The judgment emphasizes the mandatory requirement for the Government to specify reasons for granting exemptions from entertainments tax and the principle that statutory powers must be exercised in the manner prescribed by the law.

Mampad Grama Panchayat, the petitioner in this Writ Petition, is a Village Panchayat constituted under Section 4 of the Kerala Panchayat Raj Act, 1994, which is a 'local authority' as defined under sub-section (6) of Section 2 of the Kerala Local Authorities Entertainments Tax Act, 1961 (hereinafter referred to as 'the Act'). The petitioner has approached this Court in this Writ Petition challenging Ext.P2 Government order dated 16.11.2009, by which the Government of Kerala exempted 'Kannankandi Trophy All India Sevens Football Tournament' conducted by 'Mampad Friends Club', from the liability to pay entertainments tax leviable under Section 3 of the said Act.

2. As discernible from Ext.P2 Government order, the 1st respondent made a request dated 6.11.2009 before the Government seeking exemption from the liability to pay entertainments tax under the Act, for 'Kannankandi Trophy All India Sevens Football Tournament' scheduled to be held from 13.11.2009 onwards. Based on the said request, the Government by Ext.P2 order exempted the said tournament from the levy of entertainments tax, by invoking its powers under Section 7A of the said Act. Ext.P2 order contains no reasons whatsoever for exempting the said tournament from the levy of tax under the said Act.

3. Heard arguments of the learned counsel for the petitioner Grama Panchayat and also the learned Government Pleader appearing for respondents 2 and 3. In spite of service of notice, none appears for the 1st respondent.

4. The sole issue that arises for consideration in this Writ Petition is as to the legality or otherwise of the exemption granted to the 1st respondent, vide Ext.P2 Government order, from the liability to pay entertainments tax under the Act.

5. The Kerala Local Authorities Entertainments Tax Act, 1961 was enacted to unify and amend the law relating to the imposition and collection of taxes on amusements and other entertainments in the State of Kerala, which came into force on 1.4.1962, as notified by the Government in the Gazette. Subsection (4) of Section 2 of the Act defines 'entertainment' to include any exhibition, performance, amusement, game, sport or race to which persons are admitted for payment; but does not include any magic performance. Sub-section (5) of Section 2 defines 'institution' to include a company, society, club or other association of persons by whatever name called.

6. Section 3 of the Act deals with general provision regarding the levy of tax and the rate of tax. As per Section 3, any local authority may levy entertainments tax at a rate not less than 24% and not more than 48% on each price for admission to any entertainment. Going by the proviso to Section 3, the rate thus fixed shall not be lower than the sum of the entertainment tax levied under Section 3 and additional tax on entertainment levied under the Kerala Additional Tax on Entertainment and Surcharge on Show Tax Act, 1963 prevailing in the area prior to the date of commencement of the Kerala Decentralisation of Powers Act, 2000. Section 4 of the Act deals with composition and consolidated payment of tax and Section 3A inserted by the Kerala Decentralisation of Powers Act, 2000 deals with levy of entertainments tax based on seating capacity.

7. Section 7 of the Act, which deals with the power of the local authority to exempt an entertainment from payment of tax, reads thus;

“7. Entertainment exempted from payment of tax.- (1) The entertainments tax shall not be levied on the price for admission to any entertainment where the local authority is satisfied.-

(a) that the entertainment is of a wholly educational character; or

(b) that the entertainment is provided for purposes which are wholly or partly educational, cultural or scientific by an institution not conducted or established for profit; or

(c) that the entertainment is provided by an institution not conducted for profit and established solely for the purposes of promoting public health or the interests of agriculture or