Kerala High Court
State Of Kerala vs Poomully Aram Thampuran Smaraka ... on 11 January, 2021
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
MONDAY, THE 11TH DAY OF JANUARY 2021 / 21TH POUSHA, 1942
OP (TAX).No.1 OF 2021
AGAINST THE ORDER/JUDGMENT IN TA 88/2018 OF AGRL.I.T.ADDITIONAL
BENCH,KOZHIKODE
PETITIONER/S:
STATE OF KERALA
REPRESENTED BY THE DEPUTY COMMISSIONER OF STATE
(LAW),DEPARTMENT OF KERALA STATE GOODS AND SERVICE
TAX, ERNAKULAM
BY SR. GOVERNMENT PLEADER MOHAMMED RAFIQ
RESPONDENT/S:
POOMULLY ARAM THAMPURAN SMARAKA TRUST
PERINGODE P.O., VIA, KOOTTANADU, PALAKKAD-679 535
OTHER PRESENT:
THIS OP TAX HAVING COME UP FOR ADMISSION ON 11.01.2021, ALONG
WITH OP (TAX).2/2021, OP (TAX).3/2021, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
O.P.(Tax) Nos.1,2 & 3/2021
-2-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
MONDAY, THE 11TH DAY OF JANUARY 2021 / 21TH POUSHA, 1942
OP (TAX).No.2 OF 2021
AGAINST THE ORDER/JUDGMENT IN TA 86/2018 DATED 29-06-2020 OF
S.T.A.TRIBUNAL,ADDITIONAL BENCH,KZD.
PETITIONER/S:
STATE OF KERALA
REPRESENTED BY THE DEPUTY COMMISSIONER OF STATE
TAX(LAW), DEPARTMENT OF KERALA STATE GOODS AND SERVICE
TAX, ERNAKULAM.
BY SR. GOVERNMENT PLEADER MOHAMMED RAFIQ
RESPONDENT/S:
POOMULLY ARAM THAMPURAN SMARAKA TRUST
PERINGODE P.O., VIA KOOTTANADU, PALAKKAD-679 535.
OTHER PRESENT:
THIS OP TAX HAVING COME UP FOR ADMISSION ON 11.01.2021, ALONG WITH
OP (TAX).1/2021, OP (TAX).3/2021, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
O.P.(Tax) Nos.1,2 & 3/2021
-3-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
MONDAY, THE 11TH DAY OF JANUARY 2021 / 21TH POUSHA, 1942
OP (TAX).No.3 OF 2021
AGAINST THE ORDER/JUDGMENT IN TA 87/2018 OF AGRL.I.T.ADDITIONAL
BENCH,KOZHIKODE
PETITIONER/S:
STATE OF KERALA
REPRESENTED BY THE DEPUTY COMMISSIONER OF STATE TAX
(LAW), DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX,
ERNAKULAM
BY SR.GOVERNMENT PLEADER MOHAMMED RAFIQ
RESPONDENT/S:
POOMULLY ARAM THAMPURAN SMARAKA TRUST
PERINGODE P.O., VIA KOOTTANADU, PALAKKAD-679535
OTHER PRESENT:
THIS OP TAX HAVING COME UP FOR ADMISSION ON 11.01.2021, ALONG WITH
OP (TAX).1/2021, OP (TAX).2/2021, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
O.P.(Tax) Nos.1,2 & 3/2021
-4-
JUDGMENT
[ OP (TAX).1/2021, OP (TAX).2/2021, OP (TAX).3/2021 ]
Dated this the 11th day of January 2021
S.V. Bhatti, J.
Heard learned Sr. Government Pleader Mohammed Rafiq
for petitioner.
2. The petitioner and the respondent are same in these
three petitions. The petitioner assails the common order dated
29.06.2020 of Kerala Value Added Tax/Agrl. Income Tax and
Sales Tax Appellate Tribunal, Additional Bench, Kozhikode in
the instant petitions.
