Kerala High Court
Veega Holidays And Parks (P) Ltd. vs Kunnathunad Grama Panchayat on 11 July, 2003
Equivalent citations: AIR2004KER168, 2003(3)KLT442, AIR 2004 KERALA 168, (2003) 4 KHCACJ 292 (KER), ILR(KER) 2004 (1) KER 97, (2003) 2 KER LJ 688, (2003) 3 KER LT 442
Author: A.K. Basheer
Bench: A.K. Basheer
JUDGMENT Jawahar Lal Gupta, C.J.
1. Is the appellant company, which is running an 'Amusement Park' liable to pay 'Entertainment Tax' to the respondent-Panchayat? Is the appellant's 'Park' liable to be closed on account of the failure to deposit the amount of tax as demanded by the respondents? These two questions represent the core of the controversy in this bunch of 23 appeals. The learned Single Judge has answered both the questions against the appellant. Thus, the 21 Writ Petitions filed by the appellant to challenge the demand for more than Rs. Nine Crores have been dismissed. On the other hand the petition filed by the respondent - Panchayat for closure of the facility has been allowed. The petition filed by the appellant to challenge the order for closure has been dismissed. Aggrieved by the common judgment, the appellant has filed these appeals. The respondents in the appeals have put in appearance at the stage of the preliminary hearing. In the normal course, the admission of the appeals would have been the easiest course. However, in view of the prayer for interim relief, both sides have argued the matter fully. Thus, we are deciding the cases at the stage of admission.
2. The relevant facts may be briefly noticed.
3. The appellant established an Amusement Park known as 'Veega Land' in Pallikkara. The place falls within the jurisdiction of the Kunnathunadu Grama Panchayat. The appellant is providing entertainment to the customers who visit the Veega Land. It includes a variety of facilities like ride in mini train, car ride on rails, ride on jumping cabins, provision for sea bath and play in an artificial wave pool, ride on floats and sheets etc.
4. The Panchayat raised a demand for an amount of Rs. 9.23 Crores on account of the levy of entertainment tax during the period from April 2000 to November, 2002. The appellant filed 21 Writ Petitions to challenge the demand. The Panchayat then passed an order directing the appellant to close the Park. It also filed O.P. No. 5723/2001 with the prayer that a direction be given to the Police to implement the order for the closure of the Park. The appellant challenged the order of the Panchayat for closure of the Park by filing O.P. No. 6146/2001.
5. The appellant's claim in the Writ Petitions was that the tax was not legally leviable. Thus, the demand as raised by the Panchayat was not tenable. The claim was contested by the Panchayat. Ultimately, the learned Single Judge considered the matter. The Writ Petitions filed by the appellant were dismissed. The one filed by the Panchayat was allowed. Hence, these 23 appeals.
6. Mr. Chacko George, learned counsel for the appellant, has contended that Section 3 of the Kerala (Local Authorities) Entertainment Tax Act, 1961 embodies only an enabling provision. In exercise of the power under the Act, the Panchayat has passed a byelaw. It has chosen to impose tax only on 'exhibition'. Thus, the order for payment of tax as passed by the Panchayat is beyond the scope of the bye-law. Resultantly, it is contended that the orders of levy cannot be sustained. Equally, it is submitted that the order for the closure of the facility is illegal.
7. Mr. N. Sukumaran, learned counsel for the respondent-Panchayat has controverted the claim as made on behalf of the appellant. He submits that keeping in view the aims and objects of the Act and the provisions contained in Section 3, the tax as levied by the respondent is in conformity with law. The view taken by the learned Single Judge, thus, deserves to be sustained. In the alternative, it is submitted that the activity falls within the mischief of Bye-law 4. Thus, the levy is in conformity with law and should be sustained. Mr. Raju Joseph, learned counsel for respondent Nos. 2 and 3 has endorsed the submissions of Mr Sukumaran.
8. In view of the contentions as raised by the learned counsel, the short question that arises for consideration is - Are the impugned orders of levy of tax in conformity with law?
