Hotel amenity charges and luxury tax: telephone and laundry charges were not separately taxable without express statutory authority.

Hotel telephone call charges and laundry charges were not separately exigible to luxury tax under the Karnataka Tax on Luxuries Act, 1979, because the charging scheme taxed the composite luxury of lodging and only those charges compulsorily payable as part of that luxury. Distinct taxation of separate facilities required an express legislative provision, which was absent for the disputed items. The later amendment excluding telephone calls, laundry and other amenities from the definition of lodging charges reinforced that interpretation. A departmental circular stating that telephone call charges were not liable to luxury tax was within the Commissioner's authority, consistently followed, and binding on the Revenue; it should not have been quashed suo motu.

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Issues: Whether outgoing telephone call charges and laundry charges collected by hotels were separately exigible to luxury tax under the Karnataka Tax on Luxuries Act, 1979, and whether the departmental circular excluding telephone charges could be ignored or quashed while interpreting the Act.

Analysis: The Act levied luxury tax under the charging provisions in section 3, while section 2(1) and section 2(5) defined the relevant lodging charges and luxury provided in a hotel. The scheme of the Act showed that the tax under section 3 was on the composite luxury of lodging at the prescribed rate card and on charges compulsorily payable as part of that luxury, whereas separate taxation of distinct facilities was specifically provided only where the Legislature so enacted, as in sections 3-B and 3-C. Telephone calls and laundry charges were not shown to be compulsorily payable components of lodging in the manner contemplated by section 2(5), and the later amendment excluding telephone calls, laundry and other amenities from section 2(1) supported that legislative understanding. The departmental circular dated 15.02.1983, which stated that telephone call charges were not liable to luxury tax, was within the authority of the Commissioner, had been consistently acted upon, and was binding on the Revenue. The learned single Judge was therefore not justified in quashing the circular suo motu, and the statutory scheme did not permit a separate levy on the disputed items in the absence of an express charging provision.

Conclusion: Telephone charges and laundry charges were not separately liable to luxury tax, and the assessees succeeded.

Ratio Decidendi: A separate tax cannot be imposed on hotel amenities unless the charging provision expressly so provides, and a binding departmental circular consistent with the statutory scheme must be given effect to by the Revenue.

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