3. The issue arises under the Kerala Tax on Luxuries
Act, 1976 (for short 'the Luxuries Act'). The respondent is an
Ayurvedic treatment centre attached to M/s. Poomully Aram
O.P.(Tax) Nos.1,2 & 3/2021
Thampuran Smaraka Trust, Peringode, Palakkad. The
respondent provides ayurvedic therapy and treatment to
individuals admitted at the said centre. On 07.01.2014 the
Intelligence Officer, Squad No.VI, Commercial Taxes, Palakkad
inspected the premises and verified the books of account of the
respondent. The three petitions concern the penalty levied on
the respondent for the years 2012-13, 2013-14, and 2014-15. In
other words, the penalty proceedings are initiated under
Section 17A of the Luxuries Act and are the subject matter of
these petitions. The circumstances and the issues for decision
are substantially similar, hence disposed of by this common
judgment.
4. The assessing officer under the Luxuries Act had
imposed the following penalty on the respondent by treating
70% of the treatment charges as representing luxury or service
provided by the respondent.
O.P.(Tax) Nos.1,2 & 3/2021
"(2012-13) - Rs.6,02,900/-
(2013-14) - Rs.7,38,714/-
(2014-15) - Rs.6,62,500/- "
The Deputy Commissioner (Appeals) on appeal by respondent
treated 30% of treatment charges as charges towards amenities
and services under Section 2(fb) of the Luxuries Act. The
respondent filed Tax Appeal Nos.86, 87, and 88 of 2018 before
the Tribunal. The Tribunal through the common order
impugned in the petitions allowed the appeals filed by the
respondent. Hence the petitions
5. The assessing officer noted that the respondent was
providing service in five rooms, four double bed A/C rooms and
one non A/C room. The respondent, for providing the
accommodation in rooms to individuals, no separate tariff is
fixed. The respondent, by way of reply, informed assessing
officer that Rs.650/- is charged for A/C room per day and
O.P.(Tax) Nos.1,2 & 3/2021
Rs.350/- per day for non A/C room towards rent. According to
respondent, as the amount received by the respondent towards
rent is less than Rs.1000/- the respondent is not obliged to
collect luxury tax and pay luxury tax to the Department. The
circumstances noted from the date of inspection, material
brought on record, the conclusions recorded by the primary
and first appellate authority are considered in detail by the
Tribunal. For brevity, we are not proposing to refer to the
circumstances in the common order, particularly having regard
to the fact that the levy of penalty is interdicted by the
Tribunal, as penalty is ordinarily levied on an assessee for
contumacious conduct or for a deliberate violation of the
provisions of the particular Statute. [See Pratibha Processors v.
Union of India - AIR 1997 SC 138].
6. Section 17A of Luxuries Act reads as follows:
O.P.(Tax) Nos.1,2 & 3/2021
"17A. Imposition of penalties by assessing authority- if an
assessing authority is satisfied that any person-
(a) liable to pay tax under this Act.-
(i) has failed to keep true and complete account or
(ii) has failed to submit any return as required by the
provisions of this Act or the rules made thereunder or has
submitted an untrue or incorrect return; or
(b) has failed to comply with all or any of the terms of any
notice issued to him by or under the provisions of this Act or
the rules made thereunder or;
(c) has prevented or obstructed inspection, entry search or
seizure by any officer, or
(d) has acted in contravention of the provisions of this Act
or any rules made thereunder, for the contravention of which
no express provision or payment of penalty or punishment is
made by this Act, such authority may direct that such person
shall pay, by way of penalty, an amount not exceeding twice
the amount of luxury tax or other amount sought to be avoid
where it is practicable to quantity such evasion, or, an amount
not exceeding five thousand rupees in any other case.
Explanation: The burden of proving that any person is not
liable to the penalty under this section shall be on such
person."
O.P.(Tax) Nos.1,2 & 3/2021
7. The Tribunal has examined the legality of levy of
penalty from two perspectives; the first perspective being
whether the proceedings of assessing officer determined as a
fact, the obligation of respondent to collect and pay tax under
the Luxuries Act; for, the respondent, even if treated as a
hospital, is under obligation to file return under the Luxuries
Act only when the amount collected by the respondent per day
per room exceeds Rs.1000/-. In the case on hand, the assertion
of respondent is that the respondent is charging Rs.650/- and
Rs.350/- respectively for A/C and non A/C rooms. The
collection of rent at the said rates, it is not the case of the
Department as well, would come within the purview of the
Luxuries Act. The primary authority and the first appellate
authority have broadly assumed or inferred what could be the
therapy or treatment expenses and fees paid to the Ayurveda
O.P.(Tax) Nos.1,2 & 3/2021
Doctors at the centre. Thereafter, on a notional basis,
determined the tax payable by the respondent and demanding
the penalty thereon. The respondent before the Tribunal relied
on the judgment of this Court in U.K. Monu Timbers (M/s.) v.
