Holy Cross Hospital Pvt. Ltd. v. State of Kerala

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: K. Vinod Chandran
Ashok Menon
Judgment Date: 2019-03-01
Court Decision / Holding: OT.Rev.No.191/2016 and OT.Rev.No.6/2017 partly allowed. The Assessing Officer is directed to re-examine on production of bills, afford a hearing, and consider those invoices; capital goods purchases should be excluded from estimation of sales where supported by invoices. Costs to be borne by the parties.
Final Disposition: Partly allowed

Parties to the Case

Appellants / Petitioners

Holy Cross Hospital Pvt. Ltd.

Respondents

State of Kerala represented by Secretary, Taxes Department, Thiruvananthapuram

Legal Representation & Advocates

Counsels for Petitioners

• A. Kumar
• Imam Grigorios Karat
• N. Krishna Prasad
• Mini (Smtg.)

Counsels for Respondents

• V. K. Shamsudheen, Sr GP

Case Synopsis & Summary

Two revision petitions (OT.Rev.No.191/2016 and OT.Rev.No.6/2017) filed by Holy Cross Hospital Pvt. Ltd. challenge a common order of the Kerala Value Added Tax Appellate Tribunal, Palakkad, dated 29-10-2014, on three issues. The Court framed questions of law: (A) whether tax on X-ray films purchased and used in diagnostic services and consumables used for hospital upkeep can be treated as sale and thus exigible to tax; (B) whether input tax credit can be denied merely for an inadvertent Form 8B invoice, when the returns and books show the same goods having suffered output tax and remittance is not disputed; and (C) whether, with regard to capital goods purchases, the Tribunal ought to have allowed the assessee to explain the nature of the goods from the books and perhaps remand to the 1st Appellate Authority for consideration when the issue was not considered. The High Court, relying on the Full Bench decision in SanJose Parish Hospital v. Commercial Tax Officer, 2019 (1) KLT 336 (FB), held the first question in favor of the assessee, the second in favor of the revenue, and partly allowed the third by remanding for consideration of certain invoices. It directed the Assessing Officer to re-examine the capital goods invoices upon production of bills, and exclude those from the estimation of sales. The revisions are partly allowed with costs.

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners argued that charges for X-ray films used in diagnostic services and consumables used for hospital upkeep do not constitute sales and cannot be taxed as such. They submitted that input tax credit should not be denied for inadvertent Form 8B errors where returns show the goods already taxed and remittance is not disputed. On capital goods, they contended that invoices and records indicate capital items, and the Assessing Officer should re-examine the issue using the actual bills, with those capital goods excluded from sales estimation.

Contentions of Respondents

The respondents contended that the Tribunal rightly observed the lack of production of capital goods invoices to the AO/First Appellate Authority and Tribunal; Form 8B-based denial of input tax credit is appropriate when the invoicing is defective; regarding capital goods, the matter requires scrutiny of invoices and may warrant remand for proper verification and reliance on documentary evidence now produced by the petitioner.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Sanjose Parish Hospital v. Commercial Tax Officer	2019 (1) KLT 336 (FB)	Positive	Full Bench decision cited and used to support the assessee's position on taxability of hospital-related purchases and related credit issues.

Extracted Judgment Text

Exact text extracted from official judgment records.

