Taken for a taxing ride?

A skywheel that runs atop a seven-storeyed castle giving a bird’s eyeview of the city and its scenic surroundings, a gigantic wavepool that evokes a feeling of being on a real beach, a pool where a family can have fun for the whole day, India’s first ultra modern digital music fountain, Vintage tornado, Wonder Splash, Kid’s fun, Rapid River, Flying Boat, Dancing Cars…No wonder Veega Land Amusement Park in Pallikkara, a beautiful hilly area near Kochi, offering over 50 exciting rides emerged the most sought-after fun destination in South India. The theme message of the park “All Fun, All Day Long, For Everyone” seems perfectly right for the entertainment-starved Keralites as well as the fun seekers and holiday makers from the neighbouring states.

But for the Kunnathunadu Gram Panchayat that houses the park it has not been fun all along the way. The panchayat has been waging a legal battle against Veega Land for the last three years on the levy an entertainment tax and collection of dues. Three cases against the park are now pending with the Supreme Court.

The park is owned by V-Guard Industries which is a brand leader in the voltage stabilizer sector in the country; it started functioning in 2000. It has won the Kerala State Tourism Award for 2001-2002 for the most Eco-friendly Tourism Project in the state, the first prize of the Kerala State Pollution Control Board for its pollution free environment, and the Managing Director of the Veega Land, Kochouseph Chittilappalli won the Tourism Man of the Year Award 2000. “But this glory does not reflect when it comes to the tax payment,” says Sali Raju, president of Kunnathunadu Gram Panchayat. She points out that around Rs.15 crores (one crore = 10 millions) is due as the entertainment tax. “For a small underdeveloped panchayat like ours which doesn’t have many other revenue options, it’s a very big amount that could be utilised for various development activities.”

The legal battle between the panchayat and the amusement park started with the panchayat’s rejection of an application filed by the park requesting to exempt it from the entertainment tax for a period of five years and also for compounding the tax at a nominal rate. Veega Land's grounds for exemption were that it had invested a huge amount, the average daily expenditure of the park was much more than the average daily collection, and thus the company was incapable of paying the tax. The panchayat rejected the application holding that the inability of the company to pay the tax was not a ground for exemption. Also, while an LDF-ruled panchayat had originally issued licence to Veega Land in 2000, in the next panchayat the Congress party made the tax issue an election campaign and came to power.

“The panchayat is demanding one third of the total revenue as the entertainment tax from us,” says Kumar, Assistant Manager (PR) of Veega Land. “We are producing our actual financial statement to the panchayat based on the actual number of visitors and income etc. We are willing to pay a maximum of Rs 10 lakhs (1 million) annually as entertainment tax. Also, we are demanding exemption only for a period of first five years.” He also points out that Veega Land pays Rs 2.5 lakh as professional, building and other taxes to the panchayat.

The panchayat argues that it is fully empowered to collect entertainment taxes as per The Kerala (Local Authorities) Entertainment Act 1961 and that it does not have any right to exempt anybody from tax without the prior permission of the state government. The local body demanded Rs 9.23 crores as entertainment tax for a period from 2000 April to 2002 November. The park refused to pay and the panchayat issued a closure order. It also appealed to the Kerala High Court that a direction be given to the police to implement the order for closure of the park.

Veega Land challenged this order arguing that in accordance with the Act , the panchayat had passed a byelaw which has chosen to impose tax only on exhibition (vinodapradarshanam) and Veega Land activities were beyond the scope of the byelaw. The claim was contested by the panchayat, and ruling in favour of the panchayat, a single Judge bench of the High Court ordered levy of tax from Veega Land.

The Kerala (Local Authorities) Entertainment Act 1961 was promulgated to unify and amend the law relating to the imposition and collection of taxes on amusements and other entertainments in Kerala. The Act was substantially amended in 1975. Sections 2,3 and 4 of the amended Act clearly define “admission”, “entertainment” and general provisions regarding the levy and rate of taxation. Under these sections, ‘admission’ includes admission as a spectator or as one of an audience and admission for the purpose of amusement by taking part in entertainment. “Entertainment” includes any exhibition, performance, amusement, game, sport or race to which people are admitted for payment but does not include any magic performance. Section 3 states that “any local authority may levy a tax at the rate not less than 15% and not more than 30% on each payment for admission to any entertainment.” Later in 2000, The Kerala Decentralisation of Powers Act raised the tax rate limits to 24-48%.