State of Kerala1 for the proposition that notional determination
of slab of charges from gross receipt and determination of
luxury tax or penalty thereon is impermissible. The Division
Bench of this Court referred to the judgment of the apex Court
in State of Rajasthan v. Rajasthan Chemists Association2. The
operative portion of the judgment reads thus:
"The subject of tax being sale, it was held, the measure of tax
for the purpose of quantification must retain the nexus with
sale which is the subject of tax. Hence, the measure of tax
cannot be determined on a notional basis and cannot at all be
on a hypothetical value. Section 4A was held to be designed to
bring the levy on a value which was divorced from the sale
(first point sale) and subjecting such value to tax under the Act
and hence was held to be beyond the legislative competence
1 2012 (3) KHC 111 (DB)
2 2006 (6) SCC 773
O.P.(Tax) Nos.1,2 & 3/2021
under Entry 54 of List II of the Seventh Schedule. The
consequent notification to the extent it intended levy of tax on
first point sale with reference to the price which could be
charged in respect of a subsequent sale was also held to be
unsustainable."
8. In the above background let us excerpt the operative
portion of the judgment under appeal to appreciate the
challenge laid by the petitioner.
"The specific contention taken by the appellant is that the
ayurvedic treatment charges received by it cannot be taken as
luxury charges and the same is to be treated as charges towards
professional services like that of therapist and others.
Absolutely no other luxury has been provided in the hospital.
Though the appellant has shown the doctors consultation
charges, food and medicine charges separately, the remaining
receipts towards the treatment charges are shown as one head
as Ayuvedic Treatment charges. Though the enquiry authority
says that the appellant is providing telephone facility, internet
facility and other luxury in the room, absolutely there is no
materials available to show the same. It is true that the
appellant has not furnished the item wise details regarding the
Ayurvedic treatment charges received by it. As modified in 1 st
O.P.(Tax) Nos.1,2 & 3/2021
appeal, 30% of the ayurvedic treatment charges is taken as
receipts towards luxury, but no basis is there for taking 30%
even for the purpose of estimating the luxury tax. It is for the
assessing authority concerned to verify each and every bills
issued by the appellant to its customers and to ascertain
whether the appellant has collected any amount other than
professional charges and included the same under the head
Ayuvedic treatment charges. It is settled by the decision of the
Hon'ble High Court of Kerala in M/s.U.K Monu Timbers Vs.
State of Kerala = (2012) (3) KHC 111 (DB) that the enquiry
authority has no power to make an estimation of turnover for
the purpose of determining the penalty. It is true that the said
decision has been passed by the Hon'Ble High Court of Kerala
while considering the powers of the enquiry authority u/s. 67
of KVAT Act 2003. However, the same principle can be applied
in the case in hand as well. It has been held by the Hon' ble
High Court in the said case that the estimation of the turnover,
however, reasonable it may be, would be in the realm of the
best judgment of the assessing authority concerned. Here, in
the case in hand the appellant is collecting daily rent @ 650/-
and Rs.350/- respectively for A/c Rooms and non A/c. Rooms.
Except the rough estimation by the authorities below,
absolutely there is no material to show that the appellant has
received gross amount of Rs.1,000/- per room excluding the
O.P.(Tax) Nos.1,2 & 3/2021
charges of food, medicine and professional services. The
decision relied on the by learned Addl. Law Officer in TA (ST)
09/2014 and connected cases of the Kerala AIT/ST Appellate
Tribunal, Addl. Bench, Palakkad, dated 13.02.2015 was passed in
the assessment proceedings. Hence, said decision cannot be
applied in the case in hand. Reckoning the above aspects, we
are of the considered view that available materials are
insufficient to impose penalty on the appellant u/s.17A of the
KTL Act. It is made clear that the assessing authority
concerned is at liberty to initiate assessment proceedings in
accordance with law, subject to the period of limitation, if
there are sufficient materials for doing so. Therefore, we are
inclined to interfere in the impugned orders of penalty passed
by the authorities below. Thus, these appeals are to be allowed.
