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2016 (2) TMI 550 - PUNJAB AND HARYANA HIGH COURT

2016 (2) TMI 550 - PUNJAB AND HARYANA HIGH COURT - TMI - Levy of tax on open space termed as “banquet halls” providing only accommodation or space for marriages/receptions in terms of Section 2(c) in the manner stated under Section 2(k) of the Haryana Tax on Luxuries Act, 2007 - whether these are not covered under the head 'Luxury' vide entry No.62 of List II of Schedule VII of the Constitution of India? - Held that:- The explanation being clarificatory in nature has simplified the calculation a .....

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of the State to enact such a provision or there being violation of any constitutional mandate.

Nothing has been shown by the learned counsel for the petitioner to substantiate that the State legislature was not empowered to define the expression 'luxury in the banquet hall' under Section 2(k) in the statute. The definitions of various expressions under Section 2 of the Act and other substantive provisions of the Act are within the legislative competence and have not been shown to be .....

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n to Section 2(k) of the Act and also the other provisions of the Act to which an attempt has been made to assail as ultra vires, cannot be held to be beyond the legislative competence of the Haryana State Legislature or that they had exceeded its law making power or contravened any of the provisions of the Constitution of India on the basis of which it could be declared to be unconstitutional. The validity of the same is upheld and the petition is dismissed. - CWP No.24765 of 2015 - Dated:- 7-1 .....

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f Schedule VII of the Constitution of India. Prayer has also been made for setting aside Explanation to Section 2(k) of the Act which prescribes inclusion of charges for amenities, even if arranged by persons other than the proprietor of the banquet hall. The petitioner has also assailed levy and collection of tax on charges for banquet hall under Section 9 read with Section 11 of the Act to be bad being based on assumption and presumptions. 2. A few facts relevant for the decision of the contro .....

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pose of computing the luxury tax notwithstanding that these are provided by persons other than the proprietor of the banquet hall. The levy and collection of tax is governed by Section 9 of the Act. The petitioner is required to register itself under the Act by virtue of Section 11 of the Act. The petitioner is further required to deposit security on the basis of anticipated tax payment under Section 11(4) of the Act. Under Section 12 of the Act, every proprietor shall declare the normal rate fo .....

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pace in any manner does not constitute 'luxury' under the Act. As long as the petitioner is letting out its space for marriages without providing any facility like air conditioning, air cooling, chairs, tables, utensils etc. for a consideration below ₹ 20,000/- per function, its subject activity cannot be termed as luxury. As far as provision for amenities is concerned, it is the option of the organizer to arrange of its own. The charges for amenities are bound to vary from functio .....

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0/- vide order dated 27.11.2014, Annexure P.2. The petitioner had to approach the appellate authority under Section 31 of the Act. Vide order dated 16.7.2015, the said order was set aside and the case was remanded back to the assessing authority for framing de novo assessment in accordance with law after providing opportunity of hearing to the petitioner. Hence the instant writ petition with the prayer as mentioned above. 3. The primary grievance of the petitioner that arises for consideration i .....

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ged that the State is not competent to legislate for imposing 'luxury tax' on banquet halls, which simply let out the space for conducting marriages. According to the petitioner, the services provided by it are not liable to levy of tax. Reliance was placed on judgments in M/s Sandley Industries vs. Union of India and others, CWP No.10564 of 2014, decided on 20.8.2015 and Bidhannagar (Salt Lake) Welfare Association vs. Central Valuation Board and others, (2007) 6 SCC 668. Reference in th .....

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nder the Act specially when the petitioner has been letting out the open space for marriages without providing any facility like air conditioning, air cooling, chairs, tables, utensils and vessels, shamiana, tent, pavilion, electricity, water, fuel, interior or exterior decoration, music, orchestra, live telecast or other amenities for a consideration below ₹ 20,000/- per function. 6. It was also contended that so far as the provision for amenities is concerned, it is exclusively the optio .....