But the HC’s first order approving of the panchayat’s levy of tax was quashed by a division bench of the High Court in July 2003. The Bench maintained that the 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 (Veega Land)”. According to the division bench, the Section 3 contained only an enabling provision, and it did not impose a mandatory duty on the authority to charge tax on every form of entertainment at a specific rate.

According to the management itself, an average of 4000-5000 people visit the park daily. During vacations and weekends the number of daily visitors rises to an average of 6000. The website of the park reveals that around 20 lakh people visited the park till March 2003. The gate charges for adults and children are Rs 320 and Rs 240 respectively on weekends and Rs 260 and Rs 90 on weekdays.

Panchayat officials allege that the state government has so far not taken a sympathetic stand towards the local body. Last year, the State cabinet almost decided to exempt all amusement parks from the entertainment tax. “We held dharnas in front of the secretariat. Panchayat officials met the then chief minister A K Antony and convinced him of the fall-out of such a decision,” says Aboobacker, vice president of the panchayat.

The government has since withdrawn from the decision to exempt amusement parks and has recently introduced a bill in the Assembly amending the Kerala (Local Authorities) Entertainment Tax Act. The new bill proposes to implement a slab system to the entertainment industry with effect from 1999. Accordingly Veega Land would come under slab C and it would have to annually pay entertainment tax capped at Rs 50 lakhs. The Bill has been introduced on the ground that “the existing Act is not realistic.”

In the meantime the cases against the park remain pending with the Supreme Court. “We feel the real intention of the Bill is to weaken our cases pending with the Supreme Court. When the government itself says the existing Act needs to be amended in order to make it realistic, the argument of the panchayat based on the Act becomes weak,” points out Raju Joseph, Standing Committee chairprson of the panchayat.

But using rough estimates of revenue from the ticket costs and total numbers of vistors per year, Rs.50 lakh per year effectively amounts to entertainment tax percentage of 1-2%. Going by this, the state government and the panchayat seem to have very different preferences on taxation levels for entertainment.

The panchayat did not renew the licence of Veega Land for 2004-2005. The decision not to renew the licence was taken on March 28 this year. But within three days, the state government stayed the panchayat's refusal to renew. President Sali Raju says that the panchayat is fed up with the state government and will not challenge the government. To aggravate things further, Veega Land has not submitted revenue collection statements to the Panchayat after the division bench's verdict of July 2003 making it difficult for the panchayat to estimate dues accurately for the current year.

To add to the frustration for the panchayat is the unsympathetic attitude of the media. Even those newspapers that fiercely covered Coca Cola's role in the Plachimada water shortage issue look the other way when it comes to Kunnathunadu vs Veega Land. All the Malayalam channels, magazines and newspapers get branded programmes or a good number of advertisements from Veega Land and V-Guard. Raju Joseph points out that even the press conferences organised by the panchayat went unreported.

The panchayat has spent around Rs 2 lakh on the case so far and they feel it has become expensive. On whether the local body is interested in a settlement with Veega Land, Sali Raju says that if Veega Land approaches the panchayat with an acceptable proposal it will be considered.

Panchayat officials also dismiss the claims by Veega Land that it brought development to Pallikkara and has provided the local people with employment opportunities. As per the panchayat records, there are 157 permanent employees with Veega Land but none of them is from the locality. Most of the people employed here as sweepers or security guards are either from out side the district or from Tamilnadu.

The park is reportedly extracting 8-10 lakh litres of water per day for water rides and for other purposes. Furthermore, officials and people from the locality allege that the park is discharging untreated water into the paddy fields during the night. Till 1999, rice cultivation was prominent in the area. There has been a significant change in agriculture and land use pattern. Documents reveal that land under rice cultivation reduced to 671 ha in 2003 from 1719 ha in 1997.

The dispute is now at the Supreme Court. Perhaps in considering these cases, the Court will also look at the lingering but fundamental question of how far our Panchayati Raj institutions are really empowered. (Quest Features and Footage)