taxes on luxuries.

Analysis:
1. The petitioner, the owner of a residential building, challenged the assessment order for luxury tax based on the discrepancy in the plinth area calculation by the Tahsildar. Despite filing an appeal and remitting installment amounts, the petitioner faced challenges in receiving updates on the appeal status. The revision petition was rejected, leading to a revised assessment order imposing luxury tax. The petitioner contended that the luxury tax demand was unsustainable in law due to the repeal of the Kerala Tax on Luxuries Act, 1976, but Section 5A of the 1975 Act remained unchanged. The court analyzed the history of the legislation and previous judgments to determine the validity of the luxury tax assessment.

2. The court examined the constitutional provisions related to legislative powers for taxation, emphasizing the exclusive authority of Parliament over Union List matters and the State Legislature's jurisdiction over State List subjects. The judgment delved into the changes brought about by the 101st amendment and the impact on the taxation of luxuries. It was argued that the introduction of the Central Goods and Services Tax Act led to the repeal of certain acts, including the Kerala Tax on Luxuries Act, 1976. However, the court clarified that the introduction of Section 5A in 1999 was distinct from the repealed act, thus upholding the validity of the luxury tax assessment under Section 5A.

3. The court referred to a previous case challenging the constitutionality of Section 5A and highlighted the legislative competence to levy taxes on luxuries under Entry 62 of List II. The judgment emphasized the legislative discretion to levy taxes on different items through separate enactments and justified the insertion of Section 5A in the Kerala Building Tax Act for imposing luxury tax on residential buildings. The court rejected the petitioner's contention that the luxury tax assessment lacked jurisdiction, concluding that the respondents' actions were within the legislative framework and did not warrant interference under Article 226 of the Constitution.

In conclusion, the court dismissed the writ petition, affirming the validity of the luxury tax assessment under Section 5A of the Kerala Building Tax Act, 1979, and upholding the legislative competence to levy taxes on luxuries, specifically on residential buildings meeting the specified criteria.