9. Inevitably, a brief reference to the provisions of the Act is essential.
10. The Kerala (Local Authorities) Entertainment Tax Act, 1961 (Act 20 of 1961) was promulgated to "unify and amend the law relating to the imposition and collection of taxes on amusements and other entertainments in the State of Kerala". The Act was substantially amended in 1975. For the purposes of the present case, the provisions of the Act as amended by Act, No. 9 of 1975 are relevant. Section 2 contains the definitions. The relevant clauses may be noticed:-
"2(1) 'Admission' includes admission as a spectator or as one of an audience and admission for the purpose of amusement by taking part in an entertainment.
(4) 'Entertainment' includes any exhibition, performance, amusement, game, sport or race to which persons are admitted for payment but does not include any magic performance.
The really relevant provision is contained in Section 3. It provides:-
3. General provisions regarding the levy of the tax and the rate of tax:-Any local authority may levy a tax (hereinafter referred to as the entertainments tax) at the rate not less than fifteen percent and not more than thirty percent on each payment for admission to any entertainment".
11. A perusal of the provisions shows that Section 2(4) defines entertainment to include exhibition, performance, amusement, game, sport or race. Section 3 enables the local authority to levy a tax on 'any entertainment'. It also lays down the broad limits within which the tax can be imposed. The rate as originally fixed under the 1961 Act was 10 to 25 percent. By the amendment in 1975, it was enhanced to 15 to 30%. Subsequently, a provision for Additional Entertainment Tax was made. Ultimately, by the Kerala Decentralization of Powers Act, 2000 (Act 16 of 2000), the 'tax' and the 'additional tax' were merged together and the provision in Section 3 was modified to substitute the words 15% and 30% by 24% and 48%.
12. On the basis of the aforesaid two provisions, Mr. Chacko George, learned counsel for the appellant, has contended that Section 2(4) comprehends various activities, which would fall within the definition of 'entertainment' Section 3 enables the Local Authority to levy a tax on all, some or none of those activities. It also confers discretion to fix the rate, which can vary from 24% to 48%.
13. On the other hand, learned counsel for the respondents have contended that Section 3, on its own, provides for the levy of tax. Thus, the demand as made by the Panchayat falls within the ambit of the provision.
14. A tax is a compulsory exaction of money. The Government has the right to impose it. It is a legitimate method to raise funds to meet public needs. But the demand for money has to be in conformity with the provisions of the Statute. And the provisions of a taxing statute have to be construed strictly. A person cannot be taxed unless the provision clearly provides for it. The words of the statute have to be given their true and natural meaning. The Authority cannot add to the words. It cannot impose a levy by reading an implication into the plain words of the provision. There is no room for intendment. The words of the statute cannot be strained. Strict letter of law has to be seen. The present set of cases has to be examined in the light of these broad parameters.
15. Section 2(4) defines 'Entertainment'. It includes a variety of activities like exhibition, performance, amusement, game, sport or race. Section 3 enables the Local Authority (the Panchayat in the present case) to impose a levy. The Legislature has used the word 'may'. It is true that sometimes 'may' has been read to mean 'shall'. But these are normally cases where power is being conferred on a high dignitary. The legislature shows deference to the 'Office'. However, in the present case, the text and the context of the provision do not show that 'may' was intended to mean 'must'. Why?
16. The provision provides for levy of 'Entertainment Tax' by a 'Local Authority'. Section 2(6) defines the term. In case of a city, it is the Corporation. For a Municipal area, it is the Municipal Council concerned. In case of the area falling within the jurisdiction of a Panchayat, the local authority is the 'Panchayat'. Each authority is an instrument of local self-government. In the very nature of things, the resources and requirements are likely to be different. Thus, the legislature has provided moving space to each Authority. It has conferred 'permissive power'. The provision does not cast a mandatory duty. The Authority has the right to take a decision in the exercise of its own judgment. It can take the decision in any form. The Statute does not describe any mode. It can levy Tax even by a resolution. However, in this case, as shall be presently noticed, the Panchayat had framed a Bye-law.