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY ,THE 01ST DAY OF MARCH 2019 / 10TH PHALGUNA, 1940** **OT.Rev.No. 191 of 2016** **AGAINST THE ORDER IN T.A(VAT) 252/2013 of KERALA VALUE ADDED TAX ADDITIONAL APPELLATE TRIBUNAL,PALAKAD DATED 29-10-2014** ## **REVISION PETITIONER/S:** **M/S.HOLY CROSS HOSPITAL PVT. LTD. COURT ROAD, MANJERI 676 121, MALAPPURAM DISTRICT, REPRESENTED BY DR. M.C. JOY.** **BY ADVS. SRI.A.KUMAR SRI.IMAM GRIGORIOS KARAT SRI.N.KRISHNA PRASAD** ## **RESPONDENT/S:** **STATE OF KERALA REPRESENTED BY SECRETARY, TAXES DEPARTMENT, THIRUVANANTHAPURAM.** ## **SRI V.K SHAMSUDHEEN SR GP** **THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 01.03.2019, ALONG WITH OT.Rev.6/2017, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **OT.Rev 191/2016 ,OT.Rev.6/2017** **2** # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY ,THE 01ST DAY OF MARCH 2019 / 10TH PHALGUNA, 1940** **OT.Rev.No. 6 of 2017** **AGAINST THE ORDER IN T.A(VAT) 1044/2013 of VALUE ADDED TAX ADDITIONAL APPELLATE TRIBUNAL, PALAKKAD, DATED 29-10-2014** **REVISION PETITIONER/S:** **M/S.HOLY CROSS HOSPITAL PVT. LTD. COURT ROAD, MANJERI-676121, MALAPPURAM DISTRICT, REPRESENTED BY DR.M.C. JOY.** **BY ADVS. SRI.A.KUMAR SMTG.MINI(1748)** ## **RESPONDENT/S:** **STATE OF KERALA REPRESENTED BY SECRETARY, TAXES DEPARTMENT, THIRUVANANTHAPURAM.** **THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 01.03.2019, ALONG WITH OT.Rev.191/2016, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **OT.Rev 191/2016 ,OT.Rev.6/2017** **3** ## **ORDER** ## K.Vinod Chandran,J. The questions of law raised in O.T.Rev.No.191/2016 are as follows: A. Whether on the facts and in the circumstances of the case and in law impost of tax on X Ray films purchased and used in diagnostic service and use of consumables purchased in the Hospital for upkeep of the hospital can be treated as sale at all and whether or not the same is exigible to tax at all. B. Whether on the facts and in the circumstances of the case and in law input tax credit can be denied merely for the reason of an inadvertent error of the supplier in issuing invoice in Form 8B, when the returns and books reveal the same goods having suffered output tax and remittance of the same is not disputed and are not the order of the Tribunal reversing the orders of the 1[st] Appellate authority passed without application of mind and mechanically. **OT.Rev 191/2016 ,OT.Rev.6/2017** **4** C. Whether on the facts and in the circumstances of the case and in law, on the impost of tax on capital goods the Tribunal ought to have afforded opportunity to explain and establish from the books the nature of the goods itself if doubted and ought not the matter have been remanded to the 1[st] Appellate authority to consider the same when the 1[st] Appellate authority has not considered the issue at all. 2. Two revisions are filed since the revisions are from a common order in an appeal filed by the Revenue and by the assessee. The first question is answered in favour of the assessee and against the revenue, looking at the declaration of the Full Bench in **Sanjose Parish Hospital** v. **Commercial Tax Officer** [2019 (1) KLT 336 (FB)]. 3. The second question is answered against the asseessee and in favour of the revenue, since, Form-8B is the invoice issued on last sale and it is specified in the form **OT.Rev 191/2016 ,OT.Rev.6/2017** ## **5** itself that there can be no input tax credit claimed on such purchases. 4. The third question is on the capital goods purchases, on which gross profit was added and sales estimated. The assessee's specific contention was that certain purchases, which were deduced from the Kerala Value Added Tax Information System [KVATIS] was of capital goods. 5. Sri.Shamsudheen, learned Senior Government Pleader specifically points out that the Tribunal has considered the issue and found that the evidence by way of invoices of purchase of capital goods were never produced before the Assessing Officer, the first Appellate Authority or before the Tribunal. 6. In any event, we see that now certain invoices have been produced. We see from the **OT.Rev 191/2016 ,OT.Rev.6/2017** ## **6** assessment order produced as Annexure-A that one of the invoices referred to therein as item No.13 is invoice No.65, issued by Sabari Enterprises, showing a price of Rs.1449636 and tax of Rs.57985. The total invoice price is Rs.1507621 as seen from Annexure-A. 7. Sri.A.Kumar, learned counsel for the assessee specifically points out Annexure-D produced herein, which indicates the very same values as seen from the assessment order at item No.13. True, there is a total invoice amount shown of 1508201.29, which is on addition of CESS at 1%. At least with respect to this invoice, we see from the purchases made that they are all capital goods; spares and equipments used in the hospital. 8. In such circumstance, it is only proper that the Assessing Officer re-consider **OT.Rev 191/2016 ,OT.Rev.6/2017** **7** the issue on production of the bills. The assessee shall within a period of one month from the date of receipt of a copy of this judgment produce the bills along with written submissions, if any. The Assessing Officer shall then afford a hearing and consider the issue of those invoices. The invoices in which purchase of capital goods were made, shall be avoided from estimation of sales. These O.T.Revisions are partly allowed. Parties to suffer their respective costs. ## **Sd/-** ## **K.VINOD CHANDRAN** **JUDGE** **Sd/-** ## **ASHOK MENON** **JUDGE** SB/01/03/2019 **OT.Rev 191/2016 ,OT.Rev.6/2017** **8** ## **APPENDIX OF OT.Rev 191/2016** **PETITIONER'S/S EXHIBITS:** **ANNEXURE-A A TRUE COPY OF THE ASSESSMENT ORDER DATED 24/8/2012** **ANNEXURE-B A COPY OF THE 1ST APPELLATE ORDER ANNEXURE-C A COPY OF ORDER PASSED BY THE TRIBUNAL ANNEXURE-D A TRUE COPY OF THE INVOICE ANNEXURE-E A TRUE COPY OF THE MEMORANDUM OF APPEAL ANNEXURE-F TRUE COPY OF DEMAND NOTICE DTD.25.10.2016** **RESPONDENTS EXTS: NIL** **// TRUE COPY //** **P.A TO JUDGE** **OT.Rev 191/2016 ,OT.Rev.6/2017** **9** ## **APPENDIX OF OT.Rev 6/2017** **PETITIONER'S/S EXHIBITS:** **ANNEXURE-A A TRUE COPY OF THE ASSESSMENT ORDER DATED 24/8/2012 ANNEXURE-B A COPY OF THE 1ST APPELLATE ORDER DATED 25/9/2012 ANNEXURE-C A COPY OF ORDER PASSED BY THE TRIBUNAL DATED 29/10/2014.** **RESPONDENTS EXTS: NIL** **// TRUE COPY // P.A TO JUDGE**