TMI Blog2011 (1) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... short, hereinafter referred to as the Act ), holding that the section does not stipulate any levy on the mere existence of the facility and the tax is leviable only on the member who utilizes the facility available in the club. The Karnataka Legislature, in order to augment the Revenue of the State, proposed to levy tax on luxuries provided in hotels and lodging houses and therefore, it enacted Karnataka Tax on Luxuries Act, 1979 which came into force from March 31, 1979. At the inception, there was no provision for levy and collection of tax on luxuries provided in a club. In fact, as the law stood then, the word club was included in the definition of the word hotel . It was inserted by Act No. 5 of 2000 giving retrospective operation. However, the Legislature, by way of an amendment to the Act, inserted section 3D by way of substitution by Act No. 3 of 2004 and it was declared that it shall be deemed to have been substituted with effect from April 1, 2003. In other words, retrospective effect was not given by the Legislature expressly restricting its operation only from April 1, 2003. The constitutional validity of the said provision was challenged by the respondents here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel appearing for the respondents/clubs contended that for mere providing a luxury, no tax can be levied as held by the apex court in Godfrey Phillips India Ltd. v. State of U. P. reported in [2005] 139 STC 537 (SC). The liability to pay tax arises only when a member pays the requisite fee for enjoying the luxury provided by the club and therefore, the interpretation placed by the learned single judge is apt and no case for interference is made out. In the light of the aforesaid facts and the rival contentions, the question that arises for our consideration in this appeal is, Whether the liability to pay luxury tax under section 3D arises the moment the club provides luxury to its members and they are required to pay fee or when the members actually use luxury and pay fee? In this regard, it is necessary to look into section 3D, which reads as under: 3D. Levy and collection of tax on luxury provided in a club. (1) There shall be levied and collected a tax on luxuries provided in a club to the members who are required to pay any amount as fee, deposit, donation or any other such charges by whatever name called, at the rate as specified in column (3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay any amount as fee, deposit, donation or any other such charges by whatever name called. If these two conditions are satisfied, then, the charging section comes into operation and a liability is cast on the club to levy and collect taxes. The rate of tax to be collected is specified in the table set out in section 3D. The proviso to section 3D makes it clear, such a liability to pay tax is not there on the club in respect of members who have attained 65 years of age and who utilized its luxuries on payment of such fee, deposit or donation. The said proviso is also not applicable to youth clubs registered or recognized as such by the Department of Youth Services. Sub-section (2) of section 3D abundantly makes it clear, who has to pay taxes. According to the said sub-section, the tax shall be paid by every proprietor within such period and in such manner as may be prescribed. Explanation II is added to clarify the payment of the luxury taxes by the clubs in respect of corporate membership or similar membership. Though the corporate member is treated as one, if more than one person uses luxuries, then, the tax shall be levied and collected in respect of such number of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the liability to pay tax arises only when the member utilises the said luxury by paying a fee. On the contrary, the liability to tax arises when a luxury is provided and the member is required to pay for that luxury. Whether a member utilises the said luxury and pays fee or not, the taxing event is attracted, the moment the said luxury is provided for a price. In fact, the Constitution Bench of the apex court in the case of Express Hotels Private Ltd. v. State of Gujarat reported in [1989] 74 STC 157 (SC); AIR 1989 SC 1949 was dealing with somewhat identical situation where the question arose whether the taxable event arises whether by actual utilisation or the moment the luxury is provided. They were interpreting the provisions of section 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 where the said section 4 reads as under: 4. Liability for luxury tax. There shall be charged, levied and paid to the State Government a luxury tax by the proprietor of every hotel and restaurant in which there is provision for luxury and such tax shall be calculated (a) In the case of a restaurant at the rate of an annual sum of rupees three hundr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be embraced by it, then, the taxing power cannot be limited to or conditioned in the manner suggested. Once the legislative competence and the nexus between the taxing power and the subject of taxation is established, the other incidents are matters of fiscal policy behind the taxing law. The measure of the tax is not the same thing as, and must be kept distinguished from, the subject of the tax. So far as the argument that fundamental rights under article 19(1)(g) are violated by a levy on a mere provision for luxury, without its actual utilization, is concerned, it is settled law that the mere excessiveness of a tax or that it affects the earnings cannot, per se, be held to violate article 19(1)(g). . . (Underlining1 by us). 1Here italicised. Therefore, it is clear from the authoritative pronouncement of the Constitution Bench, the State has power to levy tax on luxuries even if there is no actual utilisation or the actual consumption of the said luxury provided. When once, the nexus between taxing power of the State and the tax is established, all other matters are matters of fiscal policy and it is not amenable to the judicial review by the courts. A perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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