17. The provision does not even fix the rate of tax. It only provides the limits. It lays down the minimum and the maximum rate of levy. It gives discretion to the local authority. It empowers the Panchayat to levy tax on "each price for admission to any entertainment". In other words, it is open to a Panchayat to say that in view of the prevailing economic situation, it need not levy any entertainment tax. Equally, it can say that it will levy tax on performance, but not on exhibition, games, sports or races. Still further, each local authority can choose its own rate of levy. It can even be uniform or different. To illustrate, a local authority may levy tax at a lower rate on sports but at a higher rate on exhibition of films. The legislature has given a complete freedom to the Local Authority.
18. Mr. Sukumaran points out that the learned Single Judge has considered the matter and found that Section 3 is the charging Section. He submits that this view should commend itself to the Court.
19. The submission cannot be accepted. As noticed above, Section 3 permits the levy of tax. But as the plain language of the provision shows, the power conferred by the provision is permissive. In the context, the word 'may' cannot be read to mean that the Panchayat 'must' levy the tax. Still further, the Panchayat has even the right to choose the form of entertainment on which it may want to levy the tax. It may choose to tax all, some or none of the items of entertainment. And then, the provision lays down the parameters within which the tax can be levied. Today, it cannot be less than 24% or more than 48%. At what rate would a particular 'Local Authority' levy the tax? There has to be a decision by the Authority. Each authority can lay down its own rate. It can vary even from item to item. Thus, there is complete freedom to the local authority with regard to the imposition of the tax and its computation. The Act only fixes the broad parameters. Section 3 does not make a clear provision for levy and computation. Can it be still read as a charging section?
20. At this stage, it may be noticed that wherever the Legislature has provided for the collection of tax under a provision, the language is materially different. By way of instance, the provision for the levy of sales tax as contained in Section 5 of the Kerala General Sales Tax Act, 1963, categorically provides that "every dealer ........shall pay tax on his taxable turnover for that year.....". It prescribes the taxable event and the rate of levy. It leaves the authority or the dealer with no choice. Similarly, even in the case of Panchayats, the provision for levy of taxes etc. is contained in Section 200 of the Panchayat Raj Act, 1994. It enables the Panchayat to levy taxes on buildings, profession, advertisement etc. In Clause (4), it has been provided as under:
"4(i) A show tax shall be levied on all shows within the village Panchayat area at the rates prescribed by the Government in this behalf.
Explanation:- The term 'show' shall include any entertainment, exhibition, performance, amusement, game, sport or race to which persons are admitted on payment.
(ii) The tax leviable shall be payable by and recoverable from the owner of the premises where the show is conducted if he receives rent for the show or if no rent is paid, the proprietor of the show including any person responsible for the management thereof.
The above provision clearly brings out the distinction between Section 3 of the 1961 Act and the charging provisions under the other two Statutes. These categorically provide that tax shall be levied at the rates as prescribed. Thus, levy and computation are clearly provided for. In view of the plain language of Section 3, it cannot be said that it authorizes the Panchayat to levy tax at a specific rate without anything more. Thus, it is only an enabling provision. Not a changing section.
21. In fact, even the Panchayat had also understood the provision in that light. It was apparently on account of this reason that the Panchayat had promulgated Byelaws and made a specific provision to fix the rate of tax and the activity on which it was to be levied. The Panchayat had promulgated the "Kunnathunadu Panchayat Byelaws". These were framed under Section 12 and enforced with effect from July 9, 1981. In these Byelaws, a provision was made for the levy of entertainment Tax. The relevant provision is contained in Byelaw 4. The original text is in Malayalam. Learned counsel for the appellant had produced before us a translated copy of the Byelaw. There was a slight difference of opinion between the counsel for the two sides. Learned counsel for the respondent-Panchayat has produced before us his own version of Byelaw 4. The transaction as given by Mr. Sukumaran reads as under:-
(4). All entertainment exhibitions conducted within the limits of the Panchayat except those exhibitions which are specifically exempted from time to time under Section 7(1) and 7(3) of the Act are levied entertainment tax as per Section 3 of the Act at 20% of the payment for admission. If the owner of the exhibition intends to pay the tax, as per returns, he shall remit such amount, as may be directed by the Executive Authority, as deposit. The entertainment tax shall be remitted in the Panchayat Office, together with additional entertainment tax, show tax and surcharge before 12 noon on the day following the entertainment and receipt obtained in respect thereof.