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d party is under no obligation to disclose the expenses incurred to the petitioner, therefore, no tax liability can be fastened on the petitioner for acts and omission of others which is unsustainable. 7. Continuing with his submissions, the Act was also assailed on the ground that the taxable event is when the services are offered and consideration is received. Under the Explanation to Section 2(k) of the Act, the charges incurred by the function organizer for the amenities gathered/arranged by .....

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holding of such functions in marriage halls cannot be termed as 'luxury'. The activity of the petitioner cannot be said to be akin to entertainment, amusement, betting and gambling as used in Entry No.62 in List II of Seventh Schedule of the Constitution of India. The luxury in hotels would be on different pedestal from renting out land as banquet hall. The State Legislature is infact incompetent to do so as it lacks legislative competence. Further, no machinery for redressal of grievanc .....

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gambling'. With that constitutional sanction, Haryana Tax on Luxuries Act, 2007 was enacted to provide for the levy and collection of tax on luxuries and for matters incidental thereto and connected therewith. The relevant statutory provisions incorporated under the Act needs to be scrutinized. Section 2 of the Act provides definition of various expressions used in the Act which read thus:- 2 (c) "banquet hall" means any premises or part of premises, garden or part of the garden or .....

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sils and vessels, shamiana, tent, electricity, water, fuel, interior or exterior decoration, music systems, orchestra, live telecast, and the like and any amount received by way of donation or charity or by whatever name called in relation to letting out the banquet hall but do not include any charges for food and drinks; Explanation.- If any question arises whether any charges are charges for banquet hall, such question shall be referred to the State Government and decision of the State Governm .....

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ut do not include any charges for food and drinks) is twenty thousands rupees or more per occasion; Explanation.-While computing twenty thousand rupees or more, charges for providing air cooling, air conditioning, chairs, tables, utensils and vessels, shamiana, tent, pavilion, electricity, water, fuel, interior or exterior decoration, music, orchestra, live telecast, or other amenities will be taken in account even if charged separately whether by the proprietor of a banquet hall or on his behal .....

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rcent or such other rate not exceeding fifteen percent, as the State Government may, by notification in the Official Gazette, direct: Provided that tax levied under sub-section (1) shall be paid only by such proprietor wherein charges for the luxury provided in a banquet hall are twenty thousand rupees or more with in the meaning of clause (k) of section 2. (2) The tax levied under sub- section (1) shall be paid by every proprietor in such manner as may be prescribed. Registration of proprietors .....

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on such demand, the proprietor shall furnish security within a period of ten days from the date of receipt of the order demanding security. (4) The amount of security payable under sub-section (3) shall not exceed an amount equivalent to one-fourth of tax anticipated for the year from the proprietor. The assessing authority may demand an additional security, if it has reason to believe that the security furnished already is inadequate. (5) The security furnished shall be maintained in full until .....

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tinued, transferred or otherwise disposed off his business. . (8) The assessing authority shall have power, for good and sufficient reasons, to cancel, modify or amend any registration certificate issued by it. (9) A registration certificate shall be personal to the proprietor to whom it is granted and shall not be transferable. Declaration of charges. 12. Every proprietor liable to pay tax shall declare the normal rate fixed for luxury provided by him in such manner and within such period as ma .....

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behalf by any other person if the said amenities are provided within the precincts of such banquet hall. As per section 9 of the Act, the tax shall be collected on the charges payable on the luxury at the rate of ten percent or more but not exceeding fifteen percent where the charges are ₹ 20,000/- or more. Under Section 11(4) of the Act, the petitioner is required to deposit security on the basis of anticipated tax payment. Under Section 12 of the Act, every proprietor liable to pay tax .....

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se but it should be allocated fullest meaning and the widest amplitude so as to extend to all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in them. 14. The Constitution Bench of the Supreme Court in the case of Express Hotels Private Limited vs. State of Gujarat, (1989) 74 STC 157 while examining the scope of Entry 62 of List II of Schedule VII of the Constitution of India under similar circumstances held that the concept of tax on luxury cannot be .....