Point answered accordingly."
9. From the conclusion recorded by the Tribunal, this
Court notices that the Tribunal has found fault with the
assessing authority and the appellate authority for notionally
determining and assuming that 30% of gross charges would
represent the luxury provided by respondent under Section
2(fb) of the Luxuries Act and that there is no material even to
O.P.(Tax) Nos.1,2 & 3/2021
come to the conclusion as to the rate at which the
accommodation is provided by the respondent. In other words,
the reasoning of its Tribunal rightly points out the mistakes of
authority under the Act in levy penalty.
10. We find two substantial reasons for rejecting the
prayer of petitioner; firstly, in the case on hand, no assessment
determining the obligation/liability under the Luxuries Act is
made, penalty proceedings are taken up, and by notionally
calculating the amount the penalty is imposed. The Tribunal, in
the portion excerpted above, has given liberty to department to
first proceed to initiate assessment proceedings in accordance
with law, subject to the period of limitation, if sufficient
materials are available for doing so and consequently penalty
proceedings could be contemplated. Having regard to the
findings of fact recorded by the Tribunal, the valid reasons
recorded, and that no perversity is pointed out or that a
O.P.(Tax) Nos.1,2 & 3/2021
question of law within the frame of our judicial review under
Article 226/227 is made out by the petitioner, we are of the view
that the petitions must fail and accordingly dismissed.
No order as to costs.
Sd/-
S.V.BHATTI
JUDGE
Sd/-
BECHU KURIAN THOMAS
JUDGE
jjj
O.P.(Tax) Nos.1,2 & 3/2021
APPENDIX OF OP (TAX) 1/2021
PETITIONER'S/S EXHIBITS:
EXHIBIT P1 A TRUE COPY OF THE PENALTY ORDER DATED 30.05.2015
BY INTELLIGENCE OFFICER FOR THE YEAR 2014-15
EXHIBIT P2 A TRUE COPY OF THE ORDER PASSED BY THE DEPUTY
COMMISSIONER (APPEALS) KOZHIKODE IN LTA NO.S 3,4
AND 5 OF 2015 DATED 15.07.2017
EXHIBIT P3 TRUE COPY OF THE ORDER PASSED BY THE KERALA
VALUE ADDED TAX /AGRICULTURAL INCOME TAX AND
SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH,
KOZHIKODE IN T.A.NO.S 86 TO 88 OF 2018 DATED
29.06.2020
O.P.(Tax) Nos.1,2 & 3/2021
APPENDIX OF OP (TAX) 2/2021
PETITIONER'S/S EXHIBITS:
EXHIBIT P1 A TRUE COPY OF THE PENALTY ORDER DATED 30.05.2015
BY INTELLIGENCE OFFICER FOR THE YEAR 2012-13.
EXHIBIT P2 TRUE COPY OF THE ORDER PASSED BY THE DEPUTY
COMMISSIONER (APPEALS), KOZHIKODE IN LTA NOS.3, 4
AND 5 OF 2015 DATED 15.07.2017.
EXHIBIT P3 TRUE COPY OF THE ORDER PASSED BY THE KERALA
VALUE ADDED TAX/AGRICULTURAL INCOME TAX AND
SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH,
KOZHICODE IN TA NOS.86 TO 88 OF 2018 DATED
29.06.2020.
O.P.(Tax) Nos.1,2 & 3/2021
APPENDIX OF OP (TAX) 3/2021
PETITIONER'S/S EXHIBITS:
EXHIBIT P1 A TRUE COPY OF THE PENALTY ORDER DATED 30.05.2015
BY INTELLIGENCE OFFICER FOR THE YEAR 2013-14
EXHIBIT P2 TRUE COPY OF THE ORDER PASSED BY THE DEPUTY
COMMISSIONER (APPEALS) ,KOZHICODE IN LTA NO.3 ,4
AND 5 OF 2015 DATED 15.07.2017
EXHIBIT P3 TRUE COPY OF THE ORDER PASSED BY THE KERALA
VALUE ADDED TAX/AGRICULTURAL INCOME TAX AND
SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH,
KOZHICODE IN T.A.NO.S 86 TO 88 OF 2018 DATED
29.06.2020