22. A perusal of the above provision shows that the exhibitions conducted within the limits of the Panchayat, except those, which may be specifically exempted under Section 7, have been subjected to the levy of entertainment tax at the rate of 20% of "the payment for admission". In other words, the taxable event is an exhibition for entertainment. It does not cover anything more.
23. Mr. Sukumaran emphasized the words 'entertainment exhibition' and contended that the bye-law encompasses all that falls within the definition of entertainment.
24. Section 2(4) really takes within its ambit different kinds of entertainment viz. exhibition, performance, amusement, game, sport or race. Truly, entertainment is an expression of very wide amplitude. A court entertains a petition. A hotel entertains a guest. A banquet, a sumptuous feast, is an entertainment of eating and drinking. A school may provide entertainment to the guests at its annual function. However, all the activities have to be judged in the light of the statutory provision. When the provision of Section 2(4) is read with Section 3, we find that the Panchayat had a choice. While enacting Bye-law 4, it had deliberately chosen to levy tax only on such exhibitions, which had an element of entertainment for the viewer or the participants. All other activities like amusement, a musical performance or a game, sport etc. were not brought within the ambit of the levy.
25. On a closer we look, there appears to be a clear rationale for the provision. Admittedly, the Byelaw was framed in the year 1981. At that time, there was hardly any facility for entertainment in the rural areas. At best, there was exhibition of films. Resultantly, even the decision of the members of the Panchayat was conditioned by the facilities, which were actually available. Consequently, the activities like games, sports etc. or musical performances and other items of amusement were not taken into the fold for the levy of tax. The levy was confined to the basic mode of entertainment, which was prevalent at that time. It is, undoubtedly, true that the Country has moved forward in many ways after 1981, However, the Panchayat has not chosen to amend the Byelaw. It has been retained in its original form. That being the factual position, the short question that arises is - could the Panchayat have levied entertainment tax on the appellant? The answer is - No.
26. There is another aspect of the matter. In the 21 petitions filed by the appellant, different orders of assessment relating to different periods have been produced. In O.P. No. 11896/2001, the order of assessment is at Ext. P11. It was passed on July 7, 2000. It related to the period from April 4, 2000 to July 3, 2000. It was alleged that the appellant had collected a total amount of Rs. 3,36,88,254/-. A tax of Rs. 67,37,651/-and an additional entertainment tax of Rs. 40,42,590/- was levied. Thus, the total tax as levied was Rs. 1,07,80,241/-. It included the levy of 'show tax' which was assessed at Rs. 2,580/- and the surcharge of Rs. 640/- thereon. However, there is no finding in the order of assessment that the appellant was engaged in any exhibition.
27. Mr. Sukumaran points out that the tax was levied on account of entertainment and show. It may be so. However, there is no finding that the appellant was engaged in any exhibition for entertainment. Thus, even on the basis of the order of assessment, it cannot be said that there was a positive finding that the appellant fell within the mischief of Byelaw 4. In fact, such a finding could not have been recorded.
28. It has been pointed out on behalf of the respondents that the tax was levied for 'show'. It is undoubtedly so. However, this levy was admittedly ordered in view of the provision contained in Section 200(4) of the Panchayat Raj Act, 1994 as reproduced above. It was for a small sum. The appellant does not dispute the levy under Section 200(4) of the 1994 Act.
29. On the basis of the above, it is clear that the tax was mechanically levied on the assumption that the appellant was liable to pay it. The authority had not even examined the facts to find out as to whether or not the activity fell within the mischief of Byelaw 4. In the absence of a finding that there was an exhibition for entertainment, the orders of levy cannot be sustained. In fact, as already noticed, it appears that since there were no amusement Parks at the time of promulgation of the Byelaws, nobody had applied his mind to the levy of entertainment tax on the activity as undertaken by the appellant. The tax was to be levied only on exhibition of films etc. However, in view of the facts as apparent from the record of these cases, it cannot be said that the Appellant's activity fell within the ambit of Byelaw 4.