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ative entry cannot be exhausted by these cases, illustrative of the 'concept'. The entry encompasses all the manifestations or emanations, the notion of 'luxuries' can fairly and reasonably be said to comprehend. The element of extravagance or indulgence that differentiates 'luxury' from 'necessity' can not be confined to goods and articles. There can be elements of extravagance or indulgence in the quality of services and activities. 15. In the light of earlier j .....

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3, this court was dealing with the scope of the power of the Provincial Legislature under Sec. 100 of the Govt. of India Act, 1935, with respect to Entry 50 in Schedule VII of the said Act, to make laws with respect to "taxes on luxuries including taxes on entertainments, amusements, betting and gambling". The contention of the appellant in that case was that the entry authorised a law imposing taxes on persons who received or enjoyed the luxuries etc. and that no law made with respect .....

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axes on luxuries or entertainments or amusements' in entry 50 as having a restricted meaning so as to confine the operation of the law to be made thereunder only to taxes on persons receiving the luxuries, entertainments, or amusements. The entry contemplates luxuries, entertainments, and amusements as objects on which the tax is to be imposed. If the words are to be so regarded, as we think they must, there can be no reason to differentiate between the giver and the receiv- er of the luxuri .....

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ss of what is required for economic and personal well being would be expenditure on luxury although the expenditure may be of a nature which is inclined by a large number of people, including those not economically well off. It was recorded thus:- " .... The word "luxury" in the above context has not been used in the sense of something pertaining to the exclusive preserve of the rich. The fact that the use of an article is popular among the poor sections of the population would no .....

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ay be of a nature which is incurred by a large number of people, including those not economically well-off .... " It was also noticed that as to what constitutes article of 'luxury' cannot be static and keeps on changing based on citizens of one country or nationals of another country for precious living in a different climate. The relevant observations read thus:- There is nothing static about what constitutes an article of luxury. The luxuries of yesterday could well become the ne .....

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to enjoyment, comfort or pleasure extraordinary to necessities of life. As noticed above, the bone of contention in the present case primarily relates to Explanation to Section 2(k) of the Act which provides for computation of value of facilities or amenities to be included as items of luxury in respect of luxury provided in a banquet hall . According to the explanation for assessing the quantum of ₹ 20,000/- as referred in Section 2(k) of the Act, the facilities or amenities enumerated th .....

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lities or amenities are provided by the proprietor of the banquet hall or any person on his behalf when such amenities are provided within the precincts of such banquet hall. It can by no stretch of imagination on taking hypothetical illustration be declared to be ultra vires without showing lack of legislative competence of the State to enact such a provision or there being violation of any constitutional mandate. 18. Nothing has been shown by the learned counsel for the petitioner to substanti .....

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ve competence in the State legislature to enact a provision, in the absence of the learned counsel for the petitioners to demonstrate that the same is arbitrary, discriminatory or violative of Article 14 of the Constitution of India, it cannot be declared to be unconstitutional. 19. It is well settled law that a statute enacted by Parliament or legislature can only be struck down by courts on two counts which are viz; (a) lack of legislative competence; and (b) violation of any of the fundamenta .....

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ution where the power of the Congress and the State Legislatures to make laws is limited in two ways, viz., the division of legislative powers between the States and the federal government and the fundamental rights (Bill of Rights) incorporated in the Constitution. In India, the position is similar to the United States of America. The power of the Parliament or for that matter, the State Legislatures is restricted in two ways. A law made by the Parliament or the Legislature can be struck down b .....

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ished that such injustice infact is prohibited or violates the rights guaranteed or protected by the Constitution of India. 20. As far as the judgments cited by the learned counsel for the petitioner, there is no quarrel with the proposition of law enunciated therein. In Bidhannagar's case (supra), it was held by the Apex Court that when a substantive unreasonableness is to be found in a statute, it may have to be declared unconstitutional. Although the court may not go into the question of .....

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