30. Mr. Sukumaran points out that Section 3 of the Act was considered by their Lordships of the Supreme Court in Ashoka Talkies v. Badagara Municipality, 1995 (2) KLT 895. Their Lordships had read Section 3 as 'empowering' the Local Authorities to levy a tax.
31. It is undoubtedly true that while considering Section 3, their Lordships had observed that the provision "empowers the local authorities to levy a tax at the rate not less than 10% and not more than 25%. This observation was, however, made in the context that the Municipality had, by notification, fixed the rate at 20%. Later on, by a notification on May 31, 1969, it was enhanced to 25% with effect from 15th of July 1969. Thus, in Ashoka Talkies case, there was a resolution by the Municipality, which had been duly published. In that context, it was observed by their Lordships that the action fell within the ambit of Section 3. However, we cannot read the decision of their Lordships to mean that Section 3 itself is a charging provision. In our view, it is only an enabling provision.
32. In fairness to Mr. Sukumaran, it may be noticed that he had even submitted that Byelaw 4 takes within the ambit all kinds of entertainments except those, which are exempted under Section 7. Is it so?
33. A perusal of the Byelaw, as reproduced above, shows that it refers to Entertainment Exhibitions. The reference to Sections 7(1) and 7(3) is also confined to the exhibitions only. The words in the Byelaw are "except those exhibitions which are specifically exempted". The words and intention are clear. Nothing but 'exhibition' was sought to be taxed.
34. It is undoubtedly true that Section 7 permits the Panchayat as well as the State Government to grant exemption. The obvious purpose behind the provision is that a particular person may be able to show that the levy is unjust and unreasonable. He may put forward cogent reasons, which may persuade the authorities to take the view that the activity is useful and healthy for the progress of the area and the imposition of levy may defeat the very purpose for which the facility has been provided. Thus, a power has been reserved to grant exemption. Even the economics of a particular project could be a relevant consideration for the authority when it is confronted with a petition for the grant of exemption. The power which was initially conferred by Section 7(3) is now embodied in Section 7A. However, so far as the present Byelaw is concerned, the provision being categoric, we are unable to read it in the manner as suggested by Mr. Sukumaran.
35. In view of the above conclusion, learned counsel for the appellant states that it is not necessary to consider the other submissions as made by him.
36. In view of the above, it is held that:-
1. The provision of a taxing statute have to be strictly construed. A person cannot be taxed unless the provision clearly provides for it. The words of the statute have to be given their true and natural meaning. The Authority cannot add to the words. It cannot impose a levy by reading an implication into the plain words of the provision. There is no room for intendment. The words of the statute cannot be strained. Strict letter of law has to be seen.
2. Entertainment is an expression of very wide amplitude. A court entertains a petition. A hotel entertains a guest. A banquet, a sumptuous feast is an entertainment of eating and drinking. Section 2(4) really takes within its ambit different kinds of entertainment viz. exhibition, performance, amusement, game, sport or race.
3. Section 3 contains only an enabling provision. It embodies a 'permissive power'. It does not impose a mandatory duty on the 'authority' to charge tax on every form of entertainment at a specific rate. The Local Authority can impose tax by a Resolution or by framing a Byelaw. The Statute gives the Local Authority an option. It may levy tax or it may not. It can also choose the items to be subjected to the levy.
4. Even the respondent-panchayat had interpreted Section 3 as an enabling provision. It had framed Byelaws under Section 12. Under the Byelaw, only 'exhibitions', which had an element of entertainment, were subjected to the levy of tax. Other activities were not brought within the mischief of the Byelaw.
5. In view of the above conclusions we find that the learned Single Judge had erred in taking the view that Section 3 was a charging section and that the Panchayat was entitled to recover the tax from the appellants.
Thus, the appeals are allowed. The judgment of the learned Single Judge is set aside. The orders of levy of tax are quashed. Even the order for the closure of the facility, which was passed for failure to pay the tax, is set aside. The petition filed by the Panchayat is dismissed. No costs.